11

BasicsBasicsofof

InsuranceInsurance

22

Contents:-Contents:-

Life insuranceLife insurance

General insuranceGeneral insurance

Insurance market scenarioInsurance market scenario

Emerging trends in insuranceEmerging trends in insurance

33

LearningLearning Insurance Insurance

What Is InsuranceWhat Is Insurance

Insurance is concerned with Insurance is concerned with protection of economic value of protection of economic value of assets.Tangible assets are human assets.Tangible assets are human beings, house, furniture, motor cycle beings, house, furniture, motor cycle etc.Intangible assets are liabilitiesetc.Intangible assets are liabilities

44

History of InsuranceHistory of Insurance

It started from Lloyd’s coffee house It started from Lloyd’s coffee house LondonLondon

First policy issued in England in First policy issued in England in 1583 1583

In India first policy issued in 1870In India first policy issued in 1870

55

History of InsuranceHistory of Insurance

LIC of India formed in 1956 after LIC of India formed in 1956 after

nationalization of life insurancenationalization of life insurance

Business of 245 private insurance Business of 245 private insurance

companiescompanies General insurance business of 107 General insurance business of 107

insurance companies was insurance companies was

nationalized in 1972 & four public sector nationalized in 1972 & four public sector General Insurance Companies were General Insurance Companies were formedformed

66

Classes of Classes of Insurance Insurance

A. Life insuranceA. Life insurance

B. General insuranceB. General insurance

General insurance is further General insurance is further

classified:-classified:-

1.Fire insurance1.Fire insurance

2.Marine insurance2.Marine insurance

3.Miscellaneous insurance3.Miscellaneous insurance

77

Miscellaneous Insurances:-Miscellaneous Insurances:-

1.Motor insurance1.Motor insurance

2.Mediclaim insurance2.Mediclaim insurance

3.Householders insurance3.Householders insurance

4.Shopkeepers insurance4.Shopkeepers insurance

5.Engineering insurances5.Engineering insurances

etc.etc.

88

1.Insurable interest- Means financial interest1.Insurable interest- Means financial interest

2.Utmost good faith- Greater duties of faith 2.Utmost good faith- Greater duties of faith on proposer & insurer on proposer & insurer

3.Indemnity- Actual compensation of loss. 3.Indemnity- Actual compensation of loss.

not applicable in life policies not applicable in life policies

FundamentalFundamental Principles of InsurancePrinciples of Insurance

99

Fundamental Principles Fundamental Principles of of

Insurance Insurance

4.Subrogation-Transfer of rights of 4.Subrogation-Transfer of rights of insured to insurer.Not applicable in insured to insurer.Not applicable in life policies.life policies.

5.Contribution-Sharing of loss by all 5.Contribution-Sharing of loss by all insurers.Not applicable in life insurers.Not applicable in life policies.policies.

1010

Market Scenario before Irda Act Market Scenario before Irda Act 1999 1999

Life insurance companyLife insurance company 1. 1. LIC of IndiaLIC of India General insurance companiesGeneral insurance companies 1.1.National insurance company ltdNational insurance company ltd 2.New India assurance company ltd2.New India assurance company ltd 3.Oriental insurance company ltd3.Oriental insurance company ltd 4.United India insurance company ltd4.United India insurance company ltd

1111

Market Scenario after Irda Act Market Scenario after Irda Act 19991999

Stage of Stage of

Liberalization,Liberalization,

Privatization &Privatization &

GlobalizationGlobalization (Competition between public sector & (Competition between public sector &

private sector)private sector)

1212

Life Insurance CompaniesLife Insurance Companies

1.Bajaj Allianz Life Insurance Company Ltd1.Bajaj Allianz Life Insurance Company Ltd

2.Birla Sun Life Insurance Company Ltd2.Birla Sun Life Insurance Company Ltd

3.HDFC Standard Life Insurance Company Ltd3.HDFC Standard Life Insurance Company Ltd

4.ICICI Prudential Life Insurance Company Ltd4.ICICI Prudential Life Insurance Company Ltd

5.ING Vysya Life Insurance Company Ltd5.ING Vysya Life Insurance Company Ltd

6.Max New York Life Insurance Company Ltd6.Max New York Life Insurance Company Ltd

1313

Life Insurance CompaniesLife Insurance Companies

7.Met Life India Insurance Company Ltd7.Met Life India Insurance Company Ltd8.Kotak Mahindra Old Mutual Life 8.Kotak Mahindra Old Mutual Life

Insurance Company LtdInsurance Company Ltd9.SBI Life Insurance Company Ltd9.SBI Life Insurance Company Ltd

10.Tata AIG Life Insurance Company Ltd10.Tata AIG Life Insurance Company Ltd

11.Reliance Life Insurance Company Ltd11.Reliance Life Insurance Company Ltd

1414

Life Insurance CompaniesLife Insurance Companies

12.Aviva Life Insurance Company Ltd12.Aviva Life Insurance Company Ltd

13.Sahara India Life Insurance 13.Sahara India Life Insurance Company LtdCompany Ltd14.Shriram Life Insurance Company 14.Shriram Life Insurance Company LtdLtd15.Bharti Axa Life Insurance Company 15.Bharti Axa Life Insurance Company LtdLtd16.Life Insurance Corporation Of 16.Life Insurance Corporation Of IndiaIndia

1515

Life Insurance CompaniesLife Insurance Companies

17.Future Generali India Life Insurance 17.Future Generali India Life Insurance Company Ltd.Company Ltd.

18. 18. IDBI Fortis Life Insurance Company IDBI Fortis Life Insurance Company Ltd.Ltd.19.19.Canara HSBC Oriental Bank of Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.Commerce Life Insurance Company Ltd.

1616

Life Insurance CompaniesLife Insurance Companies

20.Aegon Religare Life Insurance 20.Aegon Religare Life Insurance Company Limited.Company Limited.21. DLF Pramerica Life Insurance Co. Ltd.21. DLF Pramerica Life Insurance Co. Ltd.22. Star Union Dai-ichi Life Insurance Co. 22. Star Union Dai-ichi Life Insurance Co. Ltd. Ltd.

23.India First Life Insurance Company Ltd23.India First Life Insurance Company Ltd..24. Edelweiss Tokio Life Insurance Co. Ltd24. Edelweiss Tokio Life Insurance Co. Ltd

1717

General Insurance CompaniesGeneral Insurance Companies

1.Bajaj Allianz General Insurance 1.Bajaj Allianz General Insurance Company LtdCompany Ltd

2.Icici Lombard General Insurance 2.Icici Lombard General Insurance Company LtdCompany Ltd

3.Iffco Tokio General Insurance 3.Iffco Tokio General Insurance Company LtdCompany Ltd

4.Reliance General Insurance 4.Reliance General Insurance Company LtdCompany Ltd

5.Royal Sundaram Alliance Insurance 5.Royal Sundaram Alliance Insurance Company LtdCompany Ltd

1818

General Insurance CompaniesGeneral Insurance Companies

6.Tata AIG General Insurance 6.Tata AIG General Insurance Company LtdCompany Ltd

7.Cholamandalam Ms General 7.Cholamandalam Ms General Insurance Company LtdInsurance Company Ltd

8.HDFC-ERGO General Insurance 8.HDFC-ERGO General Insurance Company LtdCompany Ltd

9.Star Health & Allied Insurance 9.Star Health & Allied Insurance Company LtdCompany Ltd

1919

General Insurance CompaniesGeneral Insurance Companies

10.Export Credit Guarantee 10.Export Credit Guarantee Corporation LtdCorporation Ltd

11.Agriculture Insurance 11.Agriculture Insurance Company Of India LtdCompany Of India Ltd12.National Insurance Company 12.National Insurance Company LtdLtd13.New India Assurance Company 13.New India Assurance Company LtdLtd

2020

General Insurance CompaniesGeneral Insurance Companies

14.Oriental Insurance Company 14.Oriental Insurance Company LtdLtd

15.United India Insurance Company 15.United India Insurance Company Ltd Ltd

16. Apollo Munich Health Insurance 16. Apollo Munich Health Insurance Company LtdCompany Ltd

2121

General Insurance CompaniesGeneral Insurance Companies

17.Future Generali India Insurance Company 17.Future Generali India Insurance Company

LtdLtd

18. Universal Sompo General Insurance Co. 18. Universal Sompo General Insurance Co.

Ltd. Ltd. 

19.Shriram General Insurance Company Limited19.Shriram General Insurance Company Limited

20.Bharti AXA General Insurance Company ltd.20.Bharti AXA General Insurance Company ltd.

21.Raheja QBE General Insurance Company Limited21.Raheja QBE General Insurance Company Limited

22.SBI General Insurance Company Ltd.22.SBI General Insurance Company Ltd.

23.Max Bupa Health Insurance Company Ltd.23.Max Bupa Health Insurance Company Ltd.

24.L & T General Insurance Company Ltd.24.L & T General Insurance Company Ltd.

2222

Market IntermediariesMarket Intermediaries

Who procure the Who procure the

insurance business:-insurance business:-AgentsAgentsCorporate agentsCorporate agents Insurance brokersInsurance brokersBanks (Bancassurance)Banks (Bancassurance)

2323

Other market IntermediariesOther market Intermediaries

SurveyorsSurveyors

Who assess the loss in Non-Life Who assess the loss in Non-Life Insurance ClaimsInsurance Claims

TPA ( Third Party Administrators)TPA ( Third Party Administrators)

Who provide the claim settlement Who provide the claim settlement service in health insurance policiesservice in health insurance policies

2424

Basic Life Insurance PoliciesBasic Life Insurance Policies

Term assurance policyTerm assurance policy Provides death cover onlyProvides death cover only

during policy periodduring policy period Premium is lowPremium is low No refund of premiumNo refund of premium Sum assured paid on deathSum assured paid on death

2525

Whole Life PolicyWhole Life Policy

Death cover onlyDeath cover only Period is not specifiedPeriod is not specified Premium is low & paid Premium is low & paid

during life time during life time No refund of premiumNo refund of premium Sum assured paid on deathSum assured paid on death

2626

Endowment Assurance PlanEndowment Assurance Plan

Covers death & survival Covers death & survival

benefitsbenefits Sum assured paid on death Sum assured paid on death

or on maturity of policy or on maturity of policy Period of policy at the option Period of policy at the option

of proposerof proposer Most common planMost common plan

2727

Money Back PolicyMoney Back Policy

Available for different periodsAvailable for different periods

Covers death & survival benefitsCovers death & survival benefits

Lump sum paid periodicallyLump sum paid periodically

Full sum assured paid on deathFull sum assured paid on death

2828

Unit Linked Insurance Policies Unit Linked Insurance Policies (ULIP)(ULIP)

Each premium split into units and risk Each premium split into units and risk premium for life coverpremium for life coverUnits are priced as per current Units are priced as per current market valuemarket valueSum assured & current value of units Sum assured & current value of units

paid on death as per policy conditionpaid on death as per policy conditionCurrent value of units paid on maturityCurrent value of units paid on maturity

2929

Annuity (Pension) Annuity (Pension) Plans Plans

These are pension plansThese are pension plans Immediate annuity or deferred annuity Immediate annuity or deferred annuity

starts at specified age periodicallystarts at specified age periodicallySingle premium paid for immediate Single premium paid for immediate

annuityannuityPremium in installments paid Premium in installments paid

for deferred annuityfor deferred annuityLife cover simultaneouslyLife cover simultaneously

3030

Important aspects of Life Important aspects of Life Insurance PoliciesInsurance Policies

Policies available with bonus or without Policies available with bonus or without bonusbonus

Death due to accidents can be covered for Death due to accidents can be covered for additional S.A.additional S.A.

Policies available exclusively for women & Policies available exclusively for women & childrenchildren

Additional cover for major diseases Additional cover for major diseases availableavailable

Guaranteed bonus policies availableGuaranteed bonus policies available

3131

Important aspects of Life Important aspects of Life Insurance PoliciesInsurance Policies

Policies available for limited period Policies available for limited period premium payment & risk for longer premium payment & risk for longer policy periodpolicy period

Premium can be paid in monthly, Premium can be paid in monthly, quarterly, half yearly, yearly quarterly, half yearly, yearly installmentsinstallments

3232

Important aspects of Life Insurance Important aspects of Life Insurance PoliciesPolicies

Loans are available on policiesLoans are available on policiesLapsed policies can be revivedLapsed policies can be revivedPolicy can be surrendered after three Policy can be surrendered after three

yearsyearsNomination & assignment can be Nomination & assignment can be

donedone

3333

General Insurance PoliciesGeneral Insurance Policies

Fire policiesFire policiesMarine policiesMarine policiesMotor vehicle policiesMotor vehicle policiesPersonal line policiesPersonal line policiesHealth insurancesHealth insurancesLiability insurancesLiability insurancesRural insurance policiesRural insurance policiesEngineering insurancesEngineering insurances

3434

Fire PoliciesFire Policies

Standard fire policy-Standard fire policy- Common policy for buildings, Common policy for buildings,

shops,offices, Industrial & shops,offices, Industrial & manufacturing risksmanufacturing risks

3535

FIRE POLICIES-SPECIAL POLICIESFIRE POLICIES-SPECIAL POLICIES

Industrial & Manufacturing Industrial & Manufacturing clientsclients Floater policyFloater policyDeclaration policyDeclaration policyFloater declaration policyFloater declaration policyReinstatement value policyReinstatement value policy Industrial all risk policyIndustrial all risk policyConsequential loss policyConsequential loss policy

3636

Marine PolicyMarine Policy

Marine Cargo PolicyMarine Cargo Policy Policy insures physical loss or damage to the Policy insures physical loss or damage to the

goods in transit by road, rail, air, water caused goods in transit by road, rail, air, water caused due to accidents, fire etcdue to accidents, fire etc..

Marine Hull PolicyMarine Hull Policy Policy insures marine ships,steamers etc.Policy insures marine ships,steamers etc.

3737

Special Marine Cargo Policies Special Marine Cargo Policies

For business, industries, For business, industries,

importers and exporters importers and exporters Annual policyAnnual policySpecial declaration policySpecial declaration policyOpen coverOpen coverOpen policy Open policy

3838

Motor Vehicle PoliciesMotor Vehicle Policies

Liability only motor policyLiability only motor policy

Mandatory motor vehicle policy Mandatory motor vehicle policy Package motor policyPackage motor policy

Motor policy additionally insures Motor policy additionally insures loss and damage of the motor loss and damage of the motor vehicle due to theft and accidents vehicle due to theft and accidents along with third party risk is called a along with third party risk is called a package motor policypackage motor policy..

3939

Personal Line InsurancesPersonal Line Insurances

House holders policyHouse holders policyShop keepers policyShop keepers policyPersonal accident policyPersonal accident policyGroup personal accident policyGroup personal accident policyFidelity guarantee policyFidelity guarantee policy

4040

Health InsuranceHealth Insurance

Medi claim policyMedi claim policyOverseas medi claim policyOverseas medi claim policyVidesh yatra mitra policyVidesh yatra mitra policyCorporate frequent travelers policyCorporate frequent travelers policyEmployment & study policyEmployment & study policyGroup medi claim policyGroup medi claim policyCancer policyCancer policy

4141

Liability InsurancesLiability Insurances

Compulsory public liability policyCompulsory public liability policyPublic liability policyPublic liability policyProducts liability policyProducts liability policyProfessional indemnity policyProfessional indemnity policyLift (third party) policyLift (third party) policyDirector’s liability policyDirector’s liability policyEmployer’s liability policyEmployer’s liability policy

4242

Rural Insurance PoliciesRural Insurance Policies

Cattle policyCattle policy

Poultry policyPoultry policy

Agricultural pump set Agricultural pump set

policypolicy

Crop insuranceCrop insurance

4343

Engineering InsurancesEngineering Insurances

Machinery Breakdown InsuranceMachinery Breakdown Insurance Loss of Profits (Machinery Loss of Profits (Machinery Breakdown) InsuranceBreakdown) Insurance Electronic Equipment InsuranceElectronic Equipment Insurance Erection All Risk Insurance (EAR)Erection All Risk Insurance (EAR) Storage cum Erection Insurance Storage cum Erection Insurance (SCE)(SCE)

4444

Engineering InsurancesEngineering Insurances

Contractors All Risk Insurance (CAR)Contractors All Risk Insurance (CAR) Contractors Plant and Machinery Insurance Contractors Plant and Machinery Insurance

(CPM)(CPM) Boiler and Pressure Plant InsuranceBoiler and Pressure Plant Insurance Loss of Profits (Boiler Explosion) InsuranceLoss of Profits (Boiler Explosion) Insurance Deterioration of Stocks Insurance.Deterioration of Stocks Insurance.

4545

Insurance Law Insurance Law

The Insurance Act 1938The Insurance Act 1938

(amended)(amended) Insurance Regulatory & Development Insurance Regulatory & Development

Authority Act 1999Authority Act 1999

4646

IRDAIRDA

Insurance Regulatory & Insurance Regulatory & Development Authority is the Development Authority is the controlling and regulatory apex body controlling and regulatory apex body in the country for insurance sector in the country for insurance sector and its chairman and members are and its chairman and members are appointed by Government of India. appointed by Government of India. IRDA’s HQ is located at HyderabadIRDA’s HQ is located at Hyderabad

4747

Insurance RegulationsInsurance Regulations(Regulations issued by IRDA)(Regulations issued by IRDA)

IRDA Actuarial Report and Abstract 2000IRDA Actuarial Report and Abstract 2000 IRDA Registration of Indian Insurance IRDA Registration of Indian Insurance

Companies 2000Companies 2000 IRDA IRDA Insurance Advertisement and Advertisement and

Disclosure 2000Disclosure 2000 IRDA The IRDA (Meetings) 2000IRDA The IRDA (Meetings) 2000 IRDA Investments (Life and General) IRDA Investments (Life and General)

20002000 IRDA Statements of Accounts 2000IRDA Statements of Accounts 2000

4848

Insurance RegulationsInsurance Regulations(Regulations issued by IRDA)(Regulations issued by IRDA)

IRDA The Insurance Advisory IRDA The Insurance Advisory Committee (Meetings) Regulations, Committee (Meetings) Regulations, 20002000

IRDA Assets, Liabilities, and Solvency IRDA Assets, Liabilities, and Solvency Margin of Insurers Regulations, 2000Margin of Insurers Regulations, 2000

IRDA Obligations of Insurers to Rural IRDA Obligations of Insurers to Rural Social Sectors Regulations, 2000Social Sectors Regulations, 2000

IRDA Licensing of Insurance Agents IRDA Licensing of Insurance Agents Regulations, 2000Regulations, 2000

IRDA Appointed Actuary 2000IRDA Appointed Actuary 2000

4949

Insurance RegulationsInsurance Regulations(Regulations issued by IRDA)(Regulations issued by IRDA)

IRDA General Insurance - Reinsurance IRDA General Insurance - Reinsurance Regulations, 2000Regulations, 2000

IRDA The IRDA (Staff) 2000IRDA The IRDA (Staff) 2000 IRDA Surveyors and Loss Assessors 2000IRDA Surveyors and Loss Assessors 2000 IRDA Reinsurance –Life 2000IRDA Reinsurance –Life 2000 IRDA Revised Investment Regulations in IRDA Revised Investment Regulations in

April 2001April 2001

5050

Insurance RegulationsInsurance Regulations

Irda (third party administrators) regulations 2001Irda (third party administrators) regulations 2001

Irda (protection of policyholder’s interest ) Irda (protection of policyholder’s interest ) regulations, 2002regulations, 2002

Irda ( licencing of corporate agents) regulations Irda ( licencing of corporate agents) regulations 20022002

5151

Insurance RegulationsInsurance Regulations

Irda (manner of receipt of premium) Irda (manner of receipt of premium) regulation 2002regulation 2002

Irda (licencing of brokers) regulation 2002Irda (licencing of brokers) regulation 2002 Irda (micro-insurance) regulations, 2005Irda (micro-insurance) regulations, 2005 IRDA (Treatment of Discontinued Linked IRDA (Treatment of Discontinued Linked

Insurance Policies) Regulations, 2010Insurance Policies) Regulations, 2010 IRDA (Sharing of Database for Distribution IRDA (Sharing of Database for Distribution

of Insurance Products) Regulations, 2010of Insurance Products) Regulations, 2010

5252

IRDA Guidelines on Corporate IRDA Guidelines on Corporate Governance for the Insurance Sector Governance for the Insurance Sector

IRDA vide letter no. IRDA/F&A/CIR/025/2009-10 IRDA vide letter no. IRDA/F&A/CIR/025/2009-10 dated 05-08-2009 has issued detailed guidelines dated 05-08-2009 has issued detailed guidelines to all insurers on corporate governance for the to all insurers on corporate governance for the insurance sector for compliance with effect from insurance sector for compliance with effect from 01-04-2010 and an Amendment No.1 has been 01-04-2010 and an Amendment No.1 has been issued vide letter issued vide letter no.no.IRDA/F&I/CIR/F&A/014/01/2010 dated 29-01-IRDA/F&I/CIR/F&A/014/01/2010 dated 29-01-20102010

5353

Growth of Insurance BusinessGrowth of Insurance Business

Life Insurance Premium was Rs.400 crores Life Insurance Premium was Rs.400 crores in 1956. First year life premium of 2009-10 in 1956. First year life premium of 2009-10 increased from Rs. 109290 crores to increased from Rs. 109290 crores to Rs.125826 crores in 2010-11 with 15.13 % Rs.125826 crores in 2010-11 with 15.13 % growth.growth.

General Insurance Premium was Rs.200 General Insurance Premium was Rs.200 crores in 1972.In 2010-11 it increased to crores in 1972.In 2010-11 it increased to Rs. 42568 crores from Rs. 34944 of 2009-Rs. 42568 crores from Rs. 34944 of 2009-10 with 21.68 % growth. 10 with 21.68 % growth.

5454

Growth of Insurance BusinessGrowth of Insurance Business

Further in 2010-11 Health insurance Further in 2010-11 Health insurance increased to Rs. 1558 crores with increased to Rs. 1558 crores with 44.76 % growth, Agriculture 44.76 % growth, Agriculture insurance increased to Rs. 1960 insurance increased to Rs. 1960 crores with 29 % growth, Credit crores with 29 % growth, Credit insurance increased to Rs. 885.67 insurance increased to Rs. 885.67 crores with 8.84 % growth.crores with 8.84 % growth.

5555

Emerging TrendsEmerging Trends

Detariffing in General Insurance from Detariffing in General Insurance from 1.1.2007 leading to greater price war 1.1.2007 leading to greater price war & new products in future& new products in future

Banks entering insurance market Banks entering insurance market through joint ventures with foreign through joint ventures with foreign finance majorsfinance majors

5656

Emerging TrendsEmerging Trends

Increasing Role ofIncreasing Role of Insurance BrokersInsurance BrokersBancassuranceBancassuranceCorporate AgencyCorporate Agency IT intervention & usesIT intervention & uses

5757

Emerging TrendsEmerging Trends

Greater Job OpportunitiesGreater Job OpportunitiesFor thousands of InsuranceFor thousands of Insurance Managers, IT ProfessionalsManagers, IT ProfessionalsFor lacs of Insurance AdvisorsFor lacs of Insurance AdvisorsFor Insurance ProfessionalsFor Insurance ProfessionalsFor Risk ManagersFor Risk ManagersFor UnderwritersFor UnderwritersFor claim SettlementsFor claim Settlements

5858

Emerging TrendsEmerging Trends

Increasing No. of Insurance Increasing No. of Insurance companies & Intermediariescompanies & Intermediaries

Increasing Awareness about Increasing Awareness about InsuranceInsurance

Growth in GDPGrowth in GDP Increasing No. of Middle ClassIncreasing No. of Middle Class

5959

Emerging TrendsEmerging Trends

Vast No. of uninsured populationVast No. of uninsured populationUnderinsuranceUnderinsuranceUntapped potential for General Untapped potential for General

InsuranceInsurance

6060

Emerging TrendsEmerging Trends

Increasing awareness about Health Increasing awareness about Health InsuranceInsurance

Increasing awareness about Personal Increasing awareness about Personal Line Insurance like House, Shop, Line Insurance like House, Shop, Personal AccidentPersonal Accident

Market flooded with new insurance Market flooded with new insurance productsproducts