ARTS & COMMERCE
Class : S.Y.B.F.M.
Semester : 3
PRESENTATION ON :
Ethics in Insurance Sector
Submitted to : Prof. Rupal Jain
Academic year : 2011-12
What is Ethics ?
Ethics involves learning what is right or wrong,
and then doing the right thing -- but "the right
thing" is not nearly as straightforward as
conveyed in a great deal of business ethics
Many ethicists assert there's always a right
thing to do based on moral principle, and
others believe the right thing to do depend on
the situation -- ultimately it's up to the
individual. Many philosophers consider ethics
to be the "science of conduct."
Seniors explain that ethics includes the
fundamental ground rules by which we live
our lives. Philosophers have been discussing
ethics for at least 2500 years.
Many ethicists consider emerging ethical
beliefs to be "state of the art" legal matters,
i.e., what becomes an ethical guideline today
is often translated to a law, regulation or rule
tomorrow. Values which guide how we ought
to behave are considered moral values, e.g.,
values such as respect, honesty, fairness,
responsibility, etc. Discussions around how
these values are applied are sometimes
called moral or ethical principles.
Introduction of Insurance
In 1993, Malhotra Committee, headed by former
Finance Secretary and RBI Governor R.N.
Malhotra, was formed to evaluate the Indian
insurance industry and recommended its figure
direction. The Malhotra committee was set up
with the objective of complementing the reforms
initiated in the financial sector.
The reforms were aimed at “creating a more
efficient and competitive financial system suitable
for the requirements of the economy keeping in
mind the structural changes currently underway
and recognizing that insurance in an important part
of the overall financial system where it was
necessary to address the need for similar reforms.
The low penetration can be explained in terms of
non-emphasis on customer awareness, training
issues of agents and a low tax base.
The heavy capital investments in terms of the
distribution networks, hiring of agents and the long
gestation periods of 7-10 years provide entry
barriers for the industry.
The key industry drivers are related to lifestyle
issues in terms of perceiving insurance as a
savings instrument rather than for risk cover, need
based selling, quality of service and customer
awareness. The future growth areas could be in
term assurance, pension and health insurance. In
terms of the distribution channels, there is
tremendous opportunity with banks and finance
companies and by making the channel IT driven.
With increased commoditization of insurance
products, brand building is going to play a vital
role. The provisions of the IRDA bill acknowledge
a many issues related to insurance permia that will
present it from seeping out of the country. The
IRDA bill provides for three levels of players –
Insurance Company, Insurance brokers and
Meaning Of Insurance Sector :
Insurance is a form of risk management primarily
used to hedge against the risk of a
contingent, uncertain loss. Insurance is defined as
the equitable transfer of the risk of a loss, from one
entity to another, in exchange for payment. An
insurer is a company selling the insurance; an
insured, or policyholder, is the person or entity
buying the insurance policy. The insurance rate is
a factor used to determine the amount to be
charged for a certain amount of insurance
coverage, called the premium.
The transaction involves the insured assuming a
guaranteed and known relatively small loss in the
form of payment to the insurer in exchange for the
insurer's promise to compensate (indemnify) the
insured in the case of a financial (personal) loss.
The insured receives a contract, called
the insurance policy, which details the conditions
and circumstances under which the insured will be
Types of Insurance :
Life Insurance :
Life Insurance Corporation of India (LIC) was
formed in September, 1956 by an Act of
Parliament, viz., Life Insurance Corporation Act,
1956, with capital contribution from the
Government of India. The then Finance Minister,
Shri C.D. Deshmukh, while piloting the bill,
outlined the objectives of LIC thus: to conduct the
business with the utmost economy, in a spirit of
trusteeship; to charge premium no higher than
warranted by strict actuarial considerations; to
invest the funds for obtaining maximum yield for
the policy holders consistent with safety of the
capital; to render prompt and efficient service to
policy holders, thereby making insurance widely
Subsidiary of Life Insurance:
1. Birla Sun Life Insurance
2. SBI Life Insurance
3. ICICI Prudential
4. Kotak Mahindra
General Insurance :
General insurance or non-life insurance policies,
including automobile and homeowners policies,
provide payments depending on the loss from a
particular financial event. General insurance
typically comprises any insurance that is not
determined to be life insurance.
Prior nationalization there were 68 Indian insurers
(including LIC) and 45 non-Indian insurers did the
In Nov. 1972, the general insurance business was
nationalized by the General Insurance Business
(Nationalized), Act 1972 (GIBNA) and vested in
the hand of the GIC and its four subsidiaries viz.
1. National Insurance Co. Ltd.,
2. New India Assurance Co. Ltd.,
3. Oriental Fire and General Insurance Co. Ltd.,
4. United India Insurance Co. Ltd.
CSR Towards Insurance
Selling Life Insurance is like selling intangible
product. So, the marketing staff needs to
observe a set of norms in his / her
professional conduct, which make him / her
worthy of trust and faith.
The Code of Ethics for the life insurance,
1. To perform his / her duties in high esteem.
2. To give utmost priority to the client's
3. Not to disclose client's confidential and
4. To ensure prompt and sincere service to
the client and his or her family.
5. To use appropriate methods in convincing
clients to protect their insurable interest.
6. To make truthful and accurate
7. To improve his / her knowledge of life
insurance through constant study.
8. To set a plan and work accordingly.
9. To maintain fair relations with colleagues.
10. To strictly follow the concerned laws and
Financial System Of
Insurance Planning is the process of providing
advice and assistance to clients to determine
whether and how clients can meet their
financial needs and life’s goal through proper
management of financial resources.
♦ Establishing and defining the client –
planner relationship: The Financial advisor
should clearly explain or document the
services to be provided and define the
responsibilities. The advisor should explain
fully how he will be paid and by whom. The
advisor should also disclose any restrictions
on his ability to give unbiased advice and
disclose any conflicts of interests.
The advisor should agree on how long the
professional Relationship should last and how
decisions will be made.
♦ Gathering client data, including goals:
information about the financial situation. The
planner should mutually define the personal
and financial goals, understand the time frame
for results and discuss, if relevant, how one
feel’s about risk. The Financial Planner should
gather all the necessary documents before
giving the advice.
♦ Analyzing and evaluating the financial
status: The Financial advisor should analyze
the information to assess the current situation
and determine what one must do to meet the
goals, depending on what services have been
asked. For this one could include analyzing
the assets, liabilities and cash flow, current
♦ Developing and presenting Financial
alternatives: The Financial Planner should
offer Financial Planning recommendations
recommendations with the client to help and
understand them so that one makes informed
decisions. The planner should also listen to
recommendations as appropriate.
♦ Implementing the Financial Planning
recommendations: The planner and the
recommendations will be carried out. The
planner may carry out the recommendations
or serve as your ‘coach’, coordinating the
whole process along with professionals such
as solicitors or stockbrokers.
Accounts Of Insurance :
There are two types of Books:
1. Statutory Book:
A. Register Of Policies
B. Register Of Claims
C. The Register Of Licensed Insurance
Premium Cash Book
Branch Cash Book
Petty Cash Book
Claim Cash Book
Lapsed and Cancelled Policies Book
There is a probability of a spurt in employment
opportunities. A number of web-sites are coming
up on insurance, a few financial magazines
exclusively devoted to insurance and also a few
training institutes being set up hurriedly. Many of
the universities and management institutes have
already started or are contemplating new courses
in insurance. Life insurance has today become a
mainstay of any market economy since it offers
plenty of scope for garnering large sums of money
for long periods of time. A well-regulated life
insurance industry which moves with the times by
offering its customers tailor-made products to
satisfy their financial needs is, therefore, essential
if we desire to progress towards a worry-free