Progress Of Life insurance in India since 2000

WHAT IS LIFE INSURANCE IN INDIA? Life insurance made its debut in India well over 100 years ago. Its salient features are not as widely understood in our country as they ought to be. What follows is an attempt to acquaint readers with some of the concepts of life insurance, with special reference to life insurance. It should, however, be clearly understood that the following narration is by no means an exhaustive description of the terms and conditions of a life insurance policy or its benefits or privileges. For more details, please contact our Branch or Divisional Office. Any life insurance Agent will be glad to help you choose the life insurance plan to meet your needs and render policy servicing. Life Insurance sector is the fastest growing sector in India since 2000 when the Government allowed Private players and FDI [Foreign Direct Investment] up to 26%. Life Insurance in India was nationalized by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC. In 2000, the legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000 was passed, where in the newly appointed insurance regulator - Insurance Regulatory and Development Authority [IRDA] started to issue licenses to private life insurers. What is Life Insurance? Life Insurance is a contract for payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) on the happening of the event insured against. Usually the contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the assured. Life insurance is universally acknowledged to be an institution which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilisation's partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: that of dying prematurely leaving a dependent family to fend for itself and that of living to old age without visible means of support. Why is it superior to other forms of Savings? Protection: Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

Life insurance is normally offered after a medical examination of the life to be assured. The deducted premium is remitted by the employer to the LIC. such as children's education. such as for the purchase of a house or for other investments. Besides. policy moneys can be so arranged to be made available at the time of one's retirement from service to be used for any specific purpose. Who Can Buy A Life Insurance Policy? Any person who has attained majority and is eligible to enter into a valid contract can take out a life insurance policy for himself and on those in whom he has insurable interest. on the life of one's spouse or children. half yearly or yearly). At present. factors such as the state of health of the life to be assured. The Salary Saving Scheme can be introduced in an institution or establishment subject to specified terms and conditions. Policies can also be taken out. In such cases the assured in effect pays a lower premium for his insurance than he would have to pay otherwise. Subject to certain conditions. However. Take. While underwriting proposals. Alternatively. Medical And Non-Medical Schemes.Aid To Thrift: Life insurance encourages 'thrift'. start-in-life or marriage provision or even periodical needs for cash over a stretch of time. quarterly. a life insurance policy is also generally accepted as security for even a commercial loan. Liquidity: Loans can be raised on the sole security of a policy which has acquired loan value. for example. Prior to nationalization (1956). loans are granted to policyholders for house building or for purchase of flats. Money When You Need It: A suitable insurance plan or a combination of different plans can be taken out to meet specific needs that are likely to arise in future. our Salary Saving Scheme popularly known as SSS. After nationalization of life insurance. subject to certain conditions. Tax Relief: Tax relief in Income Tax and Wealth Tax is available for amounts paid by way of premium for life insurance subject to Income Tax rates in force. many of the private insurance companies used to offer insurance to female lives with some extra premium or on restrictive conditions. This scheme provides a convenient method of paying premium each month by deduction from one's salary. . Assessees can avail themselves of provisions in the law for tax relief. In other cases. Insurance On Women. a restrictive clause is imposed and that too only if age of the female is up to 30 years and if she does not have an income attracting Income Tax. the terms under which life insurance is granted to female lives have been reviewed from time to time. to facilitate greater spread of insurance and also as a measure of relaxation. women with earned income are treated on par with male lives. Long term saving can be made in a relatively 'painless' manner because of the 'easy instalment' facility built into the scheme (method of paying premium either monthly. the proponent's income and other relevant factors are considered by the Corporation.

The premium rate charged for a 'with' profit policy is therefore higher than for a 'without' profit policy. In the former. All private life insurance companies at that time were taken over by LIC. While the committee submitted its report in 1994.LIC has been extending insurance cover without any medical examination. most of them joint ventures between Indian groups and global insurance giants. after periodical valuations are allotted to the policy and are payable alongwith the contracted amount. Keyman Insurance. it took another six years before the enabling legislation was passed in the year 2000. Keyman Insurance is taken by a business firm on the life of key employee(s) to project the firm against the finance loss which may occur due to the premature demise of the Keyman. subject to certain conditions.Insurance Regulatory and Development Authority IRDA -. 4. With Profit And Without Profit Plans. bonuses disclosed. Life Insurance in India was nationalised by incorporating Life Insurance Corporation (LIC) in 1956. In 'without' profit plan the contracted amount is paid without any addition. Life Insurer in Public Sector 1. legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. 2. In 1993 the Government of Republic of India appointed RN Malhotra Committee to lay down a road map for privatisation of the life insurance sector. Life Insurance Corporation of India Life Insurers in Private Sector 1. Life Insurance is the fastest growing sector in India since 2000 as Government allowed Private players and FDI up to 26%. An insurance policy can be 'with' or 'without' profit. there are 20 other private sector life insurers. 2008) Apart from Life Insurance Corporation. 3. 5.started issuing licenses to private life insurers. List of Life Insurers (as of Sept. SBI Life Insurance Metlife India Life Insurance ICICI Prudential Life Insurance Bajaj Allianz Life Max New York Life Insurance . the public sector life insurer. if any. The same year that the newly appointed insurance regulator .

IDBI Fortis Life Insurance 18. Kotak Life Insurance 11.0% of its equity / ordinary share capital. CANARA HSBC Oriental Bank of Commerce LIFE INSURANCE Foreign Direct Investment (FDI) Policy in Insurance Sector As per the current (Mar 06) FDI norms.Further.0%. the state owned behemoth. Aviva Life Insurance 12.Among others. foreign participation in an Indian insurance company is restricted to 26. Kotak Life Insurance emerging as a one of the best product provider in the current market. Among the private sector players. Sahara Life Insurance 7. only ICICI Prudential is rated by Fitch India at National Insurer Financial Strength Rating of AAA(Ind) with stable outlook indicating the highest claims paying ability rating. these type of plans are . ING Vysya Life Insurance 14. AEGON Religare Life Insurance 19. Tata AIG Life 8. The private companies are coming out with better products which are more beneficial to the customer. Bharti AXA Life Insurance Co Ltd 16. Therefore there is no risk in going in for private insurance players. The Union Budget for fiscal 2005 had recommended that the ceiling on foreign holding be increased to 49. Future Generali Life Insurance Co Ltd 17. Reliance Life Insurance Company Limited . Among such products are the ULIPs or the Unit Linked Investment Plans which offer both life cover as well as scope for savings or investment options as the customer desires.It has been estimated that customer growth of Kotak Life Insurance is better than any private insurance company in India. Indian life insurance industry overview All life insurance companies in India have to comply with the strict regulations laid out by Insurance Regulatory and Development Authority of India (IRDA).Formerly known as AMP Sanmar LIC 13. Shriram Life Insurance 15.6. remains by far the largest player in the market. In terms of being rated for financial strength like international players. The government approved the much-awaited comprehensive Insurance Bill that seeks to raise foreign direct investment (FDI) cap in private sector to 49 per cent from 26 per cent. ICICI Prudential Life Insurance(JV between ICICI Bank and Prudential PLC) is the largest followed by Bajaj Allianz Life Insurance Company Limited (JV between Bajaj Group and Allianz). Birla Sunlife 10. DLF Pramerica Life Insurance 20. Life Insurance Corporation of India (LIC). HDFC Standard Life 9.

5% to6% on the premium paid. comparison of such products with mutual funds would be erroneous.yr 2 and 3rd year and 3.30% Referral fees to banks – Max 55% for regular premium and 10% for single premium. the above commission may be further subject to the product wise limits specified by IRDA while approving the product • . • o Agency commission for retail pension policies  7.Unit linked policies it varies between 1. Commission / intermediation fees • The maximum commission limits as per statutory provisions are: Agency commission for retail life insurance business: • o     7. Hence. However in any case this fee cannot be more than the agency commission as filed under the product.subject to a minimum lock-in period of three years to prevent misuse of the significant tax benefits offered to such plans under the Income Tax Act.5% thereafter • • Maximum broker commission .90% for 1st year premium if the premium paying term is more than 20 years 7.5% .10% for 1st year premium if the premium paying term is more than 15 years 7. In case of Mutual fund related .thereafter for all premium paying terms.10% for 1st year premium if the premium paying term is less than 10 years 7% . However.5% for 1st year premium and 2.

Miscellaneous insurance Miscellaneous Insurance exists to help people gain a good understanding of the various kinds of insurance coverage's that are available to people today. Insurance has become a very important part of many people's lives as they realize the need to provide protection for different areas of their everyday life. There is a wide variety of types of insurance coverage available today. the insurance may be revoked. The dictionary defines insurance as "coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril". If the customer fails to pay the premiums due. leaving the customer vulnerable. This means that an individual enters into an agreement with an insurance company that will pay a set amount of money in case of a loss in a specified area. the miscellaneous portfolio of Insurance is poised to be a sunrise portfolio of General Insurance. There are a number of inclusions and exclusions involved in each insurance policy with all kinds of variables that must be taken into consideration before purchasing the policy. Most policies will accurately describe the types of losses covered and the amount of money that the company will pay for those losses. With the increase in public awareness and the consequent thrust of the Insurance Industry in the areas of Health Insurance. One of the most important things to remember is that an insurance policy is a contract between the insurance company and their customer. The insurance company agrees to pay certain amounts of money in case of loss and the customer agrees to pay the insurance premiums that are required to keep the policy in place. The contract specifically makes the insurance company liable to pay for any loss that is specifically stated in the insurance policy. . Liability Insurance and other personal lines of insurances.

 Glass Insurance  Money Insurance  Burglary Insurance  Electronic Equipment Insurance  Workmen Compensation Insurance  Machinery Insurance  Travel Accident Insurance  Boat Insurance  Personal Accident Insurance  Golfer Insurance  General Public Legal Liability Insurance  Contract Works Insurance  Fidelity Guarantee Insurance  Aviation Insurance  All Risks Insurance Thus miscellaneous insurance is an addition to your existing insurance giving you an extra security. This programme has been designed keeping in mind these developments in the market and attempts to address the need for increased awareness of the multidimensional miscellaneous portfolio. Management of Miscellaneous Insurance Business Background With the increase in public awareness and consequent thrust of the Insurance Industry in the areas of Health Insurance. the miscellaneous portfolio of Insurance is poised to be the sunrise portfolio of General Insurance business. Objectives • • • • To enhance the participants understanding of the miscellaneous portfolio To acquaint them with various aspects of Health and Liability Insurance in context with the Current scenario Help them explore the potential of rural insurance in line with the regulatory guidelines. . Liability Insurance and other personal lines of insurances. To emphasize the importance of and explore the potential of personal line of business under miscellaneous portfolio.

if injured. While insurance helps a policyholder pay off hospital and medical bills in case of accident injuries. product and marketing Personal line products . Accident Insurance Accident insurance provides a cash cover to a policyholder when s/he suffers injuries as a result of an accident. the policyholder. This income is non-taxable and does not exceed the policyholder’s after-tax . 365 days a year. for as long as s/he is unable to work due to the accidental injuries. it provides cash benefits to family members if the policyholder dies in the accident. distribution channels Scope and Coverage of New Products Credit Default Cover Bankers Indemnity Insurance/ Jewelers Block Covers. just like income.potential and marketing. This insurance.Contents • • • • • • • • • • • Analysis of the miscellaneous insurance products Health Care Management . receives cash benefits every month. is also commonly referred to as personal accident insurance. applicable 24 hours a day. Types of Personal Accident Insurance Policies Under personal accident insurance.regulations. Stock Brokers / Insurance Brokers Indemnity Packaging & Product Development Special Contingency Covers Participants’ Profile Executives handling Technical Departments and Office In-charge of operating offices of General Insurance Companies.Indian and Global Perspective TPA’s an Effective Service Provider Legal framework and Liability Insurance Products Rural and Social Sector .

earnings minus the state benefits s/he can claim. Travel accidents: This policy offers benefits in case the policyholder meets with an accident while traveling. they are worse off when injured in an accident. such as a sportsperson. It is very important to know the basic clause of the insurance plans. In case of death of the policyholder due to an accident. due to burglary. Self-employed: Since self employed individuals are not eligible for employee benefits. Burglary Insurance With the increase in materialistic wealth and booming economy. Since several activities are excluded from this policy. lawyer or doctor. actor. the chances of burglary in business premises are also increasing. who have special requirements. organizers can seek cover for all the members of a sports team. we have provided the basic information that you need to know. In India. One should understand and choose the policy with utmost care. many insurance companies have come up with attractive insurance plans that promise to provide cover against the rise of loss or damage in the business premises. There are eight common types of personal accident insurance policies: • • • • • • • • Individual: This policy can be taken by any individual. Team: Through a team accident insurance policy. . Professional: This policy is specifically for self employed professionals. a burglary insurance (business premises) policy generally covers contents of business premises. The benefits usually enclose partners and children. before opting for a burglary insurance plan. although they may vary from company to company. To counteract the situation and protect the hard earned wealth of the businesspersons. the family receives a specific lump-sum amount. There are varied accident insurance policies to suit different needs. Over 50: This policy targets people over 50 years of age. it is not as useful for people who love adventurous sports. like mountaineering and rock climbing. as accidents can cause more grievous injuries to them. In this article. against the risk of loss or damage by burglary and housebreaking. Group: This policy is used by companies to cover employees for expenses related to accidents. Children: The purpose of this policy is to provide financial help to parents if they are unable to work or if they incur expenses as a result of an accident.

promissory notes. With regard to cash in locked safe. bonds. is reimbursed by a burglary insurance policy. The insurance companies provide insurance against nothing but burglary. Applicants need to submit the proposal form furnishing detailed information on the location of the risk and claims history. In order to substantiate a burglary insurance claim. stamp collections. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident. bills of exchange. These may include educational institution or a place of worship.Burglary Insurance Policy • • • • • • • • • • • • • The loss of materialistic wealth in a business organization. books of account. or motor insurance) is insurance purchased for cars. while contained in the insured premises and not in any other premises. due to burglary. Often inspection of the premises and its neighborhood is carried out by agents or brokers or marketing officers of the insurance company. Motor insurance Vehicle insurance (also known as auto insurance. . the theft is not valid. to determine the proximate cause of the loss and the quantum. The property insured is covered only if loss or damage takes place. the key to the safe or strong room should not be left in the premises overnight or at least anywhere near the safe. In some insurance plans. or a person who didn't break into the business premises. medals and coins. In other words. documents of any kind. The insurers will depute and obtain a survey report even on the stolen goods. in the business premises. cash. Stock books and other accounts are also verified before furnishing the insurance cover. Damage to property by burglars is covered only when the insured is made good. motor vehicles. damage to own premises are not covered. cheque. which usually do not find favor with the insurers. Loss of or damage to deeds. and live stock cannot be claimed under office burglary insurance policy in India. Premises located in isolated areas or the adjoining premises are those. securities for money stamps. and other vehicles. treasury notes and bank notes. trucks. if it has been conducted by an internal staff. manuscripts. car insurance. one must produce the FIR and non-detection report from the police. which are not occupied in the night.

credit insurance etc. accident by external means.Legally. malicious act. then the actual value (after depreciation) of this item can be added to the sum insured over and above the IDV. cyclone. Hence. rockslide. typhoon. and liability insurance which covers legal liabilities. IDV is calculated on the basis of the manufacturer's listed selling price of the vehicle (plus the listed price of any accessories) after deducting the depreciation for every year as per the schedule provided by the Indian Motor Tariff. Natural Calamities: Fire. landslide. riot. inland waterway. flood. If the price of any electrical and / or electronic item installed in the vehicle is not included in the manufacturer's listed selling price. hailstorm. Motor insurance policies cover against any loss or damage caused to the vehicle or its accessories due to the following natural and man made calamities. rail. One can also opt for a personal accident cover for passengers and third party legal liability. terrorist activity. . There are also other covers such as Errors and Omissions insurance for professionals. It includes any permanent injury / death of a person and damage caused to the property. theft. strike. no motor vehicle is allowed to be driven on the road without valid insurance. Third party legal liability protects against legal liability arising due to accidental damages. Motor insurance provides compulsory personal accident cover for individual owners of the vehicle while driving. Man made Calamities: Burglary. lift. GENERAL INSURANCE What is General Insurance? Insurance other than ‘Life Insurance’ falls under the category of General Insurance. General Insurance comprises of insurance of property against fire. The vehicles are insured at a fixed value called the Insured's Declared Value (IDV). storm. the CNG/LPG kit fitted to the vehicle is to be insured separately at an additional premium. frost. self-ignition or lightning. it is obligatory to get the vehicle insured. elevator or air. In case the vehicle is fitted with CNG / LPG. earthquake. personal insurance such as Accident and Health Insurance. inundation. any damage in transit by road. hurricane. explosion. tempest. burglary etc.

( 50% of the loss being borne by the insured for underinsuring the property by 50% ). insurance of motor vehicles against damages and theft forms a major chunk of non-life insurance business. Some of the covers such as the foregoing (Motor Third Party and Workmen’s Compensation policy ) are compulsory by statute. in the event of a loss to the extent of say Rs. This concept is quite often not understood by most insureds. the maximum claim amount payable would be Rs. Personal insurance covers include policies for Accident. In respect of insurance of property.50/-. For instance if the value of a property is Rs. Liability Insurance not compulsory by statute is also . Health insurance covers offered by non-life insurers are mainly hospitalization covers either on reimbursement or cashless basis. The non-life companies also offer policies covering machinery against breakdown. the insured will have to bear a rateable proportion of the loss. Where a property is undervalued for the purposes of insurance. Normally when a group is covered. Further. earthquake and so on. A group could be a group of employees of an organization or holders of credit cards or deposit holders in a bank etc. Liability insurance covers such as Motor Third Party Liability Insurance. theft etc. 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. There are products that cover property against burglary. insurers offer group discounts. The cashless service is offered through Third Party Administrators who have arrangements with various service providers. i..50/-.25/. The Workmen’s Compensation Act etc. air and road.e. The Third Party Administrators also provide service for reimbursement claims. flood storm and inundation. Accident and health insurance policies are available for individuals as well as groups. hospitals. Workmen’s Compensation Policy etc offer cover against legal liabilities that may arise under the respective statutes— Motor Vehicles Act. Health etc.Non-life insurance companies have products that cover property against Fire and allied perils. Products offering Personal Accident cover are benefit policies.there are policies that cover the hull of ships and so on. Sometimes the insurers themselves process reimbursement claims.100 and it is insured for Rs. A Marine Cargo policy covers goods in transit including by sea.

there are package policies available for householders. Property can be covered. They need to cover their liabilities as well. Financiers insist on insurance. earthquakes. There are liability covers available for Products as well. Most general insurance covers are annual contracts. The proposal form needs to be filled in completely and correctly by a proposer to ensure that the cover is adequate and the right one. Suitable general Insurance covers are necessary for every family. There are general insurance products that are in the nature of package policies offering a combination of the covers mentioned above. most industries or businesses that are financed by banks and other institutions do obtain covers. A loss or damage to one’s property can leave one shattered. there are few products that are long-term. However. Apart from offering standard covers. so also the people against Personal Accident. Such losses can be devastating but insurance could help mitigate them. machinery. So. For instance. It is important to protect one’s property.gaining popularity these days. Losses created by catastrophes such as the tsunami. shop keepers and also for professionals such as doctors. chartered accountants etc. cyclones etc have left many homeless and penniless. It is important for proposers to read and understand the terms and conditions of a policy before they enter into an insurance contract. Many industries insure against Public liability. Also organizations or industries that are self-financed should ensure that they are protected by insurance. But are they obtaining the right covers? And are they insuring adequately are questions that need to be given some thought. Industries also need to protect themselves by obtaining insurance covers to protect their building. A Health Insurance policy can provide financial relief to a person undergoing medical treatment whether due to a disease or an injury. which one might have acquired from one’s hard earned income. stocks etc. insurers also offer customized or tailor-made ones. .

reinsurers. pet insurance. football players and other very specific risks. commercial fleet and other general insurance products sold in a relatively standard fashion to many organisations. brokers and other companies that are typically physically located in the City of London. The London Market also participates in personal lines and commercial lines. General insurance typically comprises any insurance that is not determined to be life insurance. domestic and foreign.S. product liability. public liability. commercial lines and London market. It is called property and casualty insurance in the U. The London market insures large commercial risks such as supermarkets. These would include workers' comp (employers liability). It consists of a number of insurers. [P&I Clubs]. including automobile and homeowners policies. In the UK. homeowners (household). The Lloyd's of London is a big participant in this market. Personal lines products are designed to be sold in large quantities. . through reinsurance. General insurance is broadly divided into three areas: personal lines. including shops. creditor insurance and others. This would include autos (private car). and Non-Life Insurance in Continental Europe. restaurants and hotels. Commercial lines products are usually designed for relatively small legal entities. There are many companies that supply comprehensive commercial insurance packages for a wide range of different industries. provide payments depending on the loss from a particular financial event.General insurance or non-life insurance policies.

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