Insurance (1)

INDIAN FINANCIAL SYSTEM
TOPIC: INSURANCE
GROUP PRODUCT-TEAM 6
1.DIVYESH
2.KUNAL SHARMA
3.PRATHYUSHA RANI KOTLA
4.SHADAB HASAN

CERTIFICATE
TO WHOM EVER IT MAY CONCERNS
The project study entitled INSURANCE submitted by team 6 (PBRM Batch 2) in partial fulfillment of the
PGDBRM 2021-2022 is a record of original work carried out by us under the guidance and supervision of
Dr. VIVEK SAXENA .This is to certify that the work has not been submitted elsewhere for any award of
any degree or diploma.
DR VIVEK SAXENA
PROJECT GUIDE

ACKNOWLEDGEMENT
An Acknowledgement such as this can only scratch the surface and not really portray the thanks which we
really wish to acknowledge to Dr. VIVEK SAXENA (NIIT University, Neemrana) for his valuable inputs
that helped us in formalizing the basic frame work of analysis and identifying issues with regard to work.
He has not only given his precious guidance and suggestions but also his constructive criticism and timely
disapprobation also resulted in ultimate desired efficacy.
We will be missing our responsibility if we do not thank our course co-coordinator Dr. VIVEK SAXENA
(Assistant professor, NIIT University) who had been very encouraging from the very onset of the final tem
project and without whom the project would not have been successful.
Finally, we sincerely thank to our colleagues for their timely inputs and constructive criticism, and we
express our gratitude towards all those who have helped without our knowledge directly or indirectly
completing our project work.
Indeed, we did enjoy the project work which was of much enlightening and knowledge gathering to us.
Team 6
(PBRM Batch 2)

TABLE OF CONTENTS
INSURANCE…………………………………………………............1
HISTORY OF INSURANCE SECTOR IN INDIA………………..2
INSURANCE INDUSTRY IN ECONOMIC STABILITY………..5
INSURANCE COMPANIES AND FINANCIAL STABILITY…...6
THE SPECIAL ROLE OF REINSURERS…………………………7
IMPORTANCE OF INSURANCE INDUSTRY……………………8
VARIOUS TERMINOLOGIES IN THE INSURANCE
SECTOR……………………………………………………………....11
DIFFERENT TYPES OF INSURANCE POLICIES IN INDIA…..13
THINGS TO CHECK WHEN WE BUY INSURACE……………..25
INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY…………………………………………………………25
RESPONSIBILITIES OF IRDAI……………………………………27
FOREIGN DIRECT INVESTMENT……………………………….29
CONCLUSION……………………………………………………….31

1
INSURANCE
The normal activities of daily life carry the risk of enormous financial loss. Many persons are willing to p
ay a small amount for protection against certain risks because that protection provides valuable peace of
mind. The term insurance describes any measure taken for protection against risks. When insurance takes
the form of a contract in an insurance policy, it is subject to requirements in statutes, Administrative
Agency regulations, and court decisions.
In an insurance contract, one party, theinsured, pays a specified amount of money, called a premium, to a
nother party, the insurer. The insurer, in turn, agrees to compensate the insured for specific future losses.
The losses covered are listed in the contract, and the contract is called a policy.
When an insured suffers a loss or damage that is covered in the policy, the insured can collect on the proc
eeds of the policy by filing a claim, or request for coverage, with the insurance company. The company th
en decides whether or not to pay the claim. The recipient of any proceeds from the policy is called the ben
eficiary. The beneficiary can be the insured person or other persons designated by the insured.
A contract is considered to be insurance if it distributes risk among a large number of persons through an
enterprise that is engaged primarily in the business of insurance. Warranties or service contracts for merch
andise, for example, do not constitute insurance. They are not issued by insurance companies, and the risk
distribution in the transaction is incidental to the purchase of the merchandise. Warranties and service co
ntracts are thus exempt from strict insurance laws and regulations.
The business of insurance is sustained by a complex system of risk analysis. Generally, this analysis invol
ves anticipating the likelihood of a particular loss and charging enough in premiums to guarantee that insu

2
red losses can be paid. Insurance companies collect the premiums for a certain type of insurance policy an
d use them to pay the few individuals who suffer losses that are insured by that type of policy.
HISTORY OF INSURANCE SECTOR IN INDIA
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 startedpublishing returnsof Insurance Companies in India. The Indian
Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the

3
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.
The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large
number of insurance companies and the level of competition washigh. 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. GeneralInsurance 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

4
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.
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 statedthat foreign companies be allowed to enterby 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 hasthe 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.

5
Today there are 34 general insurance companies including the ECGC and Agriculture Insurance
Corporation of India and 24 life insurance companies operating in the country.
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.
INSURANCE INDUSTRY IN ECONOMIC
STABILITY
Insurance companies can be important for the stability of financial systems mainly because they are large
investors in financial markets, because there are growing links between insurers and banks and because
insurers are safeguarding the financial stability of households and firms by insuring their risks.
This special feature discusses the main reasons why insurance companies can be important for the stability
of the financial system. It also highlights the special role of reinsurers in the insurance sector and discusses
some of the key differences between insurers and banks from a financial stability point of view.
The insurance sector has traditionally been regarded as a relatively stable segment of the financial system.
This is mainly because most insurers’ balance sheets, unlike those of banks’, are composed of relatively
illiquid liabilities that protect insurers against the risk of rapid liquidity shortages that can and do confront
banks. In addition, insurers are not generally seen to be a significant potential source of systemic risk. One

6
of the main reasons for this view is that insurers are not interlinked to the same extent as banks are, for
instance, in interbank markets and payment systems
The insurance sector can, however, be a source of vulnerability for the financial system, and the failure of
an insurer – an event that has occurred from time to time – can create financial instability. In addition, the
traditional view that insurers pose limited systemic risk can be challenged, however, because it does not
take account of the fact that interaction between insurers, financial markets, banks and other financial
intermediaries has been growing. It is important, however, to recognize that insurance companies, given
their role as motivators of risk and their often long-term investment horizons, often also support financial
stability.
INSURANCE COMPANIES AND FINANCIAL
STABILITY
There are three main reasons why insurers are important for the stability of the financial system.1 First,
insurers are large investors in financial markets.2 Second, insurers often have close links to banks and other
financial institutions, and problems confronting an insurer cantherefore spread to the banking sector.Third,
insurers contribute to the safeguarding of the stability of household and firm balance sheets by insuring
their risks
THE SPECIAL ROLE OF REINSURERS

7
Although the reinsurance sector is much smaller than the primary insurance sector, it can still be seen as
important for financial stability for two main reasons. First, reinsurers provide safety nets for primary
insurers, and a reinsurer’s financial difficulties can significantly affect the primary insurance sector. For
example, if a reinsurer experiences financial stress, the problems could spread to many primary insurers if
their reinsurance hedges were to fail to perform as expected. In this sense,reinsurance is a credit risk for
primary insurers. It could also lead to a reduction in the availability of reinsurance coverage,which might
force primary insurers to cut back on their underwriting, withdraw from capital markets and bolster
solvency positions by other means. Second, because the business of reinsurers is to protect against extreme
events, they are usually more exposed than primary insurers to rare and unexpected catastrophic events,
such as natural disasters and terrorist attacks, the likelihood of which is difficult to quantify accurately.
The potential for a reinsurer to cause a systemic event within the primary insurance sector has increased in
recent years,due to consolidation in the reinsurance sector. The global reinsurance sector is dominated by
a handful of very large companies. What is more, the reinsurers themselves are interlinked as they distribute
reinsurance exposures among one another (called retrocession). In retrocession markets, large and unique
risks can be spread around the global reinsurance market to allow primary insurers to also reinsure risks
that are too large for a single reinsurer.
IMPORTANCE OF INSURANCE INDUSTRY

8
Business risk
The success and growth of any business depend upon how the business mitigate and control the risk which
they can face in business due to any unavoidable circumstances which may occur.
1. Reduce stress during difficult times
Insurance help us to avoid any unforeseen tragedies such as illness or even death. At that time our family
facing huge emotional stress and even grief. If we have taken insurance then it will help our family to cope
out of financial stress, then our family will focus on the recovery and rebuilding their lives.
2. To enjoy financial security
We may enjoy good financial position today but due to any unexpected event like happen in the
pandemic many people faces huge financial lossThere may be a fire in the factory, storm in the sea,or
loss of life. In all these cases it becomes difficult to bear the loss. Insurance provides a cover against
any sudden loss. Life Insurance ensures that your loved ones continue to enjoy a good quality of life
against any unforeseen event.
Peace of mind

9
Insurance encourages the behaviour to plan in advance for life stage needs. Not having insurance
sometimes means you have to dip into investments or assets to meet expenses, such as legal bills, medical
costs, fire loss, burglary loss, etc. In some cases,a lack of insurance you’re your dependents at risk -- for
example, with no medical insurance, a spouse or child may not get the treatment they need. This creates
worry and stress. With insurance, you know that you have a cushion on which you can rely, giving you
peace of mind. It helps you and gives you an instrument to plan your life goals and ambitions suchas buying
a new house, getting married, securing your child’s future, etc. When you take out an insurance policy, you
assume responsibility for the financial issues and do not expect other members of society to foot your bills.
This personal sense of accountability keeps you independent and reduces the burden you put on others
bringing you peace of mind.
Spreading Risk:
The basic principle of insurance is to spread risk among a large number of peoples. A large number of
persons get the insurance policies and pay a premium to the insurer .whenever a loss occurs, it is
compensated out of the fund to the insurer. This helps in spreading risk from one individual to society at
large.
Encourage savings:Assome amount of premium needs to be periodically paid against an insurance policy,
it leads to compulsive saving behavior. It inculcates the habit of saving among people while planning for a
better future. Hence,insurance does not only protect the risks but it provides the investment channel too.
Life insurance provides a mode of investment. In the case of fixed time policies, the insured gets a lump
sum amount after the maturity of the policies.
Tax Benefits: Pre-tax benefits are added advantages to the policyholders. These benefits help them to save
a large portion of their tax payment. When the tax-payment gets reduced,their disposable income increases.
Insurance policies also help plan your retirement. Retirement insurance ensures that you or your family
members receive a regular pension amount post a retirement date. You have the flexibility to choose the
retirement date and the manner in which you receive the pension.
Growth drivers for insurance in India
• Overall growth in the financial industry - increasing working population with higher disposable income.
• Increasing awareness about financial products including insurance.

10
2. Innovation and efficiency
• Increase in potential insurance customers - individuals and companies across different industries, small
and medium enterprises, multinational companies.
• Expansion due of insurance universe due to professionalization of companies.
• The scope of IoT in Indian insurance market continues to go beyond telematics and customer risk
assessment. Currently, there are 110+ Insure Tech start-ups operating in India.
• According to S&P Global Market Intelligence data, India is the second largest insurance technology
market in Asia-Pacific,accounting for 35% of the US$ 3.66 billion insure tech-focusedventure investments
made in the country.
3. Competition
• Increasing number of insurance providers with various sophisticated products at competitive prices.
• Regulations which are conducive for growth of the industry.
4. Growth in specific segments
• Increase in micro insurance due to increased focus of Government on financial inclusion.
• Increase in demand of motor insurance as a by-product of rapidly expanding auto industry.
• In March 2021, health insurance companies in the non-life insurance sector increased by 41%, driven by
rising demand for health insurance products amid COVID-19 surge.
• Group insurance has also been a big driver of insurance growth in the country
5. Digital disintermediation
• Digital disintermediation is proceeding strongly in the Indian insurance industry. The number of start-ups
offering online insurance has grown, with the key player being Policy Bazaar.
• Backed by Soft Bank and Singapore’s Temasek, each holding a 15% stake, Policy bazaar has a 50%
market share in the online insurance sales and is planning an IPO in 2021, with listings in the US and India

11
VARIOUS TERMINOLOGIES IN THE
INSURANCE SECTOR
Life Insurance Terminology
Are you starting a new family? Do you have a spouse or children who you want to provide for in life and
in death? Gerber Life Insurance offers adult and children’s life insurance to help you protectyour family’s
future. Here is some of the basic terminology for life insurance:
 Insured– The person(s) covered by the insurance policy.
 Premiums – The monthly or annual amount that you must pay in order to have the insurance coverage.
 Face Amount– The dollar amount that the insurance policy would pay out upon the death of the Insured.
 Primary Beneficiary– The person(s) designated to receive the proceeds of the life insurance policy upon
the death of the Insured.
 Contingent Beneficiary– The person(s) designated to receive the proceeds of the life insurance policy if
the Primary Beneficiary is no longer living.
 Term Life Coverage– The type of coverage that lasts for only a specified period of time (the “term”)
and has a defined ending date.The face amount would be paid to the designated beneficiary if the Insured
dies while the policy is in force.
 Whole Life Coverage– The type of coverage that can last for as long as the Insured is alive, provided
that all of the premiums are paid. This type of coverage usually keeps the same premium rate throughout
the life of the policy.

12
Health Insurance Terminology
The Patient Protection and Affordable Care Act enables more Americans to have access to quality,
affordable health insurance. The federally facilitated marketplaces are just one place where people can
compare plans. Here is some of the basic terminology for health insurance:
 Deductible– The annual amount of money that you must pay out of pocket for medical expenses before
your insurance kicks in and starts to make payments.
 Premiums – The monthly or annual amount that you must pay in order to have the insurance coverage.
 Co-payment– A flat fee that you must pay toward the cost of medical visits, your insurance provider
pays the remaining balance. For example, you could be responsible for a $10 co-pay for each visit to the
doctor.
 Coinsurance– The percentage that you must pay to share responsibility for your medical claims after
you meet your annual deductible. For example, your insurance provider might pay 80% of your claim
leaving you responsible for paying the remaining 20%.
Automobile Insurance Terminology
Requirements regarding auto insurance vary state by state,but the following definitions can be helpful for
understanding the basics when shopping for auto insurance:
 Deductible– The amount of money that you must pay out of pocket for damages sustained, such as in a
collision, before your insurance kicks in and starts to make payments.
 Premiums – The monthly or annual amount that you must pay in orderto have the exchange for insurance
coverage.
 Collision Coverage– The type of coverage that pays for the damages to your vehicle sustained as a result
of a collision with another vehicle or object.
 Comprehensive Coverage– The type of coverage that pays for damage to your vehicle sustained as a
result of fire, theft, vandalism, or various other stated causes.
 Bodily Injury Coverage– The type of coverage that pays for medical expenses and/or funeral costs of
other individuals injured, or killed, in an accident for which you are liable.
 Medical Payments Coverage– The type of coverage that pays for medical and funeral expenses for
anyone covered under your insurance policy in the event of an accident, regardless of fault.

13
 Uninsured Motorist Coverage– The type of coverage that pays for injuries, including death, which you
and/or other occupants of your vehicle sustain as a result of a collision with an uninsured driver who is
at fault.
DIFFERENTTYPESOF INSURANCEPOLICIESIN
INDIA
In life, unplanned expenses are a bitter truth. Even when you think that you are financially secure, a sudden
or unforeseen expenditure can significantly hamper this security. Depending on the extent of the
emergency, such instances may also leave you debt-ridden.
While you cannot plan ahead for contingencies arising from such incidents, insurance policies offer a
semblance of support to minimise financial liability from unforeseen occurrences.
There is a wide range of insurance policies, each aimed at safeguarding certain aspects of your health or
assets.
Broadly, there are 8 types of insurance, namely:
 Life Insurance
 Motor insurance
 Health insurance

14
 Travel insurance
 Property insurance
 Mobile insurance
 Cycle insurance
 Bite-size insurance
Simply knowing the various insurance policies does not help. Instead, you must know how each of these
plans work.
Without adequate knowledge about each of them, you may not be able to protect your finances, as well as
the financial well-being of your family members. Read on to learn all you need to know about the various
insurance policies.
1. Life Insurance
Life Insurance refers to a policy or cover whereby the policyholder can ensure financial freedom for his/her
family members after death. Suppose you are the sole earning member in your family, supporting your
spouse and children.

15
In such an event, your death would financially devastate the whole family. Life insurance policies ensure
that such a thing does not happen by providing financial assistance to your family in the event of your
passing.
Types of Life Insurance Policies
There are primarily seven different types of insurance policies when it comes to life insurance. These are:
 Term Plan - The death benefit from a term plan is only available for a specified period, for instance, 40
years from the date of policy purchase.
 Endowment Plan - Endowment plans are life insurance policies where a portion of your premiums go
toward the death benefit, while the remaining is invested by the insurance provider. Maturity benefits, death
benefit and periodic bonuses are some types of assistance from endowment policies.
 Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a part of your insurance premiums
go toward mutual fund investments, while the remaining goes toward the death benefit.
 Whole Life Insurance - As the name suggests, such policies offer life cover for the whole life of an
individual, instead of a specified term. Some insurers may restrict the whole life insurance tenure to 100
years.
 Child’s Plan - Investment cum insurance policy, which provides financial aid for your children throughout
their lives. The death benefit is available as a lump-sum payment after the death of parents.
 Money-Back - Such policies pay a certain percentage of the plan’s sum assured after regular intervals. This
is known as survival benefit.
 Retirement Plan - Also known as pension plans, these policies are a fusion of investment and insurance.
A portion of the premiums goes toward creating a retirement corpus for the policyholder. This is available
as a lump-sum or monthly payment after the policyholder retires.
Benefits of Life Insurance
If you possess a life insurance plan, you can enjoy the following advantages from the policy.
 Tax Benefits - If you pay life insurance premiums, you are eligible for tax benefits in India, under Section
80(C) and 10(10D) of the Income Tax Act. Thus, you can save a substantial sum of money as taxes by
opting for a life insurance plan.
 Encourages Saving Habit - Since you need to pay policy premiums, buying such an insurance policy
promotes the habit of saving money.
 Secures Family’s Financial Future - The policy ensures your family’s financial independence is
maintained even after your demise.
 Helps Plan Your Retirement - Certain life insurance policies also act as investment options. For instance,
pension plans offer a lump-sum payout as soon as you retire, helping you to fund your retirement.

16
Now that you know all about life insurance policies readon to understand the various facetsofother general
insurance policies.
2. Motor Insurance
Motor insurance refers to policies that offer financial assistance in the event of accidents involving your car
or bike. Motor insurance can be availed for three categories of motorised vehicles, including:
 Car Insurance - Personally owned four-wheeler vehicles are covered under such a policy.
 Two-wheeler Insurance - Personally owned two-wheeler vehicles, including bikes and scooters, are
covered under these plans.
 Commercial Vehicle Insurance - If you own a vehicle that is used commercially, you need to avail
insurance for the same. These policies ensure that your business automobiles stay in the best of shapes,
reducing losses significantly.
Types of Motor Insurance Policies
Based on the extent of cover or protection offered, motor insurance policies are of three types, namely:
 Third-Party Liability - This is the most basic type of motor insurance cover in India. It is the minimum
mandatory requirement for all motorised vehicle owners, as per the Motor Vehicles Act of 1988. Due to
the limited financial assistance,premiums for such policies also tend to be low. These insurance plans only
pay the financial liability to the third-party affected in the said mishap, ensuring that you do not face legal
hassle due to the accident. They, however, do not offer any financial assistance to repair the policyholder’s
vehicle after accidents.
 Comprehensive Cover - Comparedto the third-party liability option, comprehensive insurance plans offer
betterprotection and security. Apartfrom covering third party liabilities, these plans also cover the expenses
incurred for repairing the damages to the policyholder’s own vehicle due to an accident. Additionally,
comprehensive plans also offer a payout in case your vehicle sustains damage due to fire, man-made and
natural calamities, riots and others such instances. Lastly, you can recover your bike’s cost if it gets stolen,

17
when you have a comprehensive cover in place. One can also opt for several add-ons with their
comprehensive motor insurance policy that can make it better-rounded. Some of these add-ons include zero
depreciation cover, engine and gear-box protection cover, consumable cover, breakdown assistance, etc.
 Own Damage Cover - This is a specialised form of motor insurance, which insurance companies offer to
consumers. Further, you are eligible to avail such a plan only if you purchased the two-wheeler or car after
September 2018. The vehicle must be brand new and not a second-hand one. You should also remember
that you can avail this standalone own damage cover only if you already have a third party liability motor
insurance policy in place. With own damage cover, you basically receive the same benefits as a
comprehensive policy without the third-party liability portion of the policy.
Benefits of Motor Insurance Policies
Cars and bikes are increasingly more expensive with each passing day. At such a time, staying without
proper insurance can lead to severe monetary losses for the owner. Listed below are some advantages of
purchasing such a plan.
 Prevents Legal Hassle - Helps you avoid any traffic fines and other legalities that you would otherwise
need to bear.
 Meets All Third-Party Liability - If you injure a person or damage someone’s property during a vehicular
accident, the insurance policy helps you meet the monetary losses, effectively.
 Financial Assistance to RepairYour own Vehicle - After accidents,you need to spend considerable sums
on repairing your own vehicle. Insurance plans limit such out of pocket expenses,allowing you to undertake
repairs immediately.
 Theft/loss cover - If your vehicle is stolen, your insurance policy will help you reclaim a portion of the
car/bike’s on-road price. You can expect similar assistance if your vehicle is damaged beyond repair due to
accidents.
Additionally, individuals who own a commercial car/two-wheeler can also avail tax benefits if they pay
premiums for that vehicle.

18
3. Health Insurance
Health insurance refers to a type of general insurance, which provides financial assistance to policyholders
when they are admitted to hospitals for treatment. Additionally, some plans also cover the cost of treatment
undertaken at home, prior to a hospitalisation or after discharge from the same.
With the rising medical inflation in India, buying health insurance has become a necessity.However,before
proceeding with your purchase, consider the various types of health insurance plans available in India.
Types of Health Insurance policies
There are eight main types of health insurance policies available in India. They are:
 Individual HealthInsurance - These are healthcare plans that offer medicalcover to just one policyholder.
 Family Floater Insurance - These policies allow you to avail health insurance for your entire family
without needing to buy separate plans for each member. Generally, husband, wife and two of their children
are allowed health cover under one such family floater policy.
 Critical Illness Cover - These are specialised health plans that provide extensive financial assistance when
the policyholder is diagnosed with specific, chronic illnesses. These plans provide a lump-sum payout after
such a diagnosis, unlike typical health insurance policies.
 Senior Citizen Health Insurance - As the name suggests, these policies specifically cater to individuals
aged 60 years and beyond.
 Group Health Insurance - Such policies are generally offered to employees of an organisation or
company. They are designed in such a way that older beneficiaries can be removed, and fresh beneficiaries
can be added, as per the company’s employee retention capability.
 Maternity Health Insurance - These policies cover medical expenses during pre-natal, post-natal and
delivery stages. It covers both the mother as well as her newborn.

19
 Personal Accident Insurance - These medical insurance policies only cover financial liability from
injuries, disability or death arising due to accidents.
 Preventive Healthcare Plan - Such policies coverthe cost of treatmentconcerned with preventing a severe
disease or condition.
Benefits of Health Insurance
After assessing the various kinds of health insurance available, you must be wondering why availing such
a plan is essential for you and your loved ones. Look at the reasons listed below to understand why.
 Medical Cover - The primary benefit of such insurance is that it offers financial coverage against medical
expenditure.
 Cashless Claim - If you seek treatment at one of the hospitals that have tie-ups with your insurance
provider, you can avail cashless claim benefit. This feature ensures that all medical bills are directly settled
between your insurer and hospital.
 Tax Benefits - Those who pay health insurance premiums can enjoy income tax benefits. Under Section
80D of the Income Tax Act one can avail a tax benefit of up to Rs.1 Lakh on the premium payment of their
health insurance policies.
There may be additional advantages, depending on the insurance provider in question.
4. Travel Insurance
When talking about the different types of insurance policies, one must not forget to learn more about travel
insurance plans. Such policies ensure the financial safety of a traveller during a trip. Therefore, when
compared to other insurance policies, travel insurance is a short-term cover.
Depending on the provider you choose, travel insurance may offer financial aid at various times, such as
during loss of baggage, trip cancellation and much more. Here is a look at some of the different types of
travel insurance plans available in the country:

20
 Domestic Travel Insurance - This is the kind of travel insurance policy that safeguards your finances
during travels within India. However, if you plan to step outside the country for a vacation, such a policy
would not offer any aid.
 International Travel Insurance - If you are stepping out of the country, ensure you pick an international
travel insurance plan. It allows you to cover the unforeseen expenses that can arise during your trip like
medical emergencies, baggage loss, loss of passport, etc.
 Home Holiday Insurance - When you are travelling with family, your home remains unguarded and
unprotected. Chances of burglary are always significant, which may lead to significant losses. Thankfully,
with home holiday insurance plans, which are often included within travel policies, you are financially
protected from such events as well.
Benefits of Travel Insurance
The following aspects are covered under travel insurance plans:
 Cover Flight Delay - Flight delays or cancellations can lead to significant losses for the passenger. If you
buy travel insurance, you can claim such financial losses from the insurer.
 Baggage Loss/Delay - Travelinsurance lets you claim monetary assistance if there is a delay or you happen
to lose your luggage during the trip. With this amount, you can purchase some of the necessary items.
 Reclaim Lost Travel Documents - Visa and passport are essential documents during an international trip.
Opting for international travel insurance ensures that you have the necessary financial backing to reapply
for interim or replacement documents as and when necessary.
 Trip Cancellation Cover - A sudden death in the family or a medical emergency may play spoilsport with
your travel arrangements. Thankfully, international travel insurance plans support trip cancellations in such
events. You can claim financial assistance to pay penalties and cancellation charges for flights, hotels, etc.
Make sure that you choose an insurer carefully, especially a company that is reliable and available 24x7 to
assist you.

21
5. Property Insurance
Any building or immovable structure can be insured through property insurance plans. This can be either
your residence or commercial space. If any damage befalls such a property, you can claim financial
assistance from the insurance provider. Keepin mind that such a plan also financially safeguardsthe content
inside the property.
Types of Property Insurance in India
Here are some types of property insurance policies available in India:
 Home Insurance - With such a policy, you remain free from all financial liabilities that may arise from
damage to your home or contents inside due to fires, burglaries, storms, earthquakes, explosions and other
events.
 Shop Insurance - If you own a shop, which acts as a source of income for you, it is integral to protect
yourself from financial liability arising from the same.Whetherthe liability occursdue to natural calamities
or due to accidents, with these plans, you can immediately undertake repairs to the shop.
 Office Insurance - Another type of property insurance policy, office insurance ensures that the office
building and all the equipment inside are significantly protected in the event of unforeseen events.
Generally, office spaces include expensive equipment, such as computers, servers and much more. Thus,
availing these plans is essential.
 Building Insurance - If you own a complete building, opting for home insurance may not be sufficient.
Instead, you can purchase building insurance to cover the entire premises.
Benefits of Property Insurance
If you still think that property cover is not one of the types of insurance plans you need to avail, take a look
at some of the advantages from the same.
 Protection against Fires - While the insurance policy cannot prevent fires, it can prevent financial
liabilities from such an event.

22
 Burglaries - If your property exists in an area prone to theft and burglaries, such a policy is vital to ensure
financial security.
 Floods - In certain parts of India, floods are common. These floods can ravage your property leading to
substantial losses. Property insurance also protects against such events.
 Natural Calamities - The plan also offers financial aid against damage arising from earthquakes, storms
and more.
Rebuilding or renovation of a property is immensely expensive. Thus, property insurance policies are the
best option to ensure long-term financial health.
6. Mobile Insurance
Owing to the rising price of mobile phones and their several applications today, it has become imperative
to insure the device. Mobile insurance allows you to reclaim money that you spend on repairing your phone
in the event of accidental damage.
Further, you can also claim the same in case of phone theft, making it easier to replace the handset with a
new phone.
Benefits of Mobile Insurance
Mobile insurance policies are extremely beneficial, especially for those who own a premium smartphone.
 Comprehensive protection for newdevices - The value of phones tend to decline with time. Thus, when
the handset is new, phone insurance can help safeguard its significant value.

23
 Coverage against Damage to Screen - If you accidentally damage the smartphone screen,which is one of
the most important parts of such devices, your insurance plan will pay for the repair expenses.
 Theft or Robbery of Smartphone - Nothing is worse than buying your dream smartphone and losing it
due to theft or burglary. Well, phone insurance will help you afford a replacement handset if such an
unfortunate thing happens.
Some insurers may not allow you to buy insurance for the smartphone after a month or two passes from the
purchase of the handset.
7. Cycle Insurance
Bicycles are valuable properties in India as some people rely on these vehicles for their daily commute. A
cycle insurance policy ensures that you have access to necessary funds should your bicycle undergo
accidental damage or theft. It saves your out of pocket expenses, while also ensuring immediate repairs to
the vehicle.
Benefits of Cycle Insurance
The advantages of availing such an insurance policy are:
 Worldwide Coverage - Depending on the insurance provider, cycle insurance policies provide financial
assistance regardless of where your bicycle undergoes damage. Even if you meet with a cycling accident in
a different country, such a plan will offer aid.
 Protection against Fires and Riots - If your bicycle sustains damage due to accidental fires and/or rioting,
insurance policies will provide the necessary financial assistance to repair or undo the damage.
 Accidental Death Benefit - If you pass away due to bicycle accidents, the insurance policy for the cycle
would offer a lump-sum payout to your surviving family members.
Regardless of your cycle’s price, opting for insurance can reduce your financial liabilities significantly.

24
8. Bite-Size Insurance
Bite-sized insurance policies refer to sachet insurance plans that minimise your financial liability for
a very limited tenure, generally up to a year.
These insurance plans allow you to protect your finances against specific damage or threats.
For instance, particular bite-sized insurance may offer accidental cover of Rs. 1 Lakh for a year. You can
choose this policy when you think you might be particularly susceptible to accidental injuries.
Another example is insurance cover for specific diseases. For instance, if your area is prone to water-borne
diseases, such as cholera, you can pick a policy that covers cholera treatment and all associated costs for a
1-year period.
Benefits of Bite-sized Insurance
The primary benefit of bite-size insurance policies is that it allows you to avail financial protection at very
limited prices.
The premiums are so low that it hardly makes any impact on your overall monthly expenditures. In
comparison, the sum insured is significant.

25
THINGS TO CHECK WHEN WE BUY INSURACE
Service benefits - You should look at Service Benefits like 24*7 Customer Support, Convenient Pick-up
& Drop for your vehicle and a Wide Network of Cashless Garages.
Choose the right Sum Insured - The Right sum insured helps in ensuring that you are completely covered
in case of an emergency
Speed of claims of the insurer - Claims is the reason you buy an insurance. So check how long your
insurance company takes to settle claims.
Best value - If you are satisfied with the service and the Sum Insured, check the premium and the discount
you are getting.
INSURANCE REGULATORY AND
DEVELOPMENT AUTHORITY

26
Insurance Regulatory and Development Authority of India(IRDAI)is a statutory body formed under an Act
of parliament. This Acts comes into existence on 1999.The IRD Act has established the insurance
Regulatory and regulator to regulate and promote the insurance industry in India and to protect the interest
of holders of insurance policies.
The member of IRDA are appointed by the Central Government from amongst persons of ability, integrity
and standing who have knowledge or experience in life insurance, general insurance, actuarial science,
finance, economics, law, accountancy,administration etc.The Authority consists of a chairperson, not more
than five whole-time members and not more than four part-time members.
Powers, Duties and functions of the Authority
Authority has been responsible for duty to regulate, promote and ensure the orderly growth of the insurance
and re-insurance business in India. Further it has been conferred with numerous powers and functions
which include prescribing regulations on the investments of funds by insurance companies, regulating
maintenance of the margin of solvency, adjudication of disputes between insurers and intermediaries,
supervising the functioning of the Tariff Advisory Committee, specifying the percentage of premium
income of the insurer to finance schemes for promoting and regulating professional organizations and
specifying the percentage of life insurance business and generalinsurance business to be undertaken by the
insurer in the rural or social sector.
Tariff Advisory Committee
Tariff Advisory Committee is a body corporate, which controls and regulates the rates, advantages, terms
and conditions offered by insurers in the general insurance business. The advisory Committee has the
authority to require any insurer to supply such information or statements necessary for discharge of its
functions. If any insurer fails to comply with such provision shall be deemed to have contravened the
provisions of the Insurance Act.
Every insurer is required to make an annual payment of fees to the Advisory Committee of an amount not
exceeding in case ofreinsurance business in India, one percentof the totalpremiums in respectoffacultative
insurance accepted by him in India, and in case of any other insurance business, onepercent of the total
gross premium written direct by him in India
.

27
RESPONSIBILITIES OF IRDAI
The IRDAI is constituted under the insurance Regulatory and Development Authority Act of 1999. The
IRDAI has many roles and responsibilities such as:
 It specifies the code of conduct for the surveyors and loss assessors
 It regulates the maintenance of margin of solvency
 It promotes efficiency in the conduct of insurance business
 It levies fees and other charges for carrying out the purposes of this Act
 It supervises the functioning of the Tariff Advisory Committee
 Regulate all the entities conducting insurance business including and intermediary business such
as brokers, surveyors, agents etc.
Control of approvals
Multiple approvals are needed from IRDAI for different types of transfers and changes. Some of them
including the following,
 Any transferof sharesby any transferoror a group of transferorsrequires IRDAapproval, provided
this transfer jointly or severally exceeds 1% of the paid up equity capital of an insurance company.
 Additionally, if in a transfer the shareholding of the transferee is likely to exceed 5% of the paid up
equity capital of the insurance company, IRDA approval is mandatory.
 Any foreign direct investment in a bank (in cases where an insurance company is owned by a bank)
has to be approved by the Reserve Bank of India. This is done in consultation with the IRDA.
 Asper the Guidelines for Listed Indian Insurance Companies, 2016 any transferofthe equity shares
capital of the concerned insurer has to be subject to the lock-in period which has been specified by
the IRDA.
Minimum capital requirements

28
If the application is made for the business of Life insurance, General Insurance or Health insurance, there
must be documentary evidence require which proves that the paid-p capital of the business is at least Rs.
100 cr.
Additionally, a foreign company which is carrying on reinsurance business in India, by setting up a branch
in India, is required to have a net owned funds of INR 50 Billion.
Protection of the policy holder
The IRDA has issued a regulations act of 2017 which is called the Protection of Policyholders Interests.
The primary function of this regulation is to protect the interests of policyholders. Under this regulation the
insurer is required to have a policy approved by the board for the protection of the policyholder’s interests.
This policy shall prescribe certain minimum parametersand proceduresas mentioned in the regulations act.
Transfers of portfolios
Transfer of portfolio and mergers are very crucial decisions and require special attention by IRDA. There
is a requirement to submit a scheme of amalgamation and then approved by the IRDA and after that it has
to be advertised to the policyholders. In the end IRDAGives a final approval provided the transferor merger
is in the best interest of the policy holders.
Outsourcing
The IRDA has issued a regulations act called Outsourcing of Activities by Indian Insurers.The guidelines
also prohibit an insurer to outsource the following activities,
 Compliance with KYC.
 Approving advertisements.
 Grievance handling of policyholders.
 Decisions regarding the appointment of Agents, Surveyors and Loss Assessors.
 Funds management. This also includes calculations of NAV.
 Investment and other related functions.
The contracts which are outsourced have certain clauses and conditions such as:

29
 Guarantee from the outsourcing service provider.
 Contingency planning of the outsourcing service provider.
 Termination clauses which specify orderly handing over of data and assets.
 Asset ownership rights, data security, and the protection of confidential information
The IRDAhasmultiple guidelines for the proper functioning of the Insurance Industry in India. The primary
focus is to protect the common man and to provide long-term funds for accelerating the growth of the
economy.
FOREIGN DIRECT INVESTMENT
What is FDI?
Aforeign direct investment (FDI) is an investment made by a firm or individual in one country into business
interests located in another country. Generally, FDI takes place when an investor establishes foreign
business operations or acquires foreign business assets in a foreign company.
Recently, the Ministry of Finance amended Indian Insurance Companies (Foreign Investment) Rules,
2015 and clarified on the final rules for increased FDI (Foreign Direct Investment) in the Insurance Sector.
 Parliament had passed the Insurance Amendment Bill 2021 to increase the FDI limit in the insurance
sector to 74% from 49%.
 The Ministry of Finance has notified 'Indian Insurance Companies (Foreign Investment) Amendment
Rules, 2021’.

30
New FDI Rules
Management Persons to be Resident Indian Citizens:
 For an Indian insurance company having foreign investment,
majority of its directors, key management persons, and at least one among the chairperson of
its board, its managing director and its chief executive officer will be a resident Indian citizen.
Meaning of foreign investment
Here the foreign investment mean sum of both direct and indirect foreign investment
 Direct investment by a foreigner will be called foreign direct investment, while investment by an
Indian company (which is owned or controlled by foreigners) into another Indian entity is considered
as indirect foreign investment.
Significance
The increase in foreign ownership to 74% can result in inclusion of global best practices in terms of
insurance products going forward. It will also help in bringing down the cost of insurance products in
India.
It is good for Indian Promoters, it will let them keep control of management and board, the additional
capital inflow will help them with funds to push for growth.
It will benefit small insurance players or the ones where the sponsors don’t have the ability to put in
more capital and hence it will benefit in strengthening them and increasing competition across the
industry.
It is likely to help local private insurers grow fast and expand their presence across India, which has
one of the lowest insurance penetration levels globally.
Insurance Penetration in India
Presently insurance penetration in India is 3.7% of the Gross Domestics Product(GDP) compared to world
average of 6.31%

31
Presently the Growth in life insurance sector has decreased to 11-12% from 15-20% until fiscal 2020 as the
pandemic pushed customers to save cash instead of spending on stocks or life insurance policies.
As of 31st
March, 2021 there were only 24 life and 34 non-life direct insurers in India, whereas there were
243 life insurance companies and 107 non-life insurance companies at the time of nationalization.
So increase in FDI from 49% to 74% helps to increase insurance penetration in India and we cansee healthy
competition in insurance sector in post covid. More foreign private players can set up their insurance
business in India which leads to more employment generation and also new technology comes to Indian
market
CONCLUSION
 Buying insurance is important as it ensures that you are financially secure to face any type of
problem in life, and this is why insurance is a very important part of financial planning. A general
insurance company offers insurance policies to secure health, travel, motor vehicle, and home.
 Insurance turn accumulated capital into productive investments. Insurance also enables mitigation
of losses, financial stability and promotes trade and commerce activities those results into
sustainable economic growth and development. Thus, insurance plays a crucial role in the
sustainable growth of an economy

Insurance (1)

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Insurance (1)

Similar to Insurance (1) (20)

Recently uploaded

Recently uploaded (20)

Insurance (1)