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Lic And Insurance History
 

Lic And Insurance History

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hi frnd this a pdf version of my own created file containing the history of insurance in world and in India..moreover there is a brief description of LIC is given.i think it wl b veru useful for u.and ...

hi frnd this a pdf version of my own created file containing the history of insurance in world and in India..moreover there is a brief description of LIC is given.i think it wl b veru useful for u.and kindly mail me if u have ne prob ao if u wanna me to do ne correction.....
thanx

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    Lic And Insurance History Lic And Insurance History Document Transcript

    • PROJECT REPORT ON INSURANCE SECTOR & LIFE INSURANCE CORPORATION OF INDIA SUBMITTED TO : PROF. B.S.RAO SUBMITTED BY : PIYUSH KHARE B2-38
    • INTRODUCTION Insurance is a term which means a form of agreement or contract. Its actually a protection against a loss for which we pay certain amount of money periodically in exchange for a guarantee that we will be compensated under stipulated conditions for any specified loss by fire, accident, death, etc. in other words we can say that a system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium. When we talk about insurance the first thing comes in our mind is the loss. So to compensate that loss, we pay a nominal charge to any institution, which is known as premium and the guarantee which we receive from that particular institution is known as insurance. It may be described as a social device to reduce or eliminate the risk of loss to life and property. Insurance is a collective bearing of risk. Insurance is a scheme of economic cooperation by which the members of the community share the unavoidable risks. The risks which can be insured against include fire, deaths, accidents and burglary. It can’t prevent the occurrence of risk but it provides for the losses of risks. Insurance can be defines as a legal contract between two parties whereby one party called the insurer undertakes to pay a fixed amount of money on the happening of a particular event, which may be certain or uncertain. The party called the insured pays in exchange a fixed sum known as premium. The document which embodies the contract is called the policy.  HISTORY OF INSURANCE
    • In the beginning was . . . insurance? Maybe not. But people have always yearned for security. Over 4,000 years ago Hammurabi, King of ancient Babylon, introduced a crude form of life and robbery insurance. An injured party had merely to declare his loss before God and the state would make suitable restitution. God as claims adjuster-who could be fairer? The Romans used burial clubs as a form of life insurance, providing funeral expenses for members and later payments to the survivors. With the growth of towns and trade in Europe, the medieval guilds undertook to protect their members from loss by fire and shipwreck, to ransom them from captivity by pirates, and to provide decent burial and support in sickness and poverty. By the middle of the 14th cent., as evidenced by the earliest known insurance contract (Genoa, 1347), marine insurance was practically universal among the maritime nations of Europe. In London, Lloyd's Coffee House (1688) was a place where merchants, shipowners, and underwriters met to transact business. By the end of the 18th cent. Lloyd's had progressed into one of the first modern insurance companies. Around 600 A.D., the Greeks and Romans developed their own versions of health and life insurance by forming groups that cared for the families and funeral expenses of members upon death. Other specialized lines of insurance started developing in post- Renaissance Europe, as London was becoming a major trade center. With all of the marine explorations and shipping, a more need developed for a more sophisticated type of insurance. Lloyd's of London was formed to meet this need, beginning in a London coffee house frequented by mariners and investors alike, Now, Lloyd's of London remains the largest insurer in specialty markets. It should be noted that Lloyd's is not a typical
    • insurance company -- it essentially brokers the risk to its private investors. That's one of the reasons the company is able to insure unusual things such as priceless works of art, a musician's fingers, a model's face, etc. INSURANCE SECTOR IN INDIA The history of insurance in India can be traced back to the Vedas. The Sanskrit term YOGAKSHEMA, the name of Life Insurance Corporation of India’s corporate headquarters, is found in the Rig Veda. Some form of ‘community insurance’ was practiced by the Aryans around 1000 BC. The joint family system prevalent in India was an important form of social cooperation. Insurance is a federal subject in India and has a history dating back to 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and these companies were not insuring Indian natives. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society, the birth of first
    • Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. The Swadeshi Movement of 1905-07 and many more movement of this time led to an increase in number of insurance companies. In 1912 the first legislation regulating insurance, the Life Insurance Companies Act, 1912, was promulgated. The Insurance Act, 1938, the first comprehensive legislation governing both life and non life branches of insurance was enacted to provide strict state control over the insurance business. By the mid 1950s, there were 154 Indian insurers, 16 foreign insurers and 75 provident societies carrying on life insurance business in India. Insurance business flourished and so did scams, irregularities, and dubious investments practices by scores of companies. As a result, the govt. decided to nationalize the life assurance business in India. The Life Insurance Corporation of India was set up in 1956 to take over 245 companies. The General Insurance Corporation of India was set up in 1973. Right now there are several insurance companies in India. Some of the top companies are: 1. Life Insurance Corporation of India. 2. ICICI 3. Bajaj Allianz Life Insurance Company Limited 4. SBI Life Insurance Company Limited 5. SBI Life Insurance Co Ltd 6. Reliance Life Insurance Company Ltd 7. HDFC Standard Life Insurance Company Limited 8. Birla Sun Life Insurance Company Ltd 9. Max New York Life Insurance Company Ltd
    • MALHOTRA COMMITTEE The government set up, in 1993, a committee under the chairmanship of R.N. Malhotra, the former insurance secretary and the RBI governor to evaluate the Indian insurance industry and recommend its future direction. The main recommendation of the Malhotra Committee was as follows:- i) The government should bring down its stake in the insurance companies to 50%. ii) Private companies with a minimum paid-up capital of Rs.100 crore should be allowed to enter the industry. iii) Foreign companies may be allowed to enter the industry in collaboration with domestic companies. iv)A strong and effective insurance regulatory authority in the form of a statutory autonomous board on the lines of the SEBI. v) The mandatory investment of LIC life fund in government securities need to be reduced from 15% to 50%. vi) The GIC and its subsidiaries should not hold more than 5% in any company. vii) No single company should be allowed to transact business in both the life and general insurance business. vii) The number of entrants should be controlled.
    • viii) The state level cooperatives should be allowed to set up cooperatives societies for transacting life insurance business in the state. There are some other recommendations which the committee had put. According to the recommendation of the Malhotra Committee an autonomous body was constituted on 19th April 2000, name Insurance Regulatory and Development Authority (IRDA). The Act was approved in the parliament in December 1999 and the insurance sector was thrown open for private licensees on 15th August 2000. INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY The Insurance Regulatory and Development Act of 1999 were set out as follows. “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.” The Act effectively reinstituted the Insurance Act of 1938 with (marginal) modifications. Whatever was not explicitly mentioned in the 1999 Act referred back to the 1938 Act? (1) It specified the creation and functioning of an Insurance Advisory Committee that sets out rules and regulation. (2) It stipulates the role of the “Appointed Actuary”. He/she has to be a Fellow of the Actuarial Society of India. For life insurers the
    • Appointed Actuary has to be an internal company employee, but he or she may be an external consultant if the company happens to be a non-life insurance company. The Appointed Actuary would be responsible for reporting to the Insurance Regulatory and Development Authority a detailed account of the company. (3) Under the “Actuarial Report and Abstract”, pricing of products have to be given in detail. It also requires details of the basic assumptions for valuation. There are prescribed forms that have to be filled out by the Appointed Actuary including specific formulas for calculating solvency ratios. (4) It stipulates the requirements for an agent. For example, insurance agents should have at least a high school diploma along with training of 100 hours from a recognized institution. (5) Under “Assets, Liabilities, and Solvency Margin of Insurers”, the Insurance Regulatory and Development Authority has set up strict guidelines on asset and liability management of the insurance companies along with solvency margin requirements. Initial margins are set high (compared with developed countries). The margins vary with the lines of business. Life insurers have to observe the solvency ratio, defined as the ratio of the amount of available solvency margin to the amount of required solvency margin: (a) the required solvency margin is based on mathematical reserves and sum at risk, and the assets of the policyholders’ fund; (b) the available solvency margin is the excess of the value of assets over the value of life insurance liabilities and other liabilities of policyholders’ and shareholders’ funds. (6) It sets the reinsurance requirement for (general) insurance business. For all general insurance, a compulsory cession of 20% regardless of line of business to the General Insurance Corporation, the designated national reinsurer was stipulated.
    • (7) Under the “Registration of Indian Insurance Companies”, it sets out details of registration of an insurance company along with renewal requirements. For renewal, it stipulates a fee of one-fifth of one percent of total gross premium written direct by an insurer in India during the financial year preceding the year. It seeks to give detailed background for each of the following key personnel: Chief Executive, Chief Marketing Officer, Appointed Actuary, Chief Investment Officer, Chief of Internal Audit and Chief Finance Officer. Details of sales force, activities in rural business and projected values of each line of business are also required. (8) Under “Insurance Advertisements and Disclosure”, details of insurance advertisement in physical and electronic media has to be detailed with the Insurance Regulatory and Development Authority. The advertisements have to comply with the regulation prescribed in section 41 of the Insurance Act, 1938. The Act of 1938 says, “No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectus or tables of the insurer.” (9) All insurers are required to provide some coverage for the rural sector. It is called the “Obligations of Insurers to Rural Social Sectors.” LIFE INSURANCE CORPORATION OF INDIA
    • LIC has been one of the pioneering organizations in India who introduced the leverage of Information Technology in servicing and in their business. Data pertaining to almost 10 crore policies is being held on computers in LIC. LIC have gone in for relevant and appropriate technology over the years. 1964 saw the introduction of computers in LIC. Unit Record Machines introduced in late 1950’s were phased out in 1980’s and replaced by Microprocessors based computers in Branch and Divisional Offices for Back Office Computerization. Standardization of Hardware and Software commenced in 1990’s. Standard Computer Packages were developed and implemented for Ordinary and Salary Savings Scheme (SSS) Policies. LIC of India is the one and only public sector life insurance company in India. The LIC has been a national builder since its formation. True to objectives of nationalization, the LIC has invested the funds mobilized from policy holders for the benefit of the community at large. INTERNATIONAL OPERATIONS / ASSOCIATES OF LIC INTERNATIONAL OPERATIONS  LIC Fiji.  LIC Mauritius.  LIC United Kingdom.  LIC (International) B.S.C(C), Bahrain.  LIC (Nepal) Ltd.  LIC (Lanka) Ltd.  Saudi Indian Company for Co-op. Insurance, KSA  Kenindia Assurance Co. Ltd., Kenya.  LIC Mauritius Offshore Ltd.  LIC Co-ordinating Office in India. ASSOCIATES
    •  LIC Housing Finance Ltd. Incorporated in 1989, its main objective is to provide long term finance for construction/purchase of individual houses/flats. It is the housing finance institution with widest marketing network in India. These are schemes designed for NRIs, for repair/renovation of house, for purchase of site, for setting up their own office in case of professionals. The company has set up a representative office in Dubai in 2002.  LICHLF Care Homes Ltd. A wholly owned subsidiary of LIC HFL, eatablished to built and operates on commercial basis quot;Assisted Community Living Centresquot; for senior citizens. First such centre is completed in Bangalore. The project in Bhubaneshwar (Orissa) is in progress.  LIC Mutual Fund AMC Ltd. The LIC Mutual Fund was set up in June 1989 as a separate trust by LIC of India with a view to providing accessibility of various investment media including the stock markets to all sections of investors, particularly the small investors in rural and semi-urban areas. A Mutual Fund pools the savings from numerous small investors(who buy units) and invests them in diversified securities (shares, debentures, bonds, etc.) in the capital market in order to optimize the high return, safety, high liquidity trade-off for the maximum benefit to investors. For LIC Mutual Fund schemes, Jeevan Bima Sahayog Asset Management Company Limited (JBS AMC) incorporated on 20Th. April, 1994 acts as Investment Manager.
    • BUSINESS PERFORMANCE OF LIC IN 2007-08 (Rs. In crores) z 900000 800000 700000 600000 500000 400000 300000 2006-07 200000 2007-08 100000