INSURANCE

By:Priya Garg110310MBA 2nd yr

WHAT IS INSURANCE?

Insurance is actually a contract between 2 parties whereby one party called insurer undertakes in exchange for a fixed sum called premium to pay the other party in case of happening of a certain event

Insurance in India has its history dating back till 1818, when Oriental life Insurance Company was started by European in Kolkata to fulfill the needs of the European Community.

The oldest existing insurance company in India is National insurance Company Ltd, which as founded in 1906 and is nationalized in 1972

NEED OF INSURANCE

For security Old age pension As an investment/or saving mechanism For tax benefits + Tax free cash on maturity Financial Planning Provides prevention of losses

PRINCIPLES OF INSURANCE

The 7 principles of insurance are: Principle of utmost good faith Principle of Insurable interest Principle of indemnity Principal of subrogation Contribution Principle of causa proxima Principle of Loss Minimisation

SERVICES IN INSURANCE SECTOR

5

Insurance

Life Insurance

Term Life Insurance

Permanent Life Insurance

General Insurance

Fire Insurance

Marine Insurance

Mediclaim

Business

Motor Vehicle

RE-INSURANCE The practice of insurers transferring portions of risk

portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. The intent of reinsurance is for an insurance company to reduce the risks associated with underwritten policies by spreading risks across alternative institutions.

General Insurance Corporation of India is the Reinsurance Company in India

There are two basic methods of reinsurance: Facultative Reinsurance Treaty Reinsurance

DOUBLE INSURANCE

Duplicate protection provided when two companies deal with the same  individual and undertake to indemnify that person against the same losses.

When an individual has double insurance, he or she has coverage by two different insurance companies upon the identical interest in the identical subject matter. 

If a husband and wife have a duplicate medical insurance coverage protecting each another, they would have double insurance. An individual can rarely collect on double insurance, however, majority of insurance contracts contains provision that prohibits this

LIFE INSURANCE CORPORATION (LIC) The Parliament of India passed the Life Insurance Corporation Act

on the 19th of June 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost.

The company was founded on 1st September, 1956 when the Parliament of India passed the Life Insurance of India Act that nationalised the private insurance industry in India. Over 245 insurance companies and provident societies were merged to create the state owned Life Insurance Corporation.

Today, the LIC has 8 zonal offices, around 113 divisional offices, 2,048 branches and 992 satellite offices and corporate offices

LIC's slogan yogakshemam vahamyaha is in Sanskrit language which translates in English as "Your welfare is our responsibility".

CONTINUED…

Type : Public Sector Industry : Financial services Headquarters : Mumbai, India Key people: S.K Roy (Chairman),

Sushobhan Sarker (Managing Director), S.B Mainak (Managing Director) N.R Guha (Managing Director), V.K Sharma (Managing Director), Usha Sangwan (Managing Director)

Products : Life insurance, health insurance, investment management, mutual fund

Owner: Government of India Subsidiaries: LIC Housing Finance

LIC Pension Fund Ltd. LIC International LIC Cards Services LIC Nomura Mutual Fund

GENERAL INSURANCE CORPORATION (GIC)

Prior nationalization there were 68 Indian insurers (including LIC) and 45 non-Indian insurers did the business.

In Nov. 1972, the general insurance business was nationalized by the General Insurance Business (Nationalized), Act 1972 (GIBNA) and vested in the hand of the GIC and its four subsidiaries:1. National Insurance Co. Ltd.,2. New India Assurance Co. Ltd., 3. Oriental Insurance Co. Ltd., and4. United India Insurance Co. Ltd. 10

GIC was incorporated as a holding company in 1992. General Insurance Business is completely owned by the

government. The paid up capital of GIC was fully subscribed by the

Government and of four subsidiaries. It was controlled by a single organization with four

subsidiaries The Government of India took over Control,

supervision, and policy making of GIC. The premium income for GIC comes mainly through the

obligatory reinsurance premium on a quota share basis from subsidiaries on their direct business in

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IRDA ACT The Insurance Act, 1938 provided comprehensive regulation of the insurance

business in India. In 1993, Govt. of India, with a view to examine the structure of the insurance

industry & to recommend changes to make it more competitive & efficient, appointed a committee under the chairmanship of former Governor of Reserve Bank of India, Sh. R. N. Malhotra. The committee submitted its report in Jan. 1994. In 1999 the bill titled as Insurance Regulatory & Development Authority Bill 1999 was introduced in parliament. After discussion & debate the Bill become an Act known as Insurance Regulatory & Development Authority (IRDA) Act,1999.

The aim of the Authority is “to protect the interest of holders of Insurance policies to regulate, promote and ensure orderly growth of Insurance industry & for matters connected therewith”

The IRDA Act has ramifications on The Insurance Act (1938), The Life Insurance Corporation Act (1956) and The General Insurance Business(Nationalisation) Act (1972).

FEATURES OF IRDA ACT Act to establish the regulatory authority Insurance advisory committee Ending the monopoly of LIC and GIC The insurance business opened to Indian companies only Renewal of registration Capital adequacy requirement Deposits Investment of assets Power of investigation and inspection Tariff advisory committee Licensing of surveyors and loss assessors Sufficiency of the assets No risk to assume unless premium received in advance Reinsurance