Ethics in insurance hard copy


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Ethics in insurance hard copy

  2. 2. Class : S.Y.B.F.M. rd Semester : 3 PRESENTATION ON : Ethics in Insurance Sector Submitted to : Prof. Rupal Jain Academic year : 2011-12
  4. 4. 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 literature. 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.
  5. 5. 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.
  6. 6. Introduction of Insurance Sector : 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.
  7. 7. 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 Insurance agent.
  8. 8. 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 financially compensated.
  9. 9. 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 popular. Subsidiary of Life Insurance: 1. Birla Sun Life Insurance 2. SBI Life Insurance 3. ICICI Prudential 4. Kotak Mahindra
  10. 10. 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 business. 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., and 4. United India Insurance Co. Ltd.
  11. 11. CSR Towards Insurance Sector : 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, marketing staff 1. To perform his / her duties in high esteem. 2. To give utmost priority to the client's interest. 3. Not to disclose client's confidential and personal information.
  12. 12. 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 presentations. 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 regulations.
  13. 13. Financial System Of Insurance : 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.
  14. 14. The advisor should agree on how long the professional Relationship should last and how decisions will be made. ♦ Gathering client data, including goals: The Financial advisor should ask for 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.
  15. 15. ♦ 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 insurance coverage, investments or tax strategies ♦ Developing and presenting Financial Planning recommendations and/or alternatives: The Financial Planner should offer Financial Planning recommendations that address the information provided. goals, based on the
  16. 16. The planner should go over the recommendations with the client to help and understand them so that one makes informed decisions. The planner should also listen to the client’s concerns and revise the recommendations as appropriate. ♦ Implementing the Financial Planning recommendations: The planner and the client should agree on how 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.
  17. 17. 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 Agents 2.Subsidiary Book: A. B. C. D. E. F. G. H. Cash Book Premium Cash Book Branch Cash Book Petty Cash Book Claim Cash Book Commission Register Lapsed and Cancelled Policies Book Investment Ledger
  18. 18. CONCLUSION : 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 future.