Progress Of Life insurance in India since 2000WHAT IS LIFE INSURANCE IN INDIA?Life insurance made its debut in India well over 100 years ago. Its salient features are notas widely understood in our country as they ought to be. What follows is an attempt toacquaint readers with some of the concepts of life insurance, with special reference to lifeinsurance. It should, however, be clearly understood that the following narration is by nomeans an exhaustive description of the terms and conditions of a life insurance policy orits benefits or privileges. For more details, please contact our Branch or DivisionalOffice. Any life insurance Agent will be glad to help you choose the life insurance planto meet your needs and render policy servicing.Life Insurance sector is the fastest growing sector in India since 2000 when theGovernment allowed Private players and FDI [Foreign Direct Investment] up to 26%.Life Insurance in India was nationalized by incorporating Life Insurance Corporation(LIC) in 1956. All private life insurance companies at that time were taken over by LIC.In 2000, the legislation amending the Insurance Act of 1938 and legislating the InsuranceRegulatory and Development Authority Act of 2000 was passed, where in the newlyappointed insurance regulator - Insurance Regulatory and Development Authority[IRDA] started to issue licenses to private life insurers.What is Life Insurance?Life Insurance is a contract for payment of a sum of money to the person assured (orfailing him/her, to the person entitled to receive the same) on the happening of the eventinsured against. Usually the contract provides for the payment of an amount on the dateof maturity or at specified dates at periodic intervals or at unfortunate death, if it occursearlier. Among other things, the contract also provides for the payment of premiumperiodically to the Corporation by the assured. Life insurance is universallyacknowledged to be an institution which eliminates risk, substituting certainty foruncertainty and comes to the timely aid of the family in the unfortunate event of death ofthe breadwinner. By and large, life insurance is civilisations partial solution to theproblems caused by death. Life insurance, in short, is concerned with two hazards thatstand across the life-path of every person: that of dying prematurely leaving a dependentfamily to fend for itself and that of living to old age without visible means of support.Why is it superior to other forms of Savings?Protection: Savings through life insurance guarantee full protection against risk of deathof the saver. In life insurance, on death, the full sum assured is payable (with bonuseswherever applicable) whereas in other savings schemes, only the amount saved (withinterest) is payable.
Aid To Thrift: Life insurance encourages thrift. Long term saving can be made in arelatively painless manner because of the easy instalment facility built into the scheme(method of paying premium either monthly, quarterly, half yearly or yearly). Take, forexample, our Salary Saving Scheme popularly known as SSS. This scheme provides aconvenient method of paying premium each month by deduction from ones salary. Thededucted premium is remitted by the employer to the LIC. The Salary Saving Schemecan be introduced in an institution or establishment subject to specified terms andconditions.Liquidity: Loans can be raised on the sole security of a policy which has acquired loanvalue. Besides, a life insurance policy is also generally accepted as security for even acommercial loan.Tax Relief: Tax relief in Income Tax and Wealth Tax is available for amounts paid byway of premium for life insurance subject to Income Tax rates in force. Assessees canavail themselves of provisions in the law for tax relief. In such cases the assured in effectpays a lower premium for his insurance than he would have to pay otherwise.Money When You Need It: A suitable insurance plan or a combination of differentplans can be taken out to meet specific needs that are likely to arise in future, such aschildrens education, start-in-life or marriage provision or even periodical needs for cashover a stretch of time. Alternatively, policy moneys can be so arranged to be madeavailable at the time of ones retirement from service to be used for any specific purpose,such as for the purchase of a house or for other investments. Subject to certain conditions,loans are granted to policyholders for house building or for purchase of flats.Who Can Buy A Life Insurance Policy?Any person who has attained majority and is eligible to enter into a valid contract cantake out a life insurance policy for himself and on those in whom he has insurableinterest. Policies can also be taken out, subject to certain conditions, on the life of onesspouse or children. While underwriting proposals, factors such as the state of health ofthe life to be assured, the proponents income and other relevant factors are considered bythe Corporation.Insurance On Women.Prior to nationalization (1956), many of the private insurance companies used to offerinsurance to female lives with some extra premium or on restrictive conditions. Afternationalization of life insurance, the terms under which life insurance is granted to femalelives have been reviewed from time to time. At present, women with earned income aretreated on par with male lives. In other cases, a restrictive clause is imposed and that tooonly if age of the female is up to 30 years and if she does not have an income attractingIncome Tax.Medical And Non-Medical Schemes.Life insurance is normally offered after a medical examination of the life to be assured.However, to facilitate greater spread of insurance and also as a measure of relaxation,
LIC has been extending insurance cover without any medical examination, subject tocertain conditions.With Profit And Without Profit Plans.An insurance policy can be with or without profit. In the former, bonuses disclosed, ifany, after periodical valuations are allotted to the policy and are payable alongwith thecontracted amount. In without profit plan the contracted amount is paid without anyaddition. The premium rate charged for a with profit policy is therefore higher than for awithout profit policy.Keyman Insurance.Keyman Insurance is taken by a business firm on the life of key employee(s) to projectthe firm against the finance loss which may occur due to the premature demise of theKeyman.Life Insurance is the fastest growing sector in India since 2000 as Government allowedPrivate players and FDI up to 26%. Life Insurance in India was nationalised byincorporating Life Insurance Corporation (LIC) in 1956. All private life insurancecompanies at that time were taken over by LIC.In 1993 the Government of Republic of India appointed RN Malhotra Committee to laydown a road map for privatisation of the life insurance sector.While the committee submitted its report in 1994, it took another six years before theenabling legislation was passed in the year 2000, legislation amending the Insurance Actof 1938 and legislating the Insurance Regulatory and Development Authority Act of2000. The same year that the newly appointed insurance regulator - Insurance Regulatoryand Development Authority IRDA -- started issuing licenses to private life insurers.List of Life Insurers (as of Sept, 2008)Apart from Life Insurance Corporation, the public sector life insurer, there are 20 otherprivate sector life insurers, most of them joint ventures between Indian groups and globalinsurance giants.Life Insurer in Public Sector 1. Life Insurance Corporation of IndiaLife Insurers in Private Sector 1. SBI Life Insurance 2. Metlife India Life Insurance 3. ICICI Prudential Life Insurance 4. Bajaj Allianz Life 5. Max New York Life Insurance
6. Sahara Life Insurance 7. Tata AIG Life 8. HDFC Standard Life 9. Birla Sunlife 10. Kotak Life Insurance 11. Aviva Life Insurance 12. Reliance Life Insurance Company Limited - Formerly known as AMP Sanmar LIC 13. ING Vysya Life Insurance 14. Shriram Life Insurance 15. Bharti AXA Life Insurance Co Ltd 16. Future Generali Life Insurance Co Ltd 17. IDBI Fortis Life Insurance 18. AEGON Religare Life Insurance 19. DLF Pramerica Life Insurance 20. CANARA HSBC Oriental Bank of Commerce LIFE INSURANCEForeign Direct Investment (FDI) Policy in Insurance SectorAs per the current (Mar 06) FDI norms, foreign participation in an Indian insurancecompany is restricted to 26.0% of its equity / ordinary share capital. The Union Budgetfor fiscal 2005 had recommended that the ceiling on foreign holding be increased to49.0%.The government approved the much-awaited comprehensive Insurance Bill that seeks toraise foreign direct investment (FDI) cap in private sector to 49 per cent from 26 per cent.Indian life insurance industry overviewAll life insurance companies in India have to comply with the strict regulations laid outby Insurance Regulatory and Development Authority of India (IRDA). Therefore there isno risk in going in for private insurance players. In terms of being rated for financialstrength like international players, only ICICI Prudential is rated by Fitch India atNational Insurer Financial Strength Rating of AAA(Ind) with stable outlook indicatingthe highest claims paying ability rating.Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far thelargest player in the market. Among the private sector players, ICICI Prudential LifeInsurance(JV between ICICI Bank and Prudential PLC) is the largest followed by BajajAllianz Life Insurance Company Limited (JV between Bajaj Group and Allianz).Amongothers, Kotak Life Insurance emerging as a one of the best product provider in the currentmarket.It has been estimated that customer growth of Kotak Life Insurance is better thanany private insurance company in India. The private companies are coming out withbetter products which are more beneficial to the customer. Among such products are theULIPs or the Unit Linked Investment Plans which offer both life cover as well as scopefor savings or investment options as the customer desires.Further, these type of plans are
subject to a minimum lock-in period of three years to prevent misuse of the significanttax benefits offered to such plans under the Income Tax Act. Hence, comparison of suchproducts with mutual funds would be erroneous.Commission / intermediation fees • The maximum commission limits as per statutory provisions are:Agency commission for retail life insurance business: • o 7- 90% for 1st year premium if the premium paying term is more than 20 years 7- 10% for 1st year premium if the premium paying term is more than 15 years 7- 10% for 1st year premium if the premium paying term is less than 10 years 7% - yr 2 and 3rd year and 3.5% - thereafter for all premium paying terms.In case of Mutual fund related - Unit linked policies it varies between 1.5% to6% on thepremium paid. • o Agency commission for retail pension policies 7.5% for 1st year premium and 2.5% thereafter • Maximum broker commission - 30% • Referral fees to banks – Max 55% for regular premium and 10% for single premium. However in any case this fee cannot be more than the agency commission as filed under the product. • However, the above commission may be further subject to the product wise limits specified by IRDA while approving the product
Miscellaneous insuranceMiscellaneous Insurance exists to help people gain a good understanding of the variouskinds of insurance coverages that are available to people today. Insurance has become avery important part of many peoples lives as they realize the need to provide protectionfor different areas of their everyday life. There is a wide variety of types of insurancecoverage available today.The dictionary defines insurance as "coverage by contract whereby one party undertakesto indemnify or guarantee another against loss by a specified contingency or peril". Thismeans that an individual enters into an agreement with an insurance company that willpay a set amount of money in case of a loss in a specified area. There are a number ofinclusions and exclusions involved in each insurance policy with all kinds of variablesthat must be taken into consideration before purchasing the policy.One of the most important things to remember is that an insurance policy is a contractbetween the insurance company and their customer. The insurance company agrees topay certain amounts of money in case of loss and the customer agrees to pay theinsurance premiums that are required to keep the policy in place. If the customer fails topay the premiums due, the insurance may be revoked, leaving the customer vulnerable.The contract specifically makes the insurance company liable to pay for any loss that isspecifically stated in the insurance policy. Most policies will accurately describe thetypes of losses covered and the amount of money that the company will pay for thoselosses.With the increase in public awareness and the consequent thrust of the Insurance Industryin the areas of Health Insurance, Liability Insurance and other personal lines ofinsurances, the miscellaneous portfolio of Insurance is poised to be a sunrise portfolio ofGeneral Insurance.
Glass Insurance Personal Accident Insurance Money Insurance Golfer Insurance General Public Legal Liability Burglary Insurance Insurance Electronic Equipment Contract Works Insurance Insurance Workmen Compensation Fidelity Guarantee Insurance Insurance Machinery Insurance Aviation Insurance Travel Accident Insurance All Risks Insurance Boat InsuranceThus miscellaneous insurance is an addition to your existing insurance giving you anextra security.Management of Miscellaneous Insurance BusinessBackgroundWith the increase in public awareness and consequent thrust of the Insurance Industry in theareas of Health Insurance, Liability Insurance and other personal lines of insurances, themiscellaneous portfolio of Insurance is poised to be the sunrise portfolio of General Insurancebusiness. This programme has been designed keeping in mind these developments in themarket and attempts to address the need for increased awareness of the multidimensionalmiscellaneous portfolio.Objectives • To enhance the participants understanding of the miscellaneous portfolio • To acquaint them with various aspects of Health and Liability Insurance in context with the Current scenario • Help them explore the potential of rural insurance in line with the regulatory guidelines. • To emphasize the importance of and explore the potential of personal line of business under miscellaneous portfolio.
Contents • Analysis of the miscellaneous insurance products • Health Care Management - Indian and Global Perspective • TPA’s an Effective Service Provider • Legal framework and Liability Insurance Products • Rural and Social Sector - regulations, product and marketing • Personal line products - potential and marketing, distribution channels • Scope and Coverage of New Products • Credit Default Cover • Bankers Indemnity Insurance/ Jewelers Block Covers; Stock Brokers / Insurance Brokers Indemnity • Packaging & Product Development • Special Contingency CoversParticipants’ ProfileExecutives handling Technical Departments and Office In-charge of operating offices ofGeneral Insurance Companies.Accident InsuranceAccident insurance provides a cash cover to a policyholder when s/he suffers injuries as aresult of an accident. While insurance helps a policyholder pay off hospital and medicalbills in case of accident injuries, it provides cash benefits to family members if thepolicyholder dies in the accident. This insurance, applicable 24 hours a day, 365 days ayear, is also commonly referred to as personal accident insurance.Types of Personal Accident Insurance PoliciesUnder personal accident insurance, the policyholder, if injured, receives cash benefitsevery month, just like income, for as long as s/he is unable to work due to the accidentalinjuries. This income is non-taxable and does not exceed the policyholder’s after-tax
earnings minus the state benefits s/he can claim. In case of death of the policyholder dueto an accident, the family receives a specific lump-sum amount.There are eight common types of personal accident insurance policies: • Individual: This policy can be taken by any individual. The benefits usually enclose partners and children. Since several activities are excluded from this policy, it is not as useful for people who love adventurous sports, like mountaineering and rock climbing. • Children: The purpose of this policy is to provide financial help to parents if they are unable to work or if they incur expenses as a result of an accident. • Group: This policy is used by companies to cover employees for expenses related to accidents. • Self-employed: Since self employed individuals are not eligible for employee benefits, they are worse off when injured in an accident. • Team: Through a team accident insurance policy, organizers can seek cover for all the members of a sports team. • Professional: This policy is specifically for self employed professionals, such as a sportsperson, actor, lawyer or doctor, who have special requirements. • Over 50: This policy targets people over 50 years of age, as accidents can cause more grievous injuries to them. • Travel accidents: This policy offers benefits in case the policyholder meets with an accident while traveling.There are varied accident insurance policies to suit different needs. One shouldunderstand and choose the policy with utmost care.Burglary InsuranceWith the increase in materialistic wealth and booming economy, the chances of burglaryin business premises are also increasing. To counteract the situation and protect the hardearned wealth of the businesspersons, many insurance companies have come up withattractive insurance plans that promise to provide cover against the rise of loss or damagein the business premises, due to burglary. In India, a burglary insurance (businesspremises) policy generally covers contents of business premises, against the risk of lossor damage by burglary and housebreaking. It is very important to know the basic clauseof the insurance plans, although they may vary from company to company. In this article,we have provided the basic information that you need to know, before opting for aburglary insurance plan.
Burglary Insurance Policy • The loss of materialistic wealth in a business organization, due to burglary, is reimbursed by a burglary insurance policy. • The insurance companies provide insurance against nothing but burglary, in the business premises. • The property insured is covered only if loss or damage takes place, while contained in the insured premises and not in any other premises. • Loss of or damage to deeds, bonds, bills of exchange, promissory notes, cash, treasury notes and bank notes, cheque, securities for money stamps, stamp collections, books of account, documents of any kind, manuscripts, medals and coins, motor vehicles, and live stock cannot be claimed under office burglary insurance policy in India. • Damage to property by burglars is covered only when the insured is made good. In other words, damage to own premises are not covered. • With regard to cash in locked safe, the key to the safe or strong room should not be left in the premises overnight or at least anywhere near the safe. • Applicants need to submit the proposal form furnishing detailed information on the location of the risk and claims history. • Often inspection of the premises and its neighborhood is carried out by agents or brokers or marketing officers of the insurance company. • Premises located in isolated areas or the adjoining premises are those, which are not occupied in the night. These may include educational institution or a place of worship, which usually do not find favor with the insurers. • In order to substantiate a burglary insurance claim, one must produce the FIR and non-detection report from the police. • The insurers will depute and obtain a survey report even on the stolen goods, to determine the proximate cause of the loss and the quantum. • Stock books and other accounts are also verified before furnishing the insurance cover. • In some insurance plans, the theft is not valid, if it has been conducted by an internal staff, or a person who didnt break into the business premises.Motor insuranceVehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.
Legally, no motor vehicle is allowed to be driven on the road without valid insurance. Hence, it is obligatory to get the vehicle insured. Motor insurance policies cover against any loss or damage caused to the vehicle or its accessories due to the following natural and man made calamities. Natural Calamities: Fire, explosion, self-ignition or lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rockslide. Man made Calamities: Burglary, theft, riot, strike, malicious act, accident by external means, terrorist activity, any damage in transit by road, rail, inland waterway, lift, elevator or air. Motor insurance provides compulsory personal accident cover for individual owners of the vehicle while driving. One can also opt for a personal accident cover for passengers and third party legal liability. Third party legal liability protects against legal liability arising due to accidental damages. It includes any permanent injury / death of a person and damage caused to the property. The vehicles are insured at a fixed value called the Insureds Declared Value (IDV). IDV is calculated on the basis of the manufacturers listed selling price of the vehicle (plus the listed price of any accessories) after deducting the depreciation for every year as per the schedule provided by the Indian Motor Tariff. If the price of any electrical and / or electronic item installed in the vehicle is not included in the manufacturers listed selling price, then the actual value (after depreciation) of this item can be added to the sum insured over and above the IDV. In case the vehicle is fitted with CNG / LPG, the CNG/LPG kit fitted to the vehicle is to be insured separately at an additional premium.GENERAL INSURANCEWhat is 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, personalinsurance such as Accident and Health Insurance, and liability insurance which coverslegal liabilities. There are also other covers such as Errors and Omissions insurance forprofessionals, credit insurance etc.
Non-life insurance companies have products that cover property against Fire and alliedperils, flood storm and inundation, earthquake and so on. There are products that coverproperty against burglary, theft etc. The non-life companies also offer policies coveringmachinery against breakdown,there are policies that cover the hull of ships and so on. AMarine 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-lifeinsurance business.In respect of insurance of property, it is important that the cover is taken for the actualvalue of the property to avoid being imposed a penalty should there be a claim. Where aproperty is undervalued for the purposes of insurance, the insured will have to bear arateable proportion of the loss. For instance if the value of a property is Rs.100 and it isinsured for Rs.50/-, in the event of a loss to the extent of say Rs.50/-, the maximum claimamount payable would be Rs.25/- ( 50% of the loss being borne by the insured forunderinsuring the property by 50% ). This concept is quite often not understood by mostinsureds.Personal insurance covers include policies for Accident, Health etc. Products offeringPersonal Accident cover are benefit policies. Health insurance covers offered by non-lifeinsurers are mainly hospitalization covers either on reimbursement or cashless basis. Thecashless service is offered through Third Party Administrators who have arrangementswith various service providers, i.e., hospitals. The Third Party Administrators alsoprovide service for reimbursement claims. Sometimes the insurers themselves processreimbursement claims.Accident and health insurance policies are available for individuals as well as groups. Agroup could be a group of employees of an organization or holders of credit cards ordeposit holders in a bank etc. Normally when a group is covered, insurers offer groupdiscounts.Liability insurance covers such as Motor Third Party Liability Insurance, Workmen’sCompensation Policy etc offer cover against legal liabilities that may arise under therespective statutes— Motor Vehicles Act, The Workmen’s Compensation Act etc. Someof the covers such as the foregoing (Motor Third Party and Workmen’s Compensationpolicy ) are compulsory by statute. Liability Insurance not compulsory by statute is also
gaining popularity these days. Many industries insure against Public liability. There areliability covers available for Products as well.There are general insurance products that are in the nature of package policies offering acombination of the covers mentioned above. For instance, there are package policiesavailable for householders, shop keepers and also for professionals such as doctors,chartered accountants etc. Apart from offering standard covers, insurers also offercustomized or tailor-made ones.Suitable general Insurance covers are necessary for every family. It is important toprotect one’s property, which one might have acquired from one’s hard earned income. Aloss or damage to one’s property can leave one shattered. Losses created by catastrophessuch as the tsunami, earthquakes, cyclones etc have left many homeless and penniless.Such losses can be devastating but insurance could help mitigate them. Property can becovered, so also the people against Personal Accident. A Health Insurance policy canprovide financial relief to a person undergoing medical treatment whether due to adisease or an injury.Industries also need to protect themselves by obtaining insurance covers to protect theirbuilding, machinery, stocks etc. They need to cover their liabilities as well. Financiersinsist on insurance. So, most industries or businesses that are financed by banks and otherinstitutions do obtain covers. But are they obtaining the right covers? And are theyinsuring adequately are questions that need to be given some thought. Also organizationsor industries that are self-financed should ensure that they are protected by insurance.Most general insurance covers are annual contracts. However, there are few products thatare long-term.It is important for proposers to read and understand the terms and conditions of a policybefore they enter into an insurance contract. The proposal form needs to be filled incompletely and correctly by a proposer to ensure that the cover is adequate and the rightone.
General insurance or non-life insurance policies, including automobile and homeownerspolicies, provide payments depending on the loss from a particular financial event.General insurance typically comprises any insurance that is not determined to be lifeinsurance. It is called property and casualty insurance in the U.S. and Non-Life Insurancein Continental Europe.In the UK, General insurance is broadly divided into three areas: personal lines,commercial lines and London market.The London market insures large commercial risks such as supermarkets, football playersand other very specific risks. It consists of a number of insurers, reinsurers, [P&I Clubs],brokers and other companies that are typically physically located in the City of London.The Lloyds of London is a big participant in this market. The London Market alsoparticipates in personal lines and commercial lines, domestic and foreign, throughreinsurance.Commercial lines products are usually designed for relatively small legal entities. Thesewould include workers comp (employers liability), public liability, product liability,commercial fleet and other general insurance products sold in a relatively standardfashion to many organisations. There are many companies that supply comprehensivecommercial insurance packages for a wide range of different industries, including shops,restaurants and hotels.Personal lines products are designed to be sold in large quantities. This would includeautos (private car), homeowners (household), pet insurance, creditor insurance andothers.