KRUPANIDHI INSTITUTE OF MANAGEMENT EDUCATION 2009

TABLE OF CONTENTS

Sr.No.

Particulars

Page No.

1 Executive Summary 2 Introduction 3 Objectives of the Study 4 Methodology 5 A study on Indian General Insurance Industry- Auto Insurance 6 Suggestions & Findings 7 Conclusion 8 Bibliography

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EXECUTIVE SUMMARY

The project is about the study conducted on Indian General Insurance Industry, in particular with the Auto Insurance segment of general insurance. It studies the current market how the insurance segment is booming in the last few years. How the market has chanced with the new private entrants, what are the major challenges faced by insurance companies, The role played by Government in this industry. The marketing strategies used by the competitors to survive in the market The opportunities available with the company to progress and to overcome the challenges faced by them. The future of this industry is very bright the short term scenario For the general insurance sector appears to be challenging the long term prospects definitely present ample opportunities for growth.

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INTRODUCTION:

This project is about the study conducted on the general insurance industry. In particular with the auto insurance this is a part of general insurance. This is the detailed study on how auto insurance industry sector functions, What are the challenges faced by auto insurance industry currently, Who are the market players in this auto insurance sector? What is the current market situation about of the auto insurance sector What are the various market strategies followed by these industries What are the challenges faced by auto insurance sector How the companies are taking steps in order can overcome the challenges. What are the future prospects of auto insurance industry

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OBJECTIVES OF THE STUDY:

The objective of the thesis is: “To study the Indian general insurance industry particularly with the auto insurance segment of general insurance , identify areas of excellence and areas needing improvement; and provide suggestions for such improvement”.

The aim of this Thesis is to successfully study general insurance sector a common platform, analyze their working and performance, marketing

on

strategies highlight their performance , evaluating the various challenges faced by them while providing suggestions and recommendations for improvement.

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METHODOLOGY

The data is collected from various articles, documents,

market analysis , published on the internet and also form

booklet of few auto insurance companies

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

software

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RELIANCE MONEY Reliance Money, a Reliance Capital company and part of the Reliance Anil Dhirubhai Ambani Group is a comprehensive financial services and solution provider. It is a one-stop-shop, providing end-to-end financial solutions (including mobile and web-based services). It has the largest non-banking distribution channel with over 10,000 outlets and 20,000 touch points spread across 5,165 cities/ towns; catering to the diverse needs of over 3 million existing customers.

Reliance Money endeavors to change the way investors transact in financial markets and avails financial services. It provides customers with access to Equity, Equity and Commodity Derivatives, Offshore Investments, Portfolio Management Services, Wealth Management Services, Investment Banking, Mutual Funds, IPOs, Life and General Insurance products and Gold Coins. Customers can also avail Loans, Credit Card, Money Transfer and Money Changing services.

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Reliance Capital is one of India's leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking groups, in terms of net worth.

RELIANCE GENERAL INSURANCE Reliance General Insurance is one of India’s leading private general insurance companies with over 94 customized insurance products catering to the corporate, SME and individual customers. The Company has launched innovative products like India’s first Over-The-Counter health & home insurance policies. Reliance General Insurance has an extended network of over 200 offices spread across 173 cities in 22 states, a wide distribution channel network, 24x7 customer service assistance and a full fledged website. It is also India’s first insurance company to be awarded the ISO 9001:2000 certification across all functions, processes, products and locations pan-India. The various general insurance products offered by the company are • • • Health Insurance Motor Insurance Home Insurance
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Travel Insurance Accident Cover

WHAT IS INSURANCE? We face a lot of risks in our daily lives. Some of these lead to financial losses. Insurance is a way of protecting against these financial losses. For a payment (premium), an insurance company will take the responsibility of compensating your financial losses. Insurance provides us with protection against unforeseen incidents along with a felling of security and also keep saving intact for the future.

WHY SHOULD ONE INSURE? One of the main reasons one should insure is to protect one’s belongings and assets against financial loss. When one has earned and accumulated property, protecting it is prudent. The law also requires us to be insured against some liabilities. That is, in case we should cause a loss to another person, that person
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is entitled to compensation. To ensure that we can afford to pay that compensation, the law requires us to buy liability insurance so that the responsibility of paying the compensation is transferred to an insurance company. Insurance is generally categorized into two divisions: 1. Life Insurance
2. General Insurance

WHAT IS GENERAL INSURANCE? Insuring anything other than human life is called general insurance. Examples are insuring property like house and belongings against fire and theft or vehicles against accidental damage or theft. Injury due to accident or hospitalization for illness and surgery can also be insured. Your liabilities to others arising out of the law can also be insured and is compulsory in some cases like motor third party insurance.

WHO SHOULD BUY GENERAL INSURANCE? Anyone who owns an asset can buy insurance to protect it against losses due to fire or theft and so on. Each one of us can insure our and our dependents’ health
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and well being through hospitalization and personal accident policies. To buy a policy the person should be the one who will bear financial losses if they occur. This is known as insurable interest.

RISK COVERED UNDER GENERAL INSURANCE Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and inundation, earthquake and so on. There are products that cover property against burglary, theft etc. The non-life companies also offer policies covering machinery against breakdown, there are policies that cover the hull of ships and so on.

Marine Cargo policy covers goods in transit including by sea, air and road. Further, insurance of motor vehicles against damages and theft forms a major chunk of non-life insurance business.

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Personal insurance covers include policies for Accident, Health etc. Products offering Personal Accident cover are benefit policies. Health insurance covers offered by non-life insurers are mainly hospitalization covers either on reimbursement or cashless basis. The cashless service is offered through Third Party Administrators who have arrangements with various service providers, i.e., hospitals. The Third Party Administrators also provide service for reimbursement claims. Sometimes the insurers themselves process reimbursement claims. Insurance of property, it is important that the cover is taken for the actual value of the property to avoid being imposed a penalty should there be a claim. Where a property is undervalued for the purposes of insurance, the insured will have to bear a ratable proportion of the loss

Accident and health insurance policies are available for individuals as well as groups. A group could be a group of employees of an organization or holders of credit cards or deposit holders in a bank etc. Normally when a group is covered, insurers offer group discounts.

Liability insurance covers such as Motor Third Party Liability Insurance, Workmen’s Compensation Policy etc offer cover against legal liabilities that may arise under the respective statutes— Motor Vehicles Act, The Workmen’s Compensation Act etc. Some of the covers such as the foregoing (Motor Third
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Party and Workmen’s Compensation policy) are compulsory by statute. Liability Insurance not compulsory by statute is also gaining popularity these days. Many industries insure against Public liability. There are liability covers available for Products as well.

There are general insurance products that are in the nature of package policies offering a combination of the covers mentioned above. For instance, there are package policies available for householders, shop keepers and also for professionals such as doctors, chartered accountants etc. Apart from offering standard covers, insurers also offer customized or tailor-made ones.

IMPORTANCE OF GENERAL INSURANCE General Insurance covers are necessary for every family. It is important to protect one’s property, which one might have acquired from one’s hard earned income. A loss or damage to one’s property can leave one shattered. Losses created by catastrophes such as the tsunami, earthquakes. Cyclones etc have left many homeless and penniless. Such losses can be devastating but insurance could help mitigate them. Property can be covered, so also the people

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against Personal Accident. A Health Insurance policy can provide financial relief to a person undergoing medical treatment whether due to a disease or an injury.

Industries also need to protect themselves by obtaining insurance covers to protect their building, machinery, stocks etc. They need to cover their liabilities as well. Financiers insist on insurance. So, most industries or businesses that are financed by banks and other institutions do obtain covers. But are they obtaining the right covers? And are they insuring adequately are questions that need to be given some thought. Also organizations or industries that are self-financed should ensure that they are protected by insurance.

Most general insurance covers are annual contracts. However, there are few products that are long-term

HISTORY The general insurance industry in India was nationalized and a government company known as General Insurance Corporation of India (GIC) was formed by the Central Government in November 1972.

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THE GENERAL INSURANCE IS BASICALLY DIVIDED INTO FOLLOWING CATEGORIES

1. Auto Insurance

2. Health Insurance

3. Marine Insurance

4. Fire Insurance

5. Others

PREMIUM UNDERWRITTEN BY GENERAL INSURANCE -SEGMENT WISE

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INDIAN GENERAL INSURANCE INDUSTRY - MARKET OVERVIEW The Indian insurance sector is rapidly moving towards international standards of free (risk-based) market pricing and new/innovative product offerings. Big changes have occurred over the last few years, during which the sector was opened to private participation, along with foreign direct investment (FDI) capped at 26%. India is the 5th largest market in Asia by premium, following Japan, Korea, China and Taiwan. The country is geographically large and has the world’s 2nd largest population -- 1.13 billion in 2007 – but it also has one of the lowest penetration rates for property and casualty insurance in Asia in terms of premium as a percentage of GDP. India’s general insurance market witnessed a variety of changes as deregulation continued at a hectic pace.

The sector achieved double-digit growth and this trend is expected to persist over the medium term on the back of greater penetration, due partly in turn to the intense marketing efforts of private insurers. The
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removal of pricing controls on fire and engineering lines in 2007, insurers have discounted their rates by 50% in order to retain or win market share. Private players continue to capture market share at the expense of public enterprises on a mix of aggressive distribution and service. The number of private insurers is growing as various foreign companies have announced intentions to establish joint ventures.

Rate reductions in the recently de-tariff corporate portfolio (fire & engineering) has impacted the premium growth, but this is also leading to the greater sales of existing and new products. With the regulator lifting the ceiling on foreign ownership to 49%, foreign players participation has increase both volumes and types of products. With the increasing number of insurers in the private sector. The industry forecasts for a continuous growth and rise domestic demand. General Insurance Penetration 0.60% of GDP and the Gross Premium has increased to(2007-08) is Rs.28130 Crores compared to the Gross Premium (2000-01) of Rs.9620 Crores With CAGR: 16.6%

IMPACT OF RECESSION ON GENERAL INSURANCE
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The slowdown in economic activities in India has led to a sharp reduction in asset creation in the Indian industries. This along with rigorous cost cutting measures in all businesses has directly impacted the general insurance (non-life) industry in the country.

The 16-players industry together collected Rs 30,601 crore as premium underwritten in 2008-09, up only 9.10 per cent from Rs 28,051 crore in 2007-08. This was the slowest growth in gross premium underwritten in the last five years. The general insurance industry’s premium collection grew 22 per cent in 2006-07 and 12 per cent in 2007-08.

The most important reason for the drop in business was that many small and medium businesses either did not buy insurance covers, like fire insurance, or went for lower cover to save on premium expenditure. Also the sharp drop in sales of commercial vehicles, tractors and near stagnation in car sales led to a big drop in insurance premium underwritten

Among the private players IFFCO-Tokio did the best with 22 per cent growth in premium underwritten in 2008-09. Royal Sudaram, Bajaj Allianz are the other two players to manage a decent growth. Among the government companies only United India could manage to grow14 per cent, while the other three grew only by single digit.
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One of the major milestones in the Indian general insurance industry has been the withdrawal of premium pricing restrictions post January 2007. General insurance companies also made losses because abolition of tariffs has led to a virtual price war in certain lines of business like Fire and Engineering insurance. This is evident from the higher claims ratio in both, the fire and motor segment as well as the higher underwriting losses posted by both the private as well as public sector companies, On the whole, while short term scenario for the general insurance sector appears to be challenging the long term prospects definitely present ample opportunities for growth

MAJOR CHALLENGES

Awareness

It is the main problem faced by all the insurance company is lack of awareness about Risk exposures and about insurance products available to the customers. In India only 20% of the population is insured. Majority of the populations who are living in the rural areas and sub urban areas are not aware of the about risk exposures and about insurance products available in the market

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Affordability

In India majority of the population standard of living is low and majority of them belong to middle class and lower class and they have very little money left after satisfying basic needs. Uneconomical premium of insurance policy is also a major constrains

Accessibility

The policies are complex to understand by a layman the procedures are difficult to obtain policies if done individual .there are a lot of activities and formalities involved in order to get the insurance policy

Inappropriate / inadequate distribution strategies. Majority of the population is not aware of the benefits that the insurance company provides And they are also not aware of the various schemes which these companies introduce

MAJOR PLAYERS IN GENERAL INSURANCE INDUSTRY

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PUBLIC SECTOR Until 2000, the general insurance sector had only four public sector players, formed after the nationalization of 107 general insurers. The public enterprises – Oriental Insurance Company of India (OIC), National Insurance Company of India (NIC), New India Assurance Company of India (NIA) United Insurance Company of India (UII). They primarily focused on their immediate regions and there was little competition, leading to a near monopolistic environment.

PRIVATE SECTOR The private sector has been steadily growing market share despite the fact that public sector companies have been around for a lot longer. The private insurers enjoy considerable operational flexibility, whereas the public sector companies have been constrained by their traditions and inability to innovate. There are total 12 players in the private sector. In the private sector, the major players are –
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IFFCO-TOKIO General insurance Reliance General Insurance Co. Ltd. ICICI LOMBARDTATA AIG- General Insurance BAJAJ ALLIANCCE, BHARTI-AXA General insurance CHOLAMANDALAM , FUTURE GENERALI Royal Sudaram General Insurance Universal Sompo General Insurance Shriram General Insurance

The inherent operational flexibility of the private players – such as through aggressive pricing -- has allowed them to capture a greater share of large corporate accounts.

PRIVATE SECTOR’S GROWING INFLUENCE Market Share – Redistribution
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Premium and volume public V/s private Due to the effectiveness of private marketing strategies, the market share of public insurers has consistently declined. Given a faster growth rate, the market share of the private sector is catching that of the public sector and the two will likely converge over the medium term.

Before the removal of tariffs, fire, engineering and motor own damage (OD) contributed a much greater proportion of business for private players than was the case for public firms. Fire and engineering now broadly contribute a similar proportion of overall business for the private and public sectors. In terms of overall business, the focus has shifted towards the retail segments of motor and health, where good growth is expected.

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Regional Focus Public insurers have traditionally focused at the regional level with one each in north, east, west and south India. On account of their public charters and the absence of competitive pressures, these entities did not have to actively market their products and just wrote whatever business came their way.

Operational Flexibility In public entities there is lack the operational flexibility enjoyed as compared by the private players. Their limited capacity to innovate has impacted their ability to tailor and aggressively price products for large corporations. The private players by contrast have focused on account-level profitability for large corporations and have expanded their shares by crosssubsidizing tariffed products.

Client Servicing The public insurers have also been hampered in claims servicing by their process-oriented approach and limited operational flexibility. They have
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been unable to expedite claim settlements through out-of-court negotiations since a large proportion of their claims pertain to the third party motor segment, which is subject to adjudication by the Motor Accident Claim Tribunal. The result is a time-consuming and involved process. The situation is not the same with the private player as they enjoy more operational flexibility which in turn saves a lot of time of both parties

Strong Infrastructure and Systems Private players are not hindered by their charters or legacy systems and have constructed technologically advanced infrastructure. They started with large investments in technology, which helped them to build robust data management systems. This characteristic enables in turn quick and effective decision-making for pricing and claims settlements, attributes vital to building franchises. On the other hand, public entities have only recently upgraded their systems and have to grapple with transition issues, such as moving from paper to paper-less systems. They are encumbered by legacy systems and fragmented databases, and have not fully used their past claim experiences, something which could give them a strong pricing edge in a de-tariffed environment
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. Focused Underwriting Strategy The private players, especially during their initial years, have selectively targeted the more profitable lines of the public sector companies for growth. They benefit from the experiences of the public sector as well as their international joint-venture partners. They have drawn talent from public sector companies.

Superior Claim Paying/Processing Capability The combination of superior technology and selective underwriting has allowed the private sector to set high standards for policyholder services, thereby differentiating themselves from public sector insurers. The claim settlement performance of the private sector has also been superior because of the limited amount of third party motor business that they have underwritten. Such claims normally take a longer time to settle.

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Distribution – Rise of Banc assurance The Indian general insurance industry has historically been dominated by the agency channel, through which 75% of total premium income is sourced. But in recent periods other channels – for example, bank assurance, brokers, corporate agents, direct marketing and direct sales channels -- are gaining importance. Most insurers now have tie-ups with the banks, which act as corporate agents and are remunerated on a commission basis. For example, ICICI Lombard sources a major portion of its business from a tie-up with ICICI Bank. Similarly, Bajaj Allianz General Insurance Company Limited (BAIL, second largest private player) has tie-ups with large number of banks, which contribute a big share of its total premium income. At this time, low cost channels like tele-sales and the internet are still not developed in India, mainly due to relatively poor knowledge about insurance products and low internet penetration.

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REGULATORY ENVIRONMENT Impact of Regulation – Emphasis on Policyholder Protection

IRDA was set up with introduction of the IRDA Act in 1999. Its initial purpose was to bring about general discipline to the industry. It is responsible for protecting the interest of policyholders and promoting efficiency in the insurance business. To ensure their stability, transparency and financial strength, new entrants are subject to rigorous scrutiny and the conduct of their business is closely monitored, particularly in relation to capital adequacy and prudent investment policies. The regulatory environment to date has attracted many insurers whose domestic partners are leaders in their chosen fields and their foreign counterparts are all well-established with considerable experience in developed and emerging markets. The regulator has laid down investment guidelines that limit exposure in certain class of assets and also sets threshold limits for some assets. At the moment, insurers have to invest a minimum 30% in government securities, in contrast to some of the more mature markets like the US and Australia, which do not have such restrictions. Compliance with these relatively restrictive guidelines could limit insurers’ ability to diversify and build optimal portfolios.
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The guidelines also stipulate a minimum 10% investment in the social and infrastructure sector. The investment in un-approved securities has been limited to 25% of total investment books. General insurers must maintain a solvency ratio (available solvency margin/required solvency margin) of 1.5 times, calculated based on net premium earned and net claims incurred in various segments. Public sector entities have maintained comfortable solvency margins, supported by their strong investment portfolios and capitalizations. The private players, being in a growth phase, may require capital infusions from time to time to maintain their solvency requirements. The Indian insurance regulator has set the minimum capital required at a level to ensure that all insurers -- especially the start-ups -- have enough funds to meet their claim obligations and to limit their overall writings to the amounts supported by their capital bases. The need to manage capital to comply with IRDA’s solvency margin will induce insurers to be more risk conscious when taking on new business To ensure an orderly transition towards a deregulated insurance market and risk-based pricing, IRDA has enacted enabling legislation and issued guidelines to de-tariff various segments. De-tariffing -- introduced in January 2007 -- has been well accepted and corrections to prices in profitable lines have been dramatic and have noticeably impacted premium growth rates. In fact, the discounting has been so extreme that
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the regulator intervened in September 2007 and capped maximum discounts at 52.5% Three Phases of De-Tariffing India’s general insurance industry has undergone de-tariffing in three phases:
 1994 -- marine cargo, personal accident, health, banker liability and

aviation

 2005-06 -- marine hull segment

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

However, the de-tariffing did not immediately allow for free pricing. Instead, insurers were required to follow the “file and use” method, whereby they were expected to file a charter of proposed rates, which was then approved by IRDA. The restrictions on price discounts during the initial periods were intended to ensure orderly price adjustments. They were removed in January 2008. The only segment that remains under a tariff regime is the third party motor business, although there has been a large upward revision in this
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area’s premium rates by regulators in recent times. Moreover, commercial third party motor business, which has traditionally contributed to adverse claims ratios, has been moved to a common pool, resulting in loss share

OPPORTUNITIES AVAILABLE • The intense competition brought by deregulation has encouraged the industry to innovate in all areas; from underwriting, marketing, policy holder servicing to record-keeping

Aggressive marketing strategies by private sector insurers will buy consumer awareness of risk and expand the markets for products

Competition in a deregulated environment will allow market forces to set premiums that are appropriate for exposures and push insurers to differentiate their products and services

Innovations in distribution and improvements in market penetration will follow as public and private insurers compete to market their products

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Allowing insurers to issue their own policy wordings and set their own rates will enable underwriters to tailor products to meet client needs

The existence of stringent licensing requirements ensure that only adequately capitalized and professionally managed companies are eligible to carry out insurance and reinsurance

The Insurance Regulatory Development Authority of India’s (IRDA) emphasis on quarterly reporting/monitoring of insurer solvency will enhance capital adequacy and transparency.

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FUTURE PROSPECTS • Huge market largely untapped especially in Rural & Urban regions can be targeted to increase the number of insurer in the market

As high as 70% of population is still not covered by insurance. So the company can conduct mass campaign and educated the people more about the products and also about the risk covered and the various benefits which they can avail .The Company can use various medium to increases the awareness

Increase in standard of living, disposable income, literacy, insurance awareness throws open huge opportunities on insurance.

High growth in Automobile sector.

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

In Rural sector large number of Micro finance institutions, Self Help Groups are setup who can be the major clients of this industry

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The Government initiatives on Mass insurance.

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

The premium is expected to grow from 28,000 crores to 1lakh crore by 2015.

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

More and more number of private players entering into this industry and along with foreign companies through joint ventures.FDI is also playing a major role in this industry as government has increased the level of investment by them.

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AUTO INSURANCE Auto Insurance often referred to as Vehicle, Motor or Car insurance is categorized under General Insurance. Vehicle Insurance can be purchased from an insurance company or an insurer for the purpose of getting the loss compensated related to automobiles. The main criteria that the insured wants to get fulfilled by purchasing a Motor insurance are to get compensation against any traffic accident or liability as a result of an accident or theft of the vehicle. Under the provisions of the Motor Vehicles Act, it is mandatory that every vehicle should have a valid Insurance to drive on the road. Any vehicle used for social, domestic and pleasure purpose and for the insurer's business motor purpose should be insured. The violation of this act is punishable Auto insurance is divided into three parts ➢ Two wheeler Insurance ➢ Car-Insurance ➢ Commercial Insurance There are two types of Auto Insurance, “Motor Policy A -Act Only Risk” (also known as third party insurance) "Motor Policy B" (also known as comprehensive insurance policy).

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MOTOR POLICY A- THIRD PARTY INSURANCE COVERS

Motor Policy A or Third party insurance covers unlimited pay compensation for death or bodily injuries to third Parties and damage to the property of the third parties other than insured, up to a limit. Under this policy the insured is treated as the first party, the insuring company the second party and all others would be third parties. This insurance protects the insured from legal liabilities following an accident involving his/her vehicle. It does not cover any damage to his/her vehicle. The limit of third party property damage is limited to 7.5 lakhs.

Third Party insurance covers Personal Injury and Property damage. Personal Injury includes 1. Liability for death or injuries to third parties - this means that you are insured against death or injury (caused by your vehicle) to pedestrians, occupants of other vehicles, and outsiders other than passengers, for unlimited amounts. Passengers of private vehicles and pillion riders are also deemed covered. 2. Liability to employees connected with operation of the vehicle- this means you are insured against death or injury (caused by your vehicle) to the vehicle's
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drivers, cleaners, conductors, and coolies...employees used in the operation of the vehicle. 3. Liability to passengers carried in the vehicle for hire or reward - this means that as owner of a taxi, bus or auto-rickshaw, you are insured against death or injury (caused by your vehicle) to the passengers. Property damage covers the vehicle itself and you are insured against various damages that occurs to your vehicle on account of accidents and other instances.

MOTOR POLICY B - COMPREHENSIVE INSURANCE

Comprehensive insurance covers third party liability as well as loss or damage to the insured vehicle itself by the way of accident, theft etc and some other specified risks. Normally it is advisable to get the Comprehensive insurance Policy because it covers insured, vehicle and third party with a single policy. A Comprehensive Auto Insurance Policy Includes 1. Accident

2. Fire, Explosion, self-ignition, lightning

3. Burglary, house-breaking, theft
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4. Riots & strikes

5. Earthquakes

6. Flood, typhoon, hurricane, storm, cyclones

7. Malicious acts

8. Terrorism

9. Transit by rail/road, air, waterways

10. Also included is the towing charge (up to Rs.1, 500/- for private vehicles and Rs.2, 500/- for commercial vehicles) incurred due to accident to the vehicle.

HOW THE POLICY CAN BE OBTAINED

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Approach the insurance company directly Apply through business partners of insurance companies The Insurance Policy can be obtained through an insurance agent or development officer of the insurance company. While giving insurance premium the insurer has to obtain a cover note from the insurance company and which is having the validity of 60 days only. Within this period the insurance company issue policy and which is known as Certificate of Motor Policy. Duplicate Certificate instead of defaced, mutilated or lost certificates can be obtained on payment of a prescribed fee and after production of an affidavit to that effect. PREMIUM As per the Indian Motor Tariff, published by IRDA, all the vehicles are insured at a fixed value called the Insured's Declared Value (IDV). IDV is based on the exshowroom cost of the vehicle. On every renewal of policy the IDV is calculated after deducting the prescribed depreciation. One can extend the coverage for Personal Accident, accessories etc by paying an additional premium. Presently there is a provision for the Insuring Company to give some discounts of their own. But by the end of September 2007, according to a new resolution passed by the IRDA, the calculation of IDV will take into account the gender of the owner and their age also, along with the usual norms of calculation. From April 2007 onwards the Insurance Industry in India is also under de tariff scenario.
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RENEWAL

Usually the Insurance policy is valid for one year. It becomes active soon after the payment of premium is received by the insurance company and will end exactly a year later. So the insured must renew the policy before the expiry date. Any delay in the renewal will make the policy invalid. For every renewal a fresh certificate should be obtained

NO CLAIM BONUS

The Policy holders who have not made any claim in the previous years will be rewarded by the insurers by giving a discount of a comprehensive insurance on a reducing balance basis in the future years. If you are carrying forward a no-claim bonus on any vehicle, you can get it transferred to a new vehicle of the same type (four wheeler to four wheeler ). The only condition to avail of this discount is that you have to sell off your old vehicle. Even if you wish to retain your old vehicle, you can get around this clause by gifting the old vehicle to a family member.

TRANSFER OF INSURANCE POLICY
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If you purchase a used vehicle, you can transfer the existing insurance policy to your name. But, you must inform the insuring company within 2 weeks of purchasing the vehicle.

CLAIMING PROCEDURE Comprehensive Insurance Claim

If an accident takes place, you must report to the insurance company as soon as possible and submit the claim forms. An estimate for repairs /replacements should also be submitted. The documents to be submitted are Claim form Original / Copy of the insurance policy Copy of registration certificate of vehicle and driving license of the driver Copy of the estimated cost of repair given by the garage FIR or a police report if the accident is major, or a criminal offence, or if it caused third-party damage or resulted in injuries Fire brigade report, if the loss is due to a fire Submission of relevant documents, the Insurance company will direct a person inspect the value of damage/replacement and genuineness of estimate
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submitted and according to his report the claim will be settled. After repair, a final bill of the repair and replacements and the stamped receipt for payment from the work shop should be submitted to the company to settle the claim. Only after the inspection of the repaired vehicle that you are allowed to take the vehicle home. According to the rule of some companies, payment be done either directly to the repairer in the form of a cheque or the companies may recommend preferred auto shops for repair. In case of settlement of claim either for total loss of the vehicle or for replacement of certain items, such damaged vehicle or parts thence belongs to the insurance company. In case, a third party is involved in the accident, a case must be filed immediately with the police and at the same time a report should also be sent to the insurance company. If your vehicle has been stolen, file a police complaint and inform the insurer. If you don't get your vehicle within 90 days, obtain a "non-traceable report’ from the police submit to the insuring company to start the claiming process.

THIRD PARTY INSURANCE CLAIM In case, a third party is involved in the accident, a case must be filed immediately in the police station and a report also should be sent to the insurance company at the same time. Your Insurance Company will pay you

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Documents Required for Auto Insurance Claim For Accident Claims Claim form duly signed RC copy of the vehicle Driving license copy FIR on a case-to-case basis Original estimate Original repair invoice, payment receipt from the service center

For Third Party Claims Claim form duly signed RC copy of the vehicle Driving license copy Original policy copy Original FIR copy RTO transfer papers duly signed, mentioning that the vehicle cannot be located
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directly.

AUTO POLICY OF GOVERNMENT OF INDIA VISION TO ESTABLISH A GLOBALLY COMPETITIVE AUTOMOTIVE INDUSTRY IN INDIA AND TO DOUBLE ITS CONTRIBUTION TO THE ECONOMY BY 2010

Policy Objectives This policy aims to promote integrated, phased, enduring and self-sustained growth of the Indian automotive industry. The objectives are to:Exalt the sector as a lever of industrial growth and employment and to
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achieve a high degree of value addition in the country. Promote a globally competitive automotive industry and emerge as a global source for auto components. Establish an international hub for manufacturing small, affordable passenger cars and a key center for manufacturing Tractors and Twowheelers in the world. Ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry. Conduce incessant modernization of the industry and facilitate indigenous design, research and development. Steer India's software industry into automotive technology. Assist development of vehicles propelled by alternate energy sources. Development of domestic safety and environmental standards at par with international standards. SIAM welcomed the announcement of Auto Policy, and feels that the policy would serve as a reference document for all stake holders and other

interested parties. The Auto Policy has spelt out the direction of growth for the auto sector in India and addresses most concerns of the automobile sector, includingPromotion of R&D in the automotive sector to ensure continuous technology up

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gradation, building better designing capacities to remain competitive. Impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to facilitate their acceptance. Emphasis on low emission fuel auto technologies and availability of appropriate auto fuels and encouragement to construction of safer bus/truck bodies - subjecting unorganised OEMs The policy has rightly recognised the need for modernising the parc profile of vehicles to arrest degradation of air quality. The terminal life policy for commercial vehicles and move toward international taxing policies linked to age of vehicles, are steps in right direction. SIAM has always been advocating encouragement of value addition within the country against mere trading activity. However, this aspect has not been fully addressed. The Auto Policy allows automatic approval for foreign equity investment upto 100% in the automotive sector and does not lay down any minimum investment criteria. The recommendation of promoting passenger cars of length upto 3.8 meters through excise benefits is not in line with the free market concept and may lead to market distortion. However, with the Auto Policy in place, the automotive industry would get further fillig to become vibrant and globally competitive. The industry would get the required
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sector also to 16% excise duty on body building activity as in case of

KRUPANIDHI INSTITUTE OF MANAGEMENT EDUCATION 2009

support from other Ministries and departments of Government of India in achieving the goals laid down in the auto policy.

CHALLENGES Premiums rates remain under pressure due to intense competition on the more profitable lines

Falling premium income without a corresponding reduction in claims -- is likely to drive down profits

Public and private sector insurers’ greater reliance on their investment portfolios to generate sufficient income and gains for net profits would subject them to the volatility of the financial markets

Private insurers need to raise more capital, otherwise growth could be
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constrained since reliance on reinsurance for capital relief is not always viable or available

Traditional distribution channels, especially tied agents, need to be improved to match the new product offerings

There is general lack of transparency as financial and operational data for insurers are not readily available as none of India’s insurers are directly listed on stock exchanges

Like all developing economies on a fast track, the shortage of trained insurance professionals and technicians at all levels cannot be remedied in the short term

INDIAN AUTO INSURANCE INDUSTRY - MARKET OVERVIEW The Indian auto insurance sector is rapidly moving towards international standards, market pricing and new/innovative product offerings. Big changes have occurred over the last decade. The major part of the revenue earned by general insurance is from auto insurance sector
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Indian economy is the 12thlargest in the world, with a GDP of $1.25 trillion and 3rd largest in terms of purchasing power parity. With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, it is on the fulcrum of an ever increasing growth

Most auto insurance companies in India have comprehensive policies to help customers. Some of them have also tied up with top automobile manufacturers fast insurance process.

their

Auto insurance has started special services like 24/7 service by phone and provides online assistance on all days, including national holidays. Check of their claim status through mobile messaging, offers case of a breakdown or accident. instant updates towing facility in

Auto Insurance is one major sector which has been on a continuous growth curve since the revival of Indian economy.

The huge population and growing per capita income besides several other driving factors, has created huge opportunity for the auto insurance

With the entry of private sector players backed by foreign expertise, Indian
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Auto insurance market has become more vibrant. Competition in this market is increasing with private companies entering into this business

Due continuous competition companies are making effort to lure the customers with new product offerings. Companies are also using Information/communication technology extensively and appropriately to reach out to the whole population

MAJOR PLAYERS IN AUTO INSURANCE INDUSTRY PUBLIC SECTOR Oriental Insurance Company of India (OIC), National Insurance Company of India (NIC), New India Assurance Company of India (NIA) United Insurance Company of India (UII) .

PRIVATE SECTOR

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HDFC Insurance Kodak Mahindra General Insurance Bajaj Allianz General Insurance company Reliance General Insurance company SBI General Insurance IFFCO-TOKIO General insurance ICICI Lombard General insurance BHARTI-AXA General insurance TATA AIG- General Insurance

OPPORTUNITIES

Continuous growth in Auto industry

Growing demand from semi-urban population

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Entry of private players following the deregulation

Rising demand for retirement provision in the ageing population

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

Growing consumer class and increase in spending & saving capacity

Public private partnerships infrastructure development

Dearth of innovative & buyer-friendly insurance products

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

FUTURE PROSPECTS

High growth in Automobile sector.

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

Increase in disposable income of population of middle class society

More and more number of private players entering into this industry and along with foreign companies through joint ventures.

FDI is also playing a major role in this industry as government has opened up investment upto 49% from 26%

FINDINGS

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

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Big changes have occurred over the last few years, during which the sector was opened to private participation, along with foreign direct investment. It also has one of the lowest penetration rates for property and casualty insurance in Asia in terms of premium as a percentage of GDP. India’s general insurance market witnessed a variety of changes as deregulation continued at a hectic pace. Rate reductions in the recently de-tariff corporate portfolio (fire & engineering) has impacted the premium growth, but this is also leading to the greater sales of existing and new products. The number of private insurers is growing and they continue to capture market share at the expense of public enterprises on a mix of aggressive distribution and service. With the increasing number of insurers in the private sector. The industry forecasts for a continuous growth and rise domestic demand. Majority of the revenue is earned by the motor vehicle segment of the general insurance

SUGGESTIONS • Create awareness among the people of the various insurance products available
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in the market • Capture the untapped population residing in the rural and sub urban parts of the country •

Spread the message of benefits of insurance through mass campaign The industry needs innovative low cost distribution and servicing Strategies

The company should hire more agents with more knowledge about the products with proper training

The company can have an effective Bancassurance /NBFC tie ups so that the entire Banking infrastructure is utilized for distribution of insurance products

The insurance policies should be simple & less legalistic, with reasonable price, hassle free policy issuance and claim process more package policies

The companies should also introduce short term policies

CONCLUSION Considering the high level of underwriting losses, going forward adjustment in premium rates would occur when the industry matures and consolidation takes place. The ability to price effectively will also imply an increased focus on risk management

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by the insurance companies.

The continual entry of new private players coupled with the intense competition sparked off by the detariffication of general insurance sector has also resulted in strengthening

the bargaining power of the customer and development of customer centric insurance products.

On the whole, while short term scenario for the general insurance sector appears to be challenging the long term prospects definitely present ample opportunities for growth.

While the government’s plan to raise FDI cap in insurance companies from 26 to 49 per cent will lead to more capital flowing in, the untapped market potential holds the opportunity to grow faster.

BIBLIOGRAPHY

“Indian Insurance: The Way Forward”- G Srinivasan,

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India: The Next Insurance Giant India

by PRwire Pvt. Ltd.

www.tourindia.com

-Insurance in India

www.moody.com –Indian General insurance outlook

www.IRDA,com annual report 2007-08 – www.automobileindia.com - Auto Insurance Companies www.auto.webindia123.com- auto insurance in India www.generalinsuranceindia .com www.siam.com - auto policy govt of India www.reliancegeral.co.in

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