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INDEX

Serial No.

Topic

Page no.

1.

Introduction

2.
3.

History
Insurance Sector Reforms

8
9

4.

Importance of Insurance

11

5.

14

6.

Insurance Regulatory and Development


Authority of India
Insurance Industry-Classification

7.

4 Is of Insurance

19

8.

General Insurance

21

9.

22

10.

Changing Scenario of General Insurance


Market
Product levels

11.

Frequent Terms Used

29

12.

Public Sector Subsidiaries

31

13.

Private Players

39

14.

Market Share

41

15.

Case Study

46

16.

Conclusion

47

17.

Webliography

49

17

26

INTRODUCTION
INSURANCE
Whenever there is uncertainty there is risk. We do not have any control over
uncertainties which involves financial losses. The risk may be certain events like death,
pension, retirement or uncertain events like theft, fire, accident, etc.
Insurance is a financial service for collecting the savings of the public and providing
them with the risk coverage. It comes under service sector and while marketing this
service due care is taken in quality product and customer satisfaction. The main function
of the insurance is to provide protection against the possible chances of generating losses.
The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again.
Tracing the
developments in the Indian insurance sector reveal the 360-degree turn witnessed over a
period of almost two centuries.
The opening up of Insurance sector was a part of the on going liberalization in the financial
sector of India. The changing face of the financial sector and the entry of several companies in
the field of life and non life Insurance segment are one of the key results of these liberalization
efforts. Insurance business by way of generating premium income adds significantly to be the
GDP.
Over the past three years, more than thirty companies have expressed interest in doing business
in India. The IRDA (Insurance Regulatory Development Authority) is the regulatory authority,
which looks over all related aspects of the insurance business. The provisions of the IRDA bill
acknowledge many issues related to insurance sector. The IRDA bill provides guidance for three
level of players - Insurance Company, Insurance brokers and Insurance agent. Life Insurance
sector is key of the key areas where enormous business potential exists. In India currently the
life insurance premium as a percentage of GDP is 1.3% against, 5.2 per cent in the US.
The entry of several private insurance companies particularly international insurance companies,
through joint ventures, will speed up the process of insurance mobilization. The competition will
unleash new scheme and benefits, which will give consumers a better chance to save as well as
insure. The regulatory system in India is relatively new and takes some more time to make the
Insurance sector a perfectly competitive one. Insurance Regulatory Authority of India issued
regulations on 15 subjects which included appointed. Actuary, actuarial report, Insurance agents,
Solvency margins, reinsurance, registration of reinsurers, and obligation of insurers to rural and
social sector, investment and accounting procedure. The reform in Insurance in India is guided
by factors like availability of a variety of products at a competitive price, improvement in the
2

quality of customer service etc. Also the employment opportunities in the Insurance sector will
increase as major players set their business plans in India. The policy of the government to open
up the financial sector and the insurance sector is expected to bring greater FDI inflow into the
country. The increase in the investment limit in this vital sector has generated considerable
business interests among the foreign insurance companies their entry will certainly change the
insurance sector considerably.

HISTORY
INSURANCE SECTOR
The business of life insurance in India in its from started in India in the year 1818 with the
establishment of the Oriental Life Insurance Company in Calcutta. Some of the important
milestone in the life insurance business in India are:
1912: The Indian Insurance Companies Act enacted as the first statute to regulate the life
insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect the
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of
protecting the interests of the issuing public.
1956: 245 Indian and foreign issuers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a
capital contribution of rs. 5 crore from the Government of India. The General Insurance business
in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first
general insurance company established in the year 1850 in Calcutta by the British.
Some of the important milestone in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all the classes of
general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of
conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency margins
and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general
insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and
grouped into four companies viz. the National Insurance Company Ltd,. and the New India
Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance
Company Ltd. GIC incorporated as a company.

INSURANCE SECTOR REFORMS:


In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
R.N.Malhotra was formed to evaluate the Indian insurance industry and recommend its future,
direction. The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector.
In 1994, the committee submitted the report and some of the key recommendations included:
Structure:
1. Government stake in the insurance companies to be brought down to 50%.
2. Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.
3. All the insurance companies should be given greater freedom to operate.
4. Postal Life Insurance should be allowed to operate in the rural market.
5. Only one State Level Life Insurance Company should be allowed to operate in each state.
Regulatory body:
1. The Insurance Act should be charged.
2. An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent.
Investment:
1. Mandatory Investment of LIC Life Fund in government securities to be reduced from 75% to
50%.
2. GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings
to be brought down to this level over a period of time.)
Customer Service:
1. LIC should pay interest on delay in payments beyond 30 days.
2. Insurance Companies must be encouraged to set up unit linked pension plans.
3. Computerization of operations and updating of technology to be carried out in the insurance
industry.

The committee emphasized that in order to improve the Customer Services and increase the
coverage of the insurance industry should open up to competition. But at the same time, the
committee felt the need to exercise caution as any failure on the part of new players could ruin
the public confidence in the industry. Hence, it was decided to allow competition in a limited
way by stipulating the minimum capital requirement of Rs. 100 crores. The committee felt the
need to insurance companies in order to improve.

IMPORTANCE OF INSURANCE
Human beings, his family and properties are always exposed to different kinds of risks. Risk
involve the losses. Insurance is a tool which reduces the cost of loss or effect of loss caused by
variety of risk. It accumulates funds to meet individual losses. It is not device to prevent
unwanted event of happening or cause of loss but protects them against that loss by
compensating which as lost. The role and importance of insurance are discussed as follows:
1. Insurance provides securityInsurance provides safety and security against the loss on a particular event. Life insurance
provides security against death and old age sufferings. Fire insurance protects against loss due to
fire while Marine insurance provides protection and safety against loss of ship and cargo. For
personal accident and sickness insurance financial protection is given when the individual is
unable to earn. In other insurance too, this security is provided against the loss at a given
contingency.
2. Insurance reduces business risk or losses In Business, commerce and industry, huge properties are employed. Because of slight
negligence, the property may be turned in to ashes. A person may not be sure of his life, health
and cannot continue the business up to the longer period to support his dependents. By the help
of insurance, he can be sure of his earning, because the insurance company will pay a fixed
amount at the time of death, damage by fire, theft, accident and other perils.
3. Insurance provides peace of mindInsurance removes the tensions, fears, anxiety, frustrate or weaken of the human mind associated
with the future uncertainty. By providing financial position and promise to compensate losses
arise out from various risk, it provides peace of mind and stimulates more and better work
performance of an individual.
4. Life insurance encourages savingThe insured has an obligation to pay premium regularly and cannot be withdrawn easily before
the expiry of the term of policy. Life insurance encourages the habit of regular and systematic
saving through premium and after a certain period, it would be a part of necessary saving of the
insured person.
5. Insurance accelerates the economic growth of the countryTo develop the economic growth of the country, insurance provides strong hand and mind, with
protection against loss of property and capital to produce more wealth. It provides protection
against different kinds of loss caused by risk. It accumulates the capital from the insured and

utilizes for the development of country. Thus, the insurance meets all the requirements for the
economic growth of a country.
6. Insurance helps to reduce inflationInflation created from over supply of money and on less production entities. Insurance can help
to reduce the inflationary pressure in two ways. Firstly, it collects money as an amount of
premium which controls over supply of money and secondly, it provides sufficient funds for
increase production entities. Thus, it reduces the impact of inflation.

Seven Principles of Insurance:


1. Principle of Utmost Good FaithPrinciple of Utmost Good Faith, is a very basic and first primary principle of insurance.
According to this principle, the insurance contract must be signed by both parties (i.e insurer and
insured) in an absolute good faith or belief or trust.
The person getting insured must willingly disclose and surrender to the insurer his complete true
information regarding the subject matter of insurance. The insurer's liability gets void (i.e legally
revoked or cancelled) if any facts, about the subject matter of insurance are either omitted,
hidden, falsified or presented in a wrong manner by the insured.
2. Principle of Insurable InterestThe principle of insurable interest states that the person getting insured must have insurable
interest in the object of insurance. A person has an insurable interest when the physical existence
of the insured object gives him some gain but its non-existence will give him a loss. In simple
words, the insured person must suffer some financial loss by the damage of the insured object.
3. Principle of IndemnityIndemnity means security, protection and compensation given against damage, loss or injury.
According to the principle of indemnity, an insurance contract is signed only for getting
protection against unpredicted financial losses arising due to future uncertainties. Insurance
contract is not made for making profit else its sole purpose is to give compensation in case of any
damage or loss.
In an insurance contract, the amount of compensations paid is in proportion to the incurred
losses. The amount of compensations is limited to the amount assured or the actual losses,
whichever is less. The compensation must not be less or more than the actual damage.
Compensation is not paid if the specified loss does not happen due to a particular reason during a

specific time period. Thus, insurance is only for giving protection against losses and not for
making profit.
However, in case of life insurance, the principle of indemnity does not apply because the value
of human life cannot be measured in terms of money.
4. Principle of ContributionPrinciple of Contribution is a corollary of the principle of indemnity. It applies to all contracts of
indemnity, if the insured has taken out more than one policy on the same subject matter.
According to this principle, the insured can claim the compensation only to the extent of actual
loss either from all insurers or from any one insurer. If one insurer pays full compensation then
that insurer can claim proportionate claim from the other insurers.
5. Principle of SubrogationSubrogation means substituting one creditor for another. Principle of Subrogation is an extension
and another corollary of the principle of indemnity. It also applies to all contracts of indemnity.
According to the principle of subrogation, when the insured is compensated for the losses due to
damage to his insured property, then the ownership right of such property shifts to the
insurer.This principle is applicable only when the damaged property has any value after the event
causing the damage. The insurer can benefit out of subrogation rights only to the extent of the
amount he has paid to the insured as compensation.
6. Principle of Loss MinimizationAccording to the Principle of Loss Minimization, insured must always try his level best to
minimize the loss of his insured property, in case of uncertain events like a fire outbreak or blast,
etc. The insured must take all possible measures and necessary steps to control and reduce the
losses in such a scenario. The insured must not neglect and behave irresponsibly during such
events just because the property is insured. Hence it is a responsibility of the insured to protect
his insured property and avoid further losses.
7. Principle of Causa Proxima (Nearest Cause)Principle of Causa Proxima (a Latin phrase), or in simple english words, the Principle of
Proximate (i.e Nearest) Cause, means when a loss is caused by more than one causes, the
proximate or the nearest or the closest cause should be taken into consideration to decide the
liability of the insurer.

INSURANCE REGULATORY AND DEVELOPMENT


AUTHORITY (IRDA)
On the recommendations of the Malhotra Committee, government has set up an interim
Insurance Regulatory Authority (IRA), with a view to activate an insurance regulatory apparatus
essential for proper monitoring and control of the insurance industry. The IRA is headed by a
chairman who is also Controller o0f insurance and chairman of TBC. The other members of the
IRA, not exceeding seven in number of whom not more than three shall serve full time, shall be
nominated by the central government.
INSURERS:
Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:
Life Insures:
Life Insurance Corporation of India (LIC)
General Insurers:
General Insurance Corporation of India (GIC)
reinsurer)

(with effect from Dec 2000, a national

Insurance Regulatory and Development Authoritarian


Insurance Regulatory and Development Authority Act, 1999, came into existence
from 19/04/2000.

Objects are stated in Act are as follows:

"An Act to provide for establishment of Authority to protect interests of holders


of insurance policies to regulate, promote and ensure orderly growth of insurance industry
and for matters connected there with and further to amend Insurance Act, 1938, Life
Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act,
1972".

Composition:

IRDA will consist of a chairperson and not more than Five whole time members
and not more than four part time members.
Whole time members shall hold office for 5 years or until age of 62 (65 in case of
chair person) whichever is earlier. Part time members shall hold office for not more than 5
years.

Insurance Advisory Committee:

Authority has power to appoint a committee to provide guidance to Authority and


committee is called Insurance Advisory Committee.

10

This committee contains not more than 25 members excluding ex-officio member
representing interest of commerce, trade industry, agriculture, surveyors, agents,
intermediaries etc. Chairperson and members of Authority are ex-officio members of
Insurance Advisory Committee.

Code of conduct for insurance agent:


Every insurer agent shall,
Identify himself and insurance company of whom he is an agent
Disclose his license to prospect on demand
Give requisite information in respect of insurance product offered for sale by his
insurer and into account needs of prospect while recommending a specific 'plan.
Disclose scales of commission payable to him if asked by prospect
Indicate premium to be charged by insurer on insurance product
Explain to prospect nature of information required in proposal from and also
importance of disclosure of material information
Bring to notice of insurer any adverse habits or income inconsistency of Prospect
Inform promptly about acceptance of rejection of proposal by insurer.

11

IRDA- Duties, Powers and Functions


Section 14 of IRDA Act, lays down the rules, powers, duties and functions.
Subject to the provisions of this Act and any other law for the time being in force, the
Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance
business and re-insurance business. Without prejudice to the generality of the provisions
contained in sub-section the powers and functions of the Authority shall include,

Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or


cancel such registration;
Protection of the interests of the policy holders in matters concerning assigning of policy,
nomination by policy holders, insurable interest, settlement of insurance claim, surrender
value of policy and other terms and conditions of contracts of insurance;
Specifying requisite qualifications, code of conduct and practical training for
intermediary or insurance intermediaries and agents
Specifying the code of conduct for surveyors and loss assessors;
Promoting efficiency in the conduct of insurance business;
Promoting and regulating professional organizations connected with the insurance and reinsurance business;
Levying fees and other charges for carrying out the purposes of this Act;
Calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance intermediaries
and other organizations connected with the insurance business;
Control and regulation of the rates, advantages, terms and conditions that may be offered
by insurers in respect of general insurance business not so controlled and regulated by the
Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);
Specifying the form and manner in which books of account shall be maintained and
statement of accounts shall be rendered by insurers and other insurance intermediaries;
Regulating investment of funds by insurance companies;
Regulating maintenance of margin of solvency;
Adjudication of disputes between insurers and intermediaries or insurance intermediaries;
Supervising the functioning of the Tariff Advisory Committee;
Specifying the percentage of premium income of the insurer to finance schemes for
promoting and regulating professional organisations referred to in clause (f);
Specifying the percentage of life insurance business and general insurance business to be
undertaken by the insurer in the rural or social sector; and
Exercising such other powers as may be prescribed

12

CLASSIFICATION OF INSURANCE

13

TYPES OF GENERAL INSURANCE


The different types of General insurance products are listed below. While most policies
are optional that is at the behest of the insured, some are mandatory. The mandatory ones are:
i) Motor Insurance
ii) Public liability (for corporate class)
Fire insurance
Fire insurance means insurance against any loss caused by fire. Section 2(61 of the Insurance Act
defines fire insurance as follows: Fire insurance business means the business of effecting,
otherwise than incidentally to some other class of business, contracts of insurance against loss by
or incidental to fire or other occurrence customarily included among the risks insured against in
fire insurance policies.
The Motor Vehicles Insurance
The Motor Vehicles Act, 1988 (Act No. 59 of1988) is the outcome of the recommendations
proposed by various committees. It has replaced the earlier 1939 Act and it became effective
from 1st July 1989. Some of the more important provisions of the Act provide for the following
matters:
a) Rationalization of certain definitions with additions of certain new definitions of new types of
vehicles.
b) Stricter procedures for grant of driving license and period of their validity.
c) Laying down of standards for the components and parts of motor vehicles.
d) Standards for anti-pollution control devices
Marine Insurance
Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo
by which property is transferred, acquired, or held between the points of origin and final
destination. Cargo insurance discussed here is a sub-branch of marine insurance, though
Marine also includes Onshore and Offshore exposed property, (container terminals, ports, oil
platforms, pipelines), Hull, Marine Casualty, and Marine Liability. When goods are transported
by mail or courier, shipping insurance is used instead.
Mediclaim
Mediclaim Insurance is a hospitalisation benefit policy offered by both Public & Private sector
general insurance companies. The policy takes care of medical expenses following
Hospitalisation/Domiciliary Hospitalisation of the insured in respect of the following situations:
In case of sudden illness
In case of an accident
In case of any surgery which is required in respect of any disease which has arisen during
the policy period.

14

4 IS OF INSURANCE SERVICE
The 4 Is refers to the different dimensions/ characteristics of any service. Unlike pure product,
services have its own characteristics and its related problems. So the service provider needs to
deal with these problems accordingly. The service provider has to design different strategies
according the varying feature of the services. These 4 Is not only represent the characteristics of
different services but also the problems and advantages attached to it.

These 4 Is can be broadly classified as:


Intangibility
Inconsistency
Inseparability
Inventory
Intangibility:
Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible.
Hence, insurance rightly come under services, which are intangible. Efforts have been made by
the insurance companies to make insurance tangible to some extent by including letters and
forms.
Inconsistency
Service quality is often inconsistent. This is because service personnel have different
capabilities, which vary in performance from day to day. This problem of inconsistency in
service quality can be reduced through standardization, training and mechanization.
Inseparability
Services are produced and consumed simultaneously. Consumers cannot and do not separate
the deliverer of the service from the service itself. Interaction between consumer and the service
provider varies based on whether consumer must be physically present to receive the service.
Inventory
No inventory can be maintained for services. Inventory carrying costs are more subjective
and lead to idle production capacity. When the service is available but there is no demand, cost
rises as, cost of paying the people and overhead remains constant even though the people are not
required to provide services due to lack of demand.
In the insurance sector however, commission is paid to the agents on each policy that they
sell Hence, not much inventory cost is wasted on idle inventory. As the cost of agents is directly
proportionate to the policy sold.

15

STUDY OF
GENERAL INSURANCE

16

GENERAL INSURANCE
With the opening up of the insurance industry to the private sector, the need for a
strong, independent and autonomous Insurance Regulatory Authority was felt. As the
enacting of legislation would have taken time, the then Government constituted through a
Government resolution an Interim Insurance Regulatory Authority pending the enactment of
a comprehensive legislation.
The Insurance Regulatory and Development Authority Act, 1999 is an act to provide
for the establishment of an Authority to protect the interests of holders of insurance policies,
to regulate, promote and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the
Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization)
Act, 1972 to end the monopoly of the Life Insurance Corporation of India and General
Insurance Corporation and its subsidiaries.

Definition and meaning:


1.INSURANCE:
Insurance is the means of managing risk and protection against financial loss arising as a
result of contingencies, which may or may not occur.
In other words, insurance is the act of providing assurance, against a possible loss, by entering
into a contract, with one who is willing to give assurance. Through this contract the person
willing to give assurance binds himself to make good such loss, if it occurs.
2.GENERAL INSURANCE:
General insurance means managing risk against financial loss arising due to fire, marine or
miscellaneous events as a result of contingencies, which may or may not occur.
General Insurance means to Cover the risk of the financial loss from any natural calamities
viz. Flood, Fire, Earthquake, Burglary, etc.. i.e. the events which are beyond the control of
the owner of the goods for the things having insurable interest with the utmost good faith by
declaring the facts about the circumstances and the products by paying the stipulated sum , a
premium and not having a motive of making profit from the insurance contract.

17

Changing Scenario of General Insurance Market


'Looks to the future with confidence and optimism'

History of General Insurance:


In India General Insurance business started, Marine Insurance started on later part of the 17th
century. Before nationalization in 1947 we have 147 insurance companies, foreign and Indian
both. But during there nationalization, in 1973 we have 107 companies that merge into four
companies, i.e. taken over by Government. General Insurance Corporation of India (GIC) was
set up in 1973 as a holding company, with four subsidiary operating companies - National
Insurance co Ltd., New India Assurance Co. Ltd., Oriental Insurance co Ltd., and United India
Insurance Co Ltd., with a clear cut mission as set out in the Act.
The overall scenario in the insurance market in India after nationalization. GIC and its
subsidiaries function through a vast country - wide network of around 4100 offices spread across
the length and breadth of the country, GIC has taken the benefit of insurance to almost every
district, across hilly terrain and often inaccessible areas of the country. The customer interface is
made easy through a network of agents, development officers and employees at Branch,
Divisional and Regional offices as well as at the corporate level.

The GIC and its subsidiaries have a workforce of approximately 86,000 In 1973 tainted at
various levels through in house training institutions. Now the total number of employees went
up. The industry has also promoted the National Insurance Academy (NIA), which is the premier
training institute in insurance, catering not only to Indian Nationals but also to select foreign
nationals. The industry issues around 23 million documents and settles 2 million claims every
year. Country wide computerization in the recently past has made the task of policy- holder's
servicing easier and rapid. At the same time, profitable lines and premium components increases
and we became a investment company.

Where does Indian Insurance sector stand compared to International Insurance Sector?
Technologically, Indian insurance sector is quiet comparable with the international sector. Our
vast resources of skilled and technical manpower, huge market potentiality and technical knowhow - all are comparable with the international market. But lacking in the process of
computerization and in pricing (premium rate) is also seen. In product, we have demand in less
because lack of awareness for adequate insurance cover in India with insuring public. Our
marketing strategy is not very modern. But we are trying to rectify both these (Technology and
Marketing) areas.

18

The problems faced by Indian Insurance Sector Today:


The main problems are:

Lack of awareness for insurance needs.

Lack of penetration due to inadequate marketing/delivery system.

Total computerization still in the process of implementation.

Sophisticated covers do not have adequate demands because of General attitude


to insurance in India.

The Schemes:
Recognizing its organizational strengths, the Govt. of India has also entrusted the
corporation with the administration of various schemes for social melioration and public welfare.
Social security schemes benefiting millions of Citizens below the poverty line. Personal
Accident Insurance and Hut Insurance are operated all over the country for which the premiums
are paid by the Government. The GIC administers on behalf of Government, the crop Insurance
scheme for areas and crops notified under the crop Insurance Scheme.
Various low cost mass insurance policies have been evolved over a period of time, e.g.
Jan Arogya Bima Policy:
Role General Insurance Industry is playing in the growth of economy of the country:
The General Insurance Industry has an enviable track record among public sector units. It
has a consistent profit and dividend paying record accompanied by a steady growth in its
financial resources.
Through investments in the- Government sector and: socially - oriented Sectors the
Industry has contributed immensely to the nation's development. The industry is recognized as
one of the largest financial' Institutions in the Country. The ventures initiated by the industry in
the areas of Mutual Fund, Housing Finance have done exceedingly well in recent years.
To protect the country's foreign exchange reserves, the reinsurance arrangement are so
organized that maximum retention is made possible within the country while at the same time
protecting interests of the policy holders. The GIC'S inwards reinsurance wing, called the
SWIFT, maximizes the foreign exchange balance by acting as an international insurer-accepting
risk from all over the globe.

19

GIC'S International operation:


GIC'S international operations span over 31 countries around the globe. The reinsurance
expertise built over a long period has made the Indian Insurance Industry a globally
acknowledged reinsurer of repute GIC'S risk management skill has been backed by specialists
with a vast insurance experience.
Thus, the technical and underwriting skills have been acknowledged in the international market.
The corporation operates in 17 countries through branches and agencies, whereas in another 14
countries, it has subsidiaries and associate companies. The GIC has a subsidiary company known
as 'India International Pvt, Ltd.,' operating in Singapore and a joint-venture company, Kenindia
Insurance co. Ltd.
The impact of liberalization of economy in the activities of GlC. With the liberalization of
economy, General Insurance in India is poised for a quantum jump, both in quality and quantity.
Vision for the future:
It is estimated that the industry will outstrip the present rate of growth and reach a premium
value of over Rs. l,20,000 millions by taking advantage of the extra-large megarisk and social
awareness of insurance in general, even as . a developing country turns into a developed country.
The task before the industry to service the growing number of policy-holders would equally see a
quantum jump in issuance of documents and settlement of claims. Matching reserves and
consequent investment will be a natural corollary.
It is expected that the investment portfolio will touch around Rs. 2,50,000 millions by the end of
the next decade, with the strength built up over the years since nationalization, GIC new looks to
the future with confidence and optimism, takes on global chal1enge with its high standard of
service, innovative initiative and a compelling social perspective.
GIC's plan - in new business areas:
The two new areas that GIC is getting into are the areas of health care and crop insurance. For
the health care business, the corporation has received permission to set up a separate
management services company. GIC has plans to increase the scope of cover in health care,
personal accident and crop insurance and will require expertise in pricing the products.
The Research & Development activities:
They have just entered these areas and for the coming five years we are investing approximately
500 crores. GIC'S R & D cell is created backed up market research data.
The subsidiaries of GIC are becoming an autonomous body.

20

Privatization in the insurance sector of India - Is it in the right direction It's purely a government
decision and the nationalized sector is ready to face the challenge. And have taken the challenge
to stand in the stiff competition.

Some of the General Rules:


1. Mis-description:
The insurance policy shall be void and all the premiums paid by insured may be forfeited by
the insurance company in the event of mis-presentation or misdeclaration and/or non-disclosure
of any material facts.
2. Reasonable care:
The insured shall take all reasonable steps to safeguard the property insured against any loss
or damage. Insured shall exercise reasonable care that only competent employees are employed
and shall take all reasonable precautions to prevent all accidents and shall comply with all
statuary or other regulations
3. Fraud:
If any claim under the policy may be in any respect fraudulent or if any fraudulent means or
device are used by the insured or any one acting on the insureds behalf to obtain any benefit
under the insurance policy, all the benefits under the insurance policy may be forfeited.
4. Few basic principles of general insurance are:
a)
b)
c)
d)
e)

Insurable interest
Utmost good faith
Subrogation
Contribution
Indemnity

5. Risks of loss not covered under general insurance are:


The loss or damage or liability or expenses whether direct or indirect occasion by happening
through or arising from any consequences of war, invasion, act of foreign enemy, hostilities
(whether war be declared or not), civil war, rebellion revolution, civil commotion or loot or
pillage in connection therewith and loss or damage caused by depreciation or wear and tear.
However the risk of loss or damage by war can be insured by payment of additional premium in
some cases only.

21

PRODUCT LEVELS:
In this figure there is a nucleus or core in the center, which is supported by series of tangible and
intangible features and benefits and these from a cluster around the core product.

22

23

The core product of insurance company is insuring life and non life products. People opt for
this service as they want to secure their life, people dependent on them and other valuable things
in life.
The time factor plays an important role while providing service to the customer. The
customer expects that the procedures for settling the claim should be short and not much time
consuming. They should get the benefits of the service as soon as possible.

Today the technology is boosting in each and every field. Insurance is not an exception.
Companies have started providing customers facility of online payment of premium through their
websites. They also provide online assistant to the customer the policy status and how to
calculate the premium. To calculate the premium they just need the present age, the type of
police, sum assured, and accident covered if any. By filling in this information you can calculate
the amount of premium you have to pay. The customer can pay their premiums by means of
credit cards or can also give standing instruction to the bank in order to pay their monthly
premiums.
The insurance companies also provide loan facilities against their policies. At present loans
are granted on unencumbered polices as follows:
Up to 90% of the Surrender Value for policies, where the premium due is fully paid-up, and
Up to 85% of the Surrender Value for policies where the premium due is partly paid-up
The minimum amount for which a loan can be granted under a policy is Rs150. The rate of
interest charged is 10.5% p.a., payable half-yearly. Loans are not granted for a period shorter
than six months, or on the security of lost policies (the assured must have the duplicate policies)
or on policies issued under certain plans. Certain types of policies are, however, without loan
facility.

24

FREQUENT TERMS USED

Agent:

An insurance company representative licensed by the state, who solicits, negotiates or


effects contracts of insurance, and provides service to the policyholder far the insurer.

Actual Total Loss:


It is a loss where the goods are completely lost and become irrecoverable

Additional cover:

An insurance policy extended to cover additional risk perils such as strikes. Riots and
Civil commotion etc on payment of extra premium.

Agreed value policy:

Policy which undertakes to pay a specified amount in case of total loss. Under this case
the policy does not take into account the current market value.

Assessor:

Person who estimates the value of goods for the purpose of apportioning the sum payable
by the underwriters to settle the claims. Also called as Surveyor.

Assured:
Party indemnified against 19ss by means of insurance.

Burglary:

It is a theft committed by breaking into or out of the premises. Evidence of breaking In,
Is necessary.

Coverage:

The scope of protection provided under a contract of insurance; any of several risks
covered by a policy.

Cargo insurance:

A generic term used in both inland marine and ocean marine insurance to designate the
types of insurance available to provide coverage for cargo that is being transported by truck, rail,
air, ship, or boat.

Certificate of Insurance:

A statement of coverage issued to an individual insured, specifying the insurance


benefits and principal provisions applicable to the member.

25

Claim:

The formal request by a policyholder or a claimant for payment of loss under an


insurance policy.

Co-insurance:

A provision under which an insured who carries less than the stipulated percentage of
insurance to value, will receive a loss payment that is limited to the same ration which the
amount of insurance bears to the amount required;

Cover Note:
Is the document that is issued provisionary pending issuance of insurance Policy.

Indemnity:

Legal principle that specifies an insured should not collect more than the actual cash
value of a loss but should be restored to approximately the same financial position as existed
before the loss.

Insurable Interest:

A condition in which the person applying for insurance and the person who is to receive
the policy benefit will suffer all emotional or financial loss, if any untouched event occurs.
Without insurable interest, an insurance contract is invalid,

Insurance:

Social device for minimizing risk of uncertainty regarding loss by spreading the risk over
a large enough number of similar exposures to predict the individual chance of loss.

Net Premium:

The portion of premium rate which is designed to cover benefits of the policy, excluding
expenses, contingencies and profit.

Policy:
Is the legal document that has the conditions of the insurance contract

26

PUBLIC SECTOR SUBSIDIARIES


I. Oriental Insurance Company.
The Oriental Insurance Company' Ltd. (OICL) is one of the leading General
Insurance companies in India and is a subsidiary of the General Insurance Corporation (GIC) of
India. It is one of the oldest Insurance companies and was established in the year 1947. The
Company transacts all kinds of non-life insurance business ranging from insurance covers for
very big projects to small rural insurance covers
OICL has its Head office in New Delhi, the capital of India. The Company has 21
Regional Offices, 311 Divisional Offices and 635 Branch offices in various cities of the country.
Reinsurance connections are spread all over the world. The Company has a very high
reputation in the Reinsurance market.
OICL specializes in devising special covers for large projects like Power Plants, Petrochemical, Steel Plants and chemical plants. It has a highly technically qualified and competent
team of professionals, to render the best customer service. The Company has a dedicated project
cell at the Head Office as well as major cities of India. A special R & D team has been dedicated
to bring out special innovative covers like Stockbrokers Policies, Special Package Policies etc.

II. The New India Assurance Company:


Established by Sir Dorab tata in 1919, New India was the first fully Indian owned
insurance company in India. There were nearly 150 insurance firms in India - including ones
from France, the UK and America. These were operated through managing agencies in India
largely held by Indian business houses. New India is a leading global insurance group, with
offices and branches throughout India and various countries abroad. The company services the
Indian subcontinent with a network of 1,130 offices, comprising 26 Regional offices, 366
Divisional offices and 738 Branches. With approximately 25,000 employees, New India has the
largest number of specialist and technically qualified personnel at all levels of management, who
are empowered to underwrite and settle claims of high magnitude
New India has historically been a frontrunner in several diverse fields of business
and industrial activity. New India are lead underwriters of India's Space programn1e having
insured several INSAT and other, satellites. New India are pioneers in Engineering insurance,
Financial risks insurance and are now offering customized Risk Management solutions to our:
corporate clients in the Private and public Sectors in Power, Telecom, Petrochemicals, Steel and
Automobile industries
New India's foreign operations started with the establishment of an office in
London in 1920. An international presence was built up by New India as a direct writing

27

Company in 23 countries spanning 5 continents. It increased its reach and capacity, for
reinsurance facilities for all classes of business.
Starting way back in the 1920s, New India's UK operations have now taken deep
root. New India is party to one of the oldest reinsurance treaties in the UK market. Through
participation in Aviation and Marine Hull underwriting, New India has, over a period of time,
strengthened its market presence. In 1980's with the establishment of a full-fledged branch to
underwrite UK Business, it has extended its UK operations, authorized by the Department of
Trade and industry
The New India commenced its Japan operations in 1950, and now: operates
through 8 branches. The Japanese operation covers 35% of the Companys overseas premium
income.

III. The National Insurance Company:


Since incorporation in the year 1906, National Insurance~ Company has been
carrying out general insurance business under private management until 1972, the year of its
nationalization. In the same year 22 foreign and 11 Indian Insurance Companies were
amalgamated with National Insurance Company Limited, as a subsidiary company of General
Insurance Corporation of India
Headquartered in Calcutta it has an organizational network of over 964 offices with
around 20,077 trained workforces. The company also has operations in Hong Kong and Nepal
and ranks among the top global business insurers. Later on in 2002, with the passage of
Insurance amendment Bill (2002), National Insurance Company has been delinked from GlC
and. has been functioning as an independent company
Its product range includes motor vehicle insurance; fire insurance on buildings and
other assets; various crime covers like burglary and theft of cash; machinery breakdown cover
for industrial equipment; transit damage cover for imported or exported goods; as well as legal
liability cover.
Professional indemnity and directors and officers liability covers are some of the
new covers. NICO General Insurance seeks to attract clients and intermediaries and flexibility in
claims settlements, and at the same time ensuring that we do not erode shareholder value. The
objective is to add value to the shareholders' funds whilst ensuring customer satisfaction? The
strength of NGI is in its balance sheet.
NICO General Insurance views the future and its prospects as extremely bright,
exciting and rewarding for staff, clientele and shareholders alike.

28

IV. United India Insurance Company:


United India Insurance is one of the four subsidiaries of the General Insurance
Company carrying on general insurance business with its head office at Chennai. Later on in
2002, with the passage of Insurance amendment Bill (2002), United India Insurance has been Del
inked from GIC and has been functioning as an independent company.
UI spans the country with a network of 1123 offices and manpower of Over 21,000
employees. The organizational structure comprises 22 regional offices, 327 divisional offices..,
and 777 branch offices, supported by 21,505 employees. ICRA has maintained the iAAA rating,
indicating the claims paying ability of United India Insurance (UII) to be of the highest order.
The rating takes into consideration the favorable prospects for the domestic general insurance
industry following the deregulation of the sector.
UII continues to be a dominant player in the Indian insurance industry, with an overall
market share of 25% and a leadership position in the southern markets. UII is a Pioneer of
Personal Insurance Products in India who specializes in non-life insurance products including
Medical and Accident Insurance. It enjoys a market share of over 25 percent of the non-life
insurance sector in India.

PRIVATE COMPANIES
1. Bajaj Allianz General Insurance Company:

Allianz AG:

Allianz group was founded in 1890 and is one of the world's leading insurance
companies with over 100 years experience in insurance and related services. It is also the largest
insurer in Europe. Allianz group has multi-local structure and presence in over 70 countries. The
key business areas of Allianz group include General Insurance (property, engineering, marine,
motor, casualty and miscellaneous), Reinsurance, Risk Management, Life & health insurance,
Asset Management and Pension Funds Management.

Bajaj Auto Ltd.

Bajaj Auto Ltd the flagship company of Bajaj Group was incorporated in 1945 as
Bachraj Trading Corporation. Initially it started by assembling two and three wheelers in
collaboration with Piaggio of Italy. After the expiry of the Agreement in 1971 the two and three
wheelers acquired the brand name of Bajaj. The strength of the company lies in its strong brand
image and ability to offer value for money products leveraging on its large-scale operations.
29

The Joint Venture

Bajaj Allianz General Insurance a joint venture non-life company promoted jointly by
Bajaj Auto and German insurer- Allianz. Indian auto major holds 74% while Allianz holds 26%
in the Joint Venture, and has an authorized and paid up capital of Rs. ll0 crores. Mr. Graham
Norris is the CEO of the company. Bajaj Allianz General Insurance will leverage the customer
base and expertise of Bajaj Auto Ltd and Allianz.

2. Royal Sundaram General Insurance Company Limited:

Sundaram Finance

Sundaram Finance Limited (SF) was established In 1954 with a paid-up capital of Rs.
0.02 million, primarily to assist the development of Road Transport Industry.
SF has been providing financial assistance to road transport operators for acquiring
commercial vehicles under hire purchase system. Emerging as the leader in the industry, SF has
been staying at that position for over four decades. SF diversified into equipment leasing in
1981.

Royal & Sun Alliance

Royal & Sun Alliance is one of the world's leading international Insurance companies.
The Sun was established in 1710 and is the oldest. Insurance company in existence still trading
under its original name. The Alliance was founded in 1824 and the Royal in 1845.
The Group's international presence began to emerge in the 18th century with business
ventures in mainland Europe. Forays into the US and Canadian markets followed in the 19th
century, and in 1998, Royal & Sun Alliance became the first UK insurance company to be
granted a license to operate in China.

3. ICICI Lombard General Insurance Company:

ICICI

ICICI Ltd. was established in 1955 by the World Bank, the Government of India and the
Indian Industry, to promote industrial development of India by .Providing project and corporate
finance to Indian industry.

30

Since inception, ICICI has grown from a development bank to a financial conglomerate
and has become one of the largest public financial institutions in India. ICICI has thus far
financed all the major sectors of the economy, covering 6,848 companies and 16,851 projects.

Lombard

Lombard Canada Ltd., is a leading insurance management company responsible for


providing insurance management services for all of the Lombard group's commercial, personal,
and specialized insurance companies. Canadian owned and operated, Lombard Canada Ltd. has
its head office in Toronto and has annual sales in excess of$500 million and is a wholly owned
subsidiary of Fairfax Financial Holdings Limited (FFH on the TSF Lombard Canada Ltd. has
achieved a reputation for providing solid underwriting performance, diversified books of
business and strong capital positions.

The Joint Venture

ICICI Lombard General Insurance Co will be headed by Mr. Sanjiv Kerkar. ICICI would
hold about 74 percent stake, while Canadian insurer Lombard would hold the maximum
permissible 26 percent and commence business with a start-up capital ofRs.100 crore. ICICl
Lombard has plans to sell covers to the corporate clients of ICICl.

4. Tata AIG General Insurance Company Limited:

TATA Group

Tata Enterprises with 82 companies, spread over seven sectors and with an annual
turnover exceeding US $ 8.8 billion, employs more than 262,000 people. Tata Group has shown
over years that it is a value driven company and has" pioneering contributions in various fields
including insurance, activation, iron and steel. Tata companies have forged a number of global
alliances with eminent international partners in several fields. In terms of capital market
performance as many as 40 listed Tata companies account for nearly 5% 6fthe total market
capitalization of all listed companies

TATA Group in Insurance

The Late Sir Dorab Tata was the founder Chairman of New India Assurance Co. Ltd., a
group company incorporated way back in 1919. Government of India took over the management
of this company as a part of Nationalization of general insurance companies in 1972. Not
deterred by the move, Tata group have ventured into" risk management services having tied up
with AIG group, back in 1977, with the incorporation of Tata AIG Risk Management Services
Pvt. Ltd.
31

AIG

American Insurance Group is the leading U.S. based international insurance and
financial services organization and the largest underwriter of commercial and industrial
insurance in the United States. Its member companies write a wide range of commercial and
personal insurance products through a variety of distribution channels in over 130 countries
and jurisdictions throughout the world.
AIG's global businesses also include financial services and asset management,
including aircraft leasing, financial products, trading and market making, consumer finance,
institutional, retail and direct investment fund asset management, real estate investment
management, and retirement savings products.

The Joint Venture

Tata AIG General Insurance Co. Ltd. has a start-up capital of Rs. 125 crores of which
74 per cent has been brought in by Tata Sons and American partner brings in the balance 26
per cent.
Tata -AIG plans to be the first Indian insurance company to offer a comprehensive
policy to cover various risks in the IT sector, risk arising out of virus, cyber crime, negligent
acts, errors and omissions and third party liability from a security failure. Other products on
offer are property, casualty, marine, directors and officers liability, accident and health,
homeowners and automobile insurance.

Bajaj Allianz General Insurance Products

Personal Accident
Hospital Cash Daily Allowance Policy
Health Guard
Critical Illness
Burglary Insurance
Householders Insurance
Travel Companion
Fidelity Guarantee Policy
Office package
Money Insurance
Public Liability
Plate Glass Insurance
Consequential Loss (Fire) Insurance Policy
32

Tata AIG General Insurance Company Products

Executive Guard
Family Guard
Travel Guard
Home Secure
Business Guard Sanjeevani
Business Guard Jyothi

5. Reliance General Insurance Company Limited:

Reliance Group'

Reliance 'Group is India's largest business house has annual sales turnover of Rs.
41,280 crore (US$ 9,003 million) and has posted a net profit of Rs. 2,940 crore (US $ 641
million) for the 12-month period ending June 30, 2000. The Group has total assets of Rs.
52,100 crore and net worth of Rs. 22,415 crore. It has a large investor base of over 5 million,
as well as a large customer base in retail (textiles, LPG, Cellular phones, etc.) and
commercial segments.
Reliance Industries Limited, India's largest private sector enterprise, is a, major
player in the Indian petrochemicals sector. Relianc6~s operations capture value addition at
every stage from producing crude oil and gas to polyester and polymer products and are
vertically integrated to the production of textiles. Reliance has one of the largest marketing
networks in the Indian Industry. All its brands are market leaders.
Reliance General Insurance Company Limited
Reliance group has announced its plans to enter the Indian insurance sector- both in
the life and general insurance businesses'. Reliance Industries plans to bring in around Rs.
300 Crores into its insurance venture through its financial arm Reliance Capital Ltd.
Reliance group will be the lead investor for this initiative. The two companies will
have an initial authorized capital of Rs.200 crores (US $ 43.62 million) each. This is the first
application from an Indian company without a foreign insurance tie-up. However, Reliance
will associate with international insurance consultants to bring the best practices in the
business to India.

33

6. Iffco Tokio General Insurance Company ltd

Iffco

Indian farmers fertilizers cooperative limited was created on Nov 3, 1967 as a


multi unit cooperative society engaged in production and distribution of fertilizers the
byelaws of the society provide a broad framework for the activities of IIFCO as a cooperative
society the main emphasis is on production and distribution of fertilizers

The Tokio marine and fire insurance

The Tokio marine and fire insurance (Tokio marine) company holds a leading
position in Japans property and casualty insurance industry. It is the second largest in P & C
insurance market in the world.
With superior capitalization, stable profitability and conservative management tem
the company provides a large rage of property and casualty insurance products n services
including, automobile fire and personal accident to retail corporate clients

The Joint Venture

IFFCO TOKIO General Insurance Company is a joint venture promoted by India


Farmers Fertilizers Co-Operative, Tokio Marine and fire Insurance Company, Japan, the fifth
largest insurance company in the world, Krishak bharathi Cooperative ltd. (KRIBHCO), and
Indian potash. Their contribution to the Rs.100 crore equity capitals is 49 percent, 20 percent
and 5 percent respectively. The head Office is in Delhi and operating Office are in about 20
cities.

IFFCO Tokio Insurance Products


o
Home & Family Protector
o
Standard Fire & Special Perils
o
Burglary and House Breaking
o
Personal accident
o
Trade Protector
o
Travel Protector

34

MARKET SHARE
As by this time we are well versed with all the General Insurance companies both
Public and private we know how each company contributes serving the customers and also
generating revenue through it. We also know that General Insurance contributes towards the Gross
Domestic Profit, but now let us see how these companies individually contribute towards the Gross
Domestic Profit through the way of Market Share of each company both Private & Public.
As we can see in the Pie Charts a comparison of 3 consecutive years have been taken which are
2003-04, 2004-05 & 2005-06.
Public Companies have been dominating the General Insurance Market since a long time, the
market share of Private companies have been improving in the last few years by approximately 6
% each year, but then too Public sector companies capturing the major market.
But also in Public sector companies New India Assurance is been leading the way which is been
closely followed by the remaining. Among the private players we can note that ICICI Lombard is
leading the way.
By considering 2005-06 as the base year, we can note that the market share of Public companies
have been deteriorating having 73.43% of the market share from 85.54% in the year 2003-04.

35

36

CASE STUDY
.

ICICI Lombard General Insurance Company:

ICICI

ICICI Ltd. was established in 1955 by the World Bank, the Government of India and the
Indian Industry, to promote industrial development of India by .Providing project and corporate
finance to Indian industry.
Since inception, ICICI has grown from a development bank to a financial conglomerate
and has become one of the largest public financial institutions in India. ICICI has thus far
financed all the major sectors of the economy, covering 6,848 companies and 16,851 projects.

Lombard

Lombard Canada Ltd., is a leading insurance management company responsible for


providing insurance management services for all of the Lombard group's commercial, personal,
and specialized insurance companies. Canadian owned and operated, Lombard Canada Ltd. has
its head office in Toronto and has annual sales in excess of$500 million and is a wholly owned
subsidiary of Fairfax Financial Holdings Limited (FFH on the TSF Lombard Canada Ltd. has
achieved a reputation for providing solid underwriting performance, diversified books of
business and strong capital positions.

TRENDS
Trends in any sector basically refers to the up gradations or acquiring new technologies which
has replaced the conventional methods in any organizations
In Todays automated and modernized era any organization cannot take a chance by not
maintaining pace with the competition.
With the passage of time and taking into consideration todays needs and changing scenario
insurance companies should also adopt new technology i.e. it should be trendy enough to meet
customer needs and expectations.
Trends or use of technology should be such that it is eco friendly enough to be used by
customers. Today, right from a grocery shop to I.T sector technologies is explored to the fullest
E-Business or E-commerce has sown its seeds in every sector of business which is one of the
strongest sign of improvement and technology.
As we are dealing here with insurance industry let us see the technology involved in the
Insurance sector.
37

Technological:

Computerization:

Initially, in the late 1950s the insurance companies used Unit Record Machines (Electro
Magnetic Machines) to process data punched into cards. Computers were introduces in the mid
1960s and by the 1980s the Unit Phased Machines were phased out and the entire process was
computerized. This brought about greater efficiency and quick service delivery

Internet:

Internet usage has drastically improved in the last decade. There was a tremendous increase in
the use of technology by GIC during the late 1990s. The companies Launched its website in the
mid 1990s to offer basic services such as modifying policies (change of address, change of
nominee, etc) and querying the status of the policy. But today, the internet has completely
changed the service delivery process. Internet is today used to even sell insurance policies.
Internet is, in fact, proving to be one of the widely used distribution networks for selling
insurance policies. Also internet is used for sending premium notices to policy holders through emails.
Also GIC has a special feature on its website. It has a premium calculator which accurately
displays the amount of premium month wise and the remaining balance. One just has to enter the
age, name of the insurance policy, the sum assured and whether there is an accident cover or not.
By keying in this information, the entire premium amounts are shown within no time.

Metropolitan Area Network (MAN) and Wide Area Network (WAN):

GIC has commissioned a MAN connecting more than 75 branches in Mumbai. This enabled the
policy holders to pay their premiums and get their status report, surrender value quotations and
loan quotation, from any branch in the city. Following the MAN in Mumbai, seven MAN centres
(Chennai, Bangalore, Delhi, Calcutta, Pune, Hyderabad, and Ahmedabad) became operational.
These MAN centers were connected to each other by a WAN network. This WAN was designed
for distributed processing without a central database each division maintained a database of the
policyholders. The central office in Mumbai maintained an index of policy numbers and the
corresponding IP addresses of the servers where the details of the policy were maintained

Electronic Clearance Service (ECS):

Almost all the big organizations today provide the ECS facility to its customers. A policy holder
having an account in any bank which is a member of the local clearing house can opt for ECS
debit to pay premiums. The advantage here is that once the option is exercised, the policy holder
38

need not visit a branch for paying the premium or collecting the receipts. On the day indicated by
the policy holder, the premium amount will be directly debited to the bank account of the
policyholder and the receipt will be issued by the designated branch office.

Bank ATMs:

Many insurance companies have a tie-up with commercial banks so as to enable policyholders to
use the facility of paying premiums through the bank ATMs. ICICI Lombard has a tie up with
ICICI bank; Bajaj Allianz has a tie-up with Corporation bank and UTI Bank

Call Centre and SMS services:

Almost all the insurance companies have their own call centre which cater to the phone based
queries of the policyholders. This service is 24x7 and they have the Interactive Voice Response
(IVR) systems at all the branches.
Also, LIC and other companies now provide SMS services going with the new trends like SMS
banking in the banking sector.

CLAIMS
The Settlement of claims constitutes one of the important functions in an insurance organization.
The proper settlement of claims requires a sound knowledge of thee law, principles and practices
governing insurance contracts and in particular a thorough knowledge of the terms and
conditions of the standard policies and various extensions and modifications there under. The
procedure in respect of claim a under various classes of insurance follows a common pattern and
may be considered under 3 broad headings.

Preliminary procedure

It is essential that early notification of the loss is received by insurance undue delay in
notification would adversely affect the position of the insurer. However if there is any delay in
notification or not or weather is material will be ultimately decided by the courts based on the
facts of the individual cases.

The notice of loss condition in liability policies provides for two aspects
a.) Notification of the happening of the accident immediately followed by
b.) Notification of the receipt of claim or suit filed against the insured.
Under certain types of policies (e.g. Burglary) notice is also to be given to police authorities.

39

Loss Minimization

At common law, there is a duty on the part of the insured to observe good faith.This duty of good
faith means that at all times the insured has to act as if he is uninsured
For E.g., the private car package policy provides , among other things , that the insured shall take
all reasonable steps to safeguard the motor car from loss or damage and to maintain it in efficient
condition. In the event of any accident or breakdown the motor car shall not be left unattended
without proper precautions being taken to prevent further damage or loss.
ssss

Procedural

On receipt of intimation of loss or damage insurers check that:


a.) the policy is in force on the date of occurrence of the loss or damage
b.) The loss or damage is by a peril insured by the policy.
c.) Notice of loss received without undue delay.
After this check up the loss is allotted a number and entered in the claims register.

Claim Forms

The contents of the claim form vary with each class of insurance .In general the claim in general
the claim form is designed to elicit full information regarding the circumstances of the loss such
as date of loss, time, cause of loss, extent of loss etc claim forms are invariably sued in fire and
miscellaneous insurance.

Investigation and Assessment

On receipt of the claim form duly completed from the insured the insurers decide about the
investigation and assessment of loss if the loss is small the investigation to determine the cause
and extent of loss is done by an officer of the insurers. Sometimes even this may be waived and
the loss settled he basis of the claim form only.
The investigation of larger or complicated claims is entrusted to independent professional
surveyors who are specialist in their line the appointment of a surveyor is intimated to the
claimant the surveyor is furnished with all relevant claim papers such as claim form policy copy
etcHowever, many a times surveyor is appointed and survey is carried immediately on receipt
on notice of loss, that is even before claim form could be issued.

40

Claims documents

In addition to the claim form independent survey report certain documents are required to be
submitted by the insurers to substantiate the claim for example for fire claims for fire claims a
report for the fire brigade for motor claims driving license registration copy police report etc

Arbitration

It is distinct from litigation and is a method of settling disputes under contract in accordance and
conciliation act 1996.

Settlement

The claim is processed on the basis of Claim form Independent report from Surveyors, legal
opinion, medical opinion etc as the case may be. Various documents furnished by the insured.
Any other evidence secured by the insurers If the claim is in order settlement is effected by
cheque the payment is entered in claims register as well as in the relevant process record.
Appropriate recoveries are made from the insurers if any.

41

CONCLUSION
The problem with the public sector today is that this is doing a lot of third party
insurance, which is a loss making business. In this era of globalization there is
a basic need of products which are the most profitable and more friendly to the
customers. There are many policies which are provided by the government and very
successful among the masses. But still in India about 80% of human beings and major
natural resources have yet not been insured in globalization era.
Floodgates of competition opened up by the privatization of the insurance industry did
throw a challenge to the well protected nationalized sector and it seems they have picked
up the gauntlet. GIC is trying to reposition itself by having re-engineering done on the
structure and operations of their respective organizations over the past three years around
40 companies have expressed interest in entering the sector and many foreign and Indian
companies have arranged anticipatory alliances. The threat of new players taking over the
market has been overplayed. As is witness in other countries where liberalization took
place in recent years we can safely conclude that nationalised player will continue to
holds strong market share positions. Existing government players will have to explore
new distribution and marketing channels. Potential buyers for most of the insurance lie in
the middle class. Government insures must segment the market carefully to arrive at
appropriate products and pricing. Recognizing the potential, in the past 3 years the
nationalize insures have already begun to target niches like pensions, women or children.
So,this can be said that the there is a lot of scope for the government insurance policies in
country today and also there can be offered a lot which will help in maximizing the profit
and market share of this policies.

42

QUESTIONNAIRE
1. What are Challenges faced by General Insurance companies?
The private insurance industry feels that it cannot continue to provide coverage against
hurricanes and earthquakes as it has done in the past without opening itself up to the
possibility of insolvency or a significant loss of surplus. This concern stems from a series
of natural disasters in the United States since 1989 that have resulted in unprecedented
insured losses.
2. According to you why general insurance is imp?
The fact that the importance of general insurance has increased is because of the
reasoning that it covers almost everything including your home, car and health. The
numerous reasons for choosing general insurance are listed below:
The foremost reason that comes is the peace of mind provided by insurance against any
risk or mishap.
Throughout the insurance, the burden of loss is almost next to none as all gets covered up
by the insurance policy later on.
Paying premiums of insurance is like depositing in a savings account as the same comes
useful later on at the time of a mishap.
3. What are the chances of getting affected by nature in GI?
Insurance is the equitable transfer of the risk of a loss, from one entity to another in
exchange for money. It is a form of risk management primarily used to hedge against the
risk of a contingent, uncertain loss. An insurer, or insurance carrier, is selling the
insurance; the insured, or policyholder, is the person or entity buying the insurance
policy. The amount of money to be charged for a certain amount of insurance coverage is
called the premium. Risk management, the practice of appraising and controlling risk, has
evolved as a discrete field of study and practice.
4. On an average how much time does it take to settle a claim (period)?
After a person has been involved in an auto accident and called in a claim to the
insurance company, he or she is likely to wonder when the case will settle. ... One of the
most contentious matters involved in a car accident case is the level of damages requested
in the claim.
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5. According to what are the trends in General Insurance?


Computerization:
Initially, in the late 1950s the insurance companies used Unit Record Machines (Electro
Magnetic Machines) to process data punched into cards. Computers were introduces in the mid
1960s and by the 1980s the Unit Phased Machines were phased out and the entire process was
computerized. This brought about greater efficiency and quick service delivery

Internet:

Internet usage has drastically improved in the last decade. There was a tremendous increase in
the use of technology by GIC during the late 1990s. The companies Launched its website in the
mid 1990s to offer basic services such as modifying policies (change of address, change of
nominee, etc) and querying the status of the policy. But today, the internet has completely
changed the service delivery process. Internet is today used to even sell insurance policies.
Internet is, in fact, proving to be one of the widely used distribution networks for selling
insurance policies. Also internet is used for sending premium notices to policy holders through emails.

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WEBLIOGRAPHY
www.scribd.com
www.wikipedia.com
www.gicouncil.in
www.irda.com
www.icicibank.com

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