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Published by Bibin Po

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Published by: Bibin Po on Sep 27, 2011
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The introduction of private players in the industry has added to the colors in the dullindustry. The initiatives taken by the private players are very competitive and have givenimmense competition to the on time monopoly of the market LIC. Since the advent of theprivate players in the market the industry has seen new and innovative steps taken by theplayers in this sector. The new players have improved the service quality of the insurance
Bancassurance in its simplest form is the distribution of insurance products through abank's distribution channels. In concrete terms bancassurance, which is also known asAllfinanz - describes a package of financial services that can fulfill both banking andinsurance needs at the same time.Where legislation has allowed, bancassurance hasmostly been a phenomenal success and, although slow to gain pace, is now taking off across Asia, especially now that banks are starting to become more diverse financialinstitutions, and the concept of universal banking is being accepted.
In India, the signs of initial success are already there despite the fact that it is acompletely new phenomenon. The factors and principles of why it is a success elsewhereexists in India, and there is no doubt that banks are set to become a significant distributorof insurance related products and services in the years to come. Bancassurance is seen bymany to be a significant or even the primary channel.The fact that the India is the Emerging Market is throwing a lot of competitionamong the foreign players as well as the Indian players. The flow of foreign directinvestment (FDI) into the India is significant owing to low labour costs and positiveeconomic prospects. India's economic growth is boosting more investments in propertiesand automobiles, helping the companies to sell more coverage to insure the assets
Withchanges in market conditions and changing demographics, the insurance industry isexperiencing good growth. It is one of the fastest growing industries in the country. Thechanges in market conditions and increase in GDP, with a healthy growth in stock markets unit linked policies and other types of policies will continue to grow. Also, withchanges in demographics like the increasing size of middle class and middle-agedpopulation will further enhance the growth of the insurance sector. Other factors likegovernment regulations related to tax rules and the proposed FDI will further attract manyinternational companies to the country, which will provide the necessary impetus in thegrowth of the insurance industry.
The origin of insurance is very old .The time when we were not even born; manhas sought some sort of protection from the unpredictable calamities of the nature. Thebasic human trait is to be averse to the idea of taking risks. There is always an urge tominimize the risks and take protection against possible future. The risk includes fire,perils of sea, death, accidents and burglary. The basic urge in man to secure himself against any form of risk and uncertainty led to the origin of insurance.
Concept of insurance:
Insurance is a mechanism by which the financial loss experienced, either due tothe damage or due to loss of asset because of happening of some uncertainties, istransferred to an insurance pool. It is the loss distribution method in which the loss ordamages suffered by one individual is distributed to all the members of the insurancepool. It only gives alternate benefit, payment of compensation from the common fund of insurance business capital and increases the confidence of people in the business. Itmotivates the business people to boldly invest in the field of ever changing insurancebusiness.This insurance mechanism has a limitation where by, the member is compensatedonly if he experiences loss of asset. If the asset is not damaged, he will not get any returnfrom his share of funds in the common pool. The individual suffers a very negligible lossof his share amount due to the payment of premium in to the common fund.The insurance will not curb the risk prevailing to the asset due to the happening of the uncertainties, but it reduces the economic loss of assets. It only provides the alternatesource to meet the contingencies resulting due to the happening of the uncertainties andthe income loss due to the loss of the asset.
Insurance may be described as a social device to reduce or eliminate risk of lossto life and property. Insurance is a collective bearing of risk. Insurance is a financial device tospread the risks and losses of few people among a large number of people, as people prefersmall fixed liability instead of big uncertain and changing liability. Insurance can be defined
as a “legal contract between two parties whereby one party called insurer undertakes to pay a
fixed amount of money on the happening of a particular event, which may be certain or
uncertain.” The other party called insured pays in exchange a fixed sum known as premium.Insurance is desired to safeguard oneself and one‟s family against possible losses on account
of risks and perils. It provides financial compensation for the losses suffered due to thehappening of any unforeseen events.
Insurance constitutes one of the major segments of the financial market. Insuranceservices play predominant role in the process of financial intermediary. Today insuranceindustry is one of the most growing sectors in India. There is lot of potential in the IndianInsurance Industry. There are many issues, which require study. The scope of the study of insurance industry of India would be very great as there are ongoing developments in theindustry after the opening of the sector. The major issue right now is the hike in FDI (ForeignDirect Investment) limit from
26% to 49%
in the insurance sector. Government may in nearfuture allow 49% FDI in Insurance. This would lead to more capital inflow by foreignpartners. Another major issue is the effects on LIC after the entry of private players in themarket. Though market share of LIC has been affected, it has improved in terms of efficiency. There are number of other hot topics like penetration of Health Insurance, Rural
marketing of insurance, new distribution channels, new product ranges, insurance brokers‟
regulation, incentive scheme of development officers of LIC etc. So it offers lot of scope forstudying the insurance industry. Right now the insurance industry has great opportunities in acountry like India or China which huge population. Also the penetration of insurance in Indiais very low in both life and non-life segment so there is lot potential to be tapped. Before

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