INSURANCE

INSURANCE
(Governed by Insurance Act -1938,Now By
IRDA act Insurance Regulatory and Development Agency1999)

History:-Methods of transferring or distributing

risk were practiced by Chinese and Babylonian
traders as long ago as the 3rd and 2nd millennia
BC.
The Greeks and Romans introduced the origins of
health and life insurance c. 600 AD.
India:- First Indian insurance company was
Calcutta Insurance Company which setup in 1798
exclusively for Europeans. The Bombay Life
Assurance Society formed in 1870 Insured Indians
first time.

 Indian life assurance

companies
act
,
.
1912 was first statutory act to
regulate life business.
In 1928 the indian insurance
companies act enacted.
In 1938 insurance act amended to
consolidate legislation and effective
control over the activities of insurer.
19th Jan.1956 LIC is formed by
absorbing 154 Indian,16 non-indian
insurer and 75 provident societies.

 GIC was Incorporated

as
a
company
.
in Year 1971 . In 1972 General
Insurance Business(Nationalization)
Act passed with effect from 1st Jan
1973 GIC is formed by amalgamation
of 107 insurer and 4 company
formed named as
National Insurance Co. Ltd.
The New India Assurance Co. Ltd.
The Oriental Insurance Co. Ltd.
The United India insurance co. Ltd.

Cont
In Dec. 2000 subsidiaries of GIC were
restructured as independent company.
And in July 2002 parliament passed a bill
of De-linking of four subsidiaries of GIC.
Today there are 14 General insurance
companies including ECGC (Export Credit
Guarantee Corp of India)& Agricultural
insurance corporation of India and 14 life
Insurance company operating in India.

Definition: Insurance is pooling of risks. In

contract of insurance ,the insurer
(insurance company)
agree/undertakes, in consideration of
a sum of money (premium) , to make
good the loss suffered by the insured
against a specified risk such as fire ,
accident etc or any contingency.

Insurer
An individual which is insured by the
insurance agent on the basis of premium
payment. Insurers have to pay the amount
of premium to the insurance company on
the decided date in terms of decided
amount which s generally known as
installment or premium .

Insurance agent
Means an insurance agent licensed under
section 42 who receives or agrees to
receive payment by way of commission or
other remuneration in consideration of his
services which he gives by the insurer.
Agents are doing work on behalf of the
insurance company for generating the
business or would say selling the
insurance policies.

Life insurance business

Business of effecting contracts of
insurance upon human life, including
any contract whereby the payment
of money is assured on death (except
death by accident only) or the
happening of any contingency
dependent on human life.

 Parties :- There are two parties to

an Insurance contracts as: Insurer/assurer/underwriter,
Insured/assured/beneficiary
Policy :- The document laying down
the term of contract is called
(insurance) policy.

General Agents
A general agent has legal authority
to bind the principal on any matter,
which is a very broad power. General
agents related to the general
insurance.
For example, a general agent
can bind the principal to a
financial contract.

Special Agents
A special agent is given only a
narrow slice of legal authority,
typically in a defined subject matter.
Special agents are related to the life
insurance

Restriction on name of insurer

An insurer shall not be registered by
a name identical with that by which
an insurer in existence is already
registered, or so nearly resembling
that name .

Type of Insurance
Life insurance is the cover for the
risks the we are run during our lives.
It protects from the contingencies
that could effect us. Life insurance is
not for the person who passes way
but it is for the person who survives.

Type of Life Insurance

Polices
Endowment Policy-A type oflife
insurancethat is payable to theinsuredif
he/she is still living on thepolicy'smaturity
date, or to abeneficiaryotherwise. but if
the endowment period is complete.
Whole Life Policy-A typical whole life
policy runs as long as the policyholder is
alive. In other words, the risk is covered for
the entire life of the policyholder, which is
why they are know as whole life policies.

 Limited Payment Life Policy-You pay a

premium for a predetermined number of
years and you have your policy for the
rest of your life.
Joint Life Policy-Joint life policies are
similar to endowment policies in as much
as these policies also offer maturity
benefits to the policyholders, apart form
covering the risks as all life insurance
policies.

 Term life policy-covers risk for selected

period.
Money back policy- same as endowment
policy but difference is that in money back
policy the assured person claim the insurance
when the contingency happens and get full
amount of insurance.
Group insurance policy- these are with low
premiums and insurance done in a group like
employee insurance and labour insurance.

 Pension plan or Annuity- it is

different from others because it does
not provide the life insurance but It
provides guaranteed income for life.

General insurance
Almost everything that has financial
value in life and has a probability of
getting lost , stolen can be covered
under general insurance.
like Home,motor,travel.health.

Marine Insurance
Policies
Marine insurancecovers the loss or
damage of ships, cargo, terminals,
and any transport or cargo by which
property is transferred, acquired, or
held between the points of origin and
final destination..

 Time policy
A time policy is taken for definite period of time,
usually not exceeding 12 months say from
January 1, 1981 to December 31, 1981. This
policy is most suitable for hull insurance.
Voyage policy
Where the subject matter is insured for a specific
voyage, say from Karachi to Port Saeed it is
named as voyage policy.

 Mixed policy
This policy is the combination of time
and voyage policy. It, therefore,
covers the risks for both particular
voyage and for a stated period of
time.

 Floating policy
Floating policy is taken for a relatively
large sum by the regular suppliers of
goods. It covers several shipments
which are declared afterwards along
with other particulars. This policy is
most situated to exporter in order to
avoid trouble of taking out a separate
policy for every shipment.

 Valued policy
Under its terms the agreed value of the
subject matter of insurance is
mentioned in the policy itself. In case of
cargo this value means the cost of
goods plus freight and shipping charges
plus 10% to 15% margin for anticipated
profit. The said value may be more
than the actual value of goods.

 Builder's risk policy

This policy is issued for more than
one year. This covers the risk of
damage to vessels from the time its
construction commences until its trail
is completed.

 Port risk policy

This policy covers all the risk of a
vessel while it is standing at a port
for particular period of time.

 11. Special hazards policy

This policy covers special risks
incident to piracy and war. It provides
protection to insured under
agreement against seizure, capture,
detention and other war risks.

 Composite policy
This type of policy is purchased
frommorethan one under writers. If
there is no any motive of fraud then
insured will be indemnified by each
under writer separately in case of
loss.

Other Type of insurance

Property insurance
Automobile insurance
Aviation insurance
Boiler insurance
Earthquake insurance

Cont

A fidelity bond
Flood insurance
Home insurance
Landlord insurance
Marine insurance
Surety bond insurance
Terrorism insurance etc.

IRDA
In 1993 Government setup a committee under
chairmanship of RN Malhotra ,former Governor
of RBI for reforms in Insurance sector.
Recommendations are : IRDA was constituted as an autonomous body
to regulate and develop the insurance
industry.
Foreign companies are allowed up to 26% of
paid up capital and can operate with an Indian
company.

Composition of Authority under

IRDA Act, 1999
The Authority is a ten member team
consisting of
(a) a Chairman;
(b) five whole-time members;
(c) four part-time members

Duties, Powers and Functions of

IRDA
To regulate, promote and ensure orderly growth of
the insurance business and re-insurance business.
Issue to the applicant a certificate of registration,
renew, modify, withdraw, suspend or cancel such
registration .
Protection of the interests of the policy holders in
matters concerning assigning of policy,
nomination by policy holders, insurable interest,
settlement of insurance claim, surrender value of
policy and other terms and conditions of contracts
of insurance;

Cont.
Specifying requisite qualifications,
code of conduct and practical training
for intermediary or insurance
intermediaries and agents.
Specifying the code of conduct for
surveyors and loss assessors.
Promoting efficiency in the conduct of
insurance business.

Cont..
Levying fees and other charges for
carrying out the purposes of this Act
Calling for information from, undertaking
inspection of, conducting enquiries and
investigations including audit of the
insurers, intermediaries.
Control and regulation of the rates,
advantages, terms and conditions that
may be offered by insurers in respect of
general insurance business .

Cont
Specifying the form and manner in which
books of account shall be maintained and
statement of accounts shall be rendered by
insurers and other insurance intermediaries.
Regulating investment of funds by insurance
companies.
Regulating maintenance of margin of solvency
Adjudication of disputes between insurers and
intermediaries or insurance intermediaries.

Registration under IRDA

The application accompanied by: A certified copy of memorandum and
article of association.
Name, address and occupation of
Directors.
A statement of the classes of insurance
business done/to be done along with a
statement of deposits with the Reserve
Bank of India.

Cont
For life business , a sum equivalent to 1%
of total gross premium not exceeding 10
crore written in India in any Financial year.
For General business 3% of total gross
premium not exceeding 10 crore.
Reinsurance business Rs.20 crore;
Rs.100,000.
For cooperative life insurance business /
assurance companies should be Rs.2 lakh.

Cont
A declaration verified by an affidavit by the principal
officer of the insurer that the requirement of paid up
capital (Rs. 100 crore and Rs.200 crore for life/general
and reinsurance business, respectively) Rs. 250 crore
for reinsurance business or working capital.
A certified copy of the Published prospectus if any and,
Standard policy forms of the insurer and statements of
the insurer and statements of the assured rates,
advantages, terms and conditions to be offered in
connection with insurance policies, together with a
certificate in connection with life business by an
actuary.

Cont
The receipt showing payment of fee
(as determined by IRDA regulation)
not exceeding Rs.50,000 for each
class of business.
Such other document as may be
specified by IRDA.