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52

Review of Related Literature

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. Computerization 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.

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

53

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, the study adds.

With an annual growth rate of 15-20% and the largest number of life

insurance policies in force, the potential of the Indian insurance

industry is huge. Total value of the Indian insurance market (2004-05)

is estimated at Rs. 450 billion (US$10 billion)1. According to

government sources, the insurance and banking services’ contribution

to the country's gross domestic product (GDP) is 7% out of which the

gross premium collection forms a significant part. The funds available

with the state-owned Life Insurance Corporation (LIC) for investments

are 8% of GDP.

Till date, only 20% of the total insurable population of India is covered

under various life insurance schemes, the penetration rates of health

1http://www.researchandmarkets.com/reports/306103/indian_insurance_industry_new_avenues_for_growth

54

and other non-life insurances in India is also well below the

international level. These facts indicate the of immense growth

potential of the insurance sector.

The year 1999 saw a revolution in the Indian insurance sector, as major

structural changes took place with the ending of government monopoly

and the passage of the Insurance Regulatory and Development

Authority (IRDA) Bill, lifting all entry restrictions for private players

and allowing foreign players to enter the market with some limits on

direct foreign ownership.

Researcher found that very few studies that have analyzed for Life

insurance Sector and General Insurance sector. Most of the studies

have documented issues and challenges the system faces in terms of

accessibility, efficiency and quality of the life insurance and general

insurance. Review of related Literature is divided into three parts:

2.1 Review of Life Insurance Studies

2.2 Review of Non-Life Insurance Studies

2.3 Review of Comparative studies in Insurance Sector

2.1 Review of Life Insurance’s Studies

The role of education in decision-making to buy life Insurance has

been well documented by Grossman (1972) and Muurinen (1982).

They suggest that a better educated person is likely to be better

informed about both the insurance services available in the system and

the benefits of joining an insurance fund. Age has also been found

having positive and significant impact on the probability of having

insurance cover in many studies. Another important factor found is

gender which also plays an important role in the insurance decision

through its effect on expected medical consumption. This study only

55

measures the effect of education on insurance consumption but my

study will cover more factors which affect the insurance consumption.

J. David Cummins, Mary A. Weiss, and Richard D. Phillips, (1999):

‘The Incentive Effects of No Fault Automobile Insurance’ THE

WHARTON FINANCIAL INSTITUTIONS CENTER, pp – 38-99.

Study found that the effect of no fault on fatal accident rates is

ambiguous. However, if negligence assignment under tort is

sufficiently responsive to care levels undertaken by drivers, then no

fault is likely to be associated with higher fatality rates. The theoretical

analysis also reveals that more rigorous experience rating plans can be

used to offset any adverse incentive effects resulting from no fault.

Ironically, the reduction in administrative expense to premium ratios

associated with no fault has the effect of aggravating the adverse

incentive effects from restricting tort. The most important innovation is

to allow for the possible endogeneity of no fault, and our empirical

tests indicate that no fault should be treated as an endogenous variable.

Our results are consistent with the hypothesis that no fault weakens the

tort deterrent sufficiently to be associated with higher fatality rates.

Based on the models that control for the endogeneity of no fault, our

models suggest that fatality rates are between 5.5 and 9.9 percent

higher under no fault than they would be under tort. The results are

important because they suggest that policy makers should take into

account possible increases in fatal accident rates when considering the

adoption of no fault laws. Thus, there is a tradeoff between the

advantages of no fault as an accident compensation system and its

adverse effects on incentives. However, concerns about higher accident

rates could be mitigated by strengthening experience rating systems.

Better experience rating plans would have the added benefit of

discouraging the over-consumption of automobile transportation by

drivers with relatively poor driving records. But this study is not

conducted in India and it is applied that there is vast difference

56

between India and developed countries. So that study’s conclusion may

not be true for Indian Insurance Business.

In “Marketing of Life Insurance product”, by Dr. A.

Vinayagamoorthy, M.Com. M.Phil. M.Ed. PGDCA. Ph.D (2002),

says that in the global era, Insurance companies are increasingly

willing to spend more on the customer satisfaction and brand building

exercises. Though it is one of the highly regulated industries, it still

provides lot of scope for creativity and innovations. As our industry is

predominantly dominated by personal selling and personalized services

many a time the service standards vary based on the intermediary

involved in the process. In order to achieve the competitive edge over

others standardize the process and bring about quality improvement

and get feedback from the customers regarding the quality of services

rendered. This will result in customer satisfaction, customer retention,

customer acquisition, employee retention and cost reduction. This

paper focuses on the marketing approach adopted by the modern

insurers to withhold their existing customers and attract new ones.

According to a survey conducted by a leading marketing research

firm, ORG Marg A private insurance advisor, in 2001, (2002) on

“Life Insurance Marketing in India (A) The Changing Advertising &

Promotion Norms”, - "Instead of pushing policies down the throat we

educate the customer and offer guidance on how much insurance the

individual needs, an approach that is slowly paying off."

According to a survey conducted by a leading marketing research firm,

ORG Marg, brand awareness of private insurers in India was

increasing in the early 21st century. The difference in the level of

awareness of these new players as compared to the hitherto monopoly

of LIC was decreasing fast because of the aggressive advertising

measures adopted by private insurers.

57

Ashish Sadh, Soniya Billore (May 2003): ‘Brand Building and

Advertising: approaches in Indian Life Insurance Industry’, Journal

of Insurance and Management, BIMTECH, Vol. 3 No. 5: This

study found that financial service brands are based on ensuring long-

term financial security through a broad range of inherently risky

services and investment options. In the insurance sector, branding has

typically involved the concepts of stability, trust and protection. If

there was one industry in India which least considered branding as an

essentiality, it would be the insurance industry. However, with

liberalization of the industry, players have to realize the need for

branding in a competitive environment. Insurance companies need to

strive to build a brand in order to attract both the end customer and

intermediaries.

This study was intended to analyze the advertisements and to know

through a set framework and model how closely the present day

advertisements fall in line with what has been proposed in theory. It is

meant to understand the features that come up in the Insurance product

advertisement in the Indian industry and how closely the

advertisements are in line with what has been theoretically prescribed

as ideal way of communication for the Insurance products. The results

of the analysis will be particularly useful for the players of the

insurance industry, the media world and academicians.

K. Spandana (May 2003): ‘The Potential of Rural Life Insurance

in India: Problems and Prospects’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 5: This research work on the

commercial viability of doing insurance business in rural India clearly

indicated that the rural sector is a vibrant market, and that it holds

tremendous potential for the growth of insurance business in India.

However, the penetration of insurance in rural India remains pitifully

low. This study aimed at exploring the potential of life insurance in

58

rural India with all its problems, complexities and variables, and

suggesting the means and ways of meeting the challenge of developing

the rural insurance business in tandem with its potential of economic

growth.

In a study of the life insurance market, Durvasula, Lysonski et. al.

(2004,) found that customer satisfaction was positively associated with

customer’s repurchase decisions. The satisfaction can arise from the

experience of using product, from the seller and/or from after sale

service. In the field of life insurance and general insurance (only

vehicle insurance and health insurance), this satisfaction may come

from the experience and services provided by insurer and also

policyholder’s interaction with provider of services may significantly

influence his decision. This study covers only satisfaction level of

customer in general but my study includes the analysis from

customers’ point of view and also from market players’ point of vies,

specifically foe Gujarat’ major cities.

In “The need to cover the death risk should be predominant of all the

needs”, by Mr. S. M. Manchanda, (2004), here we must know that in

term insurance longer the term higher the risk to the insurer and also

higher the premium to be paid by the insured. The disadvantage in

buying a short term insurance plan is that after expiry of the term, the

insured may not get anther term insurance protection due to becoming

uninsurable by getting afflicted from some disease or disability or

sickness and also because of higher age and some other adverse health

reason, he might have to pay much higher premium.

Now the new insurance companies are giving choice to the customers

to select the quantum of death benefit as well as saving benefit within

the same premium. There are number of products available with each

insurer. All that is needed is to educate the customers of different

59

products to suit their special needs. But the need to cover the risk of

death should be predominant of all the needs.

Mala Srivastava, Yogeshwari Phatak (May 2005): ‘A Study of Risk

Perception of Indian Insurees Towards Private Life Insurers’,

Journal of Insurance and Management, BIMTECH, Vol. 4 No. 8:

The study discussed that the deregulation of the Indian Insurance

market, current under-penetration, and the anticipated potential of the

Indian insurance industry makes it an attractive opportunity for private

entrants. The extent of this opportunity is likely be a function of

several factors, not the least of which is whether customers are

satisfied with the current traditional insurer, loyalty level, and the ease

and propensity to switch insurance providers. In India life insurance is

regarded as more than a mere risk cover and is considered an important

avenue of investment. Indian insurees therefore, evaluate the past track

record and risk potential of an Insurer before taking a policy

investment decision. The study attempted firstly to study the extent to

which risk perception of the insurer affects the decision of an insuree

in selection of an insurance company and secondly, the extent to which

Indian insurers perceive private insurers to offer better services vis a

vis traditional life insurance companies i.e. LIC. The study was

conducted with the help of a close ended questionnaire which was

administered on 150 potential life insurees. Necessary statistical tools

were used for the purpose of data analysis and comparison. The study

revealed that although a number of private insurance companies have

entered the Indian life insurance market, Life Insurance Corporation of

India still seems to be the first choice for the Indian insurer due to the

perceived safety that is associated with it.

The study on “Life insurance marketing in rural segment” by

Bimabazaar- Administrator, Dr. N. R. Nagarjan, (2006), says that the

entry of private life insurers has changed the basic structure of the life

60

insurance market in India from ‘monarchy market’ to a ‘competitive

ground’. HDFC – Standard Life and ICICI – Prudential have been

taking active and special interest in rural India to spread their business

followed by Allianz Bajaj, Met life and Aviva life insurance

companies. ICICI prudential entered the rural market with a basket of

policies specially designed for rural segment.

The main strategy of private players to participate in the rural market is

to offer small life covers with low premium and this strategy will give

rich dividend to them by scoring the active participation of the rural

mass.

The astounding statistics is that life insurance in rural India is

expanding almost five times faster than the urban demand. Efficient

distribution channels and suitable products are the needs to cater the

rural demand. Bancassurance, Post offices, and Panchayats are the

right channels of distribution for the rural populace

James C. Hao, Lin-Yhi Chou Qiao (June 2006): ‘A Study on the

Impact of Merger Policy and Regulation: Minimum Capital

Requirement and Its Effect on Life Insurance Industry’, Journal of

Insurance and Management, BIMTECH, Vol. 5 No. 9: The purpose

of this study was to discuss the impact of merger and regulation

regarding minimum capital requirement and its effect on Life

Insurance Industry. They found some fair conclusions: first, the impact

of a merger policy on stockholders’ wealth is not significant. Second,

stockholders have a negative outlook on (relation to) the increase of

cost inefficiency (increasing). Third, the insurance firms’ stockholders

don’t benefit from strict capital, because this regulation will diminish

their wealth. Some firms would respond to this regulation with a larger

scale of operation. Finally, they found that firms’ scale to operations

have a positive relation with market share.

61

Yu Zheng (June 2006): ‘The Focus of Life Insurance: Risk

Protection or Investment—Evidence from the Empirical Study on

the Demand of the Life Insurance in China, An Emerging Market’,

Journal of Insurance and Management, BIMTECH, Vol. 5 No. 10:

This study evaluated the situation of the risk protection market,

compared the demand for risk protection with the demand for

investment, compared emerging markets with industrialized countries’

markets, and measured the degree and qualities of China citizens’ true

risk protection. This study mainly used the structure changed Co-

integration analysis improvement and Error Correction Model (ECM)

to carry on the positive analysis, calculates the risk protection gap, and

provided some suggestions regarding the target choices and

development strategies in the emerging life insurance markets.

Lalitha Sreenath, M.R. Sreenath (June 2006): ‘Keyman Insurance:

Cover against Loss or Tax?’, Journal of Insurance and

Management, BIMTECH, Vol. 5 No. 10: This study found that in

knowledge-driven industries, the need to indemnify the monetary

losses that may accrue on the sudden death or exit of key person in the

organization has led to the emergence of new life insurance product –

keyman insurance policy. However, with the reduction of the corporate

tax liability from 35 to 30% by the Indian Government for the fiscal

year 2005 -06, this legitimate risk management tool has been grossly

abused in Mar. 2005 for avoidance of tax. Hence this study attempted

to trace the development of this cover and the concepts used in the

valuation of this product, the gross abuse of the tax laws by the

corporate and the steps needed to rectify the situation.

Padmavathi V (June 2006): ‘Unit Linked Insurance Policies [ULIP]

and Risk Management’, Journal of Insurance and Management,

BIMTECH, Vol. 5 No. 10: The study says that Risk Management is

62

the distinctive feature drawing a boundary line between the ancient and

modern times. Life Insurance is one of the important tools of risk

management, which ensures family financial security. The present

day boom in the Insurance Market in India is primarily due to Unit

Linked Insurance Policies. But there is a contrast in the objectives of

Life Insurance and Unit Linked Insurance Policies. This study

evaluated the intricacies involved in selling and buying unit Linked

Insurance Policies from risk management perspective and makes

relevant suggestions to Sellers, Buyers, Financial Planners and the

Regulatory Authority.

According to Ram Gopal Agarwal, (2006) B.Com., L.L.B., F.C.A.

(Life insurance today, Vol. 6 No. 9 DECEMBER 2010, ISSN - 0973-

4813), ULIP controversy is the only top news for life insurance

business. For this IRDA the Insurance Regulators has taken all the

possible steps which were possible following the administrative steps

taken by SEBI in the matter. One thing is important that the Regulator

and life insurers have on record the long term experience of Unit Trust

of India as well as Life Insurance Corporation of India's ULIP business

over decades. So far UTI is concerned their products are the best and

testified over the period. Even Unit 1964 scheme which was closed

long before was the best of its kind and the investors were sufficiently

benefited from the said scheme. After their jig of ULIP most of the life

insurance companies have lunched the new variant of the ULIP

products. Now the companies must see that their sales force do not

engage in mis-selling which shall ultimately harm their business. In

life Insurance business, to sustain in long term quality of business is

important rather than quantity. Once the image of the company is

tarnished it will take long time to recoup the image. It is upon the top

management to formulate strategy and maintain a balance between

quality and quality of business. It is important to note that the

commitment level of employees in insurance companies has come

63

down sharply. The loyalty factor does not exist as such and employees

are continuously looking for greener pastures and even change the job

within few months. Since the employee knows that he will not be in

the company for long his commitment level comes down. So if the

insurance companies wants to have a steady progress they need to

build loyalty among employees.

R. B. Drennan, Michael R. Powers (June 2007): ‘What Is

Insurance? Toward a Theory of “Aloof” and “Quasi-Aloof”

Financial Risks’, Journal of Insurance and Management,

BIMTECH, Vol. 5 No. 10: The study says that a number of scholars

and practitioners have argued that financial-services integration is

inevitable because there is little meaningful distinction between

insurance risks and other financial risks. However, institutional

realities appear to defy this assessment, as the expansion of

bancassurance has proceeded little beyond the insurance sector’s

personal lines, and successes with insurance-based securities have been

very limited. In this study, they provided a formal distinction between

conventional insurance risks and other non-insurance financial risks by

showing that the former category derives from a set of “aloof” and

“quasi-aloof” risks that are qualitatively different from the latter

category’s “non-aloof” risks. While they did not argue that the

difference between these two categories of risk is so profound as to

prohibit the convergence of financial markets, they do believe that this

difference serves as a useful touchstone for insurers, investment

entrepreneurs, and government regulators in evaluating various

financial markets.

M. Dhanabhakyam, K. R. Vijaysanthi (June 2007): ‘Customer

Awareness Towards LIC Policies in Coimbatore City’, Journal of

Insurance and Management, BIMTECH, Vol. 6 No. 11: The study

says that in the new economic reality of globalization, insurance

64

companies face a dynamic global business environment. Radical

changes are taking place owing to the internationalization of activities,

the appearance of new risks, new types of covers to match with new

risk situations, and unconventional and innovative ideas on customer

service. Low growth rates in developed markets, changing customer

needs, and the uncertain economic conditions in the developing world

are exerting pressure on insurers’ resources while testing their ability

to survive. The existing insurers are facing difficulties from non-

traditional competitors that are entering the retail market with new

approaches and through new channels. The basic premise of

globalization is opening up of new service markets to provide the

developing countries with new opportunities for the expansion of trade

and economic growth.

R. B. Drennan, Imelda Yeung Powers, Michael R. (June 2007):

‘“Leapfrogging” Insurance Technology: Regulating Opportunity in

Developing Property-Liability Markets’, Journal of Insurance and

Management, BIMTECH, Vol. 6 No. 11: In this study yhe

“leapfrogging” (skipping over) of obsolescent technologies has been

observed in developing economies around the world. Examples of this

striking phenomenon are particularly apparent in telecommunications

and information technology, but can be found in virtually all industry

sectors, including financial services. Given the history of alternative-

market challenges to traditional property-liability insurance,

opportunities for leapfrogging today’s risk-financing products may

well exist in certain developing economies. In this study, they

considered the trend toward specialization in alternative-market

innovation over the past several decades, and then explore whether

government regulators of developing economies can extrapolate from

this trend to create leapfrogging opportunities in their markets.

65

Ankur Garg, Apoorva Tiwari,Goutam Dutta, Sankarshan Basu

(June 2007): ‘A Stochastic Linear Programming Model for Asset

Liability Management: The Case of An Indian Insurance Company’,

Journal of Insurance and Management, BIMTECH, Vol. 6 No. 11:

The study says that Asset - Liability management is one of the most

critical tasks for any financial institution, determining its cushion

against the risk and the net returns. The problem of asset liability

management for an insurance company requires matching the cash

inflows from premium collections and investment income with the

cash outflows due to casualty and maturity claims. Thus, what is

required is a prudent investment strategy such that the returns earned

on the assets match the liability claims at all points of time in future.

Conventionally, the asset allocation has been done using the Mean

Variance approach due to Markowitz. While such a strategy ensures

takes view of risk discussed by Markowitz, it does not maximize the

net worth of the firm nor does it take care of all the cash inflows and

outflows over a long term period. They developed a stochastic linear

programming model that maximizes the net worth of the firm and also

takes care of the uncertainties. While there are instances of stochastic

linear programming being applied for ALM in financial institutions in

developed markets, no such practical application has been reported in

this area in Indian context as yet.

T. VANNIARAJAN, R. S. BALASENTHIL (June 2007): ‘Evaluation

of Quality Dimensions in Life Insurance Market: Customer

Segmentation Analysis’, Journal of Insurance and Management,

BIMTECH, Vol. 6 No. 12: The study discussed that Indian insurance

sector is the second largest mobilization of saving after banks and

constitutes 15 per cent of Gross Domestic Product Savings. After

Globalisation and Liberalisation, the private players came into the

market and try to capture the market dominated by public player. Even

though the life insurance market is one of the biggest in the world,

66

there is a vast potential to be tapped especially in Rural India. The

insurance players are trying to capture the rural market but failed to

achieve since they are not properly designing the strategies to capture

the market. Hence, the present study focuses on that aspect only. For

that the Indian Life Insurance market is classified into four important

segments namely urban and rural customers of public and private

players. This study confined its objective to identification of important

quality dimension in the market and also identification of important

discriminate quality dimension among these four customers segments.

The study concluded that the important quality dimensions are service,

agents, product and technology quality. There is a significant

difference on the importance given on each quality dimension among

the four groups of customers. In order to reach out all segments in the

life insurance market, the insurance players formulate customized

quality dimensions according to the need of the customers in each

segment.

In another study by Ram Gopal Agarwal, B.Com., L.L.B., F.C.A,

(2010), says that life Insurance industry was much talked about for

several changes in the concept and working of life insurance industry

particularly through the regulatory aspect by the IRDA wherein ULIP

got new concept and different covers as well. Life insurers got several

regulatory bindings in their investment pattern, guaranteed return,

transparency in their products and selling aspect. Even with uneven

regulatory bindings several private insurers either showed profit or at

least minimum loss which is the proof of their stability in the insurance

market. Several new life insurers are supposed to come into the market

which shows the better scope of life insurance business in the country.

Life Insurance Corporation still rules as No.1 as the life insurers with

Govt. Sovereign Guarantee having spread its wing outside Indian

territory in several countries which is a good sign of its intensity and

67

soundness. With the high economic activities in the country as well as

increased awareness about insurance scope of investment as well as

life insurance selling getting improved with the passing of time.

Insurers also have to respond with clarity in their product selling and

transparency in customer service. We hope in the coming decade there

would be more transparency and Life Insurance companies would

come out with new customer friendly policies which will provide them

optimum risk cover as well as good returns on investment. The life

insurance companies should intensify their awareness campaign in

order to fully achieve the benefits of opening of the insurance sector.

The Study on “IRDA norm impacts Ulip pension offers”, by Mayur

Shetty (2011), discusses that Sales of pension schemes under unit-

linked insurance plans (Ulips) have almost come to a halt following the

insurance regulator's decision to prescribe a guaranteed return under

such plans. Insurers feel that new regulations would force them vacate

the pension space.

He found that most insurers feel that introducing a guaranteed return

works against a policyholder's interest in the long run. "A guaranteed

return policy would require the fund manager to invest in fixed income

paper like government securities. But it is widely accepted that equities

will provide returns in line with GDP growth, while interest rates will

fall as inflation dips and the fiscal deficit narrows," said a fund

manager with a life company

He also found that some insurers believe that the guaranteed returns

directive was aimed at distinguishing pension plans from mutual funds

in the wake of the dispute between SEBI and IRDA last year over

Ulips, which SEBI said were akin to mutual funds. Although the

finance ministry resolved the dispute in favor of the IRDA, the

68

insurance regulator subsequently took pains to draw a line

distinguishing insurance products from mutual funds.

2.2 Review of Non-life Insurance’s Studies

Harold D. Skipper, Jr, (October 2002): ‘Liberalization of Insurance

Markets: Issues and Concerns’, Journal of Insurance and

Management, BIMTECH, Vol. 1 No. 1: This study approaches

liberalization issues from several perspectives relevant to the Indian

insurance market and government in connection with its continued

liberalization. They found that First, the role and importance of

government policy in insurance. The essential point here is that

government intervention into insurance markets is essential but should

be carefully targeted to minimize undue interference. To some, this

discourse might appear a bit academic, but it is the most important in

this treatise because it lays the foundation for the circumstances under

which government should and should not intervene into insurance

markets. Seconds, the role of foreign insurers, with particular emphasis

on the concerns that have historically been expressed about their roles

in national insurance markets of emerging economies. Finally,

principles around which governments should craft their regulation of

insurance. A market regulated in accordance with these principles will

be one in which consumers enjoy a wide range of fairly priced

insurance from financially sound insurers.

Kailash Chandra Mishra (May 2003): ‘Crop Insurance: The New

Babe of the Indian Insurance Industry’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 5: This study found that there

is no specific IRDA regulation for crop insurance, a manifestation of

weak commitment of the first about of regulatory regime to this

preponderant national activity. Recently, Government of India

69

exhibited its commitment to create a safety net for Indian Agriculturist

by facilitating the formation of ACIC – Agricultural Crop Insurance

Corporation. This study was a critical study on crop insurance in India.

The study also prepared a basic frame to develop this sector and

suggest the precautions.

S. K. Sanyal, Darshy Sinha (May 2003): ‘Dimensions of Health

Insurance For The Rural Poor’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 5: this study found that there

are many constraints in healthcare system in India out of which the

absence of health insurance for the unorganized sector and the adverse

resource allocation for the rural sector stand out significantly.

Ambulatory care is a luxury item in the consumption basket of the

rural poor. This study focused on the health insurance of the bottom 60

percent of the population, as they need it most. For this purpose,

Pauly’s model was utilized to determine the optimal amount of health

insurance and the corresponding premiums at individual and household

levels for both outpatients and inpatients using the NSS 52nd round

data. The feasibility of the adoption of insurance schemes based on the

empirical findings was examined. Finally, it was suggested that the

decentralized political system at the Panchayat level and the infra-

structural medical facilities in villages be used to initiate compulsory

health insurance for the rural poor. The State Finance Commissions

should come up with measures to improve the financial condition of

the Panchayats.

Sanjaya S. Gaur, S. Viswanathan, K. Abdul Waheed (May 2003):

‘Relationship Commitment For A Non-Life Insurance Services

Provider: A Conceptual Model’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 5: This study approached that

relationship commitment is one of the most widely recognized factors

of relationship building process and also considered as central to

70

relationship marketing. Building relationship with committed

customers results in the long-term success of the businesses. Recent

competitive environment due to deregulation in the Indian insurance

services sector has thrown challenges to both Indian and multinational

companies. Building and maintaining long-term relationships with the

customers can provide competitive advantage in such situations. The

study proposed a conceptual model of relationship commitment and

provided some insights on commitment building measures so as to help

the non-life insurance service providers.

Swiss Re (May 2003): ‘Financial Crises: A Test of Insurer's Risk

Management’, Journal of Insurance and Management, BIMTECH,

Vol. 3 No. 5: The study shows that the emerging markets offer

enormous growth prospects for the insurance industry. However, it is

imperative for insurers to implement sound risk management due to the

recurrent financial crises affecting these regions. Technical

underwriting, good asset-liability management and a product range that

allows for a volatile business environment are all well established

among insurers. Nevertheless, in times of falling investment income,

volatile economic conditions, a higher risk of corporate default, stock

market crashes or even government bankruptcy, they assume a whole

new significance. In times of a financial crisis, errors made tend to

have more serious implications and can even have fatal consequences

for insurers.

Vivek Dalela (May 2003): ‘Outsourcing and Value Chain

Restructuring in the Insurance Industry’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 5: It is found that a large

number of companies in industries such as airlines, defense, energy,

financial services, freight distribution, retailing, sugar, info-com etc are

struggling with the wave of restructuring. There are a very large

number of permutations and combinations possible when a firm

71

restructures its value chain. It is easy to realize that new organizational

co-ordination forms would be required for managing the new variety of

value chain transactions. The structures and relationships that finally

survive are usually the ones that deliver the product demanded by

customers at the lowest cost. Each organizational form has its own

strengths and weaknesses The case studies reported in this study

exhibit that after going through the process of the search for the most

appropriate organizational form, a large number of companies in the

insurance sector today are opting for the contracts and outsourcing

model and are reaping substantial benefits from their value chain

restructuring exercises.

Ramesh Bhat, Sunil Maheshwari, Somen Saha (May 2003): ‘Third

Party Administrators and Health Insurance in India: Perception of

Providers and Policyholders’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 5: The study says that the

advent of Third Party Administrators (TPAs) is expected to play an

important role in the health insurance market in ensuring better

services to policyholders. In addition, their presence is expected to

address the cost and quality issues of the vast private healthcare

providers in India. However, the insurance sector still faces challenge

of effectively institutionalizing the services of the TPA. This study

presented the findings of a survey to ascertain the experiences and

challenges perceived by hospitals and policyholders in availing the

services of TPA in Ahmedabad. The major findings are: (i) low

awareness among policyholders about the existence of TPA;

policyholders mostly rely on their insurance agents; (ii) policyholders

have very little knowledge about the empanelled hospitals for cashless

hospitalisation services; (iii) TPAs insist on standardisation of fee

structure of medical services/procedures across providers; (iv)

healthcare providers experience substantial delays in settling of their

claims by TPAs; (v) hospital administrators perceive significant burden

72

in terms of effort and expenditure after introduction of TPAs and (vi)

no substantial increase in patient turnover after empanelling with

TPAs. However, there is an indication that hospital administrators

foresee business potential in their association with TPAs in the long-

run. There is a clear indication that the regulatory body need to focus

on developing mechanisms which would help TPAs to strengthen their

human capital and ensure smooth delivery of TPA services.

N Devdasan, Kent Ranson, Wim Van Damme and Bart Criel (2004):

‘Community Health Insurance in India’, 3180 Economic and

Political Weekly July 10,2004, pp 26-37. They found that Most of the

insurance programs have been started as a reaction to the high health

care costs and the failure of the government machinery to provide good

quality care. The objectives range from “providing low cost health

care” to “protecting the households from high hospitalization costs.”

BAIF, DHAN, Navsarjan Trust and RAHA explicitly state that the

health insurance scheme was developed to prevent the individual

member from bearing the financial burden of hospitalization. Health

insurance was also seen by some organizations as a method of

encouraging participation by the community in their own health care.

And finally, especially the more activist organizations (ACCORD,

RAHA) used community health insurance as a measure to increase

solidarity among its members – “one for all and all for one.” This study

is not comparing the insurance players to take buying decision of

insurance policy.

ALMA COHEN, Analysis Group and RAJEEV DEHEJIA,

Columbia University (2004): ‘The effect of Automobile insurance

and Accident liability Laws on Traffic Fatalities’, Journal of Law

and Economics, vol. XLVII (October 2004), pp – 357-392. This

paper has investigated the effect of compulsory insurance regulation

and no-fault limitations on the incidence of uninsured motorists and on

73

traffic fatalities. Also, using compulsory insurance laws as an

instrumental variable, they have investigated the effect of insurance on

traffic fatalities. The evidence indicates that compulsory insurance

rules do deliver their intended effect, which is a significant reduction in

the incidence of uninsured motorists. The evidence also indicates that

increasing the incidence of insurance produces an increase in the

number of fatalities. The magnitude of this moral hazard effect is

potentially large: a 2 percent increase in the number of fatalities for

each percentage point decrease in the number of uninsured motorists.

While the switch by some motorists to become insured increases

fatalities, this is at least partly offset by the effect of compulsory

insurance on those drivers who chose to remain uninsured. These

individuals drive more carefully, which works to reduce fatalities.

Finally, they have been able to isolate the effect of the reductions in

liability brought about by moves to a no-fault system. Such reductions

in liability produce a significant increase in the number of fatalities.

Their analysis indicates that drivers’ behavior, like the behavior of

economic agents in other contexts, is influenced by financial

incentives. Reductions in the expected financial costs of accidents,

produced by reductions in liability or by the purchase of liability

insurance, lead to more traffic fatalities.

The study on “Fire Insurance Cliam”, by Mr. Brennan, Insurance

Claims Group, Inc., (2004) discusses that a property policy has a

provision called Appraisal that permits each party to select an

independent appraiser to value the damages on their behalf. Together

the independent appraisers will then select a third party another person

know as the umpire. If you fail to hire an experienced appraiser that is

an expert in this process you are sure to suffer greatly. Failure to have

a truly unbiased umpire will cripple a policyholders chance of a fair

settlement. Due to the fact that the outcome of appraisal is "binding,"

74

to both parties, you may be stiffed with an inaccurate ruling if you do

not end up with an experienced individual.

The study on “Wedding insurance in India” by Lisa Mary Thomson,

ET Bureau, (2005), says that irrespective of how religious or

superstitious you are, you wouldn’t want to see all that money going

down the drain just in case something happened. And insurers know

that. This is why a few insurance companies have launched the little

known concept of wedding insurance in India.

Bernd Schramm, P. R. Sodani (May 2005): ‘Capacity Building for

the Development of Health Insurance Systems in India’, Journal of

Insurance and Management, BIMTECH, Vol. 4 No. 7: The study

says that health insurance in India is largely confined to the organised

labour sector and central as well as state government employees. Only

in recent years, non-governmental organizations have been trying to

introduce voluntary health insurance schemes for the rural and

informal sectors. These are largely donor-financed and limited in terms

of coverage. There is a huge demand for adequate social protection

systems, especially for the poor, but universal health insurance is still

something to be dreamed of. Bringing about institutional change to the

present, largely out-of-pocket and tax-financed system will depend on

the awareness of policy makers and the public about the benefits of

solidarity-based health insurance. Moreover, it will be necessary to

develop client-focused products and new public-private cost sharing

mechanism. Bringing in quality assurance and equity in access,

bringing in incentives to control cost, and strengthening monitoring

and control are key aspects, which would imply a reorientation of the

roles and responsibilities of different stakeholders. In order to

overcome these challenges, there is a tremendous need and demand for

75

capacity building in the areas of health financing, health insurance and

quality assurance.

Christophe Courbage (May 2005): ‘Long-Term Care Insurance and

Basis Risk’, Journal of Insurance and Management, BIMTECH,

Vol. 4 No. 7: The study said that private long-term care insurance

market is characterized by the presence of basis risk, i.e. the insurance

indemnity received in case of dependency does not directly depend on

the cost of health services but is based on a flat benefit. In this paper

we address the relationship existing between health-care demands and

basis risk in the long-term care insurance market. We wonder how the

presence of basis risk modifies health investment and long-term health

care. Using the Rank Dependant Expected Utility, we show, depending

on the probability of becoming dependent, that the presence of basis

risk does not necessarily lead to an increase in health investment

relative to situation where no basis risk is present.

Mahito Okura (May 2005): ‘A Study on The Economics of Post-Loss

Minimization: An Analysis of The Effectiveness of The Insurance

Law and Clauses’, Journal of Insurance and Management,

BIMTECH, Vol. 4 No. 8: This study proposed a simple model and an

analysis of the incentive problem in terms of post-loss minimization in

the insurance market. This Study discussed a model of the insurance

market in which the insurer decides which of the two types of clause

which are inconsistent with the commercial law, or no clause, best

influences the insured’s choice as to whether or not to make an effort

to reduce the loss. The Study seek to investigate the exogenous

situations where the insurer presents these types of clause, or no

clause, in terms of the incentive problem between insurer and insured.

76

Liang Zhao, Yuanhua Qiao (May 2005): ‘Micro-insurance

Institution and Innovations in China’s Rural Medical Insurance

Institutions’, Journal of Insurance and Management, BIMTECH,

Vol. 4 No. 8: This study analyzed and puts forward certain problems

on the new model of cooperative medical insurance in China and

introduces the process of foundation, mechanism of working,

advantage and risks connected with Micro-insurance Institutions.

Combined with the status quo of the rural medical insurance in China,

it explored the availability of health services in China and suggested

the foundation mode to bring in new ways of solving the problem of

rural health care in China. Now in China the government is appealing

to the people to build socialism and a harmonious society. I think

solving the rural health problem is very important in this regard. China

has seen reforms over 25 years and has experienced great change in

rural areas too especially in western China. Due to lack of resources,

the economy hasn’t grown as expected. Many farmers are still living

beneath the line of poverty. At the same time, they are facing much

more complex situation due to the progress achieved by other groups

of the society. In medical care, for example, for the institution of

cooperative medical insurance did not exist earlier and the cost of

medical treatment is paid by farmers themselves. Without support there

will be more and more people going below the poverty line because of

illnesses and other similar health problems. According to an

investigation in a small village in Dingnan county, Jiangxi Province,

the ratio of people turning poor because of high cost of treatment for

illness is 5%. This study was based on research while exploring a new

model of cooperative medical insurance in China.

77

Mila Kofman, J.D. and Karen Pollitz, M.P.P, (April 2006): ‘Health

Insurance Regulation by States and the Federal Government: A

Review of Current Approaches and Proposals for Change’, Health

Policy Institute, Georgetown University. The study found that The

Small Business Health Fairness Act of 2005 (H.R. 525), the Health

Care Choice Act of 2005 (H.R. 2355), and Health Insurance

Marketplace Modernization and Affordability Act of 2005 (S. 1955) if

enacted would fundamentally change the way health insurance is

regulated in the United States. In this context, the future of health

insurance regulation is not entirely clear. Congressional sponsors

appear to depart from traditional reliance on states as laboratories for

innovation and as primary regulators of health insurance. In the past,

federal legislation established a floor of national standards. The three

proposals would do the opposite. Also, while in the past Congress

heavily relied on states to implement federal standards, the bills

pending in Congress would substantially restrict state ability to

regulate health insurance. All three bills would also have the effect of

reducing the overall level of health insurance regulation by any level of

government. While they would restrict authority of states to regulate

risk selection, to limit unfair market practices, and to engage in

oversight, none of the proposals would invest substantial new

regulatory authority or capacity with the federal government. In this

respect, the three bills could be viewed as de-regulating health

insurance to varying degrees. The three bills intend to make markets

more competitive by making it easier for insurance companies and

associations to operate – not having to do business within the

constraints of 51 different sets of regulators and rules. An unintended

consequence, however, may be to allow new ways to segregate health

insurance markets by risk. Consequently, to the extent that current

insurance regulations have reached a balance in promoting competition

while ensuring an equitable spreading of risk – through rating, covered

benefits, and other rules that protect access to coverage by healthy and

78

sick alike – the segmented market could destabilize premiums and

coverage. Ironically, this may lead to a reduction in protection from

medical expenses that health insurance offers individuals, families, and

employers. It may lead to no private health insurance options for

consumers with medical needs and fewer choices for others. It remains

to be seen what direction for health insurance regulation the Congress

may set, and what changes in private coverage may result.

Bhatt and Jain (2006) analyses the factors that affect Health

insurance purchase decision in a micro insurance setting. The study

was based on a household survey in the Anand District of Gujarat in

India. The research focused on analyzing two separate but inter-related

decisions. The first decision that the household takes is whether to buy

insurance policy and if the decision to purchase is positive, the next

decision that follows is the extent (total coverage) of purchase. The

study used Heckman two-stage method to analyze both these decisions

by taking care of sample selection problem. The study finds that

income is an important factor. The study also used perception variables

related to coverage of illnesses and health expenditure and these were

found significant in insurance purchase decision. Knowledge about

insurance came out also as significant important factor affecting the

decision. The number of children in the household was also found as

an important factor affecting the extent of insurance purchase decision.

Age also came as an important variable in deciding the extent of

insurance and people in higher age groups relatively spend more on

insurance. This study includes only one city of Gujarat i.e. Anand but

this study covers major three cities of Gujarat so it will be more

informative for Health Insurance.

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Mala Srivastava (June 2007): ‘An empirical analysis to study the

impact of Switching Costs on Switching behavior in Indian

Insurance Sector’, Journal of Insurance and Management,

BIMTECH, Vol. 6 No. 12: The study found that before liberalization

of the insurance sectors in the late 1990s, there was virtually no

competition in insurance sector. The four subsidiaries of the General

Insurance Corporation enjoyed monopolistic position till 2000. All the

new players entered have eye on the all insurance business including

automobile insurance sector as it comprises of the largest segment in

the non-life segment. The extent of this opportunity is likely be a

function of several factors like de-tariffing, customers’ satisfaction

with the current insurer, loyalty, and the ease and propensity to switch

to the insurance provider. Indeed, increasing knowledge before acting

is one way to avoid the risks associated with decisions under

uncertainty. As a matter of fact, information-gathering activities are

close substitutes for insurance contracts as protection against certain

types of risks. The addition of a cost to insureds for switching insurers

is shown to give incumbent provider a degree of monopoly power in

setting prices. Adding costly insured price search further reduces the

market share of new entrants. Barriers to switching other than product

differentiation may also exist. High transition costs, or switching costs,

between insurance plans could seriously reduce the propensity to

switch. The study attempted to understand the underlying factors

which may affect the decision to change insurers using the concept of

perceived learning cost, quality of services, set up cost, relational cost

and monetary cost and to understand how these variables affects the

propensity of insured customers to switch insurers.

R. Sunitha, M. Dhanabakyam (June 2007): ‘Service Quality in

Health Insurance’, Journal of Insurance and Management,

BIMTECH, Vol. 6 No. 12: The study found that bringing up a family

is a costly affair today. This is because of the increasing cost of

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education, rise in prices and most important the rising expenses of

medication. The best way to reduce the medical cost would be to take

up health insurance. But today, the market being a customer-oriented

many service providers offer various schemes and privileges to attract

them. But how many offer quality service is a big question. Service

quality refers to the quality expected by the customers in rendering

services. Globalization and liberalization has led to a lot of changes in

the service sector. Entry of private service providers is a great

challenge to the public players. Health Insurance industry is under

hectic pressure to provide the best service to the customers. The future

growth of these companies depends upon the service quality and

various products offered to the customers. Health Insurance providers

have to be cautious in retaining their customers because the bond

between them ceases to terminate at the end of the year. The study has

made an attempt to find out the factors determining the service quality

and the level of satisfaction in the service provided by the service

providers.

The study on “The Relevancy of Crop Insurance in Enhancing Food

Security in Zimbabwe” by Innocent Tinarwo, National University of

Science and Technology, 2008, says that the survey showed that

farmers are mostly affected by climatic risks and also Zimbabwean

agriculture industry does not meet the conditions necessary for a

sustainable crop insurance program.

The paper concluded that crop insurance can enhance food security in

Zimbabwe but can not be singled out as the panacea to the food

security crises in Zimbabwe. There is need for complementary

programmes from the government, the financing institutions, research

institutions and meteorological bureaus and there is also need for

cooperation amongst the farmers. Most farmers expressed their

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willingness to participate in the restructuring of a new comprehensive

crop insurance facility.

The Study on “Understanding auto insurance coverage for seniors”

by Jasper Erick (2010), says that finding the best auto insurance for

seniors can be a very difficult task. The task becomes more difficult

when the cost of premium account is taken into consideration. Senior

citizens have no steady source of income and therefore paying the

insurance premiums after retirement seem to be very difficult for them.

Even if they do get insurance rates at discounted rates then also the

senior drivers need to increase their income and shop for higher

discounted affordable premiums.

He found that one great feature about senior drivers is the fact that they

appreciate the importance of having a clean driving record. They also

understand that having a good record will also help in availing lower

insurance quotes. This can further be ensured if getting in to traffic

violations and other traffic misconducts are avoided. This factor is

often cited by senior drivers as a positive feature about them when they

bargain for reduced rates of insurance. Insurance rates for seniors are

still higher than that quoted for the younger drivers. If the seniors can

understand the reason behind this then it becomes easier for them to

look for criterions that will help them to avail lower insurance

quotations.

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2.3 Review of Comparative Studies on Insurance sector

In Shearwater v Guardian Insurance Co., (1998) 60 BCLR (3d) 37, a

vessel sank while moored to a log boom. The policy contained a term

that the vessel would be inspected on a daily basis and pumped as

necessary. In fact, the vessel was not boarded daily but was observed

from shore and pumped when necessary. The court held that the

inspection term was not a true warranty but merely a suspensive

condition and that because the vessel had been boarded and pumped

the day before the sinking it was not causative of the loss.

Gumber and Kulkarni (2000) compared the Mediclaim, ESIS and

SEWA health insurance policies to find the similarity and differences

among them. Rao (2004), discusses the issues and challenges for

health insurance sector in India. She found financing to be one of the

most important components to improve health system in India and

advocated that health insurance should be given very high priority by

the government as a financing mechanism. But these two studies are

about health insurance and not about the specific player and specific

cities. My doctoral thesis includes the study of specific players and

specific cities. So it will be helpful to Gujarat region people.

In Elkhorn Developments Ltd. v Sovereign General Insurance Co. et

al., 2001 BCCA 243, the policy contained a warranty that any

movements of the barge would be subject to underwriters’ prior

approval. In breach of this warranty, the barge was moved without any

notice to underwriters and sank four days after the move had been

completed. The Court of Appeal rejected the argument that there must

be a “substantial relationship” between the policy term and the loss

incurred before the term could be called a true warranty. All that was

required was the intent that the breach would discharge the insurers

from further liability. This intent was found in the use of the word

“warranty” (which was not determinative), the fact that the parties

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were sophisticated professionals and in the fact that all cover notes

clearly stated “No moves without prior approval”. (Note: The intent

would have been easier to find if it had been expressly set out in the

policy.)

Arup Chatterjee (May 2003): ‘Public-Private Partnership In

Financing Catastrophe, Terrorism and Uninsurable Risks: The Role

of An Insurance Supervisor’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 5: This study attempts to

articulate different explanations that lie behind the limited risk sharing,

relating them both to recent industry developments and financial

theory based on the study of regulations and practices in vogue in

different countries of the world. It examines how financial innovation

coupled with government intervention can help change the equilibrium

toward a more efficient outcome. This study argues how the financial

exposure of households and firms to natural catastrophe disasters is

borne primarily by insurance companies and how insurers use

reinsurance to cover only a small fraction of these exposures, and how

many of them do not have enough capital and surplus to survive

medium or large disasters.

Michael R. Powers, Larry Y. Tzeng (May 2003): ‘Mean-Preserving

Transformations: Market Insurance vs. Self-Insurance’, Journal of

Insurance and Management, BIMTECH, Vol. 3 No. 5: Rothschild

and Stiglitz (1970, 1971) were the first to study how an increase in risk

affects the demand for a risky asset. Gollier (1995) identified the

necessary and sufficient condition for unambiguous comparative

static’s for demand under transformations of the asset's probability

distribution function. In this study, they studied the demand for

proportional insurance when the loss variable undergoes a mean-

preserving transformation (MPT). Treating the cases of market

insurance and self-insurance-both separately and in combination-we

84

identify the necessary and sufficient conditions for unambiguous

comparative static’s for demand. Interestingly, they found that a

change in risk has no impact on the demand for self-insurance in the

presence of market insurance, or on either type of insurance in the

presence of a budget constraint.

In Continental Insurance Co. v Almassa International Inc., 2003

ONSC 10422, concerned damage to a shipment of lumber.

Underwriters denied the claim arguing relying upon an exclusion in the

policy for delay. The assured pleaded that underwriters had acted in

bad faith in denying the claim and in dealing with the claim. Regarding

the allegations of bad faith, the trial Judge was very critical of the way

in which underwriters handled the file. The criticisms included:

making an interim payment of only US$260,000 when underwriters

had agreed to pay US$350,000; interfering with and attempting to

influence the surveyor; failing to list relevant documents and lying

about same on discovery; and, raising allegations the damage was

caused by inherent vice when underwriters knew there was no basis for

this defence. She concluded that there was definite evidence of

unfairness and deception. However, and notwithstanding these

findings, she declined to order punitive damages on the grounds that

the conduct was not so outrageous that punitive damages were required

to act as a deterrent. Thus, although underwriters need to be

continuously vigilant that they deal fairly and in good faith with their

assureds, the concerns that every denial will give rise to a finding of

bad faith are not justified.

Sanjiv Marwah, Alok Saklani (June 2004): ‘Comparative Analysis of

Agent’s Perceptions In Public and Private Sector Insurance

Companies’, Journal of Insurance and Management, BIMTECH,

Vol. 3 No. 6: This study says that privatization in Indian Market has

thrown open the long closed Insurance sector open to competition. Life

85

Insurance company (LIC) of India, the virtual monopolistic company

has some company, now. With the choice being made available, the

market must evolve fast. This study attempted to evaluate the changes

ensuing privatization, especially in the area of customer service, at the

end of the agent, who is the representative of the insurer and the direct

interface with the customer. With this view, the agents’ perceptions

and expectations have been studied as the researchers feel that these

beliefs are bound to affect their (agents) service orientations and

behavior. The following issues have been addressed: 1) whether the

agents of new players differ from those in the public sector in terms of

profile and behavior, 2) whether the new major players in life

insurance business are delivering superior service as compared to the

existing public sector player (LIC), in the eyes of agent. The results,

indicated that agents in private sector have high perceptions about their

companies and rate them above the public sector player in terms of

performance which has been verified in the relevant statistical tests,

carried out. From a managerial perspective, agents’ beliefs and its role

in improving customer satisfaction and customer loyalty is vital. The

paper touches these issues and also provides recommendations.

Saleema Razvi (June 2004): ‘Medical Healthcare and Private Health

Insurance: An Indian Perspective’, Journal of Insurance and

Management, BIMTECH, Vol. 3 No. 6: The study threw light on

Health and human development, in addition to per capita incomes,

form an integral part of the overall socio-economic development of a

nation. The health system in India has considerably improved during

the past five decades with the spread and accessibility of modern

medicine and considerable improvements in two important indicators

of health status i) the life expectancy at birth and ii) infant mortality

rates. Over the past 40 years, life expectancy has risen by 17 years to

62 years and infant mortality has fallen by more than two-thirds to 68

deaths per 1000 live births. However, compared to other developing

86

countries, the health status in India is not only below the level for all

developing countries but has also shown a lower level of improvement.

This study reviewed the developments in medical healthcare and

studied the present status of private health insurance in India.

In Secunda Marine Services Limited v Fabco Industries Limited,

2005 FC 1565, a vessel was damaged by fire during the course of a

major refit. The vessel was insured under a builders' risk policy and the

underwriters brought action against the subcontractor that caused the

fire. The subcontractor sought to rely upon a line of cases relating to

building construction in which various courts have held that

subrogation actions are not available as against contractors and

subcontractors. The Federal Court refused to extend this line of cases

to ship building contracts which he held were governed by federal

marine insurance and not provincial law.

Chao-chun Leng, Michael R. Powers, Emilio C. Venezian (May

2005): ‘The Relationship between Underwriting Profit Margin and

Investment Income: Changes in Competitiveness in Property and

Liability Insurance’, Journal of Insurance and Management,

BIMTECH, Vol. 4 No. 7: They analyzed the relationship between

underwriting profit and investment I ncome of the U.S. property and

liability insurance industry from 1958 to 1999. The series of

underwriting profit margins for this industry experienced a structural

change in 1981. Hence the analysis is based on two sub-periods :

1958-1981 and 1983-1999. In the first subperiod, the underwriting

profits follow an AR(2) process, the relationship between underwriting

profit and investment income is not consistent with competitive

equilibrium, and insurers enjoyed excess profits. In the second sub

period, the series for underwriting profit and investment income do not

reject the unit root hypothesis. In this period the relations predicted by

87

financial theory for a competitive market in equilibrium hold

empirically, and there in no evidence of excess profits.

In another study, Acharya and Ranson (2005) compared four

different CBHIs in Gujarat and tried to analyze their health

insurance schemes. The studies focusing on examining the factors

affecting health insurance purchase decision have found that income is

an important factor Savage and Wright 1999). This association has

been based on the premise that families, which have higher

hospitalization risk, will have higher probability of purchasing

insurance. Other factors such as age, education, gender etc. have also

been found to be important factors affecting insurance purchase

decision. This study did not cover the major insurance player scenario

but my study will cover this also.

R. Rajagopalan (June 2006): ‘Comparing Traditional Life

INSURANCE PRODUCTS in the Indian Market: A Consumer

Perspective’, Journal of Insurance and Management, BIMTECH,

Vol. 5 No. 9: It is found that Life insurance policies are valuable assets

to mitigate the financial risk of untimely death. As such, every

individual facing such a financial risk who can afford to pay for such a

protection must seriously consider purchasing some life insurance. In

the current Indian market, this choice is difficult on three counts:

Inherent complexity due to uncertainty and long time horizons, The

need to compare a plethora of different types of products from

competing insurance companies, Most insurance policies bundle pure

insurance with savings to offer composite products.

This study was an attempt at a comparative evaluation of the

traditional insurance policies available in the Indian market from a

consumer perspective. The study used an expected present value

approach, data on mortality rates, currently prevailing premiums on

88

insurance policies and interest rates- for the comparison within and

across policy types.

Zhang Hui, Ma LiMiao (June 2006): The Choice of Chinese Non-

life Insurance Industry Between Scale and Efficiency: Empirical

Research on Efficiency Under Globalization of Insurance Market ’,

Journal of Insurance and Management, BIMTECH, Vol. 5 No. 10:

This study discussed that since December 11th, 2001, when China

became one member of WTO, more and more foreign non-life

insurance companies has entered into Chinese market and insurance

market of China inclines toward a more extensive internationalization.

Under the exterior pressure of the competition, Chinese supervisor

deregulates gradually in many areas including business scope, the

region restriction and forms of companies. On the other hand, under

the vehement competition, Chinese supervisor also put more emphasis

upon the market behavior and solvency of insurers. Many foreign and

local investors also set foot in the non-life insurance realm.

Meanwhile, the aim of Chinese insurance industry is to be stronger and

more profitable. The research period of this study was from 1996 to

2004. They applied frontier methodology to calculate efficiency scores

.The sample came from 27 insurance companies of the Chinese

insurance market. They found that the same dispersion in efficiency

sores between Chinese local and foreign insurance companies. The

main reason for this phenomenon mainly derives from the limitation of

scale. Through the analysis of Malmquist Productivity Index, they

observed that the performance of Chinese Local companies improved

obviously. They also found that the changes are not consistent in

different companies.

In Ocean Masters Inc. v AGF M.A.T. (Allianz AGF MAT Ltd.), 2007

NLCA 35, a fishing vessel sank 40 miles off the coast but while

returning from a journey to a place 170 miles off the coast. The policy

89

contained a warranty that the vessel be “CSI certified and maintained”.

The vessel's CSI certificate did not permit the vessel to fish more than

120 miles off the coast. The Nova Scotia Court of Appeal held that the

warranty was merely a suspensive condition because the general

conditions of the policy provided a breach of a clause or condition

prior to a loss would not void coverage and because the breach had no

bearing on the loss.

T. VANNIARAJAN, M. JEYAKUMARAN (June 2007):

‘Discriminant Service Quality Among Public and Private Players in

Life Insurance Market’, Journal of Insurance and Management,

BIMTECH, Vol. 6 No. 11: The study discussed that with the

globalization and liberalization, the service sector has been facing a lot

of changes. In the insurance sector, the entry of private companies

leads to a drastic change in the market. The success of the companies

in the market rest on the availability of customized product and also

the service quality offered to customers. Life insurance company acted

as a monopoly in the market but now the private insurance companies

have acquired 13 percent of the life insurance market and 14 percent of

non – life insurance market. The future growth of the companies

depends upon its service and service quality to the customers. At this

juncture, the insurance companies should evaluate their services and

identify their distinction from others. The only way to succeed in the

market is the formulation of differentiated service to different customer

segments. Hence, it is essential to identify the discriminate service

quality among the public and private players in Life Insurance market.

This study has made on attempt on the identification of various service

quality factors among the insurers and also the discriminate service

quality factors among the public and private players especially in life

insurance market. The Life Insurance Corporation (LIC) and nine

private insurance players have been purposively selected for the study.

In total 250 customers from LIC and 20 each customers from each

90

private players have been selected to examine the objectives of the

study. The pre structured questionnaire has been used to collect the

data. The response rate is only 68.83. The study concluded that the

important service quality factors in the life insurance market are

Distribution Network, Product, Responsiveness, Reliability, Customer

Relationship Management, Empathy, Brand Building, Promotion and

Tangibles. The identified discriminate service quality factors among

the public and private players are Distribution Network, Product and

Reliability.

The study on “Health insurers fear misuse of portability” by Namita

Singh, (2010) TNN, says that the insurance regulator's fiat giving

unhappy health insurance customers the option to switch insurers

evoked mixed response from the companies. The Insurance Regulatory

and Development Authority (IRDA) allowed policy holders to change

their existing insurer without any change in the premium outgo.

She found that some insurers believe that the guidelines may have

some adverse impact on the sector. "Portability can be genesis to

various frauds and misuses. We need to evaluate the pros and cons of

the move but we are confident that in the long run, it would be the

company with the better services and integrity that would stand to gain

in the market dynamics," Antony Jacob, CEO of Apollo Munich

Health Insurance, said.

The study on “Crop Insurance: The New Babe of the Indian

Insurance Industry” by Kailash Chandra Mishra, (2003), discusses

that there is no specific IRDA regulation for crop insurance, a

manifestation of weak commitment of the first about of regulatory

regime to this preponderant national activity. Recently, Government of

India exhibited its commitment to create a safety net for Indian

Agriculturist by facilitating the formation of ACIC – Agricultural Crop

91

Insurance Corporation. This paper is a critical study on crop insurance

in India. The paper also prepares a basic frame to develop this sector

and suggest the precautions.

2.4 Gaps of the Study

Review of Literature shows that various studies have been conducted

on the various aspects of the insurance fields like Life Insurance, Non-

Life Insurance and Comparative Studies on Insurance.

In the field of Life Insurance, undertaken Studies are in the area of:

The role of education in decision-making to buy life Insurance, The

Incentive Effects of No Fault Automobile Insurance, Marketing of Life

Insurance product, Life Insurance Marketing in India (A) The

Changing Advertising & Promotion Norms, Brand Building and

Advertising: approaches in Indian Life Insurance Industry, The

Potential of Rural Life Insurance in India: Problems and Prospects, A

Study of Risk Perception of Indian Insurees Towards Private Life

Insurers, Life insurance marketing in rural segment” by Bimabazaar-

Administrator, A Study on the Impact of Merger Policy and

Regulation: Minimum Capital Requirement and Its Effect on Life

Insurance Industry, The Focus of Life Insurance: Risk Protection or

Investment—Evidence from the Empirical Study on the Demand of

the Life Insurance in China- An Emerging Market, Unit Linked

Insurance Policies [ULIP] and Risk Management, Customer

Awareness Towards LIC Policies in Coimbatore City, Leapfrogging

Insurance Technology: Regulating Opportunity in Developing

Property-Liability Markets, A Stochastic Linear Programming Model

for Asset Liability Management: The Case of An Indian Insurance

Company, Evaluation of Quality Dimensions in Life Insurance Market:

Customer- Segmentation Analysis and IRDA norm impacts Ulip

pension offers

92

In the field of Non-Life Insurance, undertaken studies are in the field

of: Liberalization of Insurance Markets: Issues and Concerns, Crop

Insurance: The New Babe of the Indian Insurance Industry,

Dimensions of Health Insurance For The Rural Poor, Relationship

Commitment For A Non-Life Insurance Services Provider: A

Conceptual Model, Financial Crises: A Test of Insurer's Risk

Management, Outsourcing and Value Chain Restructuring in the

Insurance Industry, Third Party Administrators and Health Insurance in

India: Perception of Providers and Policyholders, Community Health

Insurance in India, The effect of Automobile insurance and Accident

liability Laws on Traffic Fatalities, Fire Insurance Cliam, Wedding

insurance in India, Capacity Building for the Development of Health

Insurance Systems in India, Long-Term Care Insurance and Basis

Risk, A Study on The Economics of Post-Loss Minimization: An

Analysis of The Effectiveness of The Insurance Law and Clauses,

Micro-insurance Institution and Innovations in China’s Rural Medical

Insurance Institutions, Health Insurance Regulation by States and the

Federal Government: A Review of Current Approaches and Proposals

for Change, analyses the factors that affect Health insurance purchase

decision in a micro insurance setting, An empirical analysis to study

the impact of Switching Costs on, Switching behavior in Indian

Insurance Sector, Service Quality in Health Insurance, The Relevancy

of Crop Insurance in Enhancing Food Security in Zimbabwe and

Understanding auto insurance coverage for seniors

In the field of Comparative Study on Insurance, undertaken studies are

in the field of: Shearwater v Guardian Insurance Company, comparison

of the Mediclaim, ESIS and SEWA health insurance policies to find

the similarity and differences among them, Elkhorn Developments Ltd.

v Sovereign General Insurance Company, Public-Private Partnership In

Financing Catastrophe, Terrorism and Uninsurable Risks: The Role of

93

An Insurance Supervisor, Mean-Preserving Transformations: Market

Insurance vs. Self-Insurance, Continental Insurance Co. v Almassa

International Inc., Comparative Analysis of Agent’s Perceptions In

Public and Private Sector Insurance Companies, Medical Healthcare

and Private Health Insurance: An Indian Perspective, Secunda Marine

Services Limited v Fabco Industries Limited, The Relationship

between Underwriting Profit Margin and Investment Income: Changes

in Competitiveness in Property and Liability Insurance, comparison

four different CBHIs in Gujarat and tried to analyze their health

insurance schemes, Comparing Traditional Life INSURANCE

PRODUCTS in the Indian Market: A Consumer Perspective, The

Choice of Chinese Non-life Insurance Industry Between Scale and

Efficiency: Empirical Research on Efficiency Under Globalization of

Insurance Market, Ocean Masters Inc. v AGF M.A.T. (Allianz AGF

MAT Ltd.), Discrimination of Service Quality Among Public and

Private Players in Life Insurance Market, Health insurers fear misuse

of portability and Crop Insurance: The New Babe of the Indian

Insurance Industry

But none of the studies has been conducted in the field of Comparative

Study of Major Insurance Players in Gujarat with Special reference to

Life, Health and Vehicle Insurance. The study presents an in-depth

study on the Indian Insurance sector for last five years for Life and

Non-Life Insurance including number of registered players in India,

Number of Policies issued, Net Claim Incurred, Market Share, Number

of Individual and Corporate Agents, Investment of Public and Private

Insurance Players, Penalty charged from different players, Penetration

and Number of Offices of Insurance Players. Comparative Analysis of

major insurance players on the basis of secondary data includes

comparison of Major Insurance players’ Total Numbers of Policies

issued, Total Revenues, different aspects of Profit & Loss Account and

Balance sheet for last five year.

94

This study is descriptive in nature. It is completed with the help of

primary data as well of secondary data. Primary data was collected

through the market survey of insurance investors and interviews &

discussion with insurance manager, experts and agents. Secondary data

has been collected through the information from internet, magazines,

Books, articles, IRDA’s bulletins, newspapers, government‘s journals

etc.

With these similar concepts in mind, the study is undertaken for

Gujarat, especially for Surat, Ahmedabad, Vadodara by conducting

survey of Insurance Investors to find out the factor affecting to buying

and renewing decision of Insurance policy, to know the attitude of

people towards Insurance Industry, to know the perception of

Insurance Investors’ towards services provided by major Insurance

Players and personal interview has been conducted of Insurance

Agents to find out the strategies used by companies for introducing

insurance schemes in the market.

95

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98

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101

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