It helps to choose the write policy between different insurance companies.

1. PROJECT REPORT
ON
“INSURANCE SECTOR IN INDIA”
Name: Praveen Singh Pokharia
Master in Vocational Studies (Banking & Stock Insurance)
Semester II (2016-2017)
Project Guide:- Dr. M. L Gupta
NATIONAL POST GRADUATE COLLEGE
LUCKNOW- 226007.
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2. DECLARATON
Mr. PRAVEEN SINGH POKHARIA student of Master of Vocational Studies
(Banking & Stock Insurance) (2016-2017) of National Post Graduate College
Lucknow- 226001
Mumbai 400086 do hereby declare that I have completed the project work titled
“Insurance Sector in India”.
The information contained in this project is true and original to the best of my knowledge
and belief.
Signature of the Student
Date: -
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3. ACKNOWLEDGEMENT
I take this opportunity to extend my profound sense gratitude and heartfelt appreciation to
Dr. M. L Gupta for her guidance at all stages of my project. I would like to thank her for
her annotations and suggestions during the development of this project and also for
taking out time from their busy.
Finally I would like to sincerely thank all those who were directly or indirectly involved
in this project. “Your experience and cooperation along with my efforts helped me to
successfully complete my project.”
Signature of the student
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4. WHAT IS INSURANCE?
INTRODUCTION:
Everyone is exposed to various risks. Future is very uncertain, but there is way to protect one’s
family and make one’s children’s future safe. Life Insurance companies help us to ensure that
our family’s future is not just secure but also prosperous. Life Insurance is particularly important
if you are the sole breadwinner for your family. The loss of you and your income could
devastate your family. Life insurance will ensure that if anything happens to you, your loved
ones will be able to manage financially. This study titled “Study of Consumers Perception about
Life Insurance Policies” enables the Life Insurance Companies to understand how consumer’s
perception differs from person to person. How a consumer selects
organizes and interprets the service quality and the product quality of different Life Insurance
Policies, offered by various Life Insurance Companies.
Insurance is a tool by which fatalities of a small number are compensated out of funds (premium
payment) collected from plenteous. Insurance companies pay back for financial losses arising
out of occurrence of insured events e.g. in personal
accident policy death due to accident, in fire policy the insured events are fire and other allied pe
rils like riot and strike, explosion etc. hence insurance safeguard against uncertainties. It
provides financial recompense for losses suffered due to incident of unanticipated events,
insured with in policy of insurance. Moreover, through a number of acts of parliament, specific
types of insurance are legally enforced in our country e.g. third party insurance under motor
vehicles Act, public liability insurance for handlers of hazardous substances under environment
protection Act. Etc.
It is a commonly acknowledged phenomenon that there are countless risks in every sphere of
life .for property, there are fire risk; for shipment of goods. There are perils of sea; for human
life there are risk of death or disability; and so on .the chances of occurrences of the events
causing losses are quite uncertain because these may or may not take place. Therefore, with this
view in mind, people facing common risks come together and make their small contribution to
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5. the common fund. While it may not be possible to tell in advance, which person will suffer
the losses, it is possible to work out how many persons on an average out of the group, may
suffer losses. When risk occurs, the loss is made good out of the common fund .in this way each
and every one shares the risk .in fact they share the loss by payment of premium, which is
calculated on the likelihood of loss .in olden time, the contribution make the above-stated notion
of insurance
DEFINITION OF INSURANCE:
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6. Insurance has been defined to be that in, which a sum of money as a premium
is paid by the insured in consideration of the insurer’s bearings the risk of paying a largesum
upon a given contingency. The insurance thus is a contract whereby:
i. Certain sum, termed as premium, is charged in consideration,
ii. Against the said consideration, a large amount is guaranteed to be paid bythe insurer who
received the premium,
iii. The compensation will be made in certain definite sum, i.e., the loss or the policy amount
which ever may be, and
iv. The payment is made only upon a contingency More specifically, insurance may be defined
as a contact between two parties, wherein one party (the insurer) agrees to pay to the other
party (the insured) or the beneficiary, ascertain sum upon a given contingency (the risk)
against which insurance is required.
The Insurance Regulatory and Development Authority, an agency of the Government of India, is
the regulatory body for the insurance sector's supervision and development in India.
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7. PURPOSE OF INSURANCE :
Every human being has fear in his mind. The fear whether he will be able to meet the basic
needs of the life i.e. Food, Clothing and Housing (Roti, Kapda and Makkan). He has fear not
only for himself but also for his dependents. The source of income to meet his basic needs may
be through service or business. If he is able to meet his basic needs then he acquires the assets
i.e. vehicles, property or jewellery etc. Then he gets additional fear of saving the assets from
destruction. (The assets may be destroyed through accident, fire or earthquake etc. and the
income may be cut off due to certainty i.e. old age and death or uncertainty i.e. accident, illness
or disability.) As you know, the old age and death is certain for every human being while the
accident, illness, disability and destruction of assets may be by random. The number of
accidents will take place but with whom is uncertain. Therefore, to overcome this problem, the
Insurance plays a very important role. The principal source of income of an individual comes
from the compensation for work performed by him. If this source of income gets cut off then: -
Family will make social and economic adjustments like:
i. Wife may take employment at the cost of home making responsibilities. …
ii. Children may have to go for work at the cost of education. …
iii. Family members might have to accept charity from relatives, friends etc. at the cost of their
independence and self-respect. …
iv. Family standard of living might have to be reduced to a level below the essentials for health
and happiness.
The basic threats which all of us may encounter to varied extent and which result in cut off of
income or sudden increase in - uncalled for expenses (beyond our means or higher than our
earnings) i.e. dislocates the human life, are: -
 ILLNESS (malnutrition, environment, chronic) – uncertain z
 ACCIDENT – (uncertain)
 Disability – Permanent or Temporary (uncertain)
 OLD AGE – (certain)
 DEATH – (certain)
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8. Indian Insurance Market :
Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion and 3rd largest in
terms of purchasing power parity. With factors like a stable 8-9 per cent annual growth, rising
foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, it is
on the fulcrum of an ever increasing growth curve. Insurance is one major sector which has been
on a continuous growth curve since the revival of Indian economy. Taking into account the huge
population and growing per capita income besides several other driving factors, a huge
opportunity is in store for the insurance companies in India. According to the latest research
findings, nearly 80% of Indian population is without life insurance cover, while health insurance
and non-life insurance continues to be below international standards. And this part of the
population is also subjected to weak social security and pension systems with hardly any old age
income security. As per our findings, insurance in India is primarily used as a means to improve
personal finances and for income tax planning; Indians have a tendency to invest in properties
and gold followed by bank deposits. They selectively invest in shares also but the percentage is
very small 4-5%. This in itself is an indicator that growth potential for the insurance sector is
immense. It’s a business growing at the rate of 15-20% per annum and presently is of the order
of $47.9 billion. India is a vast market for life insurance that is directly proportional to the
growth in premiums and an increase in life density. With the entry of private sector players
backed by foreign expertise, Indian insurance market has become more vibrant. Competition in
this market is increasing with company’s continuous effort to lure the customers with new
product offerings. However, the market share of private insurance companies remains very low
-- in the 10-15% range. Even to this day, Life Insurance Corporation (LIC) of India dominates
Indian insurance sector. The heavy hand of government still dominates the market, with price
controls, limits on ownership, and other restraints.
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9. HISTORY OF INSURANCE SECTOR
In India, insurance has a deep-rooted history. It finds mention in the writings of Manu
( Manusmrithi ), Yagnavalkya (Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk
in terms of pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient
Indian history has preserved the earliest traces of insurance in the form of marine trade loans and
carriers’ contracts. Insurance in India has evolved over time heavily drawing from other
countries, England in particular.
1818 saw the advent of life insurance business in India with the establishment of the Oriental
Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the
Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870
saw the enactment of the British Insurance Act and in the last three decades of the nineteenth
century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in
the Bombay Residency. This era, however, was dominated by foreign insurance offices which
did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and
London Globe Insurance and the Indian offices were up for hard competition from the foreign
companies.
In 1914, the Government of India started publishing returns of Insurance Companies in India.
The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life
business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government
to collect statistical information about both life and non-life business transacted in India by
Indian and foreign insurers including provident insurance societies. In 1938, with a view to
protecting the interest of the Insurance public, the earlier legislation was consolidated and
amended by the Insurance Act, 1938 with comprehensive provisions for effective control over
the activities of insurers.
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10. The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a
large number of insurance companies and the level of competition was high. There were also
allegations of unfair trade practices. The Government of India, therefore, decided to nationalize
insurance business.
An Ordinance was issued on 19th
January, 1956 nationalizing the Life Insurance sector and Life
Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16
non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The
LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.
The history of general insurance dates back to the Industrial Revolution in the west and the
consequent growth of sea-faring trade and commerce in the 17th
century. It came to India as a
legacy of British occupation. General Insurance in India has its roots in the establishment of
Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian
Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of
general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the Insurance Association
of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and
sound business practices.
In 1968, the Insurance Act was amended to regulate investments and set minimum solvency
margins. The Tariff Advisory Committee was also set up then.
In 1972 with the passing of the General Insurance Business (Nationalization) Act, general
insurance business was nationalized with effect from 1st
January, 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a
company in 1971 and it commence business on January 1sst 1973.
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11. This millennium has seen insurance come a full circle in a journey extending to nearly 200
years. The process of re-opening of the sector had begun in the early 1990s and the last decade
and more has seen it been opened up substantially. In 1993, the Government set up a committee
under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations
for reforms in the insurance sector. The objective was to complement the reforms initiated in the
financial sector. The committee submitted its report in 1994 wherein , among other things, it
recommended that the private sector be permitted to enter the insurance industry. They stated
that foreign companies be allowed to enter by floating Indian companies, preferably a joint
venture with Indian partners.
Following the recommendations of the Malhotra Committee report, in 1999, the Insurance
Regulatory and Development Authority (IRDA) was constituted as an autonomous body to
regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in
April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance
customer satisfaction through increased consumer choice and lower premiums, while ensuring
the financial security of the insurance market.
The IRDA opened up the market in August 2000 with the invitation for application for
registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the
power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000
onwards framed various regulations ranging from registration of companies for carrying on
insurance business to protection of policyholders’ interests.
In December, 2000, the subsidiaries of the General Insurance Corporation of India were
restructured as independent companies and at the same time GIC was converted into a national
re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.
Today there are 28 general insurance companies including the ECGC and Agriculture Insurance
Corporation of India and 24 life insurance companies operating in the country.
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12. The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together
with banking services, insurance services add about 7% to the country’s GDP. A well-developed
and evolved insurance sector is a boon for economic development as it provides long- term
funds for infrastructure development at the same time strengthening the risk taking ability of the
country.
Important Developments in the History of Indian Insurance Business:
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13. Before deregulation in 1999, the insurance industry in India consisted of only two state insurers,
namely Life Insurance Corporation of India (LIC) for life insurance, and General Insurance
Corporation of India (GIC) with its four subsidiaries for general insurance. According to the
Insurance Regulatory and Development Authority (IRDA), the insurance industry in India at
present consists of 24 general insurance companies including specialised insurers such as Export
Credit Guarantee Corporation of India and the Agricultural Insurance Corporation of India, and
23 life insurance companies. Of the 22 insurers who set up operations in life insurance after the
industry was opened up for the private sector, 20 are joint ventures with foreign companies.
Similarly, of the 17 non-life insurers, including health insurers operating in the private sector, 16
are in collaboration with foreign partners. Thus, 36 insurance companies in the private sector are
operating in collaboration with well-established foreign companies. Prior to the opening up of
insurance for the were introduced and these included products’ liability, corporate cover,
professional indemnity policies, weather insurance, credit insurance and travel insurance.
Table 1.1 shows important developments in the history of the Indian insurance industry.
1921:The Life Insurance Companies Act. Was passed, making it mandatory for companies to
get their premium rate table certificate by an actuary.
1938:The Insurance Act of 1938 became the first legislation governing all forms of insurance to
provide strict state control over business.
1956:life Insurance in India was fully completely nationalised on January 19 by means of the
Life Insurance corporation act. All 245 existing companies operating in the country were
merged into one entity, namely Life Insurance Corporation of India.
1957: The General Insurance Council, a wing of the insurance association of India, was formed
and framed a code of conduct for enduring fair conduct and sound business practices.
1968: The Insurance Act. of 1938 was amended to regulate investments and set minimum
solvency margins. The tariff Advisory Committee was also setup.
1972: The General Insurance Business (Nationalisation) Act. was passed. With effect from
January 1, 1973, 107 companies were amalgamated and grouped into four companies,
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14. namely, National Insurance Company Ltd. Oriental Insurance Company Ltd., New India
Insurance Company Ltd., United India insurance Company Ltd.
1993: The Government of India set up a committee under the chairmanship of Mr. R.N.
Malhotra, then Governor Reserve bank of India, to propose recommendation for reforms in
the insurance sector that would complement the reforms in the financial sector.
1994: The Amphora Committee submitted its report, recommending that entry of the private
sector be permitted in the insurance sector and the foreign companies be allowed entry by
floating Indian companies, preferably as joint ventures with Indian partners.
1996: Following the recommendation of the Malhotra committee, an interim Insurance
Regulatory Authority was set up.
1999: The Insurance Regulatory Authority and Development Authority (IRDA) was constituted
as an autonomous body to regulate and developing the insurance industry. The IRDA was
incorporated as statutory body in April 2000. The Key Objective of IRDA includes
promotion of competition in order to improve customer satisfaction through increased
customer choice and lower premium, while ensuring the financial security of insurance
market. The IRDA deregulate the insurance sector and permitted the entry of private
companies foreign investor are also allowed and capped at 26 per cent holding in the Indian
Insurance companies.
2006: The Actuaries Act was passed to give the profession statutory status on per with chartered
accountants, notaries, cost and work accounts, advocates, architects and company
secretaries
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15. Socio-Economic Characteristics of Insured and Uninsured Households:
The distribution of households by occupation and level of education is shown in Table 3.1. The
occupation which forms the major source of income for the family has been taken as the
occupation of the household. Similarly, the highest level of education of any member in the
household has been taken as its level of education. This was done because, even where the head
of the family is not literate, the younger members might be well educated and, being aware of
insurance, become responsible for the household becoming insured. It can be seen from Table
3.1 that a high percentage of the insured households are: (i) self-employed to the extent of
approximately 52 per cent, comprising 9.67 per cent in agriculture and 32.28 per cent in
nonagricultural work; (ii) salaried, comprising 34 per cent; and (iii) engaged as labour,
comprising less than 13 per cent.
As regards uninsured households, the position is: (i) approximately 38 per cent belong to the
labour force, comprising five per cent in agricultural labour and 33 per cent in casual labour; (ii)
approximately 41 per cent are self-employed, comprising 16.2 per cent in agriculture and 24.81
per cent in nonagricultural work; and (iii) only one-fifth are salaried or earn regular wages. The
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16. irregularity in the earnings of uninsured households could be a major impediment in their opting
for insurance, as it involves regular payment. However, a slightly higher percentage of urban
uninsured households (3.46%) are self-employed in agriculture, as compared with insured urban
households (2.38%). Nevertheless, in both insured and uninsured households, a higher
proportion in the rural category is selfemployed in agriculture or works as agricultural labour, as
opposed to urban households where a higher proportion works as casual labour, is self-employed
in non-agricultural work, or is salaried. Tables S3.1(a), S 3.1(b) and S 3.1(c) given in Annexure,
show the state-wise distribution of households by main occupation of the household. While the
distribution follows the pattern applicable to India as a whole, there are some differences, such
as: (i) in Chandigarh, Delhi, Daman and Diu, Goa and Andhra Pradesh, the proportion of
households receiving salaries and regular wages is higher in the uninsured urban households as
compared with insured urban households; (ii) among the rural insured households surveyed, in
Sikkim more than 95 per cent were salaried or had regular wages, while the uninsured once
again had the highest proportion of households that were self-employed in agriculture; (iii)
among insured urban households, Mizoram has the highest proportion of salaried households at
approximately 95 per cent; (iv) among uninsured urban households, three-fourths in Orissa
depend on casual labour; and (v) for urban households, there is a large difference in the
proportion of salaried and labour categories as between the insured (43 per cent salaried and 14
per cent labour) and uninsured (18 per cent salaried and 42 per cent labour) in the eastern region.
As regards the highest level of education of households, nearly two-thirds of those insured are
educated at least up to higher secondary school, but much lower for the uninsured at
approximately 45 per cent. On the other hand, illiterate households account for approximately
one per cent of the insured group, but three per cent of the uninsured group. These observations
suggest that education does influence the households’ decision to opt for insurance. Within
insured households, the proportion of illiterate households is slightly higher and those educated
up to higher secondary school or above slightly lower among the rural households as compared
with the urban households. This implies that urban households are better educated. Tables S3.1
(d), S3.1 (e) and S3.1 (f ) in the Annexure show the state-wise distribution of households by
level of education of household. Among the rural insured, 95.45 per cent of the households in
Mizoram come under the highest education level, while the highest proportion of illiterates is
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17. seen in Rajasthan. Among the urban insured, Meghalaya has the highest proportion of
households under the highest education level (94.52%), while once again Rajasthan has the
highest percentage of illiterates (11.72%). Among rural households, the southern region has the
largest proportion of households in the highest education category at 65 per cent in the insured
and 50 per cent in the uninsured households. The proportion of illiterates is highest in the
northern region (2%) amongst both insured and uninsured (6%) households.
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18. TYPES OF INSURANCE
Insurance occupies an important place in the modern world because of the risk, which can be
insured, in number and extent owing to the growing complexity of present day economic
system. The different type of insurance have come about by practice within insurance
companies, and by the influence of legislation controlling the transacting of insurance business,
broadly, insurance may be classified into the following categories:
1. Classification from business point of view
 Life insurance
 General insurance
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19. 2. Classification on the basis of nature of insurance
 Life insurance
 Fire insurance
 Marine insurance
 Social insurance
 Miscellaneous insurance
3. Classification from risk point of view
 Personal insurance
 Property insurance
 Liability insurance
 Fidelity general insurance
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20. Life Insurance:
Life insurance may be defined as a contract in which the insurer, in consideration of a certain
premium, either in a lump sum or by other periodical payments, agrees to pay the assured, or to
the person for whose benefit the policy is taken, the assured sum of money, on the happening of
a specified event contingent on the human life. A contract of life insurance, as in other forms of
insurance, requires that the assured must have at the time of the contract an insurable interest in
his life upon which the insurance is affected. In a contract of life insurance, unlike other
insurance, interest has only to be proved at the date of the contract, and not necessarily present
at the time when the policy falls due.
A person can assure in his own life and every part of it, and can insure for any sum whatsoever,
as he likes. Similarly, a wife has an insurable interest in her husband and vice-versa. However,
mere natural love and affection is not sufficient to constitute an insurable interest. It must be
shown that the person affecting an assurance on the life of another is so related to that other
person as to have a claim for support. For example, a sister has an insurable interest in the life of
a brother who supports her. A person not related to the other can have insurable interest on that
other person. For example, a creditor has insurable interest in the life of his debtor to the extent
of the debt. A creditor can insure the life of his debtor upto the amount of the debt, at the time of
issue of the policy.
An employee has an insurable interest in the life of the employer arising out of contractual
obligation to employ him for a stipulated period at fixed salary. Similarly, from an employer to
the employee, who is bound by the contract to serve for a certain period of time.
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21. General insurance:
Insurance other than ‘Life Insurance’ falls under the category of General Insurance. General
Insurance comprises of insurance of property against fire, burglary etc, personal insurance such
as Accident and Health Insurance, and liability insurance which covers legal liabilities. There
are also other covers such as Errors and Omissions insurance for professionals, credit insurance
etc.
Non-life insurance companies have products that cover property against Fire and allied perils,
flood storm and inundation, earthquake and so on. There are products that cover property against
burglary, theft etc. The non-life companies also offer policies covering machinery
against breakdown, there are policies that cover the hull of ships and so on. A Marine
Cargo policy covers goods in transit including by sea, air and road. Further, insurance of motor
vehicles against damages and theft forms a major chunk of non-life insurance business.
Personal insurance covers include policies for Accident, Health etc. Products offering Personal
Accident cover are benefit policies. Health insurance covers offered by non-life insurers are
mainly hospitalization covers either on reimbursement or cashless basis. The cashless service is
offered through Third Party Administrators who have arrangements with various service
providers, i.e., hospitals. The Third Party Administrators also provide service for reimbursement
claims. Sometimes the insurers themselves process reimbursement claims.
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22. Fire Insurance:
The term fire in a fire insurance is interpreted in the literal and popular sense. There is fire when
something burns. In other words fire means visible flames or actual ignition. Simmering/
smoldering is not considered fire in Fire Insurance. Fire produces heat and light but either of
them alone is not fire. Lightening is not a fire but if it ignites something, the damage may be due
to fire.
Under section 2(6A) Insurance Act 1938, the fire insurance business is defined as follows: “Fire
insurance business means the business of effecting, otherwise than independently 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”.
Damaged through fire:
 Buildings
 Electrical installation in buildings
 Contents of buildings such as machinery, plant and equipments, accessories, etc.
 Goods (raw materials, in–process, semi–finished, finished, packing materials, etc.) in
factories, godowns etc..
 Goods in the open
 Furniture, fixture and fittings
 Pipelines (including contents) located inside or outside the compound, etc.
The owner of abovementioned properties can insure against fire damage through fire
insurance policy which provides
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23. Marine Insurance :
A contract of marine insurance is an agreement whereby the insurer undertakes to indemnity the
assured in a manner and to the extent thereby agreed, against marine losses, that is, the losses
incidental to marine adventure. There is a marine adventure when any insurable property is
exposed to marine perils. Marine perils also known as perils of the seas, means the perils
consequent on, or incidental to, the navigation of the sea or the perils of the seas, such as fire,
war perils, pirates, robbers, thieves; captures, jettisons, barratry and any other perils which are
either of the like kind or may be designed by the policy. There are different types of marine
policies known by different names according to the manner of their execution or the risk they
cover. They are : voyage policy, time policy, valued policy, unvalued policy, floating policy,
wager or honour policy.
Marine insurance provides protection against loss of marine perils. The marine perils are
collision with rock, or ship attacks by enemies, fire and capture by pirates etc. These perils cause
damage, destruction or disappearance of the ship and cargo and non-payment of freight. So,
marine insurance insures ship (Hull), cargo and freight.
Types of policies are:
 Voyage policies
 Time policies
 Valued policies
 Hull insurance
 Cargo insurance
 Freight insurance
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24. Social Insurance:
Social insurance has been developed to provide economic security to weaker sections of the
society who are unable to pay the premium for adequate insurance. The following types of
insurance can be included in social insurance
(i) Sickness Insurance : In this type of insurance medical benefits, medicines and reimbursement
of pay during the sickness period, etc. are given to the insured person who fell sick.
ii) Death Insurance : Economic assistance is provided to dependants of the assured in case of
death during employment. The employer can transfer his such liability by getting insurance
policy against employees.
iii) Disability Insurance : There is provision for compensation in case of total or partial disability
suffered by factory employees due to accident while working in factories. According to
Employees Compensation Act, the responsibility to pay compensation is vest with the
employer. But the employer transfers his liability on the insurer by taking group insurance
policy.
iv) Unemployment Insurance : In case insured person becomes unemployed due certain specific
reasons, he is given economic support till he gets employment.
v) Old-age Insurance : In this category of insurance, the insured or his dependents is paid, after
certain age, economic assistance.
For the last few years, the Indian Government has extended the scope of Social Insurance.
Under the concept of social justice, this scheme now extended to Daily-wages earners,
Rickshaw pullers, Landless labourers, Sweepers, Craftsmen, etc. through different insurance.
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25. Miscellaneous Insurance :
The process of fast development in the society gave rise to a number of risk or hazards. To
provide security against such hazards, many other types of insurance also have been developed.
The important among them are
i. Vehicle insurance on buses, cars, trucks, motorcycles, etc. and made compulsory so that the
losses due to accidents can be claimed from the insurance company.
ii. Personal accident insurance by paying an annual premium Rs.12 on policy worth Rs.12,000.
In case of accidental death or total/partial disability, a fixed amount as per conditions of
insurance, is paid to the insured.
iii. Burglary insurance -- (against theft, decoity etc.)
iv. Legal liability insurance (insurance whereby the assured is liable to pay the damages to
property or to compensate the loss of personal injury or death. This is in the form of fidelity
guarantee insurance, automobiles insurance and machines etc.)
v. Crop insurance (crops are insured against losses due to heavy rains and floods, cyclone,
draughts, crop diseases, etc.)
vi. Cattle insurance (Insurance for indemnity against the loss of cattle from various kinds of
diseases)
In addition to the above, insurance plans are available against crime, medical insurance, bullock
cart, jewellery, cycle rickshaw, radio, T.Vs., etc.
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26. Classification from Risk Point of View:
From risk point of view, insurance can be classified into four categories
1. Personal Insurance
2. Property Insurance
3. Liability Insurance
4. Fidelity Guarantee Insurance
A brief description of each is given below :
Personal Insurance:
Personal insurance refers, the loss of life by accident, or sickness to individual which is covered
by the policy. The insurer undertakes to pay the sum insured on the happening of certain event
or on maturity of the period of insurance. This insurable sum is determined at the time of
affecting the policy and include life insurance, accident insurance, and sickness insurance. Life
insurance contains the element of investment and protection, while the accidental, sickness or
health insurance contain the element of indemnity only.
Property Insurance:
Contract of property insurance is a contract of indemnity. Proof by the assured of loss is an
essential element of property insurance. The policies of insurance against burglary, home-
breaking or theft etc. fall under this category. The assured is required to protect the insured
26

27. property. After the loss has taken place, the assured usually required to notify the police as to
losses.
Liability Insurance:
Liability insurance is the major field of general insurance whereby the insurer promises to pay
the damage of property or to compensate the losses to a third party. The amount of
compensation is paid directly to third party. The fields of liability insurance include workmen
compensation insurance, third party motor insurance, professional indemnity insurance and third
party liability insurance etc. In liability insurance, there may be various reasons for the arising of
liability; viz. accident to a worker at the workplace, defective goods, explosion in the factory
during the process of production, formation of poisonous gas within the factory, due to the uses
of chemicals and other such substances in the manufacturing process.
Fidelity Guarantee Insurance:
In this type of insurance, the insurer undertakes to indemnify the assured (employer) in
consideration of certain premium, for losses arising out of fraud, or embezzlement on the part of
the employees. This kind of insurance is frequently adopted as a precautionary measure in cases
where new and untrained employees are given positions of trust and confidence.
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28. THE IMPORTANCE OF INSURANCE
Insurance benefits society by allowing individuals to share the risks faced by many people. But
it also serves many other important economic and societal functions. Because insurance is
available and affordable, banks can make loans with the assurance that the loan’s collateral
(property that can be taken as payment if a loan goes unpaid) is covered against damage. This
increased availability of credit helps people buy homes and cars. Insurance also provides the
capital that communities need to quickly rebuild and recover economically from natural
disasters, such as tornadoes or hurricanes. Insurance itself has become a significant economic
force in most industrialized countries. Employers buy insurance to cover their employees against
work-related injuries and health problems. Businesses also insure their property, including
technology used in production, against damage and theft. Because it makes business operations
safer, insurance encourages businesses to make economic transactions, which benefits the
economies of countries. In addition, millions of people work for insurance companies and
related businesses. In 1996 more than 2.4 million people worked in the insurance industry in the
United States and Canada.
Number of offices more than doubled in the last five year. Number of direct employees in Life
Insurance Industry (Source : LI Council) increased from 1,22,867 in 2000-01 to 2,49,221 in
2014-15.
The number of individual agents has increased to nearly 20 times the number in 2000-01. As on
31st March, 2015, there were 503 Corporate Agents working for Life insurance industry. Life
Insurance Industry recorded a premium income of Rs 3,28,101 crore during 2014-15 including
renewal premium as well as new premium. The number of new individual policies issued in
2014-15 stood at 2.59 Crore
28

29. Insurance as an investment that offers a lot more in terms of returns, risk cover &as also that
tax concessions added bonuses not all effects of insurance are positive ones. The possibility
of earning insurance payments motivates some people to attempt to cause damage or losses. Wit
hout the possibility of collecting insurance benefits, for instance, no one would think of
arson, the willful destruction of property by fire, as a potential source of money
EVOLUTION OF INSURANCE IN INDIA
The marine insurance is the oldest form of insurance. If we trace Indian history there are
evidence that marine insurance was practiced here about three thousand years ago. The code of
Manu indicates that there was the practice of marine insurance carried out by the traders in India
with those of SriLanka, Egypt and Greece .it is wonderful to see that Indians had even
anticipated the doctrine of average and contribution. Fright was fixed according to season and
was then very much at the mercy of the wind and other elements. Travellers by sea and land
were very much exposed to the risk of losing their vessels and merchandise because of piracy on
open seas and highway robbery of caravans was very common. The practice of insurance was
very common during the rule of Akbar to Aurangzeb, but the nature and coverage of the
insurance in this period is not well known. It was the British insurer who introduced general
insurance in India in the modern form. The Britishers opened general insurance in India around
the year 1700 .The first company known as the sun insurance office was set up in Calcutta in the
year 1710.This was followed by several insurance companies like London assurance and royal
exchange assurance (1720), Phoenix Assurance Company (1782). Etc. General insurance
business in the country was nationalized with effect from 1st January 1973 by the General
Insurance Business (Nationalization) Act, 1972. More than 100 non-life insurance companies
including branches of foreign companies operating within the country were amalgamated and
grouped into four companies, viz., the National Insurance Company Ltd., the New India
Assurance Company Ltd., the Oriental Insurance CompanyLtd., and the United India Insurance
Company Ltd. with head offices at Calcutta, Bombay, New Delhi and Madras, respectively.
Life insurance in the current form came in India from united kingdom with the establishment of
a British firm, oriental life assurance company in 1818 followed by
29

30. Bombay life assurance company in 1823, the madras equitable life insurance society in 1829
and oriental life assurance company in 1874.Prior to 1871, Indian lives were treated as sub-
standard and charged an extra premium of 15% to 20%. Bombay mutual life assurance society,
an Indian insurer that came in to existence in 1871, was the first to cover Indian lives at normal
rates. The Indian insurance company Act 1923 was enactedinter alia, to enable the government
to collect statistical information about life and non-life insurance business transacted in India by
Indian and foreign insurer, including the provident insurance societies. The first half of the
20th
century marked by two world war, the adverse effects of the World War I and World War II
on the economy of India, and in between them the period of world-wide economic
crises triggered by the Great depression. The first half of the 20th century was also marked by
struggles for India’s independence. The aggregate effect of these events led to a high rate of
bankruptcies and liquidation of life insurance companies in India. This had adversely affected
the faith of the general public in the utility of obtaining life cover In this background, the
Parliament of India passed the Life Insurance of India Act on19th June 1956, and the Life
Insurance Corporation of India was created on 1st
September, 1956, by consolidating the life
insurance business of 245 private life insurers and other entities offering life insurance services.
Since 1972, the insurance sector has been totally under the control of government of India
through LIC and GIC and its subsidiaries. As a result, revenue of both of
them increased in the last years .the amount of savings pooled by LIC increased from Rs.2704
crores in 1974 to Rs .57670 in 1994 with an annual growth rate of 16.53%.similarly premium
underwritten by GIC rose from 280 crores in 193 to 7647 crores in1998 showing an annual
growth rate of 25.18%.Despite increase in premium collected by both LIC and GIC there were
inefficiency and red tapeisum creeped in to the insurance sector. Apart from that a major policy
shift by the Narasimha Rau government during 1990’s.the Indian economy opened for foreign
competition .In this background The government of India in 1993 had set-up a
high powered committee by R.N Malhothra, former governor reserve bank of India, toexamine
the structure of Indian insurance sector and recommended changes to make it more efficient and
competitive keeping in view structural changes in other part of the financial system of the
country. Insurance sector has been opened up for competition from Indian private insurance
companies with the enactment of Insurance Regulatory and Development Authority Act, 1999
30

31. (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance Regulatory and Development
Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of
insurance policy and to regulate, promote and ensure orderly growth of the insurance industry.
IRDA Act 1999 paved the way for the entry of private players into the insurance market, which
was hitherto the exclusive privilege of public sector insurance companies corporations.
EVOLUTION OF INSURANCE ORGANIZATION:
With a view to serve the society, the insurance organizations have been developed in different
forms with innovation of insurance practice for social welfare and development; some of these
forms are outlined here.
 Self-insurance
The arrangement in which an individual or concern sets up a private fund to meet the future risk.
If some losses happened in the future the firm meets the loss out of the fund. While it may be
called ‘self-insurance’ it is not a single matter of fact, insurance at all because there is no hedge,
no shifting, or distributing the burden of risk among larger Persons. It is merely a provision to
meeting the unforeseen event. Here the
insured become the insurer for the particular risk. But it can be effectively worked only when
there is wide distribution of risks subjected the same hazard.
 Partnership
A Partnership Firm may also carry on the insurance business for the sake of profit. Since it is not
an entity distinct from the persons comprising it, the personal liability of partners in respect to
the partnership debts is unlimited. In case of huge loss the partners may have to pay from their
own personal funds and it will not be profitable to them to starts
insurance business .in the early period before the advent of joint stock companies many insuranc
e undertakings were partnership firms or unincorporated companies
 Joint stock companies
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32. The joint stock companies are those, which are organized by the shareholders who subscribe the
necessary capital to start the business. These are formed for earning profits for the stockholders
who are the real owners of the companies. The management of a company is entrusted to a
board of directors who is elected by the shareholders from amongst themselves. The company
can operate insurance business and policyholders have nothing to do with the management of
the concern. But in life insurance it is the practice to share certain portion of profit among the
certain policyholders.
 Mutual fund companies
The mutual fund companies are co- operative association formed for
the purpose of effecting insurance on the property of its members. The policyholder’s are
themselves the shareholders of the companies each member is insured as well as insured. They
have power to participate in management and in the profit sharing to the full extent. Whenever
the income is more than the expenses and claims, it is accumulated I the form of saving and is
entitled in reducing the rate of premium. Since the insured are insurers also, they always try to
reduce the management expenses and to keep the business at sound level.
 Co-operative insurance organizations
Cooperative insurance organizations are those concerns, which are incorporated and registered under
Indian cooperative societies Act. The concerns are also called ‘co-operative insurance societies’ these
societies like mutual fund companies are non-profit organization .the aim is to provide insurance
protection to its members at the lowest reasonable net cost. The Indian
insurance Act. 1938, has provided special provisions for the co-operative insurance societies, but after
nationalization the societies have ceased to exist.
 Lloyd’s Association
Lloyd’s association is one of the greatest insurance institutions in the world. Taking its name
from the coffee house Lloyd where underwriters assembled to transact business and pick-
up news. The organization traces its origins to the latter part of the seventeenth century .so it is
the oldest insurance organization in existing form in the world. In 1871, Lloyds Act was passed
incorporating the members of the association into a single corporate body with perpetual
32

33. succession and corporate seal .the powers of Lloyds corporation were extended from the
business of marine insurance to the other insurance and guarantee business. The Lloyds
Association also publishes, Lloyds list and register of shipping for the information of insuring
public and the insurers
 State Insurance
The government of a nation, sometimes, owns the insurance and runs
the business for the benefit of the public. The sate insurance is defined as that insurance which is
under public sector. In Brazil, Japan and Mexico, the insurance are largely nationalized.
Previously, the state undertook only those insurances, which were regarded as vital for the
national interest.
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34. INSURANCESECTOR REFORMS
Having looked at the insurance sector, the efforts made by the government to make the industry
more dynamic and customer friendly. To begin with, the Malhotra committee was set up with
the objective of suggesting changes that would achieve the much required dynamism.
The Malhotra Committee Report
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. In 1994, the committee submitted the report and gave the following recommendations:
Structure
Government stake in the insurance Companies to be brought down to 50%Government should
take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as
independent corporations all the insurance companies should be given greater freedom to
operate.
Competition
Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the
industry No Company should deal in both Life and General Insurance through a single entity
Foreign companies may be allowed to enter the industry in collaboration with the domestic
companies. Postal Life Insurance should be allowed to operate in the rural market. Only one
State Level Life Insurance Company should be allowed to operate in each stat
34

35. Regulatory Body
The Insurance Act should be changed. An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry)
Investments
Mandatory Investments of LIC Life Fund in government securities to be reduced from75% to
50%.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)
According to the insurance amendment bill (2015), the section 24 of the Pension Fund
Regulatory and Development Authority ( PFRDA) Act provides that the foreign investment
limit in the pension sector will be linked with the ceiling in the insurance sector, which has gone
up to 49% from 26%. Under the legislation, while up to 26 per cent foreign capital will be under
the automatic route, the balance 23 per cent has to secure approval from the Foreign Investment
Promotion Board (FIPB).According to the General Insurance Business (Nationalization) Act,
1972 (GIBNA, 1972) the four general insurance companies (GICs) had to be 100% government
owned, however The Insurance Laws (Amendment) Bill, 2015 - passed by the RajyaSabha on
March 12 and by the LokSabha. The GICs "are now allowed to raise capital, keeping in view the
need for expansion of the business in the rural and social sectors, meeting the solvency margin
for this purpose and achieving enhanced competitiveness subject to the government equity not
being less than 51% at any point of time. The amendment also clearly defines health insurance
business to include travel and personal accident cover. It is also expected that the proposed
increase in the FDI limit will have a follow on impact on other sectors, including the pension
industry creating further momentum.
Customer Service
LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be
encouraged to set up unit linked pension plans. Computerization of operations and updating of
35

36. technology to be carried out in the insurance industry.Overall, the committee strongly felt that in
order to improve the customer services and increase the coverage of the insurance industry
should be opened 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.
Few Life Insurance policies are:
Whole life policies
Whole life policies cover the insured for life. The insured does not receive money while he is
alive; the nominee receives the sum assured plus bonus upon death of the insured.
Money back policies
Money back policies cover the insured for a specific period. The insured receives money on
survival of the term and is not covered thereafter.
Money back policies
Money back policies the nominee receives money immediately on death of the insured. On
survival the insured receives money at regular intervals during the term. These policies cost
more than endowment with profit policies.
Annuities / Children's policies
Annuities / Children's policies the nominee receives a guaranteed amount of money at a pre-
determined time and not immediately on death of the insured. On survival the insured receives
money at the same pre-determined time. These policies are best suited for planning children's
future education and marriage costs.
Pension schemes
Pension schemes are policies that provide benefits to the insured only upon retirement. If the
insured dies during the term of the policy, his nominee would receive the benefits either as a
lump sum or as a pension every month. Since a single policy cannot meet all the insurance
objectives, one should have a portfolio of policies covering all the needs
36

37. INSURANCE COMPANIES IN INDIA
There are many Life Insurance Companies like:
 LIFE INSURANCE CORPORATION OF INDIA
 BAJAJ ALLIANCE LIFE INSURANCE COMPANY
 ICICI PRUDENTIAL LIFE INSURANCE COMPANY
 HDFC STANDARD LIFE INSURANCE COMPANY
37

38.  BIRLA SUN LIFE INSURANCE COMPANY
 ING VYSYA LIFE INSURANCE COMPANY
 METLIFE INSURANCE COMPANY
 TATA AIG LIFE INSURANCE COMPANY
 MAX NEWYORK LIFE INSURANCE COMPANY
 KOTAK MAHINDRA LIFE INSURANCE COMPANY
INDUSTRY PROFILE
INSURANCE AND BUSINESS ENVIRONMENT:
Insurance is considered as one of the important segment of the economy for its growth and
development. This industry provides long term funds which are essential for the growth and
development of the nation .so the growth of insurance industry largely depends up on the
environment in which they exists. Here I would like to mention about Indian business
environment and their impact on insurance sector. There are two type of environment which
affect the business one is environment which is internal to the organization (internal
environment) and the other one which is external to the organization (external environment).
Internal environment includes management, technology, competitors, employees, shareholders,
policyholders, marketing intermediary, etc.
The external environment of insurance business has been classified in four parts, namely legal,
economic, financial, and commercial. Let us discus them in detail by taking one by one.
THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY
(IRDA):
The Malhotra Committee felt the need to provide greater autonomy to insurance companies in
order to improve their performance and enable them to act as independent companies with
38

39. economic motives. For this purpose, it had proposed setting up an independent regulatory body-
The Insurance Regulatory and Development Authority. Based on the Malhotra committee report
in April 2000 IRDA was incorporated.
Since being set up as an independent statutory body the IRDA has put in a framework of globall
y compatible regulations. Section 14 of the IRDA Act 1999, lays the duties, power and functions
of the authority .the authority shall have the duty to regulate, promote and ensure orderly growth
of the insurance business and reinsurance business.
Reforms and Implications:
The liberalizations of the Indian insurance sector has been the subject of much heated debate for
some years. The sector is finally set to open up to private competition. The Insurance Regulatory
and Development Authority bill will clear the way for private entry into insurance, as the
government is keen to invite private sector participation into insurance. To address those
concerns, the bill requires direct insurers to have a minimum paid-
up capital of Rest. 1 billion, to invest policyholder’s funds only in India; and to restrict
international companies to a minority equity holding of 26 percent in any new company. Indian
Promoters will also have to dilute their equity holding to 26 percent over a 10-year period. Over
the past three year, around 30 companies have expressed interest in entering the sector and many
foreign and Indian companies have arranged alliances. Whether the insurer is old or new, private
or public, expanding the market will present challenges. A number of foreign Insurance
Companies have set up representative offices in India and have also tied up with various asset
management companies. Some of the Indian companies, which have tied up with International
partners, are
Indian Partners International Partners
Bombay Dyeing General Accident, UK
Tata American Int. Group, US
Dabur Group Liberty Mutual Funds, US
ICICI Prudential, UK
Sundaram Finance Winterthur Insurance, Switzerland
Hindustan Times Commercial Union, UK
39

40. Ranbaxy Cigna, US
HDFC Standard Life, UK
CK Birla Group Zurich Insurance, Switzerland
DCM Shriram Royal Sun Alliance, UK
Godrej J Rothschild, UK
M A Chidambaram Met Life
Cholamandalam Guardian Royal Exchange, UK
SK Modi Group Legal and General, Australia
20th Century Finance Canada Life
Alpic Finance Allianz Holding, Germany
Vysya Bank ING
The likely impact of opening up of India’s insurance sector is that private players may swamp
the market. International insurers often derive a significant part of their business from
multinational operations. Multinational insurers are indeed keenly interested as; perhaps there
home markets are saturated while emerging countries have low insurance penetration and high
growth rates
40

41. Type of life insurance policies:
Whole life insurance
Whole life is a form of permanent insurance, with guaranteed rates and guaranteed cash values.
It is the least flexible form of permanent insurance.
Universal life insurance
Universal life is similar to whole life, except that you can change the death benefit (the money
paid to the beneficiary when the insured person dies), the amount of premiums and how often
you pay the premiums.
Variable life insurance
Variable life insurance is the riskiest form of permanent insurance, but it can also give you the
best return for your money. Essentially, the life insurance company will invest your insurance
premiums for you. If the investments do well, the death benefit and cash value of the policy go
up. If they do poorly, they go down. It's a little like putting your savings into the stock market.
Group life insurance
Many companies allow their employees to buy group life insurance through the company.
Usually, you can get very good rates for this insurance but you have to give the insurance up
41

42. when you stop working there. For that reason, group insurance can be a good way to buy a little
extra life insurance, but it does not make sense to make it your main policy
There are a number of policies for specific insurance needs. Some of these
include:
Family income life insurance
This is a decreasing term policy that provides a stated income for a fixed period of time, if the
insured person dies during the term of coverage. These payments continue until the end of a
time period specified when the policy is purchased.
Family insurance
A whole life policy that insures all the members of an immediate family --husband, wife and
children. Usually the coverage is sold in units per person, with the primary wage-earner insured
for the greatest amount.
Senior life insurance
Also known as graded death benefit plans, they provide for a graded amount to be paid to the
beneficiary. For example, in each of the first three to five years after the insured dies, the death
benefit slowly increases. After that period, the entire death benefit is paid to the beneficiary.
This might be appropriate if the beneficiary is not able to handle a large amount of money soon
after the death, but would be in a better position to handle it a few years later.
Juvenile insurance
This is life insurance on a child. Coverage is paid for by an adult, usually the parents or
guardians. Such policies are not considered traditional life insurance because the child is not
producing an income that needs to be protected. However, by buying the policy when the child
is young, the parents are able to lock in an extremely low premium rate and allow many more
years of tax-deferred cash value build-up
42

43. Credit life insurance
This insurance is designed to pay off the balance of a loan if you die before you have repaid it.
Credit life insurance is available for many kinds of loans including student loans, auto loans,
farm equipment loans, furniture and other personal loans including credit cards. Credit life
insurance can be purchased by an individual. Usually it is sold by financial institutions making
loans, like banks, to borrowers at the time they take out the loan. If a borrower dies, the proceeds
of the policy repay the loan directly to the lender or creditor.
Mortgage insurance
This decreasing term coverage is designed to pay off the unpaid balance of a mortgage if you die
before the mortgage is paid off. Premiums are generally level throughout the term of the policy.
The policy is usually independent of the mortgage, meaning that the financial institution
granting the mortgage is separate from the insurance company issuing the policy. The proceeds
of the policy are paid to the beneficiaries of the policy, not the mortgage company. The
beneficiary is not required to use the proceeds to pay off the mortgage.
Annuity
An annuity is a form of insurance that enables you to save for your retirement. Basically, you
give the insurance company money for a certain period of time, and then after you retire they
will pay you a certain amount of money every year until you die. There are many different forms
of annuities. . Most people who buy annuities are 55 or older.
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44. PROFILE OF THE ORGANISATIONS:
Insurance Regulatory and Development Authority of India (IRDAI):
Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous apex
statutory body which regulates and develops the insurance industry in India. It was constituted
by a Parliament of India act called Insurance Regulatory and Development Authority Act,
1999 and duly passed by the Government of India.[4]
The agency operates from its headquarters at Hyderabad, Telangana where it shifted
from Delhi in 2001.
44

45. IRDA batted for a hike in the foreign direct investment (FDI) limit to 49 per cent in the
insurance sector from the erstwhile 26 per cent.[6]
The FDI limit in insurance sector was raised to
49% in July 2014.
MISSION STATEMENT OF THE AUTHORITY:
 To protect the interest of and secure fair treatment to policyholders;
 To bring about speedy and orderly growth of the insurance industry (including annuity
and superannuation payments), for the benefit of the common man, and to provide long
term funds for accelerating growth of the economy;
 To set, promote, monitor and enforce high standards of integrity, financial soundness, fair
dealing and competence of those it regulates;
 To ensure speedy settlement of genuine claims, to prevent insurance frauds and other
malpractices and put in place effective grievance redressal machinery;
 To promote fairness, transparency and orderly conduct in financial markets dealing with
insurance and build a reliable management information system to enforce high standards
of financial soundness amongst market players;
 To take action where such standards are inadequate or ineffectively enforced;
 To take action where such standards are inadequate or ineffectively enforced;
45

46. LIFE INSURANCE CORPORATION OF INDIA:
Life Insurance Corporation of India was formed in September 1956 by passing LICAct, 1956 in
Indian parliament. On the nationalization of the life insurance in 1956, the premium rating
of Oriental Government security life Assurance company were adopted by LIC with a reduction
of 5% of the tabular premium or Re. 1 per thousand sum assured, whichever was less. This
reduction was made in anticipation of economies of scale that would emerge on the merger of
different insurers in a single entity. Life Insurance Corporation Of India - there are many things
to consider as Life Insurance Corporation of India offers various insurance products which are
very complex, but underlying this complexity is a simple fact. The building blocks for all Life
Insurance Corporation of India are (1) investment return; (2) mortality experience; and (3)
expense management; for your Life Insurance Corporation Of India.
Objectives of LIC
46

47.  Spread Life Insurance much more widely and in particular to the rural areas and to the
socially and economically backward classes with a view to reaching all insurable persons
in the country and providing them adequate financial cover against death at a reasonable
cost.
 Maximize mobilization of people's savings by making insurance-linked savings
adequately attractive.
 Bear in mind, in the investment of funds, the primary obligation to
its policyholders, whose money it holds in trust, without losing sight of the interest of the
community as a whole; the funds to be deployed to the best advantage of the investors as
well as the community as a whole, keeping in view national priorities and obligations of
attractive return.
 Conduct business with utmost economy and with the full realization that the moneys
belong to the policyholders.
 Act as trustees of the insured public in their individual and collective capacities.
 Meet the various life insurance needs of the community that would arise in the changing
social and economic environment.
 Involve all people working in the Corporation to the best of their capability in furthering
the interests of the insured public by providing efficient service with courtesy. Promote
amongst all agents and employees of the Corporation a sense of
participation, pride and job satisfaction through discharge of their duties with dedication t
owards achievement of Corporate Objective
VISION:
"A trans-nationally competitive financial conglomerate of significance to societies and Pride of
India “
MISSION:
47

48. "Explore and enhance the quality of life of people through financial security by
providing products and services of aspired attributes with competitive returns, and by rendering
resources for economic development”
Various policies offered by life insurance corporation of India are
1. Whole Life Schemes
 Whole life with profit
 Limited payment whole life
 Single Premium whole life
 Convertible whole life plan
2. Endowment Schemes
 Endowment plan with profit
 Limited payment Endowment
 JeevanMitra (Double Cover)
 JeevanMitra (Triple cover)
 BhavishyaJeevan
 JeevanAnand
 New Jana Raksha
3. Term Assurance Plan
Every father desires to see that his children are well settled in life through sound education,
leading to good jobs and happy marriage. These needs arise at ages which can be approximately
anticipated. Say when the children are between 18 to 25 year of age. This plan provides for a
sum assured to keep aside to meet marriage educational expenses of children. Under this plan he
saving along with the vested bonus shall be payable at the end of the selected
48

49. term either is lump sum or in ten half yearly installment, at the option of the life assured
nominee beneficiary.
JeevanMitra
This plan provides additional insurance cover equal to the sum assured in the event of death
during the term of policy so that the total insurance cover in the event of death is twice the basic
sum assured. i.e. The basic sum assured is doubled and the accrued bonus is also paid.
Here we see that LIC have more number of market share. People believe more in LIC because
this is public sector insurance company. LIC have 60% market share in insurance industry but
other like private sector insurance companies have less number of market share comparison than
LIC.
49

50. ING VYSYA LIFE INSURANCE:
ING Vysya Life Insurance Company Private Limited entered the private life insurance industry
in India in September 2001, and in a short span of 18 months has established itself as a
distinctive life insurance brand with an innovative, attractive and customer friendly product
portfolio and a professional advisor force. It also distributes products in close cooperation with
its sister company ING Vysya Bank through Bank assurance. Currently, it has over 3000
advisors working from 22 locations across the country and over 300 employees.
ING Vysya Life Insurance Company is headquartered at Bangalore and has established a strong
presence in the cities of Delhi, Mumbai, Kolkata, Hyderabad and Chennai. In addition ING
Vysya Life operates in Vizag, Vijaywada, Mangalore, Mysore, Pune, Nagpur, Chandigarh,
Ludhiana and Jaipur.ING Vysya Life has pioneered product innovations in the Indian life
insurance market with customer-oriented cash bonus endowment and money back products.
(Reassuring Life and Maximising Life), the first anticipated whole life product (Fulfilling Life)
50

51. and the first Term/Critical Illness combination product (Conquering Life). Conquering Life is an
innovative term and critical illness product that has been launched recently. Conquering Life
provides affordable term cover and critical illness coverage for 10critical illnesses of up to 50%
of the Sum Assured. ING Vysya Life declared a bonus in September 2002 of 5% (cash bonus -
payable immediately) and 4% (reversionary bonus - payable at the end of the term).
The company has over 25,000 customers at the end of 2002 and has achieved a first premium
income of Rs. 17 crores in 2002.ING Vysya Life Insurance is a joint venture between ING
Insurance International BV a part of ING Group, the world's largest life insurance company
(Fortune Global 500,2002), ING Vysya Bank, with 1.5 million customers and over 400 outlets
and GMR Technologies and Industries Limited, part of GMR Group also based in Bangalore
and involved in the field of power generation, infrastructural development and several
other businesses.ING Vysya Life has a paid up capital of Rs.140 crores and an authorised
capital of Rs.200 crores.Life insurance products offered by the company are:
1. Protection plan
 Critical illness plan
 Endowment plan
2. Savings plan
 Endowment plan
 Child protection plan
 Money back plan
3. Investment Plan
 Whole life plan
 Limited payment endowment plan
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52.  Anticipated whole life plan
TATA-AIG Life Insurance:
Tata-AIG Life Insurance Company is a joint venture between the Tata Group and American
International Group Inc. (AIG), the leading US-based international insurance and financial
services organization and the largest underwriter of commercial and industrial insurance in
America. Its member companies write a wide range of commercial, personal and life insurance
products through a variety of distribution channels in approximately 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. TATA holds 76% shares and AIG
holds 24% shares in the total share capital of TATA AIG.Tata AIG Life Insurance Company
Ltd. "Tata AIG Life" offers a broad array of life insurance products to individuals, associations
and businesses of all sizes, with awide variety of additional coverage to ensure our customers
can find an insurance product to meet their needs. Tata-AIG Life Insurance and Tata-AIG
52

53. General Insurance, both joint ventures between the Tata Group and American International
Group (AIG), provide life and general insurance policies and solutions to companies, institutions
and organizations across India. It is licensed to operation on 12th
February 2001. TATA-AIGlife
is spread over28 branch offices and 39 training offices across the country. Tata-AIG Life offers
a broad array of life insurance products and solutions to corporate and other organizations.
These products and solutions have various value-added benefits and options that deliver
flexibility and choice to the company's clients. Tata AIG Life has completed its 4th year of
operations and registered a Total Premium of Rs. 497 Crores for the period April 2004 - March
2005.
The company has some 20 life insurance products with over 250 product combinations,
including endowment to term, pension to group life and credit life, money back to whole life
plans, etc. Tata-AIG Life uses different distribution channels, including direct marketing,
brokerage and banc assurance, to service client groups in 19 Indian cities. Tata-AIG Life is the
first private insurer in India to offer group retirement schemes. Additionally, the company's
group management division focuses on providing employee benefit solutions.
PRODUCTS
The product range of TATA-AIG Life is wide-spread across different segments.
Some of the products are mentioned below.
 Maha life
 Invest Assure
 Health Protector
 Star Kid
 Shubh Life
 Nirvana
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54.  Nirvana Plus
 Money Saver Plan
 Health First
 Assure Golden Life
 Assure 10, 20, 30 years – Security and Growth
 Assure Educate at 18, 21
 Assure Career Builder Plan at 27
 Assure Golden Years Plan
 Assure 21 Money Saver Plan
 Assure 1/5/10/15/20/25 years/ to age lifelines
 TROP
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55. People who buy policy from TATA AIG that people give highest rank to their insurance
company.TATA AIG have 40% share of their rank.
HDFC STANDARD LIFE INSURANCE:
The Partnership:
HDFC and Standard Life first came together for a possible joint venture, to enter the Life
Insurance market, in January 1995. It was clear from the outset that both companies shared
similar values and beliefs and a strong relationship quickly formed. In October 1995 the
companies signed a 3 year joint venture agreement. Around this time Standard Life purchased a
5% stake in HDFC, further strengthening the relationship. The next three years were filled with
uncertainty, due to changes in government and on-going delays in getting the IRDA (Insurance
Regulatory and Development authority) Act passed in parliament. Despite this both companies
remained firmly committed to the venture. In October 1998, the joint venture agreement was
renewed and additional resource made available. Around this time Standard Life purchased 2%
of Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also started to use
the services of the HDFC Treasury department to advise them upon their investments in India.
55

56. Towards the end of 1999, the opening of the market looked very promising and both companies
agreed the time was right to move the operation to the next level. Therefore, in January 2000 an
expert team from the UK joined a handpicked team from HDFC to form the core project team,
based in Mumbai. Around this time Standard Life purchased a further 5% stake in HDFC and a
5% stake in HDFC Bank. In a further development Standard Life agreed to participate in the
Asset Management Company promoted by HDFC to enter the mutual fund market. The Mutual
Fund was launched on 20th July 2000.
Incorporation of HDFC Standard Life Insurance Company Limited:
The company was incorporated on 14th August 2000 under the name of HDFC Standard Life
Insurance Company Limited. Companies ambition from as far back as October 1995, was to be
the first private company to re-enter the life insurance market in India. On the23rd of October
2000, this ambition was realized when HDFC Standard Life was the only life company to be
granted a certificate of registration. HDFC are the main shareholders in HDFC Standard Life,
with 81.4%, while Standard Life owns 18.6%. Given Standard Life’s existing investment in the
HDFC Group, this is the maximum investment allowed under current regulations. HDFC and
Standard Life have a long and close relationship built upon shared values and trust. The
ambition of HDFC Standard Life is to mirror the success of the parent companies and be the
yardstick by which all other insurance company’s in India are measured. Products offered by the
company are:
INDIVIDUAL PLAN:
 With Profit Endowment Assurance
 With Profits Money Back
 Single Premium Whole of Life
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57.  Term assurance Plan
 Loan Cover Term Assurance
 Personal Pension Plan
 Children’s Plan
GROUP PLANS:
 Group Term Insurance
 Development Insurance Plan
57

58. ICICI PRUDENTIAL LIFE INSURANCE COMPANY:
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier
financial powerhouse, and prudential plc, a leading international financial services group
headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector
insurance companies to begin operations in December 2000 after receiving approval from
Insurance Regulatory Development Authority (IRDA).ICICI Prudential’s equity base stands at
Rs. 925 crore with ICICI Bank and Prudential plc. holding 74% and 26% stake respectively. In
the quarter ended June 30, 2005, the company garnered Rs 335 crore of new business premium
for a total sum assured of Rs 2,619 crore and wrote 111,522 policies. For the past four years,
ICICI Prudential has retained its position as the No. 1 private life insurer in the country, with a
wide range of flexible products that meet the needs of the Indian customer at every step in life.
Products offered by ICICI Prudential are
1.Savings Plan
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59.  Smart kid
 Life Time
 Save ‘n’ Protect
 Cash Back
2. Protection plan
 Life Guard
 Extra Protection Through
 Riders
3. Retirement Plans
 Forever Life
 Life link pension
 Life time pension
 Reassure
4. Investment Plans
 Assure Invest
 Life Link
5. Group plans
 Group Superannuation
 Group Gratuity
 Group Term Assurance
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60. KOTAK MAHINDRA LIFE INSURANCE COMPANY:
Established in 1985 as Kotak Capital Management Finance promoted by Uday Kotak the
company has come a long way since its entry into corporate finance. It has dabbled in leasing,
auto finance, hire purchase, investment banking, consumer finance, broking etc. The company
got its name Kotak Mahindra as industrialists Harish Mahindra and Anand Mahindra picked a
stake in the company. Kotak Mahindra is today one of India's leading Financial Institutions Old
Mutual plc is an international financial services group based in London with expanding
operations in life assurance, asset management, banking and general insurance. Old Mutual is
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61. listed on the London Stock Exchange (where it is included on the FTSE 100 Index) and also on
the South African, Namibian, Malawi and Zimbabwe stock exchanges. It has 156 years of
experience in the life insurance business.
The Products offered by the Company are
Individual Plan
 Kotak Endowment Plan
 Kotak Term Plan
 Kotak Retirement Income Plan
 Kotak Child Advantage Plan
 Kotak Preferred Term Plan
 Kotak Capital Multiplier Plan
 Kotak Safe Investment Plan
 Riders
 Exclusions Under Riders
Group Plan
 Kotak Term Group plan
 Kotak Gratuity Group plan
 Kotak Credit Term Group plan
 Riders
 Exclusions Under Riders
Rural
 KotakGraminaBimaYojana
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62. MARKET SIZE OF INSURANCE INDUSTRY
Government's policy of insuring the uninsured has gradually pushed insurance penetration in the
country and proliferation of insurance schemes are expected to catapult this key ratio beyond 4
per cent mark by the end of this year, reveals the ASSOCHAM latest paper.
The number of lives covered under Health Insurance policies during 2015-16 was 36 crore
which is approximately 30 per cent of India's total population. The number has seen an increase
every subsequent year as 28.80 crore people had the policy in the previous fiscal.
During April 2015 to March 2016 period, the life insurance industry recorded a new premium
income of Rs 1.38 trillion (US$ 20.54 billion), indicating a growth rate of 22.5 per cent. The
general insurance industry recorded a 12 per cent growth in Gross Direct Premium underwritten
in April 2016 at Rs 105.25 billion (US$ 1.55 billion). The life insurance industry reported 9 per
cent increase in overall annual premium equivalent in April-November 2016. In the period,
overall annual premium equivalent (APE)- a measure to normalise policy premium into the
equivalent of regular annual premium- including individual and group business for private
players was up 16 per cent to Rs 1,25,563 crore (US$ 18.76 billion) and Life Insurance
Corporation up 4 per cent to Rs 1,50,456 crore (US$ 22.48).
India’s life insurance sector is the biggest in the world with about 360 million policies which are
expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per cent over the
next five years. The insurance industry plans to hike penetration levels to five per cent by 2020.
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63. The country’s insurance market is expected to quadruple in size over the next 10 years from its
current size of US$ 60 billion. During this period, the life insurance market is slated to cross
US$ 160 billion.
The general insurance business in India is currently at Rs 78,000 crore (US$ 11.44 billion)
premium per annum industry and is growing at a healthy rate of 17 per cent.
The Indian insurance market is a huge business opportunity waiting to be harnessed. India currently
accounts for less than 1.5 per cent of the world’s total insurance premiums and about 2 per cent of the
world’s life insurance premiums despite being the second most populous nation. The country is the
fifteenth largest insurance market in the world in terms of premium volume, and has the potential to
grow exponentially in the coming years.
CHALLENGES AND OPPORTUNITIES IN
INSURANCE INDUSTRY
The wide range of economic reforms were initiated in the year 1991 through the advent of LPG,
which not only brought forth drastic changes in their functional set up of a country but also in
the structure of insurance sector, routed through the examination carried out by Malhotra
Committee. The recommendations of the committee are mainly fostered to open up the sector
for the players. The objectives of the committee were implemented in the later part of the year
2000 under the able leadership of Insurance Regulatory Development Authority of India. These
new insurance companies started operating from metros and urban areas. The urban population
got more attention and it led to good insurance penetration in urban areas as compared to the
rural markets. Hence, the rural people didn’t have a chance to learn more about insurance. The
major challenges which have to be channelized for the growth of insurance sector are the major
challenges:
Cut Threat Competition:
Liberalization will create acute competition in the insurance market. Fierce competition to
increase volume and market share will continue as more and more players join the race for the
greater Indian insurance.
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64. Customer Relationship Management:
Customer behavior will be influenced by environmental factors as well as intrinsic personal
aspirations. The environmental factors are socio economic and demographic factors, inputs of
insurance advisors, the company’s efforts to manage customer satisfaction and experience.
Distribution of Products:
Segmentation of markets, selling segment oriented products, focusing on fuller satisfaction of
customer’s aspiration misstates multiple distribution net works. While the traditional channel of
tied up agents or advisors would be the most important distribution channel, insurers should
innovate and find new methods of delivering products to customers.
Risk Management:
With the environment changes in the economic scenario of the country the risk landscape has
undergone significant changes. With the opening up of economy and the entry of MNC in
almost all sectors, there has been a surge in the income levels, especially in the middle class.
The globalization has also resulted in cultural exchanges more than in the past.
Untapped Market Segments:
It is important to increase the customer base in semi-urban and rural areas which offer a huge
potential. The fact that a major chunk of business for LIC comes from these areas stand as a
testimony to this indisputable fact. There are difficulties in approaching this segment which will
take us back issues of customer education.
Relationship Management:
The relationship management of insurance companies is mainly trapped by individuals as well
as corporate agent. The relationship of the clients should be ever maintained, but the mistakes of
the agent are the major causes in the relationship management.
Human Resource Management:
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65. The insurance market is now filled with players, who are mature, globally prominent and big
players in the TransNationally competitive global competitive insurance market. Each of them
has ability to influence the market. The human resource competency will be another big
challenge.
Managing the Regulatory Authority:
As the competition acute, the customer becomes more vulnerable to the vagaries on market
environment. The regulators have a duel responsibility. They has to ensure that the insure adhere
to sound insurance principles and practices as well as maintain adequate financial resources to
meet their liabilities.
Opportunities :
Promote Awareness:
It is necessary to promote more awareness among public about insurance. Because the level of
insurance penetration is very low Customer needs a good deal of customer education in which
the insures have to invest a lot of their resources in terms of time, effort, infrastructure and
money. Though a know ledged customer is a challenge for the company to convince and sell a
product to him, the brighter side is that his awareness had brought him to the threshold of
insurance.
Multiple Channels of Distribution:
Distribution being a key determinant of success for insurance companies. Because at more
number of distribution channels the insures have a large database of their disposal. By data
mining prospects can be accurately together for business. Linking insurance with allied finance
products like housing loan, mutual fund investment in companies, banks credit cards etc are the
new channels for life insurance. It is definite that the new channels will help the insurance
companies to reach out farther, wider and deeper.
Professionalism in Insurance Marketing:
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66. There are quality insurance advisors in this field due to the passing of IRDA bill. To obtain an
agency license training and written test are necessary. Many educated youth, retired officials are
taking insurance agency as a career. They guide the customers so that they can select products
according to their need, rather than to force selling.
Huge Untapped Market:
There is a lot of untapped market in the country. This gives space for all players to grow and
expand the insurance industry. Middle class people are having more awareness than the lower
class and high class people. They want to provide money for the education and marriage of their
children and also to meet their old age needs. So there is market expansion for pension plans and
child career plans.
Threat to Health and Life:
People die due to natural calamities and terrorism unexpectedly. The environmental pollution
affects the health of mankind. In cities people got employment in industries like IT, ITES etc.
Due to heavy work and occupational stress they get diseases. Hence there is a growing need for
these people to go for different kinds of insurance.
Regulations of IRDA:
IRDA regulations enacted for the protection of policy holders interest has also set out the bench
marks for servicing, settlement of claims, grievance redressal and so on. It also contains matters
relating to disclosures in proposal for insurance, statutory content of a insurance document,
duties and responsibilities of the agent etc. The IRDA watch the insurance companies always.
So the companies cannot provide deficient customer service.
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67. EMPLOYIBILITY IN INSURANCE INDUSRT
The industry aims to hike penetration levels to five per cent by 2020, and has the potential
to touch USD 1 trillion over the next seven years. With the new government policy, the cap
on foreign direct investment (FDI) will be increased from 26 per cent to 49 per cent thus
further boosting the market.
Insurance Services are the foundation for smooth functioning of all business and
commercial activities. It forms the backbone of overall economy of the country and the
Indian market has grown more than 20 per cent in last three years making the potential for
career development in the sector very promising. At present the industry employs a million
plus people with another five million associated as agents, consultants, surveyors, loss
assessors, underwriters, claim settlers, salvage dealers, brokers, sub-brokers, etc.
This sector can be a great career option for the youth since it is one of the fastest growing
sectors in India. The engine driving the sales growth of the industry is the workforce that
manages the operational excellence and overall performance — yet retaining, recruiting
and maximising the value of insurance employees is becoming increasingly difficult. By
some estimates, 50 per cent of today’s insurance agents will retire in the next 10 years,
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68. leaving the industry without its most knowledgeable and highest-performing workforce.
According to a report by National Skills Development Corporation (NSDC), there will a
requirement for over two million people in insurance and banking sector by 2021. Another
report by ASSOCHEM points towards an estimated manpower requirement of 30 lakhs by
2030 for the sectors. With several international companies coming into India to penetrate
the huge potential in the urban and rural markets, huge manpower will be required to meet
its requirements. However, the huge employability gap in this sector ma y become an
obstacle to its growth.
Majority of the employees (on-rolls) in insurance industry are in the highly skilled class
with specialised job responsibilities. Apart from the on-rolls employment there is a huge
number of people employed as selling agents and advisors and they require basic
knowledge on insurance, finance and selling skills. Employability gap is the highest in the
category of agents and advisors as they are without any practical knowledge about the
industry and lack in soft skills.
Considering that this category has the highest potential for employment, it is important to
focus on training them in vocational and soft skills so they can add to the output of the
market. The most important skills required for the candidates include Lack of product
knowledge, Communication skills, Asset classes awareness, Presentation skills, Aptitude to
compliance, to name a few.
The agents and consultants who form a bulk of the workforce in this sector are more like
entrepreneurs than employees and therefore need to be trained appropriately to remain
focused and driven in their work. Soft skills become even more important for them as they
are more of a ‘one-man show’ - needing to convince customers to buy their product, guide
them about it and maintain a long-term relationship with them. Since personal interaction
and understanding is necessary to acquire insurance domain skills, developing soft skills
along with domain knowledge are crucial for results. Unfortunately, there is a lack in such
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69. skills and the industry is struggling to find adequate talent with these traits.
This is due to the lack of many quality courses specifically designed for the sector. Though
there are diploma courses for students being offered by some private colleges, they lack
practical exposure towards domain knowledge making them less productive as employees.
Also, the curriculum do not focus on personality development, attitude management and
motivational trainings, which are crucial in jobs with high levels of human engagement.
Also, they need to deal with sensitive issues like life, health, etc which require skills other
than just domain knowledge; it requires attitude, patience and empathy to be able to engage
with the customers. The business world is realizing that traits like the ability to recognize,
understand, use and manage emotions are crucial to be a successful insurance professional
and unfortunately most of the candidates are not adequately equipped with them.
It is not that organisations do not have soft skills trainings at all, but perhaps the shortfall
with traditional methods is that they fail to bring out the best in each individual due to their
universal approach. Transformational training, designed for the first time in India by Viztar
International aims at filling that gap. It profiles the students individually; try to evaluate
their strengths and weaknesses and works with them to develop the same.
Besides, most training companies do not keep track of progress after the session but
transformational trainers keep in touch with the students and take their feedback
periodically to understand if they are applying or benefiting from the training provided.
Between an aging workforce, dwindling new recruits and high attrition rates, insurers must
boost their ability to retain their best employees by focusing on employability skills and
motivate them to perform better. With the insurance sector gearing up for a huge growth
and enormous career development opportunities, we need to be preparing a skilled
workforce which can do justice to the demand.
With its huge population and general economic development, India may soon become the
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70. Insurance hub of the world. Career in insurance is more than just direct selling and requires
both analytical and technical skills and is developing into one of the charted professions in
the country.
Insurance is also one of the least attractive industries for college graduates, to turnaround
the situation of having an aging workforce, declining new recruits and high attrition rates,
insurers must transform their human capital strategies to achieve high performance in the
challenging environment.
PRESENT SCENARIO
Global integration of financial markets resulted from de-regulating measures, technological
information explosion and financial innovations. Liberalisation and Globalisation have allowed
the entry of foreign players in the Insurance sector. With the entry of private and foreign players
in the Insurance business, people have got a lot of options to choose from. Radical changes are
taking place in customer profile due to the changing life style and social perception, resulting in
erosion of brand loyalty. To survive, the focus of the modern insurers shifted to a customer-
centric relationship. The paper focuses the current position of insurance industry.
Liberalisation and Privatisation:
India's economic development made it a most lucrative Insurance market in the world. Before
the year 1999, there was monopoly state run LIC transacting life business and the General
Insurance Corporation of India with its four Subsidiaries transacting the rest. In the wake of
reform process and passing Insurance Regulatory and Development Authority (IRDA) Act
through Indian parliament in 1999, Indian Insurance was opened for private companies.
Liberalisation on the Insurance sectors has allowed the foreign players to enter the market with
their Indian partners. Most of the foreign Insurers have joined within the local market. India
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71. offers immense possibilities to foreign Insurers since it is the world's most populous country
having over a billion people.
Insurance industry had ten and six entrants in life and non-life sector respectively in the year
2000-2001. The industry again saw two and three entrants in the life and non-life business
respectively in the year 2001-2002. One additional entrant was made both in the life and in non-
life business in 2004 and 2005 respectively. At present there are fourteen companies each in Life
and General Insurance. The Funds earlier generated by the state owned insurers have been
diversified with other new insurers. We should wait and see how the new players are going to
boost up our economy.
Competition:
Private and Foreign entrants in the Insurance Industry made others difficult to retain their
market. Higher customer aspirations lead to new expectations and compel him to move towards
the insurer who provides him the best service in time. It becomes less viable for them even to
maintain the functional networks or competitive standards and services. To survive in the
Industry they analyse, the emerging requirements of the policyholders / insurers and they are in
the forefront in providing essential services and introducing novel products. Thereby they
become niche specialists, who provide the right service to the right person in right time.
Information Technology:
Insurers are the earlier adopters of technology. Because of the Information revolution, customers
are free to choose from a wide range of new and innovative products. The Insurance companies
are utilizing the Information technology applications for better customer service, cost reduction,
new product design and development and many more.
New technology gives the policyholders / insured better, wider and faster access to products and
services. The impact of Information Technology in Insurance business is being felt at an
accelerating pace. In the initial years IT was used more to execute back office functions like
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