PREFACE

1. OBJECTIVES:

¾ To find out general insurance and which are the companies involved in
it.

¾ To know what are the trends in General Insurance.

¾ To find out the developments in the General Insurance.

¾ To find out the Procedure of Claims.

2. METHODOLOGY:

¾ The study was carried out in Mumbai.

¾ Extensive Library Research was carried out.

¾ Various Websites were referred.

¾ Primary data was collected through interviews.

¾ Various books, magazines and newspapers have been referred.

 EXECUTIVE SUMMARY

Insurance is not the sale of products, but servicing customers.

It is a system, by which the losses suffered by a few are spread over many,
Exposed to similar risks. Insurance is a protection against financial loss arising:
on the happening of an unexpected event. Insurance companies collect premiums
to provide for this protection. A loss is paid out of the premiums collected from
the insuring public and the Insurance Companies act as trustees to the amount
collected. The very fundamental principle of spreading of the risk is actually
practiced by the insurance companies by reinsuring the risks that they have
insured. The opening up of the Insurance Sector to Private Companies, has made
available more products and world class service to Indian Customer.
This project has been made with an objective to give an insight into various facts
of General Insurance sector in India.
An attempt has been made to explain the apex body of General Insurance. i.e.
General Insurance Corporation of India, its structure, products and subsidiaries.

Also the review of latest entrants into insurance sector viz private players like
TATA AIG General Insurance Company, Reliance General Insurance Company
limited, Bajaj Allianz General Insurance Company, IFFCO Tokio General
Insurance Company, Royal Sundaram General Insurance Company limited and
ICICI Lombard General Insurance Company have been described in brief, Due to
the growth in the technological sector of the country, the insurance companies
have started utilizing these technologies to it’s optimum level. A case study based
on the devastating Mumbai floods on 26th July 2005 is been prepared and facts of
the case are being listed along with the effect of the particular situation on the
General Insurance Companies is been justified.
 INDEX

Serial no. Topic Page no.

1 Origin of Insurance 1
2 A brief history of the Insurance sector 2
3 Insurance Sector Reforms 5
4 Insurance Regulatory Authority 7
5 Insurance Industry Classification 8
6 4 I’s of Insurance 10
7 General Insurance 12
8 Product levels 15
9 Frequent Terms Used 20
10 Public Sector Subsidiaries 21
11 Private Players 30
12 Market Share 40
13 Insurance Regulatory & Development Authoritarian 42
14 Products 45
15 Changing Scenario of General Insurance Market 51
16 Trends 56
17 Claims 59
18 Case Study 62
 Origin of Insurance

Whenever there is uncertainty there is risk. We do not have any control over uncertainties
which involves financial losses. The risk may be certain events like death, pension,
retirement or uncertain events like theft, fire, accident, etc.

Insurance is a financial service for collecting the savings of the public and providing
them with risk coverage. It comes under service sector and while marketing this service
due care is taken in quality product and customer satisfaction. The main function of the
Insurance is to provide protection against the possible chances of generating losses.

The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again. Tracing the
developments in the Indian insurance sector reveals the 360-degree turn witnessed over a
period of almost two centuries.

1
 Brief History of the Insurance Sector

The business of life insurance in India in its existing form started in India in the year
1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of
the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,
with a capital contribution of Rs. 5 crore from the Government of India. The General
insurance business in India, on the other hand, can trace its roots to the Triton Insurance
Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British.

Some of the important milestones in the general insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a
code of conduct for ensuring fair conduct and sound business practices.

2
1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973. 107 insurers
amalgamated and grouped into four companies’ viz. the National Insurance Company
Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and
the United India Insurance Company Ltd. GIC incorporated as a company.
INSURANCE SECTOR

The opening up of Insurance sector was a part of the on going liberalization in the
financial sector of India. The changing face of the financial sector and the entry of
several companies in the field of life and non life Insurance segment are one of the key
results of these liberalization efforts. Insurance business by way of generating premium
income adds significantly to be the GDP.
Over the past three years, more than thirty companies have expressed interest in doing
business in India. The IRDA (Insurance Regulatory Development Authority) is the
regulatory authority, which looks over all related aspects of the insurance business. The
provisions of the IRDA bill acknowledge many issues related to insurance sector.
The IRDA bill provides guidance for three levels of players - Insurance Company,
Insurance brokers and Insurance agent. Life Insurance sector is one of the key areas
where enormous business potential exists. In India currently the life insurance premium
as a percentage of GDP is 1.3 % against, 5.2 per cent in the US.

General Insurance is another segment, which has been growing at a faster pace. But as
per the current comparative statistics, the general insurance premium has been lower
than life insurance. General Insurance premium as a percentage of GDP was a mere 0.5
'per cent in 1996. In the General Insurance Business, General Insurance Corporation
(GIC) and its four subsidiaries viz. New India Insurance, Oriental Insurance, National
Insurance and United India Insurance, are doing major business. The General Insurance
Industry has been growing at a rate of 19 percent per year.

3
The entry of several private insurance companies, particularly international insurance
companies, through joint ventures, will speed up the process of insurance mobilization.
The competition will unleash new schemes and benefits, which will give consumers a
better Chance to save as well as insure. The regulatory system in India is relatively new
and takes some more time to make the Insurance sector a perfectly competitive one.
Insurance Regulatory Authority of India issued regulations on 15 subjects which
included appointed. Actuary, actuarial report, Insurance agents, Solvency margins, re-
insurance, registration of Insurers, and obligation of insurers to rural and social sector,
investment and accounting procedure. The reform in Insurance in India is guided by
factors like availability of a variety of products at a competitive price, improvement in
the quality of customer services etc. Also the employment opportunities in the Insurance
sector wil1 increase as major players set their business plans in India. The policy of the
government to open up the financial sector and the Insurance sector is expected to bring
greater FDI inflow into the country. The increase in the investment limit in this vital
sector has generated considerable business interests among the foreign Insurance
companies" Their entry wil1 certainly change the Insurance sector considerably.

4
 Insurance Sector Reforms:

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its
future, direction. The Malhotra committee was set up with the objective of
complementing the reforms initiated in the financial sector.

In 1994, the committee submitted the report and some of the key recommendations
included:

Structure:
1. Government stake in the insurance Companies to be brought down to 50%. 2.
Government should take over the holdings of GlC and its subsidiaries so that these
subsidiaries can act as independent corporations.
3. All the insurance companies should be given greater freedom to operate.

Competition:
I. Private Companies with a minimum paid up capital of Rs. 1 bn should be allowed to
enter the industry.

2. No Company should deal in both Life and General Insurance through a single entity.

3. Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.

4. Postal Life Insurance should be allowed to operate in the rural market.

5. Only one State Level Life Insurance Company should be allowed to operate in each
state.

5
Regulatory Body:
1. The Insurance Act should be changed.
2. An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent.

Investment:
1. Mandatory Investments of LIC Life Fund in government securities to be reduced from
75% to 50%.
2. GIC and its subsidiaries are not to hold more than 5% in any company (There current
holdings to be brought down to this level over a period of time.)

Customer Service:
1. LIC should pay interest on delays in payments beyond 30 days.
2. Insurance companies must be encouraged to set up unit linked pension plans.
3. Computerization of operations and updating of technology to be carried out in the
insurance industry.
The committee emphasized that in order to improve the customer
Services and increase the coverage of the insurance industry should open up to
competition. But at the same time, the committee felt the need to exercise caution as any
failure on the part of new players could ruin the public confidence in the industry. Hence,
it was decided to allow competition in a limited way by stipulating the minimum capital
requirement of Rs. 100 crores. The committee felt the need to provide greater autonomy
to insurance companies in order to improve.

6
 Insurance Regulatory Authority

On the recommendations of the Malhotra Committee, government has set up an interim

Insurance Regulatory Authority (IRA), with a view to activate an insurance regulatory
apparatus essential for proper monitoring and control of the insurance industry. The IRA
is headed by a chairman who is also Controller o0f insurance and chairman of TBC. The
other members of the IRA, not exceeding seven in number of whom not more than three
shall serve full time, shall be nominated by the central government.

INSURERS:

Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:

Life Insures:

• Life Insurance Corporation of India (LIC)

General Insurers

• General Insurance Corporation of India (GIC) (with effect from Dec ‘2000, a
national reinsurer)

7
 INSURANCE INDUSTRY:
CLASSIFICATION

INSURANCE

LIFE INSURANCE GENERAL INSURANCE

Fire Insurance Marine Insurance Mediclaim Motor Vehicle

8
 SOME PLAYERS IN THE INDUSTRY:

Life Insurance General Insurance

Life Insurance Corporation of India. General Insurance Corporation of India.
1. Oriental Insurance Company Ltd.
2. New India Assurance Company Ltd.
3. National Insurance Company Ltd.
4. United India Insurance Company Ltd.
New Entrants
ICICI Prudential Life Insurance Ltd. Bajaj Alliaz General Insurance Company Ltd.
Tata AIG Life Insurance Corporation Ltd. Reliance General Insurance Company Ltd.
ING Vysya Life Insurance Corporation Ltd. Tata AIG General Insurance Company Ltd.
Om Kotak Mahindra Life Insurance Royal Sundaram Alliance Insurance Company
Corporation Ltd. Ltd.

9
 4 I’s of Insurance Service

The 4 I’s refers to the different dimensions/ characteristics of any service. Unlike
pure product, services have its own characteristics and its related problems. So the
service provider needs to deal with these problems accordingly. The service
provider has to design different strategies according the varying feature of the
service. These 4 I’s not only represent the characteristics of different services but
also the problems and advantages attached to it.

These 4 I’s can be broadly classified as:

• Intangibility
• Inconsistency
• Inseparability
• Inventory

• Intangibility:

Insurance is a guarantee against risk and neither the risk nor the guarantee is
tangible. Hence, insurance rightly come under services, which are intangible.
Efforts have been made by the insurance companies to make insurance tangible to
some extent by including letters and forms

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 • Inconsistency

Service quality is often inconsistent. This is because service personnel have

different capabilities, which vary in performance from day to day. This problem of
inconsistency in service quality can be reduced through standardization, training
and mechanization.

• Inseparability

Services are produced and consumed simultaneously. Consumers cannot and do

not separate the deliverer of the service from the service itself. Interaction between
consumer and the service provider varies based on whether consumer must be
physically present to receive the service.

• Inventory

No inventory can be maintained for services. Inventory carrying costs are more
subjective and lead to idle production capacity. When the service is available but
there is no demand, cost rises as, cost of paying the people and overhead remains
constant even though the people are not required to provide services due to lack of
demand.

In the insurance sector however, commission is paid to the agents on each policy
that they sell. Hence, not much inventory cost is wasted on idle inventory. As the
cost of agents is directly proportionate to the policy sold.

11
 GENERAL INSURANCE

With the opening up of the insurance industry to the private sector, the need for a strong,
independent and autonomous Insurance Regulatory Authority was felt. As the enacting of
legislation would have taken time, the then Government constituted through a
Government resolution an Interim Insurance Regulatory Authority pending the enactment
of a comprehensive legislation.

The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for
the establishment of an Authority to protect the interests of holders of insurance policies,
to regulate, promote and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto and further to amend the Insurance Act, 1938,
the Life Insurance Corporation Act, 1956 and the General insurance Business
(Nationalization) Act, 1972 to end the monopoly of the Life Insurance Corporation of
India (for life insurance business) and General Insurance Corporation and its subsidiaries
(for general insurance business).

Definition and meaning:

1. INSURANCE:

Insurance is the means of managing risk and protection against financial loss
arising as a result of contingencies, which may or may not occur.

In other words, insurance is the act of providing assurance, against a possible loss,
by entering into a contract, with one who is willing to give assurance. Through this
contract the person willing to give assurance binds himself to make good such loss, if it
occurs.

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2. GENERAL INSURANCE:

General insurance means managing risk against financial loss arising due to fire,
marine or miscellaneous events as a result of contingencies, which may or may not occur.

General Insurance means to “Cover the risk of the financial loss from any natural
calamities viz. Flood, Fire, Earthquake, Burglary, etc.. i.e. the events which are beyond
the control of the owner of the goods for the things having insurable interest with the
utmost good faith by declaring the facts about the circumstances and the products by
paying the stipulated sum , a premium and not having a motive of making profit from the
insurance contract.”

Some of the General Rules:

1. Mis-description :
The insurance policy shall be void and all the premiums paid by insured may be
forfeited by the insurance company in the event of mis-presentation or mis-
declaration and/or non-disclosure of any material facts.

2. Reasonable care :
The insured shall take all reasonable steps to safeguard the property insured
against any loss or damage. Insured shall exercise reasonable care that only
competent employees are employed and shall take all reasonable precautions to
prevent all accidents and shall comply with all statuary or other regulations

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3. Fraud :
If any claim under the policy may be in any respect fraudulent or if any fraudulent
means or device are used by the insured or any one acting on the insured’s behalf
to obtain any benefit under the insurance policy, all the benefits under the
insurance policy may be forfeited.

4. Few basic principles of general insurance are :

1. Insurable interest
2. Utmost good faith
3. Subrogation
4. Contribution
5. Indemnity

5 Risks of loss not covered under general insurance are:

The loss or damage or liability or expenses whether direct or indirect occasion by
happening through or arising from any consequences of war, invasion, act of foreign
enemy, hostilities (whether war be declared or not), civil war, rebellion revolution, civil
commotion or loot or pillage in connection therewith and loss or damage caused by
depreciation or wear and tear. However the risk of loss or damage by war can be insured
by payment of additional premium in some cases only.

14
 Product levels:

In this figure there is a nucleus or core in the center, which is supported by series of
tangible and intangible features and benefits and these form a cluster around the core
product.

E AUGMENTED
X
P
E
C CORE
T
E
D
POTENTIAL

15
Level Type of Contents Insurance sector
service
1 Core service Basic service product • Life
• Non-life insurance
policy
2 Expected Basic product and minimum • After sales service
service purchase conditions that must be • Low claim settling
met. period.
3 Augmented Something different, which • Technology
service enables one product to be • Online premium
differentiated from other payment
• Payment through credit
cards
• Standing instruction to
bank
4 Potential Features that attract the customers • Maturity claims settled
service and are useful to them. on or before the maturity
date.
• Loans

The core product of insurance company is insuring life and non life products. People opt
for this service as they want to secure their life, people dependent on them and other
valuable things in life.

The time factor plays an important role while providing service to the customer. The
customer expects that the procedures for settling the claim should be short and not much
time consuming. They should get the benefits of the service as soon as possible.

16
Today the technology is boosting in each and every field. Insurance is not an exception.
Companies have started providing customers facility of online payment of premium
through their websites. They also provide online assistant to the customer the policy
status and how to calculate the premium. To calculate the premium they just need the
present age, the type of police, sum assured, and accident covered if any. By filling in this
information you can calculate the amount of premium you have to pay. The customer can
pay their premiums by means of credit cards or can also give standing instruction to the
bank in order to pay their monthly premiums.
The insurance companies also provide loan facilities against their policies. At present
loans are granted on unencumbered polices as follows:

• Up to 90% of the Surrender Value for policies, where the premium due is fully paid-
up, and
• Up to 85% of the Surrender Value for policies where the premium due is partly paid-
up.

The minimum amount for which a loan can be granted under a policy is Rs150. The rate
of interest charged is 10.5% p.a., payable half-yearly. Loans are not granted for a period
shorter than six months, or on the security of lost policies (the assured must have the
duplicate policies) or on policies issued under certain plans. Certain types of policies are,
however, without loan facility.

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 FREQUENT TERMS USED

Agent:
An insurance company representative licensed by the state, who solicits,
negotiates or effects contracts of insurance, and provides service to the policyholder far
the insurer.

Actual Total Loss:

It is a loss where the goods are completely lost and become irrecoverable

Additional cover:
An insurance policy extended to cover additional risk perils such as strikes. Riots
and Civil commotion etc on payment of extra premium.

Agreed value policy:

Policy which undertakes to pay a specified amount in case of total loss.

Under this case the policy does not take into account the current market value.
Assessor:

Person who estimates the value of goods for the purpose of apportioning the sum
payable by the underwriters to settle the claims. Also called as Surveyor.

Assured:
Party indemnified against 19ss by means of insurance.

Burglary:
It is a theft committed by breaking into or out of the premises. Evidence of
breaking In, Is necessary.

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Coverage:
The scope of protection provided under a contract of insurance; any of several risks
covered by a policy.

Cargo insurance:
A generic term used in both inland marine and ocean marine insurance to
designate the type’s of insurance available to provide coverage for cargo that is being
transported by truck, rail, air, ship, or boat.

Certificate of Insurance:
A statement of coverage issued to an individual insured, specifying the insurance
benefits and principal provisions applicable to the member.

Claim:
The formal request by a policyholder or a claimant for payment of loss under an
insurance policy.

Co-insurance:
A provision under which an insured who carries less than the stipulated
percentage of insurance to value, will receive a loss payment that is limited to the same
ration which the amount of insurance bears to the amount required;

Cover Note:

Is the document that is issued provisionary pending issuance of insurance Policy.

Indemnity:
Legal principle that specifies an insured should not collect more than the actual
cash value of a loss but should be restored to approximately the same financial position
as existed before the loss.

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Insurable Interest:
A condition in which the person applying for insurance and the person who is to
receive the policy benefit will suffer all emotional or financial loss, if any untouched
event occurs. Without insurable interest, an insurance contract is invalid,

Insurance:
Social device for minimizing risk of uncertainty regarding loss by spreading the
risk over a large enough number of similar exposures to predict the individual chance of
loss.

Net Premium:
The portion of premium rate which is designed to cover benefits of the policy,
excluding expenses, contingencies and profit.

Policy:
Is the legal document that has the conditions of the insurance contract.

Premium:
It is the amount paid to secure an insurance policy.

Salvage:
Recovery made by an insurance company by the sale of property which has been
taken over from that insured as a part of loss settlement. The remains of damaged vehicle
or any other property.

Third party:
Any person other than the two parties signing an insurance, contract.

Underwriting:
Underwriting of a risk involves consideration of material, facts on the basis of
which a decision will be taken whether to accept the risk and if so at what rate of
premium.

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 Public Sector Subsidiaries
I. Oriental Insurance Company.

The Oriental Insurance Company Ltd. (OICL) is one of the leading General Insurance
companies in India and is a subsidiary of the General Insurance Corporation (GIC) of
India. It is one of the oldest Insurance. If companies and was established in the year 1947.
The Company transacts all kinds of non-life insurance business ranging from insurance
covers for very big projects to small rural insurance covers. OICL, is the –

• First to have underwritten the biggest Grass Root Refinery Project, Reliance
Jamnagar Refinery.
• First to have issued a Package Policy under mega risk to PSU Oil giants. .
• First to have issued Advance Loss of Profits policy in India.
• First to have issued directors & Officers liability policy in India.
• First to introduce Kidnap & Ransom cover in India.
• First to have issued Stock Brokers and Stock Exchange custodial services policy
in India.
• First to have issued tailor-made cover for Cellular Communication systems.
• First to have front office computerization drive in India.
• First to have a system of in-house loss assessment upto statutory limits.
• First to have started motor third party conciliatory proceedings.

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 THE PROFILE
The Oriental Insurance Company' Ltd. (OICL) is one of the leading General
Insurance companies in India and is a subsidiary of the General Insurance Corporation
(GIC) of India. It is one of the oldest Insurance companies and was established in the
year 1947. The Company transacts all kinds of non-life insurance business ranging from
insurance covers for very big projects to small rural insurance covers.
OICL has its Head office in New Delhi, the capital of India. The Company has 21
Regional Offices, 311 Divisional Offices and 635 Branch offices in various cities of the
country.

Reinsurance connections are spread all over the world. The Company has a very
high reputation in the Reinsurance market.

OICL specializes in devising special covers for large projects like Power Plants,
Petro-chemical, Steel Plants and chemical plants. It has a highly technically qualified
and competent team of professionals, to render the best customer service. The Company
has a dedicated project cell at the Head Office as well as major cities of India. A special
R & D team has been dedicated to bring out special innovative covers like Stock-
Brokers' Policies, Special Package Policies etc.

MISSION
o To develop general insurance business in the best interest of the community.
o To provide financial security to individuals, trade and commerce by offering
insurance products and service of high quality at affordable cost.

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VALUES

o Highest priority to customer needs.

o High standards of public conduct.
o Transparency in operations.

COMMITMENTS TO THE CITIZENS

o In areas coming within competence of GIC respond to all commercially viable

general insurance requirements of the citizens, not hitherto available within three
months from the date on which such a demand is received.
o In areas covered by tariff, appropriate proposals will be submitted to the Tariff
Advisory Committee with appropriate comments within two months.
o Continue to provide customized insurance products for weaker sections of the
society at affordable price within six months of receipt of a request for a specific
type of cover.
o Prepare booklets on standard policy covers setting out essential information and
make such booklets readily available for purchase at suitable places.
o Promote customer education in general insurance service by holding workshops
in important regional centers.
o Make available to a customer, on request to the policy issuing office, the status of
his claim and/or claim settlement details within 7 working days.
o Endeavor to set up a system of Ombudsman at four metropolitan cities to
conciliate disputes on personal line insurance claims

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CORPORATE OBJECTIVES:

o To serve better the insurance needs of the entire community, keeping

CUSTOMER as the focus.

o To serve better the insurance needs of the entire community, keeping

CUSTOMER as the focus.

o To manage Business profitably, Manage funds judiciously and deploy investible

funds for optimum Yield.

o To manage Business profitably, Manage funds judiciously and deploy investible

funds for optimum Yield.

o To work towards minimization of losses and develop Risk Management

Technologies.

o To function as a strong and dynamic non-life insurer.

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PRODUCTS:

The various products can be grouped under the following categories:

o Individuals/Family
o Marine
o Professionals
o Business/Office/Traders
o Engineering/Industry
o Agriculture/Sericulture/Poultry
o Animals/Birds
o Aviation
o Motor Vehicle – Private/Commercial
o Health-Mediclaim/Overseas Mediclaim/Personal Accident

25
Documents requirement for various types of Claims

Different documents are required for settling different types of claims. The most
commonly required ones are mentioned under each claims type listed below. Your
full cooperation to surveyor/Investigator appointed by the Company would enable
prompt settlement of claims.

o Claim due to Fire and/or Explosion.

o Claim due to Flood, Storm, Cyclone, Earthquake, and Subsidence/Landslide.
o Claim due to Riot, Strike, Malicious Damage and Terrorism (RSMDT).
o Marine Inland Transit Loss of cargo/machinery.
o Marine Loss of cargo/machinery for export'
o Marine Loss of cargo/machinery during Import
o Claim due to Electrical/Mechanical/Electronic Breakdown/mishandling/
o Impact damage to machine.
o Claim due to Burglary/Theft of Vehicle
o Accidental Death Claim
o Permanent Disability/Injury claim due to accident
o Temporary Total Disability (TTD) (Weekly compensation) claim due to accident
o Mediclaim claim due to hospitalization (disease/accident)
o Claim due to Death of Cattle (Non-IRDP)/Permanent Total Disablement.
Damage claim to private Vehicle (Car/2Wheeler) due. to accident
o Claim of Damage to Commercial Vehicle (Taxi/Bus/Lorry) due to accident.
Third Party (T.P.) Claim due to accident

26
 II. The New India Assurance Company.
Established by Sir Dorab tata in 1919, New India’ was the first fully Indian owned
insurance company in India. There were nearly 150 insurance firms in India - including
ones from France, the UK and America. These were operated through managing agencies
in India largely held by Indian business houses.New India is a leading global insurance
group, with offices and branches throughout India and various countries abroad. The
company services the Indian subcontinent with a network of 1,130 offices, comprising
26 Regional offices, 366 Divisional offices and 738 Branches. With approximately
25,000 employees, New India has the largest number of specialist and technically
qualified personnel at all levels of management, who are empowered to underwrite and
settle claims of high magnitude
New India has historically been a frontrunner in several diverse fields of business and
industrial activity. New India are lead underwriters of India's Space programn1e having
insured several INSAT and other, satellites. New India are pioneers in Engineering
insurance, Financial risks insurance and are now offering customized Risk Management
solutions to our: corporate clients in the Private and public Sectors in Power, Telecom,
Petrochemicals, Steel and Automobile industries

New India's foreign operations started with the establishment of an office in London in
1920. An international presence was built up by New India as a direct writing Company
in 23 countries spanning 5 continents. It increased its reach and capacity, for reinsurance
facilities for all classes of business.
Starting way back in the 1920s, New India's UK operations have now taken deep root.
New India is party to one of the oldest reinsurance treaties in the UK market. Through
participation in Aviation and Marine Hull underwriting, New India has, over a period of
time, strengthened its market presence. In 1980's with the establishment of a full-fledged
branch to underwrite UK Business, it has extended its UK operations, authorized by the
Department of Trade and industry
The New India commenced its Japan operations in 1950, and now: operates through 8
branches. The Japanese operation covers 35% of the Company’s overseas premium
income.

27
 II. The National Insurance Company

Since incorporation in the year 1906, National Insurance~ Company has been
carrying out general insurance business under private management until 1972, the year
of its nationalization. In the same year 22 foreign and 11 Indian Insurance Companies
were amalgamated with National Insurance Company Limited, as a subsidiary company
of General Insurance Corporation of India

Headquartered in Calcutta it has an organizational network of over 964 offices

with around 20,077 trained workforces. The company also has operations in Hong Kong
and Nepal and ranks among the top global business insurers. Later on in 2002, with the
passage of Insurance amendment Bill (2002), National Insurance Company has been
delinked from GlC and. has been functioning as an independent company
Its product range includes motor vehicle insurance; fire insurance on buildings
and other assets; various crime covers like burglary and theft of cash; machinery
breakdown cover for industrial equipment; transit damage cover for imported or
exported goods; as well as legal liability cover.
Professional indemnity and directors and officer’s liability covers are some of the
new covers. NICO General Insurance seeks to attract clients and intermediaries and
flexibility in claims settlements, and at the same time ensuring that we do not erode
shareholder value. The objective is to add value to the shareholders' funds whilst
ensuring customer satisfaction? The strength of NGI is in its balance sheet.
NICO General Insurance views the future and its prospects as extremely bright,
exciting and rewarding for staff, clientele and shareholders alike.

28
 IV. United India Insurance Company

United India Insurance is one of the four subsidiaries of the General Insurance
Company carrying on general insurance business with its head office at Chennai. Later
on in 2002, with the passage of Insurance amendment Bill (2002), United India
Insurance has been Del inked from GIC and has been functioning as an independent
company.

UI spans the country with a network of 1123 offices and manpower of Over
21,000 employees. The organizational structure comprises 22 regional offices, 327
divisional offices.., and 777 branch offices, supported by 21,505 employees. ICRA has
maintained the iAAA rating, indicating the claims paying ability of United India
Insurance (UII) to be of the highest order. The rating takes into consideration the
favorable prospects for the domestic general insurance industry following the
deregulation of the sector.

UII continues to be a dominant player in the Indian insurance industry, with an

overall market share of 25% and a leadership position in the southern markets. UII is a
Pioneer of Personal Insurance Products in India who specializes in non-life insurance
products including Medical and Accident Insurance. It enjoys a market share of over 25
percent of the non-life insurance sector in India.

29
 PRIVATE COMPANIES

1. Bajaj Allianz General Insurance Company:

Allianz AG:
Allianz group was founded in 1890 and is one of the world's leading insurance
companies with over 100 year's experience in insurance and related services. It is also the
largest insurer in Europe. Allianz group has multi-local structure and presence in over 70
countries. The key business areas of Allianz group include General Insurance (property,
engineering, marine, motor, casualty and miscellaneous), Reinsurance, Risk
Management, Life & health insurance, Asset Management and Pension Funds
Management.

Bajaj Auto Ltd.

Bajaj Auto Ltd the flagship company of Bajaj Group was incorporated in 1945 as
Bachraj Trading Corporation. Initially it started by assembling two and three wheelers in
collaboration with Piaggio of Italy. After the expiry of the Agreement in 1971 the two
and three wheelers acquired the brand name of Bajaj. The strength of the company lies in
its strong brand image and ability to offer value for money products leveraging on its
large-scale operations.

The Joint Venture

Bajaj Allianz General Insurance a joint venture non-life company promoted
jointly by Bajaj Auto and German insurer- Allianz. Indian auto major holds 74% while
Allianz holds 26% in the Joint Venture, and has an authorized and paid up capital of Rs.
ll0 crores. Mr. Graham Norris is the CEO of the company. Bajaj Allianz General
Insurance will leverage the customer base and expertise of Bajaj Auto Ltd and Allianz.

30
 2. Royal Sundaram General Insurance
Company Limited:

Sundaram Finance
Sundaram Finance Limited (SF) was established In 1954 with a paid-up capital of
Rs. 0.02 million, primarily to assist the development of Road Transport Industry.
SF has been providing financial assistance to road transport operators for
acquiring commercial vehicles under hire purchase system. Emerging as the leader in the
industry, SF has been staying at that position for over four decades. SF diversified into
equipment leasing in 1981.

Royal & Sun Alliance

Royal & Sun Alliance is one of the world's leading international Insurance companies.
The Sun was established in 1710 and is the oldest. Insurance company in existence still
trading under its original name. The
Alliance was founded in 1824 and the Royal in 1845.

The Group's international presence began to emerge in the 18th century with
business ventures in mainland Europe. Forays into the US and Canadian markets
followed in the 19th century, and in 1998, Royal & Sun Alliance became the first UK
insurance company to be granted a license to operate in China.

The Joint Venture

The joint venture bringing together Royal & Sun Alliance Insurance and
Sundaram Finance Limited started its operations from March 2001. The company is Head
Quartered at Chennai, and has two Regional Offices, one at Mumbai and another one at
Delhi. The venture is aiming at Rs. 120 Crores in revenue during first year of its
operations and is confident of breaking even by fifth year.

32
 3. ICICI Lombard General Insurance
Company:

ICICI
ICICI Ltd. was established in 1955 by the World Bank, the Government of India and the
Indian Industry, to promote industrial development of India by .Providing project and
corporate finance to Indian industry.
Since inception, ICICI has grown from a development bank to a financial
conglomerate and has become one of the largest public financial institutions in India.
ICICI has thus far financed all the major sectors of the economy, covering 6,848
companies and 16,851 projects.

Lombard
Lombard Canada Ltd., is a leading insurance management company responsible
for providing insurance management services for all of the Lombard group's commercial,
personal, and specialized insurance companies. Canadian owned and operated, Lombard
Canada Ltd. has its head office in Toronto and has annual sales in excess of$500 million
and is a wholly owned subsidiary of Fairfax Financial Holdings Limited (FFH on the TSF
Lombard Canada Ltd. has achieved a reputation for providing solid underwriting
performance, diversified books of business and strong capital positions.
The Joint Venture
ICICI Lombard General Insurance Co will be headed by Mr. Sanjiv Kerkar. ICICI
would hold about 74 percent stake, while Canadian insurer Lombard would hold the
maximum permissible 26 percent and commence business with a start-up capital
ofRs.100 crore. ICICl Lombard has plans to sell covers to the corporate clients of ICICl.
St the same time it will sell property insurance for ICICI home loan seekers and auto
insurance for those availing of car finance.

33
 4. Tata AIG General Insurance Company
Limited:

TATA Group

Tata Enterprises with 82 companies, spread over seven sectors and with an annual
turnover exceeding US $ 8.8 billion, employs more than 262,000 people. Tata Group has
shown over years that it is a value driven company and has" pioneering contributions in
various fields including insurance, activation, iron and steel. Tata companies have forged
a number of global alliances with eminent international partners in several fields. In terms
of capital market performance as many as 40 listed Tata companies account for nearly
5% 6fthe total market capitalization of all listed companies.

TATA Group in Insurance

The Late Sir Dorab Tata was the founder Chairman of New India Assurance Co.
Ltd., a group company incorporated way back in 1919.
Government of India took over the management of this company as a part of
Nationalization of general insurance companies in 1972. Not deterred by the move, Tata
group have ventured into" risk management services having tied up with AIG group, back
in 1977, with the incorporation of Tata AIG Risk Management Services Pvt. Ltd.

34
AIG

“American Insurance Group is the leading U.S. based international insurance and
financial services organization and the largest underwriter of commercial and industrial
insurance in the United States. Its member companies write a wide range of commercial
and personal insurance products through a variety of distribution channels in over 130
countries and jurisdictions throughout the world.

AIG's global businesses also include financial services and asset management,
including aircraft leasing, financial products, trading and market making, consumer
finance, institutional, retail and direct investment fund asset management, real estate
investment management, and retirement savings products.

The Joint Venture

Tata AIG General Insurance Co. Ltd. has a start-up capital of Rs. 125 crores of
which 74 per cent has been brought in by Tata Sons and American partner brings in the
balance 26 per cent.
Tata -AIG plans to be the first Indian insurance company to offer a comprehensive
policy to cover various risks in the IT sector, risk arising out of virus, cyber crime,
negligent acts, errors and omissions and third party liability from a security failure. Other
products on offer are property, casualty, marine, directors and officer’s liability, accident
and health, homeowners and automobile insurance.

35
 Bajaj Allianz General Insurance Products

o Personal Accident

o Hospital Cash Daily Allowance Policy

o Health Guard

o Critical Illness

o Burglary Insurance

o Householders Insurance

o Travel Companion

o Fidelity Guarantee Policy

o Office package

o Money Insurance

o Public Liability

o Plate Glass Insurance

o Consequential Loss (Fire) Insurance Policy

31
Tata AIG General Insurance Company Products

o Executive Guard

o Family Guard

o Travel Guard

o Home Secure

o Business Guard Sanjeevani

o Business Guard Jyothi

36
 5. Reliance General Insurance Company
Limited:

Reliance Group'

Reliance 'Group is India's largest business house has annual sales turnover of Rs. 41,280
crore (US$ 9,003 million) and has posted a net profit of Rs. 2,940 crore (US $ 641
million) for the 12-month period ending June 30, 2000. The Group has total assets of Rs.
52,100 crore and net worth of Rs. 22,415 crore. It has a large investor base of over 5
million, as well as a large customer base in retail (textiles, LPG, Cellular phones, etc.)
and commercial segments.

Reliance Industries Limited, India's largest private sector enterprise, is a, major player in
the Indian petrochemicals sector. Relianc6~s operations capture value addition at every
stage from producing crude oil and gas to polyester and polymer products and are
vertically integrated to the production of textiles. Reliance has one of the largest
marketing networks in the Indian Industry. All its brands are market leaders.

Reliance General Insurance Company Limited

Reliance group has announced its plans to enter the Indian insurance sector- both
in the life and general insurance businesses'. Reliance Industries plans to bring in around
Rs. 300 Crores into its insurance venture through its financial arm Reliance Capital Ltd.
Reliance group will be the lead investor for this initiative. The two companies will
have an initial authorized capital of Rs.200 crores (US $ 43.62 million) each. This is the
first application from an Indian company without a foreign insurance tie-up. However,
Reliance will associate with international insurance consultants to bring the best practices
in the business to India.

37
 Iffco Tokio General Insurance Company ltd

Iffco

Indian farmer’s fertilizers cooperative limited was created on Nov 3, 1967 as a multi unit
cooperative society engaged in production and distribution of fertilizers the byelaws of
the society provide a broad framework for the activities of IIFCO as a cooperative society
the main emphasis is on production and distribution of fertilizers

The Tokio marine and fire insurance

The Tokio marine and fire insurance (Tokio marine) company holds a leading position in
Japan’s property and casualty insurance industry. It is the second largest in P & C
insurance market in the world.

With superior capitalization, stable profitability and conservative management tem the
company provides a large rage of property and casualty insurance products n services
including, automobile fire and personal accident to retail corporate clients

38
The Joint Venture

IFFCO TOKIO General Insurance Company is a joint venture promoted by India Farmers
Fertilizers Co-Operative, Tokio Marine and fire Insurance Company, Japan, the fifth
largest insurance company in the world, Krishak bharathi Cooperative ltd. (KRIBHCO),
and Indian potash. Their contribution to the Rs.100 crore equity capitals is 49 percent, 20
percent and 5 percent respectively. The head Office is in Delhi and operating Office are
in about 20 cities.

IFFCO Tokio Insurance Products

• Home & Family Protector

• Standard Fire & Special Perils
• Burglary and House Breaking
• Personal accident
• Trade Protector
• Travel Protector

39
 Market Share

As by this time we are well versed with all the General Insurance companies both
Public and private we know how each company contributes serving the customers
and also generating revenue through it. We also know that General Insurance
contributes towards the Gross Domestic Profit, but now let us see how these
companies individually contribute towards the Gross Domestic Profit through the
way of Market Share of each company both Private & Public.

As we can see in the Pie Charts a comparison of 3 consecutive years have been
taken which are 2003-04, 2004-05 & 2005-06.

Public Companies have been dominating the General Insurance Market since a
long time, the market share of Private companies have been improving in the last
few years by approximately 6 % each year, but then too Public sector companies
capturing the major market.

But also in Public sector companies New India Assurance is been leading the way
which is been closely followed by the remaining. Among the private players we
can note that ICICI Lombard is leading the way.

By considering 2005-06 as the base year, we can note that the market share of
Public companies have been deteriorating having 73.43% of the market share from
85.54% in the year 2003-04.

40
 Companywise Market Share of Gross Premium Underwritten (In India)

Industry Total - 2003-04 Industry Total - 2004-05 Industry Total - 2005-06

New India; New India;

New India; 23.46%
25.90% Oriental;
Oriental; 24.02% Oriental;
17.21%
18.13% 17.26%

United India; National; United India;

National; National; 17.26% 15.45%
United India; 16.80%
21.87% 21.68%
19.63%
Private Co's; Private Co's;
Private Co's; 20.29% 26.57%
14.46%

Private Co's Total - 2003-04 Private Co's Total - 2004-05 Private Co's Total - 2005-06

Chola-
mandalam; Chola-
4.28% mandalam;
Bajaj Allianz; Chola- Bajaj Allianz;
Bajaj Allianz; 4.06%
24.06% mandalam; 23.73%
21.08%
4.78% TATA-AIG;
TATA-AIG;
TATA-AIG; 11.28%
13.18%
15.64%
HDFC Chubb;
4.94% Royal Sundaram; HDFC Chubb;
Royal Sundaram; 8.36%
HDFC Chubb; 3.73%
Royal Sundaram; 9.30%
11.42% 5.17%

ICICI Lombard; ICICI Lombard; ICICI Lombard;

Reliance; 2.99%
22.43% 24.88% 29.34%
Reliance; 7.13% IFFCO Tokio;
Reliance; 4.54% IFFCO Tokio;
IFFCO Tokio; 16.51%
14.09%
13.08%

4
 INSURANCE REGULATORY AND
DEVELOPMENT AUTHORITARIAN

Insurance Regulatory and Development Authority Act, 1999, came into being
from 19/04/2000.

Objects are stated in Act are as follows:

"An Act to provide for establishment of Authority to protect interests of holders
of insurance policies to regulate, promote and ensure orderly growth of insurance
industry and for matters connected there with and further to amend Insurance Act, 1938,
Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization)
Act, 1972".

Composition:

IRDA will consist of a chairperson and not more than Five whole time members
and not more than four part time members.
Whole time members shall hold office for 5 years or until age of 62 (65 in case of
chair person) whichever is earlier. Part time members shall hold office for not more than
5 years.

42
Powers and Function of Authority

1. To regulate, promote and ensure orderly growth of insurance and re- insurance
business
2. To issue a certificate of registration, renew, modify, withdraw, suspend or cancel such
registration of applicant, i.e. insurance company
3. To prepare a code of conduct for agents, surveyors and loss accesses and other
intermediaries who take part in insurance business
4. To exercise all powers and perform all functions of controller of Insurance under
Insurance Act, 1938
5. To protect interest of policy holders in matters concerning assignment of policy,
settlement of claims, terms and conditions of contract etc.
6. To promote efficiency in conduct of insurance business
7. To promote and regulate professional organizations connected with insurance business
8. To regulate investment of funds of insurance companies
9. To regulate maintenance of margin of solvency
10. To adjudicate disputes between insurers and intermediaries
11. To call for information from" undertake inspection and conduct enquiries and
investigations including audit of insurers, intermediaries etc.
12. To control and regulate rates', advantages, terms and conditions offered by Insurers
in respect of general insurance business riot so controlled by Tariff Advisory committee
13. To prescribe manner and forms in which books of accounts is to be maintained
14. To exercise other powers as such may be prescribed by central government.

43
Insurance Advisory Committee:

Authority has power to appoint a committee to provide guidance to

Authority and committee is called Insurance Advisory Committee.
This committee contains not more than 25 members excluding ex-officio member
representing interest of commerce, trade industry, agriculture, surveyors, agents,
intermediaries etc.
Chairperson and members ~f Authority are ex-officio members of Insurance
Advisory Committee.
15) Code of conduct for insurance agent:
Every insurer agent shall,
• Identify himself and insurance company of whom he is an agent
• Disclose his license to prospect on demand
• Give requisite information in respect of insurance product offered for sale by his
insurer and into account needs of prospect while recommending a specific 'plan.
• Disclose scales of commission payable to him if asked by prospect
• Indicate premium to be charged by insurer on insurance product
• Explain to prospect nature of information required in proposal from and also
importance of disclosure of material information
• Bring to notice of insurer any adverse habits or income inconsistency of Prospect
• Inform promptly about acceptance of rejection of proposal by insurer.
• Render necessary assistance to policyholder or claimant in complying with,
requirements of settlement of claims

44
 Products

The different types of General insurance products are listed below. While most policies
are optional that is at the behest of the insured, some are mandatory. The mandatory ones
are:

• Motor Insurance

• Public liability (for corporate class)

Other policies include:

Fire insurance

o Building or flat
o Furniture fixtures & other content’s
o Loss of profit that is consequential loss

Miscellaneous insurance

o Personal insurance
o Burglary ,theft
o Workmen’s compensation
o Fidelity guarantee
o Cancer
o Mediclaim
o Comprehensive Package Policy for jewelry, T.V, V.C.R, Furniture etc…

45
Marine Cargo Insurance

o Cargo In Transit
o Cargo Declaration Policy

Marine Hull Insurance

Inland vessels ocean going vessels, fishing & sailing vessels, freight at risk, construction
of ships, voyage insurance of various vessels, ship breaking , insurance Awaiting break
up, insurance Oil & energy in respect of onshore & offshore risks including construction
risk.

Non – Traditional / Rural

o Cattle / Hens
o Crop
o Water Pump for agriculture
o Hut
o Other Livestock
o Motor Insurance

Motor insurance is mandatory for all types of vehicles in India. There are two types of
motor insurance viz

o Third party, which only insures the party / parties other than the owner in an
accident
o Comprehensive, which insures the owner as well as the third party involved.

46
The premium for motor vehicles is decided on the following factors:

o Value of the vehicle

o Location where it is to registered .places having higher claim rates (like Mumbai)
are likely to have higher premium

The premium for heavy commercial

o Value of the vehicle

o Gross laden weight, that is, the carrying capacity of the vehicle.

For HCV’s the driver is also insured along with the vehicle. A charge of rs.15/- is made
as premium for the driver. For all sorts of vehicles insured, the policy would not cover the
use on hire , reward or organized racing ,speed reliability trails and speed testing.

There is (NCB) No Claim Bonus applicable for each year an insured person does not
claim .It is accrued as a 5% deduction from the premium amount for the next year,
subject to maximum 50%.

Property Insurance

Property insurance covers land, buildings and the contents of building.

There are several types of Property insurance packages, but the most common are the
Fire Insurance and burglary Insurance

47
Fire Insurance

Fire insurance is a comprehensive policy, which goes beyond only fire accidents.
The policy, besides covering loss on account of fire, also covers loss on account of the
following

o Earthquake
o Riots
o Strikes
o Malicious Intent
o Floods

Fire insurance only can be taken by the owner of the premises to be insured. A tenant
cannot insure rented premises since he does not have insurable interest. But the tenant has
the option of insuring the contents of the premises. The premium is based on “Good
faith” and depends on the value of property being insured.

It should be noted that thought fire insurance is not compulsory, in case of corporate
availing of loans, the lending institution may insist on equipment or relevant property to
be insured against fire. This trend is now also being followed by housing finance
companies, some of which are insisting that the premises be insured against fire

48
Burglary

Burglary insurance covers all losses arisen out of burglary committed in one’s premises.
The only condition for lodging a claim on the insurance party is that there should be a
“forced entry” in to the premises. A forced entry may in the form of physical damage to
the entry area, or to a person or entry gained through coercion. In this case too, the policy
has no limitations and it is the right of the insured to decide upon the value of the
insurance cover

Overseas Mediclaim Policy – Travel Insurance

Policies issued in India under Overseas Mediclaim Scheme, as approved by

Reserve Bank Of Indian residents traveling abroad for any approved visits viz.
Business, Study Tour, Specialized training conferences, Employment or higher
studies. Premium on such policies may be collected in rupees but for employment in
foreign currency.

This policy was originally introduced in 1984, to provide for payment of medical
expenses in respect of illness suffered or accident sustained by Indian residents during
their overseas trips for official or holiday purposes.

In. 1998, a new policy known as VIDESH YATRA MITRA, was made available
for Business and Holiday Travelers. Cover for corporate frequent travelers were also
introduced.

49
 The policy provides for following Sections:-

1) Medical Cover
2) Repatriation Of Remains
3) Checked Baggage Loss / Baggage Delay
4) Passport Loss
5) Personal Accident – Overseas
6) Personal Liability
7) Hijack Relief Benefit

The plan available now with various companies are however not the same as each
company has introduced. Some variation in the cover to suit the varying
requirements.

Types of overseas Mediclaim insurance policy

1) Individual Overseas Mediclaim insurance policy

2) Student Overseas Mediclaim insurance policy
3) Senior Citizen Mediclaim insurance policy.

50
 CHANGING SCENARIO OF GENERAL
INSURANCE MARKET

'Looks to the future with confidence and optimism'

Brief the history of general Insurance.

In India General Insurance business started, Marine Insurance started on later part of the
17th century. Before nationalization in 1947 we have 147 insurance companies, foreign
and Indian both. But during there nationalization, in 1973 we have 107 companies that
merge into four companies, i.e. taken over by Government.
General Insurance Corporation of India (GIC) was set up in 1973 as a holding company,
with four subsidiary operating companies - National Insurance co Ltd., New India
Assurance Co. Ltd., Oriental Insurance co Ltd., and United India Insurance Co Ltd., with a
clear cut mission as set out in the Act.

The overall scenario in the insurance market in India after nationalization.

GIC and its subsidiaries function through a vast country - wide network of around 4100
offices spread across the length and breadth of the country, GIC has taken the benefit of
insurance to almost every district, across hilly terrain and often inaccessible areas of the
country. The customer interface is made easy through a network of agents, development
officers and employees at Branch, Divisional and Regional offices as well as at the
corporate level.

51
The GIC and its subsidiaries have a workforce of approximately 86,000
In 1973 tainted at various levels through in house training institutions. Now the total
number of employees went up.
The industry has also promoted the National Insurance Academy (NIA), which is the
premier training institute in insurance, catering not only to Indian Nationals but also to
select foreign nationals. The industry issues around 23 million documents and settles 2
million claims every year.
Country wide computerization in the recently past has made the task of policy- holder's
servicing easier and rapid. At the same time, profitable lines and premium components
increases and we became a investment company.

Where does Indian Insurance sector stand compared to International Insurance

Sector?

Technologically, Indian insurance sector is quiet comparable with the

international sector. Our vast resources of skilled and technical manpower, huge market
potentiality and technical know-how - all are comparable with the international market.
But lacking in the process of computerization and in pricing (premium rate) is also seen.
In product, we have demand in less because lack of awareness for adequate insurance
cover in India with insuring public. Our marketing strategy is not very modern. But we
are trying to rectify both these (Technology and Marketing) areas.
The problems faced by Indian Insurance Sector Today:
The main problems are:
[Lack of awareness for insurance needs.
[Lack of penetration due to inadequate marketing/delivery system.
[Total computerization still in the process of implementation.
[Sophisticated covers do not have adequate demands because of General attitude to
insurance in India.

52
The Schemes

Recognizing its organizational strengths, the Govt. of India has also entrusted the
corporation with the administration of various schemes for social melioration and public
welfare. Social security schemes benefiting millions of Citizens below the poverty line.
Personal Accident Insurance and Hut Insurance are operated all over the country for
which the premiums are paid by the Government. The GIC administers on behalf of
Government, the crop Insurance scheme for areas and crops notified under the crop
Insurance Scheme.
Various low cost mass insurance policies have been evolved over a period of time, e.g.
'Jan Arogya Bima Policy'.

Role General Insurance Industry is playing in the growth of economy of the country:
The General Insurance Industry has an enviable track record among public sector
units. It has a consistent profit and dividend paying record accompanied by a steady
growth in its financial resources.
Through investments in the- Government sector and: socially - oriented Sectors the
Industry has contributed immensely to the nation's development. The industry is
recognized as one of the largest financial' Institutions in the Country. The ventures
initiated by the industry in the areas of Mutual Fund, Housing Finance have done
exceedingly well in recent years.
To protect the country's foreign exchange reserves, the reinsurance arrangement are so
organized that maximum retention is made possible within the country while at the same
time protecting interests of the policy holders. The GIC'S inwards reinsurance wing,
called the SWIFT, maximizes the foreign exchange balance by acting as an international
insurer-accepting risk from all over the globe.

53
GIC'S International operation:

GIC'S international operations span over 31 countries around the globe. The reinsurance
expertise built over a long period has made the Indian Insurance Industry a globally
acknowledged reinsurer of repute GIC'S risk management skill has been backed by
specialists with a vast insurance experience.

Thus, the technical and underwriting skills have been acknowledged in the
international market. The corporation operates in 17 countries through branches and
agencies, whereas in another 14 countries, it has subsidiaries and associate
companies. The GIC has a subsidiary company known as 'India International Pvt,
Ltd.,' operating in Singapore and a joint-venture company, Kenindia Insurance co.
Ltd.

The impact of liberalization of economy in the activities of GlC.

With the liberalization of economy, General Insurance in India is poised for a quantum
jump, both in quality and quantity.
Vision for the future:
It is estimated that the industry will outstrip the present rate of growth and reach a
premium value of over Rs. l,20,000 millions by taking advantage of the extra-large mega-
risk and social awareness of insurance in general, even as . a developing country turns
into a developed country.
The task before the industry to service the growing number of policy-holders would
equally see a quantum jump in issuance of documents and settlement of claims. Matching
reserves and consequent investment will be a natural corollary.

54
It is expected that the investment portfolio will touch around Rs. 2,50,000 millions by
the end of the next decade, with the strength built up over the years since nationalization,
GIC new looks to the future with confidence and optimism, takes on global chal1enge
with its high standard of service, innovative initiative and a compelling social
perspective.

GIC's plan - in new business areas:

The two new areas that GIC is getting into are the areas of health care and crop
insurance. For the health care business, the corporation has received permission to set up
a separate management services company. GIC has plans to increase the scope of cover
in health care, personal accident and crop insurance and will require expertise in pricing
the products.

The Research & Development activities:

They have just entered these areas and for the coming five years we are investing
approximately 500 crores. GIC'S R & D cell is created backed up market research data.
The subsidiaries of GIC are becoming an autonomous body.

Privatization in the insurance sector of India - Is it in the right direction

It's purely a government decision and the nationalized sector is ready to face the
challenge. And have taken the challenge to stand in the stiff competition.
And now, many private companies have entered the market. These companies are a result
of merger of Indian companies with foreign companies.

55
 TRENDS
Trends in any sector basically refers to the up gradations or acquiring new technologies
which has replaced the conventional methods in any organizations

In Today’s automated and modernized era any organization cannot take a chance by not
maintaining pace with the competition.

With the passage of time and taking into consideration today’s needs and changing
scenario insurance companies should also adopt new technology i.e. it should be trendy
enough to meet customer needs and expectations.

Trends or use of technology should be such that it is eco friendly enough to be used by
customers. Today, right from a grocery shop to I.T sector technologies is explored to the
fullest

E-Business or E-commerce has sown its seeds in every sector of business which is one of
the strongest sign of improvement and technology.

As we are dealing here with insurance industry let us see the technology involved in the
Insurance sector.

Technological:

• Computerization:
Initially, in the late 1950’s the insurance companies used Unit Record Machines (Electro
Magnetic Machines) to process data punched into cards. Computers were introduces in
the mid 1960’s and by the 1980’s the Unit Phased Machines were phased out and the
entire process was computerized. This brought about greater efficiency and quick service
delivery.

56
• Internet:
Internet usage has drastically improved in the last decade. There was a tremendous
increase in the use of technology by GIC during the late 1990’s. The companies
Launched its website in the mid 1990’s to offer basic services such as modifying policies
(change of address, change of nominee, etc) and querying the status of the policy.
But today, the internet has completely changed the service delivery process. Internet is
today used to even sell insurance policies. Internet is, in fact, proving to be one of the
widely used distribution networks for selling insurance policies. Also internet is used for
sending premium notices to policy holders through e-mails.

Also GIC has a special feature on its website. It has a premium calculator which
accurately displays the amount of premium month wise and the remaining balance. One
just has to enter the age, name of the insurance policy, the sum assured and whether there
is an accident cover or not. By keying in this information, the entire premium amounts
are shown within no time. This has helped the customer in a way so that he/she doesn’t
have to travel all the way to the branch to ascertain the amount of premium to be paid.

• Metropolitan Area Network (MAN) and Wide Area Network (WAN):

GIC has commissioned a MAN connecting more than 75 branches in Mumbai. This
enabled the policy holders to pay their premiums and get their status report, surrender
value quotations and loan quotation, from any branch in the city. Following the MAN in
Mumbai, seven MAN centres (Chennai, Bangalore, Delhi, Calcutta, Pune, Hyderabad,
and Ahmedabad) became operational.

These MAN centres were connected to each other by a WAN network. This WAN was
designed for distributed processing without a central database – each division maintained
a database of the policyholders. The central office in Mumbai maintained an index of
policy numbers and the corresponding IP addresses of the servers where the details of the
policy were maintained.

57
• Electronic Clearance Service (ECS):

Almost all the big organizations today provide the ECS facility to its customers. A policy
holder having an account in any bank which is a member of the local clearing house can
opt for ECS debit to pay premiums. The advantage here is that once the option is
exercised, the policy holder need not visit a branch for paying the premium or collecting
the receipts. On the day indicated by the policy holder, the premium amount will be
directly debited to the bank account of the policyholder and the receipt will be issued by
the designated branch office.

• Bank ATM’s:
Many insurance companies have a tie-up with commercial banks so as to enable
policyholders to use the facility of paying premiums through the bank ATM’s. ICICI
Lombard has a tie up with ICICI bank; Bajaj Allianz has a tie-up with Corporation bank
and UTI Bank.

• Call Centres and SMS services:

Almost all the insurance companies have their own call centres which cater to the phone
based queries of the policyholders. This service is 24x7 and they have the Interactive
Voice Response (IVR) systems at all the branches.

Also, LIC and other companies now provide SMS services going with the new trends like
SMS banking in the banking sector.

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 Claims
The Settlement of claims constitutes one of the important functions in an insurance
organisation.
The proper settlement of claims requires a sound knowledge of thee law, principles and
practices governing insurance contracts and in particular a thorough knowledge of the
terms and conditions of the standard policies and various extensions and modifications
there under.
The procedure in respect of claim a under various classes of insurance follows a common
pattern and may be considered under 3 broad headings

Preliminary procedure
It is essential that early notification of the loss is received by insurance undue delay in
notification would adversely affect the position of the insurer. However if there is any
delay in notification or not or weather is material will be ultimately decided by the courts
based on the facts of the individual cases

The notice of loss condition in liability policies provides for two aspects

a.) Notification of the happening of the accident immediately followed by

b.) Notification of the receipt of claim or suit filed against the insured.

Under certain types of policies (e.g. Burglary) notice is also to be given to police
authorities.

Loss Minimization

At common law, there is a duty on the part of the insured to observe good faith .This duty
of good faith means that at all times the insured has to act as if he is uninsured.

For E.g., the private car package policy provides , among other things , that the insured
shall take all reasonable steps to safeguard the motor car from loss or damage and to
maintain it in efficient condition. In the event of any accident or breakdown the motor car
shall not be left unattended without proper precautions being taken to prevent further
damage or loss.

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 Procedural
On receipt of intimation of loss or damage insurers check that:
a.) the policy is in force on the date of occurrence of the loss or damage
b.) The loss or damage is by a peril insured by the policy.
c.) Notice of loss received without undue delay.

After this check up the loss is allotted a number and entered in the claims register.

Claim Forms
The contents of the claim form vary with each class of insurance .In general the claim in
general the claim form is designed to elicit full information regarding the circumstances
of the loss such as date of loss, time, cause of loss, extent of loss etc claim forms are
invariably sued in fire and miscellaneous insurance.

Investigation and Assessment

On receipt of the claim form duly completed from the insured the insurers decide about
the investigation and assessment of loss if the loss is small the investigation to determine
the cause and extent of loss is done by an officer of the insurers. Some times even this
may be waived and the loss settled he basis of the claim form only.

The investigation of larger or complicated claims is entrusted to independent professional

surveyors who are specialist in their line the appointment of a surveyor is intimated to the
claimant the surveyor is furnished with all relevant claim papers such as claim form
policy copy etc…However, many a times surveyor is appointed and survey is carried
immediately on receipt on notice of loss, that is even before claim form could be issued.

Claims documents

In addition to the claim form independent survey report certain documents are required
to be submitted by the insurers to substantiate the claim for example for fire claims for
fire claims a report for the fire brigade for motor claims driving license registration copy
police report etc

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 Arbitration

It is distinct from litigation and is a method of settling disputes under contract in

accordance and conciliation act 1996.

Settlement

The claim is processed on the basis of Claim form

Independent report from Surveyors, legal opinion, medical opinion etc as the case may
be. Various documents furnished by the insured. Any other evidence secured by the
insurers
If the claim is in order settlement is effected by cheque the payment is entered in claims
register as well as in the relevant process record. Appropriate recoveries are made from
the insurers if any.

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 Case Study

26/7/2005 – Mumbai under water

Mumbai will never be the same again. And so will the insurance sector in Mumbai after
the 26/7 floods. Torrential rains which killed thousands and rendered many homeless,
also led to loss of business and vehicles.

• The facts:
As fallout of the torrential rains, the non-life insurance sector was flooded with more than
10000 claims totalling over Rs. 2000 crores. However, these did not include the 50000
cars that have been damaged in Maharashtra.

While the top four private sector general insurance companies, ICICI Lombard General
Insurance, Bajaj Allianz General Insurance, Iffco Tokio General Insurance and Tata AIG
have together received claims worth over Rs 1,000 crore; the four state-owned general
insurance companies New India Insurance, Oriental Insurance, United Insurance and
National Insurance received claims close to Rs 1,500 crore.

Private insurer, Bajaj Allianz General Insurance Company Ltd (BAGICL) alone had
received claims for at least 10,000 motor vehicles after the recent floods in Mumbai.

As several companies temporarily closed down their operations and godown stocks went
missing, corporate claims were the highest, in terms of value. Next came claims for cars
and household goods and from shopkeepers and traders for their warehouses. A majority
of individuals and small and medium entrepreneurs also submitted claims.

ONGC's insurance claim is considered to be the largest given its loss of $ 500 million
after fire gutted the Bombay High rig.

62
Insurance firms set up special cells to visit victims and settle claims. In many firms, the
special teams worked round-the-clock to take stock of the loss and speed up the
settlement process.
Bajaj Allianz settled claims worth about Rs 200 crore without any documentation, to the
victims of the recent floods in Mumbai.

After the natural calamity, the Finance Minister sought speedy redressal of claims. He
directed the Chairmen and Managing Directors of the four public sector general insurance
companies that claims below Rs 50,000, arising out of the recent floods in Maharashtra
and Gujarat, should be settled by August 31.

Public sector player, National Insurance Company received 3,000 claims for Rs 350 crore
from its customers in Mumbai for damage to property caused by the recent rains.

While some insurers had taken a re-insurance cover, some have not. Mumbai floods
brought to fore the ill-preparedness both among the mega polis administrative officials
and the insurance sector. While the latter seems to have realized the damages, the former
is still grappling with the situation. As death toll continues to rise, insurance firms have
realized the need to better manage natural calamities. The premium for flood covers may
rise in coming years.

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• The effect:
Here’s a warning to the lakhs of Mumbaikars who are planning to insure their houses in
the wake of the recent deluge. One will have to read the fine print carefully. Public sector
insurance firms are quietly planning to drop the word ‘flood’ from the policy.

As of now, a household insurance policy is basically a fire insurance policy, which also
incorporates a flood insurance policy. However, with 10,000 policy-holders filing claims
totalling Rs 1,500 crores, insurance firms are looking at new ways to keep their heads
above water. After the last calamity—the Latur quake of 1993— insurance firms had
dropped earthquakes from the household insurance policy.

Those wanting to insure their homes against flooding may now have to pay a separate
premium. The insurance sector has suffered losses of about Rs 1,500 crore. These
companies may not get re-insurance for these policies as they had not taken re-insurance
for these small individual polices.

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 Classwise Break-up of Gross Premium Underwritten (In India)

2003-04
2004-05
Aviation; 1.88%

Aviation; 3.01% Health; 9.53% Liability; 2.05%

Motor TP; 13.32% Health; 8.64% P. A.; 2.80%
Liability; 2.30% Motor TP; 13.30%
P. A.; 2.30%
Others; 9.99%
Motor OD;
28.04% Others; 10.05%

Motor OD; Fire; 18.84%

29.51%
Fire; 20.36%

MRN Cargo;
4.22%
Engg.; 4.55%
MRN Hull; 2.97%
MRN Cargo; Engg.; 4.91%
MRN Hull; 2.94% 4.48%
2005-06

Aviation; 1.96%
Health; 11.06%
Liability; 2.01%
Motor TP; 12.43%
P. A.; 2.89%

Others; 9.99%

Motor OD; 30.15%

Fire; 18.36%

Engg.; 4.80% MRN Cargo;

MRN Hull; 2.50% 3.87%

5
 Company-wise Break-up of Gross Premium Underwritten (Industry Total)

50,000
2003-04 2004-05 2005-06

42,108

47,906
45,000
37,999

35,251
35,241

40,000
34,170

40,457

31,545
30,178

30,669
29,445
35,000 28,321

30,000
INR Millions

25,000

15,920
20,000

15,000 12,877

8,961
8,561

8,852

6,124
5,013
5,067
10,000

4,536

4,689
4,763

3,307

3,533
2,956
2,024
2,204

2,580
1,623
1,838
1,701

1,617
1,611
1,117
5,000
967

0
National New India Oriental United India Bajaj Allianz Cholamandalam HDFC Chubb ICICI Lombard IFFCO Tokio Reliance Royal Sundaram TATA-AIG

6
 Class-wise Break-up of Gross Premium Underwritten (Industry Total)

70,000
2003-04 2004-05 2005-06

60,000

61,576
51,701
50,000
37,530

43,767
33,028
INR Millions

40,000
31,804

25,446
23,344

22,575
30,000

20,368
20,798

17,495
16,697

15,700
13,542
20,000
9,806
8,634
7,865

5,854
7,082
7,384

5,095
6,982

5,174

4,935
4,001
4,702
4,613

4,096
3,595
3,620

3,602
3,319
10,000

0
Fire MRN Cargo MRN Hull Engg. Motor OD Motor TP Health Aviation Liability P. A. Others

7
 Questionnaire

Q1.) What according to you, Is the General Insurance market growing to its maximum
level or some more products/dimensions are yet to be discovered?

Q2.) According to what are the trends in General Insurance?

Q3.) On an average how much time does it take to settle a claim (period)?

Q4.) How important is re-insurance according to you?

Q5.) In General Insurance Corporation, public Sector companies are dominating past
many years? Why?

Q6.) What are Challenges faced by General Insurance companies?

Q7.) What are the future prospects of General Insurance?