banking and insurance (2)

8/18/2019 Banking and Insurance (2)

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BANKING AND INSURANCE

IRDA


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HISTORY OF IRDA

1818 saw theadvent 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 lifeinsurance business in the Madras Presidency.


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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 toenable 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 theInsurance 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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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 Corporationof 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.


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Today there are 24 general insurance companies

including the ECGC and Agriculture Insurance

Corporation of India and 23 life insurance

companies operating in the country.

Theinsurance 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-developedand 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.


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IRDA NOTIFICATIONS

• IRDA notified a new definition for infrastructure in

2008, ensuring that the insurance companies have a

wider choice of investment.

• The new definition of infrastructure covers all telecom

services, including basic and cellular, hospitals and

projects relating to agro-processing and supply of inputs

to agriculture, among others.

• Insurance firms can also invest in bonds floated by

developers of special economic zones


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IRDA INITIATIVES Some of the initiatives of IRDA, by way of subsequent rules

framed by it are:

IRDA's regulation stipulate that the prospectus issued by

the insurer should explicitly state the scope of benefits,

conditions, warranties, entitlements exceptions, and rightto participate in bonus under every plan of insurance

A decision on the proposal should be made by the insurer

within 15 days

IRDA has framed regulations regarding advertisement by

insurance companies and other intermediaries. They

apply to all categories and media employed


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IRDA can adjudicate disputes between the insurance

companies and intermediaries

IRDA regulation requires that every insurancecompany appoint an actuary

IRDA regulation has laid down the following

stipulations as regards settlement of claim: All the requirements needed under death claim are to besought in one instance

Admit or repudiate the claim in 30 days

All investigations need to be completed in 6 months

Interest at 2 % over bank rate is payable in case of delayed

settlement


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i. Take care of the policyholders interest.

ii. Open the insurance sector for privatesector.

iii. Ensure continued financial soundness

and solvency.iv. Regulate insurance companies.

v. Eliminate dishonesty and unhealthycompetition.

vi. Supervise the activities of intermediaries.

vii. Amend the insurance act 1938 ,the LifeInsurance Corporation Act1956, and theGeneral Business Act1972.

OBJECTIVES OF IRDA


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FUNCTIONS OF IRDA


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To issue certificate of registration.

To protect the interests of the

policyholders.

To specify requisite qualifications code ofconduct and training for insurance

intermediaries and agents.

To specify code of conduct for Surveyors/Loss Assessors.


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To promote efficiency in the conduct of

insurance business.

To supervise the functioning of Tariff

Advisory Committee. To regulate investment of funds by the

insurance companies.

To undertake inspection, conductenquiries and investigations.


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To specify the percentage of Life and

General Insurance business. To promote and regulate professional

organizations connected with the

insurance and reinsurance.

To specify the form and manner for

maintenance of books of accounts. To prescribe the manner and form in

which accounts will be maintained and submitted by insurers and

intermediaries


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To regulate maintenance of margin of

solvency

To levy fees & other charges for carrying

out the purposes of this act.To specify the percentage of premium

income of the insurer financial schemes

for promoting & regulating professional

organization.


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INTERMEDIATION IN INSURANC

“The Role of a Broker”


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•The author in the article tries to explain the importance of

intermediaries in the insurance industr!

•The push nature of insurance sales

•In India it is mostly the insurance company that chooses

its customers rather than the other way round.

•In an ideal situation ou "ould "ant the intermediar to ma#e the

customer a"are of the concept of different product lines and then$

%ased on a customer&s uni'ue profile and needs$ find the most

suita%le insurer and product!


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BA(CASS)RA(CE

Accordin* to IRDA$ +Bancassurance, refers to %an#s actin* as

corporate a*ents for insurers to distri%uteinsurance

products!

• Insurance -roducts include .ife or (on/.ife products

A ro%ust %ro#er channel has se0eral %enefits for customers1

Esta%lishin* a ro%ust %ro#er channel has three distincti0e %enefitsfor customers 1/

• Choice

• Expertise

• Customer Ser0icin*


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(eed for -ro/acti0e -articipation

/ Bancassurance


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The author o%ser0es that the core %usiness of %an#ers and

insurers %ein* 0astl different from each other$ the should stri#e a

%alance %et"een the t"o if the Bancassurance channel is to ma#e

*ood and sensi%le pro*ress

2istor1 The startin* -oint

Bancassurance term first appeared in France in 1980$ to define the

sale of insurance products throu*h %an#s, distri%ution channels!

This term is extremel familiar amon* the European countries as

%an#s sellin* insurance products in most of these countries are a

common feature! Ban#s are %ein* used as an effecti0e alternate

channel to distri%ute insurance products either as +stand/alone

insurance products, or +add/ons to the %an# products, % "a of

com%inin* the insurance "ith tpical %an#in* products3ser0ices!


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ISSUES IN BANCASSURANCE

Banks Bank must go for life and general insurancesimultaneously in order to obtain scale economiesas well as synergy

Initially, a joint approach (banker and insurer) tosales and after sales services could be adopted

A review of the tie-up arrangements withinsurance companies from time to time isessential

The trained manpower should be used exclusivelyfor bancassurance

Due considerations be given in performanceappraisal for specified persons


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Insurance Companies Insurers must realize that 'putting bancassuranceinto operation' is a complex process as insurance

selling is indeed a distinctive skill The top management of insurance companies, inparticular public sector insurers must takebancassurance more seriously and evolvecomprehensive strategies to forge alliances with

banks. Banks and Insurance Companies

There seems to be lack of clarity between insurerand banks in regard to several operational activitiesincluding for instance, marketing.

Under bancassurance channel, though banks aredistribution agents, the need for evolving a distinct‘business model’ needs no emphasis in Indiancontext.

Another area of concern is that of customer serviceand satisfaction


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BRIDGING THE GAP

- GRIEVANCE MANAGEMENT

IN INSURANCE INDUSTRY


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The customer is the central theme thatshapes products, processes and services inall industries including financial services.

Keeping the customer satisfied with theservices is far more critical for a lifeinsurance business than many others. Aneffective framework within the insurer’sorganization where customers’ concernsand grievances are treated with empathyand fairness is therefore critical in lifeinsurance business.


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SIMPLIFY CUSTOMER AND

SALES INTERFACE

Use of need-based selling tools tounderstand the customer’s financial needsand recommendation of products inaccordance with identified needs

Making product related informationavailable in simple language and avoidingtechnical jargon to ensure transparency

Explaining policy terms and conditions in

simple language that can be easilyunderstood by an average customerTransparency will help improve


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MEASURES TO ENSURE BETTER CUSTOMER

SERVICE

Conduct periodic research to understandcustomers’ needs and major reasons forcustomer dissatisfaction, so as to initiate

corrective actionEstablish robust internal processes andcontrols, devised keeping in mind thecustomer’s expectations and needs

Ensure easily approachable and competentservicing capability to receive queries/concerns from customers andaddress/answer the same over a multipleaccess channels like telephone and internet


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PROACTIVE MEASURES

While managing customer grievances forms a keypart of the grievance management process, whatis more important is the ability of anorganization to derive ‘lessons learnt’ from a

thorough analysis of those instances to preventrecurrence. Every complaint needs to beunderstood and taken as a message to improveexperience of the customers.


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AIMING HIGH IN DELIVERY

- POLICYHOLDERS’ SERVICES

For a player obsessed with top-line growth, thepost-sales service takes the back seat. In such ascenario, the policyholders' services suffer greatlyleading to customer disenchantment and a

possible withdrawal from the contractualrelationship. Promising the moon and failing to deliver eventhe basic services is a perfect recipe for disaster.The aspect is particularly significant in the

insurance industry as the average customer maynot be highly financially literate; and might getcarried away by the lure of the tall talk.


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In a domain where it is possible that the

consumer is not fully aware of his or her rights, a

pro-active stance adopted by the players in

conveying to the client the full suite of services

due to him or her would go a long way in theirservice orientation.

A mere absence of a complaint should not be

taken as a reason for excellence.


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THANK YOU

Ash"in 4 5677758

(itish A 5677795

4a0a A 56777::

-uneet 4 56777;<

Shreansh J 56777

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