general insruance

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TABLE OF CONTENTS

Sr.No. Particulars Page No.

1

Executive Summary

2

Introduction

3

Objectives of the Study

4

Methodology

5

A study on Indian General Insurance Industry- Auto Insurance

6

Suggestions & Findings

7

Conclusion

8

Bibliography


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EXECUTIVE SUMMARY

The project is about the study conducted on Indian General Insurance Industry, in

particular with the Auto Insurance segment of general insurance.

It studies the current market how the insurance segment is booming in the last

few years.

How the market has chanced with the new private entrants, what are the major

challenges faced by insurance companies,

The role played by Government in this industry. The marketing strategies used by

the competitors to survive in the market

The opportunities available with the company to progress and to overcome the

challenges faced by them.

The future of this industry is very bright the short term scenario

For the general insurance sector appears to be challenging the long term

prospects definitely present ample opportunities for growth.


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INTRODUCTION:

This project is about the study conducted on the general insurance industry.

In particular with the auto insurance this is a part of general insurance.

This is the detailed study on how auto insurance industry sector functions,

What are the challenges faced by auto insurance industry currently,

Who are the market players in this auto insurance sector?

What is the current market situation about of the auto insurance sector

What are the various market strategies followed by these industries

What are the challenges faced by auto insurance sector

How the companies are taking steps in order can overcome the challenges.

What are the future prospects of auto insurance industry

OBJECTIVES OF THE STUDY:


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The objective of the thesis is:

To study the Indian general insurance industry particularly with the auto

insurance segment of general insurance , identify areas of excellence and

areas needing improvement; and provide suggestions for such

improvement.

The aim of this Thesis is to successfully study general insurance sector on

a common platform, analyze their working and performance, marketing

strategies highlight their performance , evaluating the various challenges faced

by them while providing suggestions and recommendations for improvement.

METHODOLOGY


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The data is collected from various articles, documents,

market analysis , published on the internet and also form

booklet of few auto insurance companies

the charts and table are done with the help of MS excel

software

RELIANCE MONEY

Reliance Money, a Reliance Capital company and part of the Reliance Anil

Dhirubhai Ambani Group is a comprehensive financial services and solution

provider. It is a one-stop-shop, providing end-to-end financial solutions (including


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mobile and web-based services). It has the largest non-banking distribution

channel with over 10,000 outlets and 20,000 touch points spread across 5,165

cities/ towns; catering to the diverse needs of over 3 million existing customers.

Reliance Money endeavors to change the way investors transact in financial

markets and avails financial services. It provides customers with access to

Equity, Equity and Commodity Derivatives, Offshore Investments, Portfolio

Management Services, Wealth Management Services, Investment Banking,

Mutual Funds, IPOs, Life and General Insurance products and Gold Coins.

Customers can also avail Loans, Credit Card, Money Transfer and Money

Changing services.

Reliance Capital is one of India's leading and fastest growing private sector

financial services companies, and ranks among the top 3 private sector financial

services and banking groups, in terms of net worth.

RELIANCE GENERAL INSURANCE

Reliance General Insurance is one of Indias leading private general insurance

companies with over 94 customized insurance products catering to the corporate,

SME and individual customers. The Company has launched innovative products

like Indias first Over-The-Counter health & home insurance policies. Reliance


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General Insurance has an extended network of over 200 offices spread across

173 cities in 22 states, a wide distribution channel network, 24x7 customer

service assistance and a full fledged website. It is also Indias first insurance

company to be awarded the ISO 9001:2000 certification across all functions,

processes, products and locations pan-India.

The various general insurance products offered by the company are

Health Insurance

Motor Insurance

Home Insurance

Travel Insurance

Accident Cover

WHAT IS INSURANCE?

We face a lot of risks in our daily lives. Some of these lead to financial losses.

Insurance is a way of protecting against these financial losses. For a payment

(premium), an insurance company will take the responsibility of compensating

your financial losses.


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Insurance provides us with protection against unforeseen incidents along with a

felling of security and also keep saving intact for the future.

WHY SHOULD ONE INSURE?

One of the main reasons one should insure is to protect ones belongings and

assets against financial loss. When one has earned and accumulated property,

protecting it is prudent. The law also requires us to be insured against some

liabilities. That is, in case we should cause a loss to another person, that person

is entitled to compensation. To ensure that we can afford to pay that

compensation, the law requires us to buy liability insurance so that the

responsibility of paying the compensation is transferred to an insurance

company.

Insurance is generally categorized into two divisions:

1. Life Insurance

2. General Insurance

WHAT IS GENERAL INSURANCE?

Insuring anything other than human life is called general insurance. Examples are

insuring property like house and belongings against fire and theft or vehicles

against accidental damage or theft. Injury due to accident or hospitalization for

illness and surgery can also be insured. Your liabilities to others arising out of the


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law can also be insured and is compulsory in some cases like motor third party

insurance.

WHO SHOULD BUY GENERAL INSURANCE?

Anyone who owns an asset can buy insurance to protect it against losses due to

fire or theft and so on. Each one of us can insure our and our dependents health

and well being through hospitalization and personal accident policies. To buy a

policy the person should be the one who will bear financial losses if they occur.

This is known as insurable interest.

RISK COVERED UNDER GENERAL INSURANCE

Non-life insurance companies have products that cover property against Fire and

allied perils, flood storm and inundation, earthquake and so on. There are

products that cover property against burglary, theft etc. The non-life companies

also offer policies covering machinery against breakdown, there are policies that

cover the hull of ships and so on.


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Marine 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-life insurance business.

Personal insurance covers include policies for Accident, Health etc. Products

offering Personal Accident cover are benefit policies. Health insurance covers

offered by non-life insurers are mainly hospitalization covers either on

reimbursement or cashless basis. The cashless service is offered through Third

Party Administrators who have arrangements with various service providers, i.e.,

hospitals. The Third Party Administrators also provide service for reimbursement

claims. Sometimes the insurers themselves process reimbursement claims.

Insurance of property, it is important that the cover is taken for the actual value

of the property to avoid being imposed a penalty should there be a claim. Where

a property is undervalued for the purposes of insurance, the insured will have to

bear a ratable proportion of the loss

Accident and health insurance policies are available for individuals as well as

groups. A group could be a group of employees of an organization or holders of

credit cards or deposit holders in a bank etc. Normally when a group is covered,

insurers offer group discounts.


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Liability insurance covers such as Motor Third Party Liability Insurance,

Workmens Compensation Policy etc offer cover against legal liabilities that may

arise under the respective statutes Motor Vehicles Act, The Workmens

Compensation Act etc. Some of the covers such as the foregoing (Motor Third

Party and Workmens Compensation policy) are compulsory by statute. Liability

Insurance not compulsory by statute is also gaining popularity these days. Many

industries insure against Public liability. There are liability covers available for

Products as well.

There are general insurance products that are in the nature of package policies

offering a combination of the covers mentioned above. For instance, there are

package policies available for householders, shop keepers and also for

professionals such as doctors, chartered accountants etc. Apart from offering

standard covers, insurers also offer customized or tailor-made ones.

IMPORTANCE OF GENERAL INSURANCE

General Insurance covers are necessary for every family. It is important to protect

ones property, which one might have acquired from ones hard earned income. A

loss or damage to ones property can leave one shattered. Losses created by

catastrophes such 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 be covered, so also the people against Personal


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Accident. A Health Insurance policy can provide financial relief to a person

undergoing medical treatment whether due to a disease or an injury.

Industries also need to protect themselves by obtaining insurance covers to

protect their building, machinery, stocks etc. They need to cover their liabilities as

well. Financiers insist on insurance. So, most industries or businesses that are

financed by banks and other institutions do obtain covers. But are they obtaining

the right covers? And are they insuring adequately are questions that need to be

given some thought. Also organizations or 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 that are long-term

HISTORY

The general insurance industry in India was nationalized and a government

company known as General Insurance Corporation of India (GIC) was formed by

the Central Government in November 1972.

THE GENERAL INSURANCE IS BASICALLY DIVIDED INTO FOLLOWING

CATEGORIES


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1. Auto Insurance

2. Health Insurance

3. Marine Insurance

4. Fire Insurance

5. Others

PREMIUM UNDERWRITTEN BY GENERAL INSURANCE -SEGMENT WISE


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INDIAN GENERAL INSURANCE INDUSTRY - MARKET OVERVIEW

The Indian insurance sector is rapidly moving towards international

standards of free (risk-based) market pricing and new/innovative product

offerings. Big changes have occurred over the last few years, during which

the sector was opened to private participation, along with foreign direct

investment (FDI) capped at 26%.

India is the 5th largest market in Asia by premium, following Japan, Korea,

China and Taiwan. The country is geographically large and has the worlds

2nd largest population -- 1.13 billion in 2007 but it also has one of the

lowest penetration rates for property and casualty insurance in Asia in

terms of premium as a percentage of GDP.

2007-08

fire

marine

motor

health

others

45.59%

17.59%

17.92% 12.43%

6.47%


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Indias general insurance market witnessed a variety of changes as

deregulation continued at a hectic pace.

The sector achieved double-digit growth and this trend is expected to

persist over the medium term on the back of greater penetration, due

partly in turn to the intense marketing efforts of private insurers. The

removal of pricing controls on fire and engineering lines in 2007, insurers

have discounted their rates by 50% in order to retain or win market share.

Private players continue to capture market share at the expense of public

enterprises on a mix of aggressive distribution and service. The number of

private insurers is growing as various foreign companies have announced

intentions to establish joint ventures.

Rate reductions in the recently de-tariff corporate portfolio (fire &

engineering) has impacted the premium growth, but this is also leading to

the greater sales of existing and new products. With the regulator lifting

the ceiling on foreign ownership to 49%, foreign players participation has

increase both volumes and types of products.

With the increasing number of insurers in the private sector. The industry

forecasts for a continuous growth and rise domestic demand.

General Insurance Penetration 0.60% of GDP and the Gross Premium has

increased to(2007-08) is Rs.28130 Crores compared to the Gross Premium

(2000-01) of Rs.9620 Crores


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With CAGR: 16.6%

IMPACT OF RECESSION ON GENERAL INSURANCE

The slowdown in economic activities in India has led to a sharp reduction in asset

creation in the Indian industries. This along with rigorous cost cutting measures in

all businesses has directly impacted the general insurance (non-life) industry in

the country.

The 16-players industry together collected Rs 30,601 crore as premium

underwritten in 2008-09, up only 9.10 per cent from Rs 28,051 crore in 2007-08.

This was the slowest growth in gross premium underwritten in the last five years.

The general insurance industrys premium collection grew 22 per cent in 2006-07

and 12 per cent in 2007-08.

The most important reason for the drop in business was that many small and

medium businesses either did not buy insurance covers, like fire insurance, or

went for lower cover to save on premium expenditure. Also the sharp drop in

sales of commercial vehicles, tractors and near stagnation in car sales led to a

big drop in insurance premium underwritten

Among the private players IFFCO-Tokio did the best with 22 per cent growth in

premium underwritten in 2008-09. Royal Sudaram, Bajaj Allianz are the other two

players to manage a decent growth. Among the government companies only


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United India could manage to grow14 per cent, while the other three grew only by

single digit.

One of the major milestones in the Indian general insurance industry has been

the withdrawal of premium pricing restrictions post January 2007.

General insurance companies also made losses because abolition of tariffs has

led to a virtual price war in certain lines of business like Fire and Engineering

insurance. This is evident from the higher claims ratio in both, the fire and motor

segment as well as the higher underwriting losses posted by both the private as

well as public sector companies,

On the whole, while short term scenario for the general insurance sector appears

to be challenging the long term prospects definitely present ample opportunities

for growth

MAJOR CHALLENGES

Awareness

It is the main problem faced by all the insurance company is lack of awareness

about Risk exposures and about insurance products available to the

customers. In India only 20% of the population is insured. Majority of the

populations who are living in the rural areas and sub urban areas are not aware

of the about risk exposures and about insurance products available in the market


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Affordability

In India majority of the population standard of living is low and majority of them

belong to middle class and lower class and they have very little money left after

satisfying basic needs. Uneconomical premium of insurance policy is also a

major constrains

Accessibility

The policies are complex to understand by a layman the procedures are difficult

to obtain policies if done individual .there are a lot of activities and formalities

involved in order to get the insurance policy

Inappropriate / inadequate distribution strategies.

Majority of the population is not aware of the benefits that the insurance company

provides

And they are also not aware of the various schemes which these companies

introduce

MAJOR PLAYERS IN GENERAL INSURANCE INDUSTRY

PUBLIC SECTOR


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Until 2000, the general insurance sector had only four public sector

players, formed after the nationalization of 107 general insurers.

The public enterprises

Oriental Insurance Company of India (OIC),

National Insurance Company of India (NIC),

New India Assurance Company of India (NIA)

United Insurance Company of India (UII).

They primarily focused on their immediate regions and there was little

competition, leading to a near monopolistic environment.

PRIVATE SECTOR

The private sector has been steadily growing market share despite the fact

that public sector companies have been around for a lot longer. The

private insurers enjoy considerable operational flexibility, whereas the

public sector companies have been constrained by their traditions and

inability to innovate. There are total 12 players in the private sector.

In the private sector, the major players are

IFFCO-TOKIO General insurance

Reliance General Insurance Co. Ltd.

ICICI LOMBARD-
http://www.automobileindia.com/automobile-insurance/auto-insurance-companies/reliance-general-insuranc-company-limited/http://www.automobileindia.com/automobile-insurance/auto-insurance-companies/reliance-general-insuranc-company-limited/


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TATA AIG- General Insurance

BAJAJ ALLIANCCE,

BHARTI-AXA General insurance

CHOLAMANDALAM ,

FUTURE GENERALI

Royal Sudaram General Insurance

Universal Sompo General Insurance

Shriram General Insurance

The inherent operational flexibility of the private players such as through

aggressive pricing -- has allowed them to capture a greater share of large

corporate accounts.

PRIVATE SECTORS GROWING INFLUENCE

Market Share Redistribution

Premium and volume public V/s private

Due to the effectiveness of private marketing strategies, the market share

of public insurers has consistently declined. Given a faster growth rate, the

market share of the private sector is catching that of the public sector and

the two will likely converge over the medium term.


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Before the removal of tariffs, fire, engineering and motor own damage

(OD) contributed a much greater proportion of business for private players

than was the case for public firms.

Fire and engineering now broadly contribute a similar proportion of overall

business for the private and public sectors.

In terms of overall business, the focus has shifted towards the retail

segments of motor and health, where good growth is expected.

Regional Focus

Public insurers have traditionally focused at the regional level with one

each in north, east, west and south India. On account of their public

charters and the absence of competitive pressures, these entities did not

have to actively market their products and just wrote whatever business

came their way.

Operational Flexibility


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In public entities there is lack the operational flexibility enjoyed as

compared by the private players. Their limited capacity to innovate has

impacted their ability to tailor and aggressively price products for large

corporations.

The private players by contrast have focused on account-level profitability

for large corporations and have expanded their shares by cross-

subsidizing tariffed products.

Client Servicing

The public insurers have also been hampered in claims servicing by their

process-oriented approach and limited operational flexibility. They have

been unable to expedite claim settlements through out-of-court

negotiations since a large proportion of their claims pertain to the third

party motor segment, which is subject to adjudication by the Motor

Accident Claim Tribunal. The result is a time-consuming and involved

process.

The situation is not the same with the private player as they enjoy more

operational flexibility which in turn saves a lot of time of both parties

Strong Infrastructure and Systems

Private players are not hindered by their charters or legacy systems and

have constructed technologically advanced infrastructure.


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They started with large investments in technology, which helped them to

build robust data management systems. This characteristic enables in turn

quick and effective decision-making for pricing and claims settlements,

attributes vital to building franchises.

On the other hand, public entities have only recently upgraded their

systems and have to grapple with transition issues, such as moving from

paper to paper-less systems. They are encumbered by legacy systems

and fragmented databases, and have not fully used their past claim

experiences, something which could give them a strong pricing edge in a

de-tariffed environment

.

Focused Underwriting Strategy

The private players, especially during their initial years, have selectively

targeted the more profitable lines of the public sector companies for

growth. They benefit from the experiences of the public sector as well as

their international joint-venture partners. They have drawn talent from

public sector companies.

Superior Claim Paying/Processing Capability

The combination of superior technology and selective underwriting has

allowed the private sector to set high standards for policyholder services,

thereby differentiating themselves from public sector insurers. The claim

settlement performance of the private sector has also been superior


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because of the limited amount of third party motor business that they have

underwritten. Such claims normally take a longer time to settle.

Distribution Rise of Banc assurance

The Indian general insurance industry has historically been dominated by

the agency channel, through which 75% of total premium income is

sourced. But in recent periods other channels for example, bank

assurance, brokers, corporate agents, direct marketing and direct sales

channels -- are gaining importance.

Most insurers now have tie-ups with the banks, which act as corporate

agents and are remunerated on a commission basis. For example, ICICI

Lombard sources a major portion of its business from a tie-up with ICICI

Bank. Similarly, Bajaj Allianz General Insurance Company Limited (BAIL,

second largest private player) has tie-ups with large number of banks,

which contribute a big share of its total premium income.

At this time, low cost channels like tele-sales and the internet are still not

developed in India, mainly due to relatively poor knowledge about

insurance products and low internet penetration.


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REGULATORY ENVIRONMENT

Impact of Regulation Emphasis on Policyholder Protection

IRDA was set up with introduction of the IRDA Act in 1999. Its initial

purpose was to bring about general discipline to the industry. It is

responsible for protecting the interest of policyholders and promoting

efficiency in the insurance business.

To ensure their stability, transparency and financial strength, new entrants

are subject to rigorous scrutiny and the conduct of their business is closely

monitored, particularly in relation to capital adequacy and prudent

investment policies. The regulatory environment to date has attracted

many insurers whose domestic partners are leaders in their chosen fields

and their foreign counterparts are all well-established with considerable

experience in developed and emerging markets.

The regulator has laid down investment guidelines that limit exposure in

certain class of assets and also sets threshold limits for some assets. At

the moment, insurers have to invest a minimum 30% in government

securities, in contrast to some of the more mature markets like the US and


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Australia, which do not have such restrictions. Compliance with these

relatively restrictive guidelines could limit insurers ability to diversify and

build optimal portfolios.

The guidelines also stipulate a minimum 10% investment in the social and

infrastructure sector. The investment in un-approved securities has been

limited to 25% of total investment books.

General insurers must maintain a solvency ratio (available solvency

margin/required solvency margin) of 1.5 times, calculated based on net

premium earned and net claims incurred in various segments. Public

sector entities have maintained comfortable solvency margins, supported

by their strong investment portfolios and capitalizations. The private

players, being in a growth phase, may require capital infusions from time

to time to maintain their solvency requirements.

The Indian insurance regulator has set the minimum capital required at a

level to ensure that all insurers -- especially the start-ups -- have enough

funds to meet their claim obligations and to limit their overall writings to the

amounts supported by their capital bases. The need to manage capital to

comply with IRDAs solvency margin will induce insurers to be more risk

conscious when taking on new business

To ensure an orderly transition towards a deregulated insurance market

and risk-based pricing, IRDA has enacted enabling legislation and issued

guidelines to de-tariff various segments. De-tariffing -- introduced in

January 2007 -- has been well accepted and corrections to prices in

profitable lines have been dramatic and have noticeably impacted


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premium growth rates. In fact, the discounting has been so extreme that

the regulator intervened in September 2007 and capped maximum

discounts at 52.5%

Three Phases of De-Tariffing

Indias general insurance industry has undergone de-tariffing in three

phases:

1994 -- marine cargo, personal accident, health, banker liability and

aviation

2005-06 -- marine hull segment

2007 - Fire, engineering and motor own damage (OD).

However, the de-tariffing did not immediately allow for free pricing.

Instead, insurers were required to follow the file and use method,

whereby they were expected to file a charter of proposed rates, which was

then approved by IRDA.

The restrictions on price discounts during the initial periods were intended

to ensure orderly price adjustments. They were removed in January 2008.

The only segment that remains under a tariff regime is the third party

motor business, although there has been a large upward revision in this

areas premium rates by regulators in recent times. Moreover, commercial


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third party motor business, which has traditionally contributed to adverse

claims ratios, has been moved to a common pool, resulting in loss share

OPPORTUNITIES AVAILABLE

The intense competition brought by deregulation has encouraged

the industry to innovate in all areas; from underwriting, marketing,

policy holder servicing to record-keeping

Aggressive marketing strategies by private sector insurers will buy

consumer awareness of risk and expand the markets for products

Competition in a deregulated environment will allow market forces

to set premiums that are appropriate for exposures and push

insurers to differentiate their products and services

Innovations in distribution and improvements in market penetration

will follow as public and private insurers compete to market their

products


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Allowing insurers to issue their own policy wordings and set their

own rates will enable underwriters to tailor products to meet client

needs

The existence of stringent licensing requirements ensure that only

adequately capitalized and professionally managed companies are

eligible to carry out insurance and reinsurance

The Insurance Regulatory Development Authority of Indias (IRDA)

emphasis on quarterly reporting/monitoring of insurer solvency will

enhance capital adequacy and transparency.

FUTURE PROSPECTS


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Huge market largely untapped especially in Rural & Urban regions can be

targeted to increase the number of insurer in the market

As high as 70% of population is still not covered by insurance. So the

company can conduct mass campaign and educated the people more

about the products and also about the risk covered and the various

benefits which they can avail .The Company can use various medium to

increases the awareness

Increase in standard of living, disposable income, literacy, insurance

awareness throws open huge opportunities on insurance.

High growth in Automobile sector.

Huge strides in Health Care opening up huge Health Insurance potential.

In Rural sector large number of Micro finance institutions, Self Help

Groups are setup who can be the major clients of this industry

The Government initiatives on Mass insurance.

General Insurance would grow at CAGR 17% next 5years.

The premium is expected to grow from 28,000 crores to 1lakh crore by

2015.


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The Large part of growth is expected to come from come from retail and

rural sectors.

More and more number of private players entering into this industry and

along with foreign companies through joint ventures.FDI is also playing a

major role in this industry as government has increased the level of

investment by them.

AUTO INSURANCE

Auto Insurance often referred to as Vehicle, Motor or Car insurance is

categorized under General Insurance. Vehicle Insurance can be purchased from


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an insurance company or an insurer for the purpose of getting the loss

compensated related to automobiles. The main criteria that the insured wants to

get fulfilled by purchasing a Motor insurance are to get compensation against any

traffic accident or liability as a result of an accident or theft of the vehicle.

Under the provisions of the Motor Vehicles Act, it is mandatory that every vehicle

should have a valid Insurance to drive on the road. Any vehicle used for social,

domestic and pleasure purpose and for the insurer's business motor purpose

should be insured. The violation of this act is punishable

Auto insurance is divided into three parts

Two wheeler Insurance

Car-Insurance

Commercial Insurance

There are two types ofAuto Insurance,

Motor Policy A -Act Only Risk (also known as third party insurance)

"Motor Policy B" (also known as comprehensive insurance policy).

MOTOR POLICY A- THIRD PARTY INSURANCE COVERS

Motor Policy A orThird party insurance coversunlimited pay compensation for
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death or bodily injuries to third Parties and damage to the property of the third

parties other than insured, up to a limit. Under this policy the insured is treated as

the first party, the insuring company the second party and all others would be

third parties. This insurance protects the insured from legal liabilities following an

accident involving his/her vehicle. It does not cover any damage to his/her

vehicle.

The limit of third party property damage is limited to 7.5 lakhs.

Third Party insurance covers Personal Injury and Property damage.

Personal Injury includes

1. Liability for death or injuries to third parties - this means that you are insured

against death or injury (caused by your vehicle) to pedestrians, occupants of

other vehicles, and outsiders other than passengers, for unlimited amounts.

Passengers of private vehicles and pillion riders are also deemed covered.

2. Liability to employees connected with operation of the vehicle- this means you

are insured against death or injury (caused by your vehicle) to the vehicle's

drivers, cleaners, conductors, and coolies...employees used in the operation of

the vehicle.

3. Liability to passengers carried in the vehicle for hire or reward - this means

that as owner of a taxi, bus or auto-rickshaw, you are insured against death or

injury (caused by your vehicle) to the passengers.


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Property damage covers the vehicle itself and you are insured against various

damages that occurs to your vehicle on account of accidents and other instances.

MOTOR POLICY B - COMPREHENSIVE INSURANCE

Comprehensive insurance covers third party liability as well as loss or damage to

the insured vehicle itself by the way of accident, theft etc and some other

specified risks. Normally it is advisable to get the Comprehensive insurance

Policy because it covers insured, vehicle and third party with a single policy.

A Comprehensive Auto Insurance Policy Includes

1. Accident

2. Fire, Explosion, self-ignition, lightning

3. Burglary, house-breaking, theft

4. Riots & strikes

5. Earthquakes


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6. Flood, typhoon, hurricane, storm, cyclones

7. Malicious acts

8. Terrorism

9. Transit by rail/road, air, waterways

10.Also included is the towing charge (up to Rs.1, 500/- for private

vehicles and Rs.2, 500/- for commercial vehicles) incurred due to

accident to the vehicle.

HOW THE POLICY CAN BE OBTAINED

Approach the insurance company directly

Apply through business partners of insurance companies


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The Insurance Policy can be obtained through aninsurance agent or

development officerof the insurance company. While giving insurance premium

the insurer has to obtain a cover note from the insurance company and which is

having the validity of 60 days only. Within this period the insurance company

issue policy and which is known as Certificate of Motor Policy. Duplicate

Certificate instead of defaced, mutilated or lost certificates can be obtained on

payment of a prescribed fee and after production of an affidavit to that effect.

PREMIUM

As per the Indian Motor Tariff, published by IRDA, all the vehicles are insured at

a fixed value called the Insured's Declared Value (IDV). IDV is based on the ex-

showroom cost of the vehicle.

On every renewal of policy the IDV is calculated after deducting the prescribed

depreciation. One can extend the coverage for Personal Accident, accessories

etc by paying an additional premium. Presently there is a provision for the

Insuring Company to give some discounts of their own. But by the end of

September 2007, according to a new resolution passed by the IRDA, the

calculation of IDV will take into account the gender of the owner and their age

also, along with the usual norms of calculation. From April 2007 onwards the

Insurance Industry in India is also under de tariff scenario.

RENEWAL
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Usually the Insurance policy is valid for one year. It becomes active soon after

the payment of premium is received by the insurance company and will end

exactly a year later. So the insured must renew the policy before the expiry date.

Any delay in the renewal will make the policy invalid. For every renewal a fresh

certificate should be obtained

NO CLAIM BONUS

The Policy holders who have not made any claim in the previous years will be

rewarded by the insurers by giving a discount of a comprehensive insurance on a

reducing balance basis in the future years. If you are carrying forward a no-claim

bonus on any vehicle, you can get it transferred to a new vehicle of the same

type (four wheeler to four wheeler ). The only condition to avail of this discount is

that you have to sell off your old vehicle. Even if you wish to retain your old

vehicle, you can get around this clause by gifting the old vehicle to a family

member.

TRANSFER OF INSURANCE POLICY

If you purchase a used vehicle, you can transfer the existing insurance policy to


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your name. But, you must inform the insuring company within 2 weeks of

purchasing the vehicle.

CLAIMING PROCEDURE

Comprehensive Insurance Claim

If an accident takes place, you must report to the insurance company as soon as

possible and submit the claim forms. An estimate for repairs /replacements

should also be submitted.

The documents to be submitted are

Claim form

Original / Copy of the insurance policy

Copy of registration certificate of vehicle and driving license of the driver

Copy of the estimated cost of repair given by the garage

FIR or a police report if the accident is major, or a criminal offence, or if it caused

third-party damage or resulted in injuries

Fire brigade report, if the loss is due to a fire

Submission of relevant documents, the Insurance company will direct a person

to inspect the value of damage/replacement and genuineness of estimate

submitted and according to his report the claim will be settled.
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After repair, a final bill of the repair and replacements and the stamped receipt

for payment from the work shop should be submitted to the company to settle

the claim. Only after the inspection of the repaired vehicle that you are allowed

to take the vehicle home. According to the rule of some companies, payment will

be done either directly to the repairer in the form of a cheque or the companies

may recommend preferred auto shops for repair. In case of settlement of claim

either for total loss of the vehicle or for replacement of certain items, such

damaged vehicle or parts thence belongs to the insurance company.

In case, a third party is involved in the accident, a case must be filed immediately with

the police and at the same time a report should also be sent to the insurance company.

If your vehicle has been stolen, file a police complaint and inform the insurer. If you

don't get your vehicle within 90 days, obtain a "non-traceable report from the police

and submit to the insuring company to start the claiming process.

THIRD PARTY INSURANCE CLAIM

In case, a third party is involved in the accident, a case must be filed immediately in the

police station and a report also should be sent to the insurance company at the same

time. Your Insurance Company will pay you


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Documents Required for Auto Insurance Claim

For Accident Claims

Claim form duly signed

RC copy of the vehicle

Driving license copy

FIR on a case-to-case basis

Original estimate

Original repair invoice, payment receipt from the service center

For Third Party Claims

Claim form duly signed

RC copy of the vehicle

Driving license copy

Original policy copy

Original FIR copy


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RTO transfer papers duly signed, mentioning that the vehicle cannot be located

directly.

AUTO POLICY OF GOVERNMENT OF INDIA

VISION

TO ESTABLISH A GLOBALLY COMPETITIVE AUTOMOTIVE INDUSTRY IN

INDIA AND TO DOUBLE ITS CONTRIBUTION TO THE ECONOMY BY 2010

Policy Objectives

This policy aims to promote integrated, phased, enduring and self-sustained

growth of the Indian automotive industry. The objectives are to:-


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Exalt the sector as a lever of industrial growth and employment and to

achieve a high degree of value addition in the country.

Promote a globally competitive automotive industry and emerge as a global

source for auto components.

Establish an international hub for manufacturing small, affordable

passenger cars and a key center for manufacturing Tractors and Two-

wheelers in the world.

Ensure a balanced transition to open trade at a minimal risk to the Indian

economy and local industry.

Conduce incessant modernization of the industry and facilitate indigenous

design, research and development.

Steer India's software industry into automotive technology.

Assist development of vehicles propelled by alternate energy sources.

Development of domestic safety and environmental standards at par with

international standards.

SIAM welcomed the announcement of Auto Policy, and feels that the policy

would serve as a reference document for all stake holders and other

interested parties.

The Auto Policy has spelt out the direction of growth for the auto sector in India and


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addresses most concerns of the automobile sector, including-

Promotion of R&D in the automotive sector to ensure continuous technology up

gradation, building better designing capacities to remain competitive.

Impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to

facilitate their acceptance.

Emphasis on low emission fuel auto technologies and availability of appropriate auto

fuels and encouragement to construction of safer bus/truck bodies - subjecting

unorganised sector also to 16% excise duty on body building activity as in case of

OEMs

The policy has rightly recognised the need for modernising the parc profile of vehicles

to arrest degradation of air quality. The terminal life policy for commercial vehicles

and move toward international taxing policies linked to age of vehicles, are steps in

the right direction.

SIAM has always been advocating encouragement of value addition within the

country against mere trading activity. However, this aspect has not been fully

addressed. The Auto Policy allows automatic approval for foreign equity investment

upto 100% in the automotive sector and does not lay down any minimum investment

criteria.

The recommendation of promoting passenger cars of length upto 3.8 meters through

excise benefits is not in line with the free market concept and may lead to market

distortion.


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However, with the Auto Policy in place, the automotive industry would get further

fillig to become vibrant and globally competitive. The industry would get the required

support from other Ministries and departments of Government of India in achieving

the goals laid down in the auto policy.

CHALLENGES

Premiums rates remain under pressure due to intense competition on the

more profitable lines

Falling premium income without a corresponding reduction in claims -- is

likely to drive down profits

Public and private sector insurers greater reliance on their investment

portfolios to generate sufficient income and gains for net profits would

subject them to the volatility of the financial markets

Private insurers need to raise more capital, otherwise growth could be


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constrained since reliance on reinsurance for capital relief is not always

viable or available

Traditional distribution channels, especially tied agents, need to be improved

to match the new product offerings

There is general lack of transparency as financial and operational data for

insurers are not readily available as none of Indias insurers are directly

listed on stock exchanges

Like all developing economies on a fast track, the shortage of trained

insurance professionals and technicians at all levels cannot be remedied in

the short term

INDIAN AUTO INSURANCE INDUSTRY - MARKET OVERVIEW

The Indian auto insurance sector is rapidly moving towards international

standards, market pricing and new/innovative product offerings. Big changes

have occurred over the last decade.

The major part of the revenue earned by general insurance is from auto

insurance sector

Indian economy is the 12thlargest in the world, with a GDP of $1.25 trillion

and 3rd largest in terms of purchasing power parity.


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With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserv

a booming capital market and a rapidly expanding FDI inflows,

it is on the fulcrum of an ever increasing growth

Most auto insurance companies in India have comprehensive policies to help their

customers. Some of them have also tied up with top automobile manufacturers for a

fast insurance process.

Auto insurance has started special services like 24/7 service by phone and

provides online assistance on all days, including national holidays. Check

instant updates of their claim status through mobile messaging, offers

towing facility in case of a breakdown or accident.

Auto Insurance is one major sector which has been on a continuous growth

curve since the revival of Indian economy.

The huge population and growing per capita income besides several

other driving factors, has created huge opportunity for the auto insurance

With the entry of private sector players backed by foreign expertise, Indian

Auto insurance market has become more vibrant. Competition in this market is

increasing with private companies entering into this business

Due continuous competition companies are making effort to lure the customers with

new product offerings. Companies are also using Information/communication


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technology extensively

and appropriately to reach out to the whole population

MAJOR PLAYERS IN AUTO INSURANCE INDUSTRY

PUBLIC SECTOR

Oriental Insurance Company of India (OIC),

National Insurance Company of India (NIC),

New India Assurance Company of India (NIA)

United Insurance Company of India (UII) .

PRIVATE SECTOR

HDFC Insurance

Kodak Mahindra General Insurance

Bajaj Allianz General Insurance company


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Reliance General Insurance company

SBI General Insurance

IFFCO-TOKIO General insurance

ICICI Lombard General insurance

BHARTI-AXA General insurance

TATA AIG- General Insurance

OPPORTUNITIES

Continuous growth in Auto industry

Growing demand from semi-urban population

Entry of private players following the deregulation

Rising demand for retirement provision in the ageing population

Rising per capita incomes among the strong middle class, and spreading

affluence

Growing consumer class and increase in spending & saving capacity

Public private partnerships infrastructure development


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Dearth of innovative & buyer-friendly insurance products

New players entering into this sector along with FDI investment in this sector.

FUTURE PROSPECTS

High growth in Automobile sector.

Increase in standard of living, literacy, and insurance awareness throws open huge

opportunities on insurance.

Increase in disposable income of population of middle class society

More and more number of private players entering into this industry and along with

foreign companies through joint ventures.

FDI is also playing a major role in this industry as government has

opened up investment upto 49% from 26%


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FINDINGS

The Indian insurance sector is rapidly growing for last few years.

Big changes have occurred over the last few years, during which the sector

was opened to private participation, along with foreign direct investment.

It also has one of the lowest penetration rates for property and casualty

insurance in Asia in terms of premium as a percentage of GDP.

Indias general insurance market witnessed a variety of changes as

deregulation continued at a hectic pace.

Rate reductions in the recently de-tariff corporate portfolio (fire &

engineering) has impacted the premium growth, but this is also leading to the

greater sales of existing and new products.

The number of private insurers is growing and they continue to capture

market share at the expense of public enterprises on a mix of aggressive

distribution and service.

With the increasing number of insurers in the private sector. The industry


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forecasts for a continuous growth and rise domestic demand.

Majority of the revenue is earned by the motor vehicle segment of the

general insurance

SUGGESTIONS

Create awareness among the people of the various insurance products

available in the market

Capture the untapped population residing in the rural and sub urban parts of the

country

Spread the message of benefits of insurance through mass campaign

The industry needs innovative low cost distribution and servicing

Strategies

The company should hire more agents with more knowledge about the

products with proper training

The company can have an effective Bancassurance /NBFC tie ups so that the

entire Banking infrastructure is utilized for distribution of insurance

products

The insurance policies should be simple & less legalistic, with reasonable price,

hassle free policy issuance and claim process more package policies

The companies should also introduce short term policies


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CONCLUSION

Considering the high level of underwriting losses, going forward adjustment in

premium rates would occur when the industry matures and consolidation takes place.

The ability to price effectively will also imply an increased focus on risk management

by the insurance companies.

The continual entry of new private players coupled with the intense competition

sparked off by the detariffication of general insurance sector has also resulted in

strengthening the bargaining power of the customer and development of customer

centric insurance products.

On the whole, while short term scenario for the general insurance sector appears to be

challenging the long term prospects definitely present ample opportunities for growth.

While the governments plan to raise FDI cap in insurance companies from 26 to 49

per cent will lead to more capital flowing in, the untapped market potential holds the

opportunity to grow faster.


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BIBLIOGRAPHY

Indian Insurance: The Way Forward-G Srinivasan,

India: The Next Insurance Giant India by PRwire Pvt. Ltd.

www.tourindia.com -Insurance in India

www.moody.comIndian General insurance outlook

www.IRDA,com

annual report 2007-08

www.automobileindia.com- Auto Insurance Companies

www.auto.webindia123.com-auto insurance in India

www.generalinsuranceindia.com

www.siam.com - auto policy govt of India

www.reliancegeral.co.in
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