Non- Banking Financial Services
Department of BBA
Kristu Jayanti College
• Insurance is a form of risk management in which the insured transfers the
cost of potential loss to insurer in exchange for monetary compensation
known as the premium.
• An Insurer is a company designing, promoting and selling the insurance
products and services amongst the public. An insured or policyholder is
the person or entity purchasing the insurance products and services.
• IRDA Insurance Regulatory and Development Authority of India, is the
apex body overseeing the insurance business in India. It protects the
interests of the policyholders, regulates, promotes and ensures orderly
growth of the insurance business in India.
Types of Insurance
• Life Insurance - Providing life cover to the policyholder . The
policyholder wants to be sure that his family / dependents can
maintain their lifestyle in his absence.
• Proceeds from the life insurance policy will replace his/her
income allowing the family members to lead a near-normal life
as far as the household finances go.
• General Insurance - Common forms of general insurance are
motor, fire, home, marine, health, travel, accident and other
miscellaneous forms of non-life insurance.
Types of Life Insurance policies
• Term Life Insurance - They provide life cover with no savings /
profits component. They are the most affordable form of life
insurance as premiums are cheaper compared to other life
• Whole Life Policy - The main feature of a whole life policy is
that the validity of the policy is not defined so the individual
enjoys the life cover throughout his life. The policyholder pays
regular premiums until his death, upon which the corpus is paid
out to the family.
• Endowment Plans - pay out the sum assured under both scenarios –
death and survival. However, endowment plans charge higher fees /
expenses – reflected in premiums – for paying out sum assured,
along with profits, in either scenario – death or maturity.
• Unit Linked Insurance Plans - combination of investment and
• Money Back Policy - It gives periodic payments over the policy
term. A portion of the sum assured is paid out at regular intervals.
If the policy holder survives the term, he gets the balance sum
assured. In case of death over the policy term, the beneficiary gets
the full sum assured.
Life Insurance Companies in India
• Life Insurance Corporation of India
• Aviva Life Insurance Co. India Ltd.
• Bajaj Allianz Life Insurance Co. Ltd.
• Bharti AXA Life Insurance Co. Ltd.
• Birla Sun Life Insurance Co. Ltd.
• Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.
• HDFC Standard Life Insurance Co. Ltd.
• ICICI Prudential Life Insurance Co. Ltd.
• IDBI Federal Life Insurance Co.
• SBI Life Insurance Co. Ltd.
• Tata AIA Life Insurance Co. Ltd.
Types of General Insurance
Motor Insurance offers protection to the vehicle owner against:
• Damage to the vehicle
• It also pays for any third party liability determined by law against the owner of the
• Motor insurance is mandatory in India as per the Motor Vehicles Act, 1988 and
needs to be renewed every year. Driving a motor vehicle without insurance in a
public place is a punishable offence.
• Common motor insurance categories include:
– Car Insurance
– Two Wheeler Insurance
– Commercial Vehicle Insurance
• Health Insurance - covers the medical and surgical expenses of the insured
individual due to hospitalisation from an illness.
• Home Insurance - provides protection against risks and damages from fire,
burglary, theft, flood, earthquakes etc. covering the physical asset (building
structure) and valuables (contents) in it.
• Marine (Cargo) Insurance - covers goods/cargo against loss or damage
during transit by rail, road, sea and/or air. Shipments are protected from the
time the goods leave the seller’s warehouse till they reach the buyer’s
• Commercial Insurance - coverage for businesses for protection against
potential losses through unforeseen circumstances like theft, property damage
and injured employees, etc
General Insurance Companies in India
• General Insurance Corporation of India
• Agriculture Insurance Co. of India Ltd.
• National Insurance Co. Ltd.
• The New India Assurance Co. Ltd.
• The Oriental Insurance Co. Ltd.
• United India Insurance Co. Ltd.
• Apollo Munich Health Insurance Co. Ltd.
• Bajaj Allianz General Insurance Co. Ltd.
• Bharti AXA General Insurance Co. Ltd.
• Cholamandalam MS General Insurance Co. Ltd.
• HDFC ERGO General Insurance Co. Ltd.
• ICICI Lombard General Insurance Co. Ltd.
• Kotak Mahindra General Insurance Co. Ltd.
• L&T General Insurance Co. Ltd.
• ECGC Ltd. (formerly Export Credit Guarantee Corporation of India Ltd.)
Principles of Insurance
• Principle of Utmost Good Faith
• Principle of Insurable Interest
• Principle of Indemnity
• Principle of Subrogation
• Principle of Contribution
• Principle of Loss Minimization
• Principle of Proximate Cause
• Principle of Utmost Good Faith - Under this insurance
contract both the parties should have faith over each
other. As a client it is the duty of the insured to disclose
all the facts to the insurance company. Any fraud or
misrepresentation of facts can result into cancellation of
• Principle of Insurable Interest -Insured must have the
insurable interest on the subject matter. In case of life
insurance spouse and dependents have insurable interest
in the life of a person.
• Principle of Indemnity - The purpose of this principle is to
set back the insured to the same financial position that existed
before the loss or damage occurred.
• Principal of subrogation - Enables the insured to claim the
amount from the third party responsible for the loss. For
example, if you get injured in a road accident, due to reckless
driving of a third party, the insurance company will
compensate your loss and will also sue the third party to
recover the money paid as claim.
• Principle of Contribution - In case the insured took more
than one insurance policy for same subject matter, he/she
can't make profit by making claim for same loss more than
• For example - Raj has a property worth Rs.5,00,000. He took
insurance from Company A worth Rs.3,00,000 and from
Company B - Rs.1,00,000.
• In case of accident, he incurred a loss of Rs.3,00,000 to the
property. Raj can claim Rs. Rs.3,00,000 from A but after that
he can't make profit by making a claim from Company B.
• Principle of Loss Minimisation - This principle states that the
insured must take all the necessary steps to minimize the losses to
inured assets. For example - Ram took insurance policy for his
house. In an cylinder blast, his house burnt. He should have called
nearest fire station so that the loss could be minimised.
• Principle of Proximate Cause - An accident may be caused by
more than one cause. In case property insured for only one cause.
In such case nearest cause of the accident is found out. Insurer
pays the claim money only if the nearest cause is insured
Accounts of Life Insurance
• Register of policies – particulars of various policies such as
the name and address of the insured, date on which the
policy was effected, etc.
• Register of claims – Name and address of the claimant, the
date of claim and the date on which the claim was settled
• Register of licensed insurance agents – Name and address,
particulars of business done and commission due to them
• New premium cash register
• Renewal premium cash register
• Petty cash book
• Agency and branch cash book
• General cash book
• Commission register
• Lapsed and cancelled policies book
• Agency ledger
• Policy loan ledger
• Investment ledger
Regulation of Insurance Business
• Insurance business in India is regulated by the provisions of IRDA
• By means of amendment of the LIC Act, 1956 and the General
Insurance Business (Nationalization) Act, 1972, the insurance
business has been thrown open to the private sector also.
• For every company carrying on business of life insurance or
general insurance, the minimum paid-up capital has been fixed at
Rs.100 crore. For carrying on exclusively the business as a
reinsurer, the minimum paid-up equity capital is Rs.200 crore.
• Revenue Account – Form A - RA
• Profit and Loss Account – Form A - PL
• Balance sheet – Form A – BS