CHAPTER 1 ORIGIN OF INSURANCE

Whenever there is uncertainty there is risk. We do not have any control over uncertainties which involves financial losses. The risk may be certain events like death, pension, accident, etc. Insurance is a financial service for collecting the savings of the public and providing them with risk coverage. It comes under service sector and while marketing this service due care is taken in quality product and customer satisfaction. The main function of the Insurance is to provide protection against the possible chances of generating losses. The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries. retirement or uncertain events like theft, fire,

1.1 Brief History of the Insurance Sector

The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta

by the British.

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

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four

companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

CHAPTER 2 INSURANCE SECTOR The opening up of Insurance sector was a part of the on going liberalization in the financial sector of India. The changing face of the financial sector and the entry of several companies in the field of life and non life Insurance segment are one of the key results of these liberalization efforts. Insurance business by way of generating premium income adds significantly to be the GDP. Over the past three years, more than thirty companies have expressed interest in doing business in India. The IRDA (Insurance Regulatory Development Authority) is the regulatory authority, which looks over all related aspects of the insurance business. The provisions of the IRDA bill

acknowledge

many

issues

related

to

insurance

sector.

The IRDA bill provides guidance for three levels of players - Insurance Company, Insurance brokers and Insurance agent. Life Insurance sector is one of the key areas where enormous business potential exists. In India currently the life insurance premium as a percentage of GDP is 2.5 percent against, 4.7 per cent in the US. General Insurance is another segment, which has been growing at a faster pace. But as per the current comparative statistics, the general insurance premium has been lower than life insurance. General Insurance premium as a percentage of GDP was a mere 0.65 per cent in 1996. In the General Insurance Business, General Insurance Corporation (GIC) and its four subsidiaries viz. New India Insurance, Oriental Insurance, National Insurance and United India Insurance, are doing major business. The General Insurance Industry has been growing at a rate of 19 percent per year.

The entry of several private insurance companies, particularly international insurance companies, through joint ventures, will speed up the process of insurance mobilization. The competition will unleash new schemes and benefits, which will give consumers a better Chance to save as well as insure. The regulatory system in India is relatively new and takes some more time to make the Insurance sector a perfectly competitive one. .

Insurance Regulatory and Development Authority of India issued regulations on 15 subjects which included appointed. Actuary, actuarial report, Insurance agents, Solvency margins, re-insurance, registration of Insurers, and obligation of insurers to rural and social sector, investment and accounting procedure. The reform in Insurance in India is guided by factors like availability of a variety of products at a competitive price, improvement in the quality of customer services etc. Also the employment opportunities in the Insurance sector wil1 increase as major players set their business plans in India. The policy of the government to open up the financial sector and the Insurance sector is expected to bring greater FDI inflow into the country. The increase in the investment limit in this vital sector has generated considerable business interests among the foreign Insurance companies" Their entry wil1 certainly change the Insurance sector considerably.

2.1 Insurance Sector Reforms: In 1993, Malhotra Committee, headed by former Finance Secretary and

RBI Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its future, direction. The Malhotra committee was set up with the objective of in the financial sector. In 1994, the committee submitted the report and some of the key recommendations included: 2.1.1 Structure: 1. Government stake in the insurance Companies to be brought down to 50percent. 2. Government should take over the holdings of GlC and its subsidiaries so that these subsidiaries can act as independent corporations. 3. All the insurance companies should be given greater freedom to operate. 2.1.2 Competition: 1. Private Companies with a minimum paid up capital of Rs. 1 bn should be allowed to enter the industry. . 2. No Company should deal in both Life and General Insurance through a single entity. 3. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. 4. Postal Life Insurance should be allowed to operate in the rural market. 5. Only one State Level Life Insurance Company should be allowed to operate in each state. complementing the reforms initiated

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

2.1.4 Investment: 1. Mandatory Investments of LIC Life Fund in government securities to be reduced from 75 percent to 50 percent. 2. GIC and its subsidiaries are not to hold more than 5 percent in any company (There current holdings to be brought down to this level over a period of time.) 2.1.5 Customer Service: 1. LIC should pay interest on delays in payments beyond 30 days. 2. Insurance companies must be encouraged to set up unit linked pension plans. 3. Computerization of operations and updating of technology to be carried out in the insurance industry. The committee emphasized that in order to improve the customer Services and increase the coverage of the insurance industry should open up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs. 100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve.

2.1.6 Insurance Regulatory Authority

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

2.1.6 INSURERS: Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers: Life Insures: Life Insurance Corporation of India (LIC) General Insurers General Insurance Corporation of India (GIC) (with effect from Dec 2000, a national reinsurer)

CHAPTER 3 INSURANCE INDUSTRY:CLASSIFICATION

INSURANCE

GENERAL INSURANCE

LIFE INSURANCE

Motor Vehicle

Fire Insurance Marine Insurance

Mediclaim

3.1 SOME PLAYERS IN THE INDUSTRY:

LIFE INSURANCE Life Insurance Corporation of India.

GENERAL INSURANCE General Insurance Corporation of India. 1. Oriental Insurance Company Ltd. 2.New India Assurance Company Ltd. 3.National Insurance Company Ltd. 4.United India Insurance Company

New Entrants

Ltd.

ICICI Prudential Life Insurance Ltd. Tata AIG Life Insurance Bajaj Alliaz General Insurance Corporation Ltd. ING Vysya Life Insurance Company Ltd. Reliance General Insurance

Corporation Ltd. Kotak Mahindra Life

Company Ltd.

Insurance Corporation Ltd.

Tata

AIG

General

Insurance

Company Ltd. Royal Sundaram Alliance Insurance Company Ltd.

3.2 Four Is of Insurance Service

The 4 Is refers to the different dimensions/ characteristics of any service. Unlike pure product, services have its own characteristics and its related problems. So the service provider needs to deal with these problems accordingly. The service provider has to design different strategies according the varying feature of the service. These 4 Is not only represent the characteristics of different services but also the problems and advantages attached to it. These 4 Is can be broadly classified as: Intangibility Inconsistency Inseparability Inventory

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

Inconsistency Service quality is often inconsistent. This is because service personnel have different capabilities, which vary in performance from day to day. This problem of inconsistency in service quality can be reduced through standardization, training and mechanization.

 Inseparability Services are produced and consumed simultaneously. Consumers cannot and do not separate the deliverer of the service from the service itself. Interaction between consumer and the service provider varies based on whether consumer must be physically present to receive the service. Inventory No inventory can be maintained for services. Inventory carrying costs are more subjective and lead to idle production capacity. When the service is available but there is no demand, cost rises as, cost of paying the people and overhead remains constant even though the people are not required to provide services due to lack demand. In the insurance sector however, commission is paid to the agents on each policy that they sell. Hence, not much inventory cost is wasted on idle inventory. As the cost of agents is directly proportionate to the policy sold. of

CHAPTER 4

GENERAL INSURANCE

With the opening up of the insurance industry to the private sector, the need for a strong, independent and autonomous Insurance Regulatory Authority was felt. As the enacting of legislation would have taken time, the then Government constituted through a Government resolution an Interim Insurance Regulatory Authority pending the enactment of a comprehensive legislation. The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end the monopoly of the Life Insurance Corporation of India (for life insurance business) and General Insurance Corporation and its subsidiaries (for general insurance business). Definition and meaning: 1. INSURANCE: Insurance is the means of managing risk and protection against financial loss arising as a result of contingencies, which may or may not occur. In other words, insurance is the act of providing assurance, against a possible loss, by entering into a contract, with one who is willing to give assurance. Through this contract the person willing to give assurance binds himself to

make good such loss, if it occurs.

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

General Insurance means to Cover the risk of the financial loss from any natural calamities viz. Flood, Fire, Earthquake, Burglary, etc. i.e. the events which are beyond the control of the owner of the goods for the things having insurable interest with the utmost good faith by declaring the facts about the circumstances and the products by paying the stipulated sum , a premium and not having a motive of making profit from the insurance contract. 4.1 Some of the General Rules: 1. Mis-description: The insurance policy shall be void and all the premiums paid by insured may be forfeited by the insurance company in the event of mispresentation or mis- declaration and/or non-disclosure of any material facts. 2. Reasonable care: The insured shall take all reasonable steps to safeguard the property insured against any loss or damage. Insured shall exercise reasonable care that only competent employees are employed and shall take all reasonable

precautions to prevent all accidents and shall comply with all statuary or other regulations

3. Fraud: If any claim under the policy may be in any respect fraudulent or if any fraudulent means or device are used by the insured or any one acting on the insureds behalf to obtain any benefit under the insurance policy, all the benefits under the insurance policy may be forfeited. 4. Few basic principles of general insurance are: 1. 2. 3. 4. 5. Insurable interest Utmost good faith Subrogation Contribution Indemnity

5 Risks of loss not covered under general insurance are: The loss or damage or liability or expenses whether direct or indirect occasion by happening through or arising from any consequences of war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion revolution, civil commotion or loot or pillage in connection therewith and loss or damage caused by depreciation or wear and tear. However the risk of loss or damage by war can be insured by

payment of additional premium in some cases only.

4.2 Product levels:

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

E X AUGMENTED . P E CORE POTENTIAL

C T E D

Le vel 1 2 Type of service Core service Expected service Contents Basic service product Basic product and minimum service purchase conditions that must be met. Insurance sector o o o o Life Non-Life Insurance After sales service Low claim settling period

Augmented service

Something different, which enables one product to be differentiated from other

Online premium payment o Standing instruction to bank o

Potential service

Features that attract the customers and are useful to them.

Payment through credit card o Loans o Maturity claims settled on or before the maturity date o

The core product of insurance company is insuring life and non life products. People opt for this service as they want to secure their life, people dependent on them and other valuable things in life. The time factor plays an important role while providing service to the customer. The customer expects that the procedures for settling the claim should be short and not much time consuming. They should get the benefits of the service as soon as possible. Today the technology is boosting in each and every field. Insurance is not an exception. Companies have started providing customers facility of online payment of premium through their websites. They also provide online assistant to the customer the policy status and how to calculate the premium. To calculate the premium they just need the present age, the type of police, sum assured, and accident covered if any. By filling in this information you can calculate the amount of premium you have to pay. The customer can pay their premiums by means of credit cards or can also give standing instruction to the bank in order to pay their monthly premiums. The insurance companies also provide loan facilities against their policies. At present loans are granted on unencumbered polices as follows: Up to 90 percent of the Surrender Value for policies, where the premium due is fully paid-up, and

Up to 85 percent of the Surrender Value for policies where the premium due is partly paid-up. The minimum amount for which a loan can be granted under a policy is Rs150. The rate of interest charged is 10.5 percent p.a., payable half-yearly. Loans are not granted for a period shorter than six months, or on the security of lost policies (the assured must have the duplicate policies) or on policies issued under certain plans. Certain types of policies are, however, without loan facility.

4.3 PRODUCTS The various products can be grouped under the following categories: o o o o o o o o o o Individuals/Family Marine Professionals Business/Office/Traders Engineering/Industry Agriculture/Sericulture/Poultry Animals/Birds Aviation Motor Vehicle - Private/Commercial Health-Mediclaim/Overseas Mediclaim/Personal Accident

4.4 FREQUENT TERMS USED

Agent: An insurance company representative licensed by the state, who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder far the insurer. Actual Total Loss: It is a loss where the goods are completely lost and become irrecoverable Additional cover: An insurance policy extended to cover additional risk perils such as strikes. Riots and Civil commotion etc on payment of extra premium. Agreed value policy: Policy which undertakes to pay a specified amount in case of total loss. Under this case the policy does not take into account the current market value.

Assessor: Person who estimates the value of goods for the purpose of apportioning the sum payable by the underwriters to settle the claims. Also called as Surveyor. Assured: Party indemnified against 19ss by means of insurance. Burglary: It is a theft committed by breaking into or out of the premises. Evidence of breaking In, Is necessary.

Coverage: The scope of protection provided under a contract of insurance; any of several risks covered by a policy. Cargo insurance: A generic term used in both inland marine and ocean marine insurance to designate the types of insurance available to provide coverage for cargo that is being transported by truck, rail, air, ship, or boat. Certificate of Insurance: A statement of coverage issued to an individual insured, specifying the insurance benefits and principal provisions applicable to the member. Claim: The formal request by a policyholder or a claimant for payment of loss under an insurance policy. Co-insurance: A provision under which an insured who carries less than the stipulated percentage of insurance to value, will receive a loss payment that is limited to the same ration which the amount of insurance bears to the amount required;

Cover Note: Is the document that is issued provisionary pending issuance of insurance Policy. Indemnity: Legal principle that specifies an insured should not collect more than the

actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss. Insurable Interest: A condition in which the person applying for insurance and the person who is to receive the policy benefit will suffer all emotional or financial loss, if any untouched event occurs. Without insurable interest, an insurance contract is invalid, Net Premium: The portion of premium rate which is designed to cover benefits of the policy, excluding expenses, contingencies and profit. Salvage: Recovery made by an insurance company by the sale of property which has been taken over from that insured as a part of loss settlement. The remains of damaged vehicle or any other property. Third party: Any person other than the two parties signing an insurance, contract. Underwriting: Underwriting of a risk involves consideration of material, facts on the basis of which a decision will be taken whether to accept the risk and if so at what rate of premium.

CHAPTER 5

Public Sector Subsidiaries

5.1 Oriental Insurance Company The Oriental Insurance Company Ltd. (OICL) is one of the leading General Insurance companies in India and is a subsidiary of the General Insurance Corporation (GIC) of India. It is one of the oldest Insurance. If companies and was established in the year 1947. The Company transacts all kinds of non-life insurance business ranging from insurance covers for very big projects to small rural insurance covers. OICL, is the First to have underwritten the biggest Grass Root Refinery Project, Reliance Jamnagar Refinery. First to have issued a Package Policy under mega risk to PSU Oil giants. . First to have issued Advance Loss of Profits policy in India. First to have issued directors & Officers liability policy in India. First to introduce Kidnap & Ransom cover in India. First to have issued Stock Brokers and Stock Exchange custodial services policy in India. First to have front office computerization drive in India.

5.1.a CORPORATE VISION TO BE THE MOST RESPECTED & PREFERRED NON-LIFE INSURER IN THE MARKETS WE OPERATE 5.1.b THE PROFILE Oriental Insurance Company Ltd was incorporated at Bombay on 12th September 1947. The Company was a wholly owned subsidiary of the Oriental Government Security Life Assurance Company Ltd and was formed to carry out General Insurance business. The Company was a subsidiary of Life Insurance Corporation of India from 1956 to 1973 (till the General Insurance Business was nationalized in the country). In 2003 all shares of our company held by the General Insurance Corporation of India has been transferred to Central Government. The Company is a pioneer in laying down systems for smooth and orderly conduct of the business. The strength of the company lies in its highly trained and motivated work force that covers various disciplines and has vast expertise. Oriental specializes in devising special covers for large projects like power plants, petrochemical, steel and chemical plants. The company has developed various types of insurance covers to cater to the needs of both the urban and rural population of India. The Company has a highly technically qualified and competent team of professionals to render the best customer service. Oriental Insurance made a modest beginning with a first year premium of Rs.99,946 in 1950. The goal of the Company was Service to clients and achievement thereof was helped by the strong traditions built up overtime. ORIENTAL with its head Office at New Delhi has 30 Regional Offices and nearly 900+ operating Offices in various cities

of the country. The Company has overseas operations in Nepal, Kuwait and Dubai. The Company has a total strength of around 15,000+ employees. From less than a lakh at inception, the Gross Premium went up to Rs.58 crores in 1973 and during 2010-11 the figure stood at a mammoth Rs. 5569.88 crores.

5.1.c CORPORATE OBJECTIVES o o To serve better the insurance needs of the entire community, keeping Customer as the focus. To serve better the insurance needs of the entire community, keeping Customer as the focus. To manage Business profitably, Manage funds judiciously and deploy investible funds for optimum Yield. To manage Business profitably, Manage funds judiciously and deploy investible funds for optimum Yield. To work towards minimization of losses and develop Risk Management Technologies. To function as a strong and dynamic non-life insurer.

o o o o

5.1.d TO ENSURE 1) Act as a financially sound corporate entity with high business ethics 2) Implement best human resource development practices to build a highly efficient,

dedicated and motivated workforce with high morale and moral values 3) Optimally utilize the information technology infrastructure 4) Provide excellent customer service 5) Run the business profitably through prudent underwriting and efficient & proper claim management 6) Effectively manage Reinsurance operations 7) Effective risk management systems 8) Improving the penetration of non-life insurance by underwriting, innovation & marketing

5.2 The New India Assurance Company.

5.2.a History Incorporated on July 23rd, 1919 Founded by the House of Tata Founder member - Sir Dorab Tata. Nationalised in 1973 with merger of Indian companies. 5.2.b Present Position. Gross Premium (in India) of Rs. 7097.14 crores in the year 2010-2011, as against Rs. 6042.51 crores in the year 2009-2010. Assets Rs. 39621.27 crores as on 31st March 2011. Network of Offices-26 Regional Offices, 397 Divisional Offices, 588 Branches, 29 Direct Agent Branches and 45

Extension Counters. Rank No. 1 in the Indian market. Largest Non-Life insurer in Afro-Asia excluding Japan. First Indian non-life company to cross Rs. 8225.51 crores Gross Premium. Global Re-insurance facilities. Over-seas presence in countries like Japan, U.K, Middle East, Fiji and Australia. 5.2.c International Presence. Overseas operations commenced in 1920. Operations in 23 countries in the year 20010-11 Network of 19 Branches, 7 Agencies, 4 Associate companies and 3 Subsidiary companies in the year 2009-10. Overseas Premium of Rs. 1128.37 crores in the year 2010-11, which accounts for more than 80% of total overseas premium in India.

5.3.d Strengths Largest number of Offices - In India and Abroad Trained and technically qualified staff 1085 fully computerised offices across India. "A-" (Excellent) rating by A.M.Best & Co (Europe) First domestic company to be rated by an International Rating Agency Rating based upon following factors: Superior capital position Strong operating performance Strong market position Only company to develop significant International

operations, long record of successful trading outside India. 5.2.e Pioneers

First company to set up an Aviation Insurance Department in 1946. First company to handle the Hull Insurance requirements of the Indian Shipping Fleet.

First company to establish its own Training School. First company to introduce the concept of 'Model Office Training'. First company to create department in Engineering insurance. Pioneer in Satellite insurance.

5.2.f MISSION o To develop general insurance business in the best interest of the

community. o To provide financial security to individuals, trade and commerce by offering insurance products and service of high quality at affordable cost.

5.2.g COMMITMENTS TO THE CITIZENS o In areas coming within competence of GIC respond to all commercially viable general insurance requirements of the citizens, not

hitherto available within three months from the date on which such a demand is received. o In areas covered by tariff, appropriate proposals will be submitted to the Tariff Advisory Committee with appropriate comments within two months. o Continue to provide customized insurance products for weaker sections of the society at affordable price within six months of receipt of a request for a specific type of cover. o Prepare booklets on standard policy covers setting out essential information and make such booklets readily available for purchase at suitable places. o Promote customer education in general insurance service by holding workshops in important regional centers. o Make available to a customer, on request to the policy issuing office, the status of his claim and/or claim settlement details within 7 working days.

5.2.h VALUES o Highest priority to customer needs. o High standards of public conduct. o Transparency in operations.

5.3 THE NATIONAL INSURANCE COMPANY

5.3.1 PROFILE National Insurance Company Limited was incorporated in 1906 with its registered office in Kolkata. Consequent to passing of the General Insurance Business Nationalisation Act in 1972, 21 Foreign and 11 Indian Companies were amalgamated with it and National became a subsidiary of General Insurance Corporation of India (GIC) which is fully owned by the Government of India. After the notification of the General Insurance Business (Nationalisation) Amendment Act, on 7th August 2002, National has been de-linked from its holding company GIC and presently operating as a Government of India undertaking. National Insurance Company Ltd (NIC) is one of the leading public sector insurance companies of India, carrying out non life insurance business. Headquartered in Kolkata, NIC's network of about 1000 offices, manned by more than 16,000 skilled personnel, is spread over the length and breadth of the country covering remote rural areas, townships and metropolitan cities. NIC's foreign operations are carried out from its branch offices in Nepal. Befittingly, the product ranges, of more than 200 policies offered by NIC cater to the diverse insurance requirements of its 14 million policyholders. Innovative and customized policies ensure that even specialized insurance requirements are fully taken care of. The paid-up share capital of National is Rs.100 crores. Starting off with a premium base of 500 million rupees (50 crores rupees) in 1974, NIC's gross direct premium income has steadily grown to 4021.97 million rupees

(4021.97 crores rupees ) in the financial year 2007-2008.

National transacts general insurance business of Fire, Marine and Miscellaneous insurance. The Company offers protection against a wide range of risks to its customers. The Company is privileged to cater its services to almost every sector or industry in the Indian Economy viz. Banking, Telecom, Aviation, Shipping, Information Technology, Power, Oil & Energy, Agronomy, Plantations, Foreign Trade, Healthcare, Tea, Automobile, Education, Environment, Space Research etc. National Insurance is the second largest non life insurer in India having a large market presence in Northern andEastern India.

5.3.2 CUSTOMER SERVICE INITIATIVES o Establishing Connectivity among 1000 offices with in the country o Facility to get Policy through NET soon o Tie-ups with leading Banks, Corporate Sectors, State Governments o Conciliatory Fora for facilitating quick settlement of Motor Third Party claims, Compromise settlement, LokAdalat and Jald Rahat Yojana. o Zonal Advisory Committees set up to maintain progress. o May I help you counters set up at Head Office and all Regional Offices.

o Citizens Charter Commitments being implemented by all offices.

5.4 UNITED INDIA INSURANCE COMPANY

5.4.1 About United India Insurance Company United India Insurance Company Limited was incorporated as a Company on 18th February 1938. General Insurance Business in India was nationalized in 1972. 12 Indian Insurance Companies, 4 Cooperative Insurance Societies and Indian operations of 5 Foreign Insurers, besides General Insurance operations of southern region of Life Insurance Corporation of India were merged with United India Insurance Company Limited. After Nationalization United India has grown by leaps and bounds and has 18,300 work force spread across 1,340 offices providing insurance cover to more than 1 Crore policy holders. The Company has variety of insurance products to provide insurance cover from bullock carts to satellites. United India has been in the forefront of designing and implementing complex covers to large customers, as in cases of ONGC Ltd , GMRHyderabad International Airport Ltd, Mumbai International Airport Ltd Tirumala-Tirupati Devasthanam etc. We have been also the pioneer in taking Insurance to rural masses with large level implementation of Universal Health Insurance Programme of Government of India & Vijaya Raji Janani Kalyan Yojana ( covering 45 lakhs women in the state of Madhya Pradesh) , Tsunami Jan Bima Yojana (in 4 states covering 4.59 lakhs of families) , National Livestock Insurance and many such schemes. United India Insurance is one of the four subsidiaries of the General Insurance Company carrying on general insurance business with its head office at

Chennai. Later on in 2002, with the passage of Insurance amendment Bill (2002), United India Insurance has been Del inked from GIC and has been functioning as an independent company.

5.4.1 VISION We United India will be

The most preferred insurer in India with global footprint & recognition. Trusted brand admired by all stakeholders The best-in-class customer service provider leveraging technology & multiple channels The provider of a broad range of innovative products to meet the needs of all customer segments Great place to work with highly motivated and empowered employees Recognized for its contribution to the society

TYPE OF OFFICE Head Office Regional Offices Large Corporate &.. Brokers Unit(LCB) Divisional Offices Branch Offices Micro Offices Total

NOS. Chennai 26 7 385 663 360 1446

CHAPTER 6

PRIVATE COMPANIES
6.1 Bajaj Allianz General Insurance Company:

Allianz AG Allianz group was founded in 1890 and is one of the world's leading insurance companies with over 100 year's experience in insurance and related services. It is also the largest insurer in Europe. Allianz group has multi-local structure and presence in over 70 countries. The key business areas of Allianz group include General Insurance (property, engineering, marine, motor, casualty and miscellaneous), Reinsurance, Risk Management, Life & health insurance, Asset Management and Pension Funds Management. Bajaj Auto Ltd. Bajaj Auto Ltd the flagship company of Bajaj Group was incorporated in 1945 as Bachraj Trading Corporation. Initially it started by assembling two and three wheelers in collaboration with Piaggio of Italy. After the expiry of the Agreement in 1971 the two and three wheelers acquired the brand name of Bajaj. The strength of the company lies in its strong brand image and ability to offer value for money products leveraging on its large-scale operations. The Joint Venture Bajaj Allianz General Insurance a joint venture non-life company promoted jointly by Bajaj Auto and German insurer- Allianz. Indian auto major holds 74 percent while Allianz holds 26 percent in the Joint Venture, and has an authorized and paid up capital of Rs. 110 crores. Mr. Graham Norris is the CEO of the company. Bajaj Allianz General Insurance will leverage

the customer base and expertise of Bajaj Auto Ltd and Allianz.

PROFILE Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Finserv Limited (recently demerged from Bajaj Auto Limited) and Allianz SE. Both enjoy a reputation of expertise, stability and strength. Bajaj Allianz General Insurance received the Insurance Regulatory and Development Authority (IRDA) certificate of Registration on 2nd May, 2001 to conduct General Insurance business (including Health Insurance business) in India..

As on 31st March 2010, Bajaj Allianz General Insurance maintained its premier position in the industry by achieving growth as well as profitability. Bajaj Allianz has made a profit before tax of Rs. 180 crores and has become the only private insurer to cross the Rs.100 crore mark in profit before tax in the last four years. The profit after tax was Rs. 121 crores, 27% higher than the previous year.

Products o Personal Accident o Health Guard o Critical Illness o Burglary Insurance o Householders Insurance o Fidelity Guarantee Policy o Office package o Money Insurance o Consequential Loss (Fire) Insurance Policy

6.2 Royal Sundaram General Insurance Company Limited:

Sundaram Finance Sundaram Finance Limited (SF) was established In 1954 with a paid-up capital of Rs. 0.02 million, primarily to assist the development of Road Transport Industry. SF has been providing financial assistance to road transport operators for acquiring commercial vehicles under hire purchase system. Emerging as the leader in the industry, SF has been staying at that position for over four decades. SF diversified into equipment leasing in 1981. Royal & Sun Alliance Royal & Sun Alliance is one of the world's leading international Insurance companies. The Sun was established in 1710 and is the oldest. Insurance company in existence still trading under its original name. The Alliance was founded in 1824 and the Royal in 1845. The Group's international presence began to emerge in the 18th century with business ventures in mainland Europe. Forays into the US and Canadian markets followed in the 19th century, and in 1998, Royal & Sun Alliance became the first UK insurance company to be granted a license to operate in China. The Joint Venture The joint venture bringing together Royal & Sun Alliance Insurance and Sundaram Finance Limited started its operations from March 2001. The company is Head Quartered at Chennai, and has two Regional Offices, one at Mumbai and another one at Delhi. The venture is aiming at Rs. 120 Crores in revenue during first year of its operations and is confident of breaking even by fifth year. Currently, Royal Sundaram has over 5 million customers, over 1700 employees and its products are distributed in over 180 cities across India,

through Agents, Distribution Partners, Affinity Partners and Brokers.

6.3 ICICI Lombard General Insurance Company:

ICICI ICICI Ltd. was established in 1955 by the World Bank, the Government of India and the Indian Industry, to promote industrial development of India by .Providing project and corporate finance to Indian industry. Since inception, ICICI has grown from a development bank to a financial conglomerate and has become one of the largest public financial institutions in India. ICICI has thus far financed all the major sectors of the economy, covering 6,848 companies and 16,851 projects. Lombard Lombard Canada Ltd., is a leading insurance management company responsible for providing insurance management services for all of the Lombard group's commercial, personal, and specialized insurance companies. Canadian owned and operated, Lombard Canada Ltd. has its head office in Toronto and has annual sales in excess of $500 million and is a wholly owned subsidiary of Fairfax Financial Holdings Limited (FFH on the TSF Lombard Canada Ltd. has achieved a reputation for providing solid underwriting performance, diversified books of business and strong capital positions. The Joint Venture ICICI Lombard General Insurance Co will be headed by Mr. Sanjiv Kerkar. ICICI would hold about 74 percent stake, while Canadian insurer Lombard would hold the maximum permissible 26 percent and commence business with a start-up capital of Rs.100 crore. ICICl Lombard has plans to sell covers to the corporate clients of ICICl. St the same time it will sell

property insurance for ICICI home loan seekers and auto insurance for those availing of car finance.

6.4 Tata AIG General Insurance Company Limited:

TATA Group Tata Enterprises with 82 companies, spread over seven sectors and with an annual turnover exceeding US $ 8.8 billion, employs more than 262,000 people. Tata Group has shown over years that it is a value driven company and has" pioneering contributions in various fields including insurance, activation, iron and steel. Tata companies have forged a number of global alliances with eminent international partners in several fields. In terms of capital market performance as many as 40 listed Tata companies account for nearly 5 percent 6fthe total market capitalization of all listed companies. TATA Group in Insurance The Late Sir Dorab Tata was the founder Chairman of New India Assurance Co. Ltd., a group company incorporated way back in 1919. Government of India took over the management of this company as a part of Nationalization of general insurance companies in 1972. Not deterred by the move, Tata group have ventured into" risk management services having tied up with AIG group, back in 1977, with the incorporation of Tata AIG Risk Management Services Pvt. Ltd.

AIG American Insurance Group is the leading U.S. based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. Its member companies write a wide range of commercial and personal insurance products through a variety of distribution channels in over 130 countries and jurisdictions throughout the world. . AIG's global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products. The Joint Venture Tata AIG General Insurance Co. Ltd. has a start-up capital of Rs. 125 crores of which 74 per cent has been brought in by Tata Sons and American partner brings in the balance 26 per cent. Tata -AIG plans to be the first Indian insurance company to offer a comprehensive policy to cover various risks in the IT sector, risk arising out of virus, cyber crime, negligent acts, errors and omissions and third party liability from a security failure. Other products on offer are property, casualty, marine, directors and officers liability, accident and health, homeowners and automobile insurance. Products o Executive Guard o Family Guard o Travel Guard

o Home Secure o Business Guard Sanjeevani o Business Guard Jyothi

6.5 Reliance General Insurance Company Limited:

Reliance Group Reliance 'Group is India's largest business house has annual sales turnover of Rs. 41,280 crore (US$ 9,003 million) and has posted a net profit of Rs. 2,940 crore (US $ 641 million) for the 12-month period ending June 30, 2000. The Group has total assets of Rs. 52,100 crore and net worth of Rs. 22,415 crore. It has a large investor base of over 5 million, as well as a large customer base in retail (textiles, LPG, Cellular phones, etc.) and commercial segments. Reliance Industries Limited, India's largest private sector enterprise, is a, major player in the Indian petrochemicals sector. Relianc6~s operations capture value addition at every stage from producing crude oil and gas to polyester and polymer products and are vertically integrated to the production of textiles. Reliance has one of the largest marketing networks in the Indian Industry. All its brands are market leaders. Reliance General Insurance Company Limited Reliance group has announced its plans to enter the Indian insurance sector- both in the life and general insurance businesses'. Reliance Industries plans to bring in around Rs. 300 Crores into its insurance venture through its financial arm Reliance Capital Ltd. Reliance group will be the lead investor for this initiative. The two companies will have an initial authorized capital of Rs.200 crores (US $ 43.62 million)

each. This is the first application from an Indian company without a foreign insurance tie-up. However, Reliance will associate with international insurance consultants to bring the best practices in the business to India.

CHAPTER 7

MARKET SHARE

April

2010

to

February 2011 Gross new premium income for private sector (in Rs millions)

ICICI-lombard Bajaj Allianz IFFCO-Tokio Reliance General HDFC ERGO General Tata-AIG Royal Sundaram Cholamandalam Shriram General Future Generali Bharti AXA General

SBI General 0 10,000 20,000 30,000 40,000 50,000

April 10 to February 11

April 09 to February 10

Among the state-owned companies, New India continued to be the leading insurer with gross premium income of Rs 63.7 billion during the period April 2010 to February 2011. during the period. The four state-owned companies remain the dominant players with a combined market share of a little over 58 per cent

April 2010 to February 2011 Gross new premium income for public sector (in Rs millions)

New India United India National Oriental Insurance 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Insurance

April 10 to February 11

April 09 to February 10

During April 2010 to February 2011, the gross premium income of the private sector insurers registered a growth of over 24.7 per cent compared to the same period in FY2009-10. The overall industry recorded a gross premium collection of Rs379 billion, registering a growth of 22.5 per cent year on year. ICICI Lombard maintained its position as the market leader amongst the private insurers, with a market share of 24.5 per cent. The company reported gross premium collection of Rs38.8 billion in the first eleven months of this fiscal, registering a growth of 29.2 per cent over the same period last year. Reliance General was the only private sector player to register a negative growth in the period under review. The company recorded a decline of 18

per cent in the premium income during the period.

CHAPTER 8 INSURANCE AUTHORITY

Insurance Regulatory and Development Authority Act, 1999, came into being from 19/04/2000. 8.1 Objects are stated in Act are as follows: "An Act to provide for establishment of Authority to protect interests of holders of insurance policies to regulate, promote and ensure orderly growth of insurance industry and for matters connected there with and further to amend Insurance Act, 1938, Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972". 8.2 Composition: IRDA will consist of a chairperson and not more than Five whole time members and not more than four part time members. Whole time members shall hold office for 5 years or until age of 62 (65 in case of chair person) whichever is earlier. Part time members shall hold office for not more than 5 years.

REGULATORY

AND DEVELOPMENT

8.3 Powers and Function of Authority 1. To regulate, promote and ensure orderly growth of insurance and re- insurance business 2. To issue a certificate of registration, renew, modify, withdraw, suspend or cancel such registration of applicant, i.e. insurance company 3. To prepare a code of conduct for agents, surveyors and loss accesses and other intermediaries who take part in insurance business 4. To exercise all powers and perform all functions of controller of Insurance under Insurance Act, 1938 5. To protect interest of policy holders in matters concerning assignment of policy, settlement of claims, terms and conditions of contract etc. 6. To promote efficiency in conduct of insurance business 7. To promote and regulate professional organizations connected with insurance business 8. To regulate investment of funds of insurance companies 9. To regulate maintenance of margin of solvency 10. To adjudicate disputes between insurers and intermediaries 11. To call for information from" undertake inspection and conduct enquiries and investigations including audit of insurers, intermediaries etc.

12. To control and regulate rates', advantages, terms and conditions offered by Insurers in respect of general insurance business riot so controlled by Tariff Advisory Committee 13. To prescribe manner and forms in which books of accounts is to be maintained 14. To exercise other powers as such may be prescribed by central government.

8.4 Insurance Advisory Committee: Authority has power to appoint a committee to provide guidance to Authority and committee is called Insurance Advisory Committee. This committee contains not more than 25 members excluding ex-officio member representing interest of commerce, trade industry, agriculture, surveyors, agents, intermediaries etc. Chairperson and members of Authority are ex-officio members of Insurance Advisory Committee. Code of conduct for insurance agent: Every insurer agent shall, Identify himself and insurance company of whom he is an agent Disclose his license to prospect on demand Give requisite information in respect of insurance product offered for sale by 'plan. Disclose scales of commission payable to him if asked by prospect his insurer and into account needs of prospect while recommending a specific

 Indicate premium to be charged by insurer on insurance product Explain to prospect nature of information required in proposal from and also importance of disclosure of material information Bring to notice of insurer any adverse habits or income inconsistency of Prospect Inform promptly about acceptance of rejection of proposal by insurer. Render necessary assistance to policyholder or claimant in complying with, requirements of settlement of claims

CHAPTER 9

Products in General Insurance

The different types of General insurance products are listed below. While most policies are optional that is at the behest of the insured, some are mandatory. The mandatory ones are: Motor Insurance Public liability (for corporate class)

Other policies include: 9.1 Fire insurance o Building or flat o Furniture fixtures & other contents o Loss of profit that is consequential loss 9.2 Miscellaneous insurance o o o o o o o Personal insurance Burglary ,theft Workmens compensation Fidelity guarantee Cancer Mediclaim Comprehensive Package Policy for jewelry, T.V, Laptops, Furniture etc

9.3 Marine Cargo Insurance o Cargo In Transit o Cargo Declaration Policy 9.4 Marine Hull Insurance Inland vessels ocean going vessels, fishing & sailing vessels, freight at risk, construction of ships, voyage insurance of various vessels, ship breaking , insurance Awaiting break up, insurance Oil & energy in respect of onshore & offshore risks including construction risk. 9.5 Non - Traditional / Rural o o o o o Cattle / Hens Crop Water Pump for agriculture Hut Other Livestock

9.6 Motor Insurance

Motor insurance is mandatory for all types of vehicles in India. There are two types of motor insurance viz o Third party, which only insures the party / parties other than the owner in an accident o Comprehensive, which insures the owner as well as the third party involved. The premium for motor vehicles is decided on the following factors: o Value of the vehicle o Location where it is to registered .places having higher claim rates (like Mumbai) are likely to have higher premium The premium for heavy commercial o Value of the vehicle o Gross laden weight, that is, the carrying capacity of the vehicle. For HCVs the driver is also insured along with the vehicle. A charge of rs.15/- is made as premium for the driver. For all sorts of vehicles insured, the policy would not cover the use on hire , reward or organized racing ,speed reliability trails and speed testing. There is (NCB) No Claim Bonus applicable for each year an insured person does not claim .It is accrued as a 5 percent deduction from the premium amount for the next year, subject to maximum 50 percent.

9.7 Property Insurance

Property insurance covers land, buildings and the contents of building. There are several types of Property insurance packages, but the most common are the Fire Insurance and burglary Insurance

9.8 Fire Insurance

Fire insurance is a comprehensive policy, which goes beyond only fire accidents. The policy, besides covering loss on account of fire, also covers loss on account of the following o o o o o Earthquake Riots Strikes Malicious Intent Floods

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

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

9.9 Burglary Insurance

Burglary insurance covers all losses arisen out of burglary committed in ones premises. The only condition for lodging a claim on the insurance party is that there should be a forced entry in to the premises. A forced entry may in the form of physical damage to the entry area, or to a person or entry gained through coercion. In this case too, the policy has no limitations and it is the right of the insured to decide upon the value of the insurance cover 9.10 Overseas Mediclaim Policy - Travel Insurance Policies issued in India under Overseas Mediclaim Scheme, as approved by Reserve Bank of India residents traveling abroad for any approved visits viz. Business, Study Tour, Specialized training conferences, Employment or

higher studies. Premium on such policies may be collected in rupees but for employment in foreign currency. This policy was originally introduced in 1984, to provide for payment of medical expenses in respect of illness suffered or accident sustained by Indian residents during their overseas trips for official or holiday purposes. In. 1998, a new policy known as VIDESH YATRA MITRA, was made available for Business and Holiday Travelers. Cover for corporate frequent travelers were also introduced. The policy provides for following Sections:1) 2) 3) 4) 5) 6) 7) Medical Cover Repatriation Of Remains Checked Baggage Loss / Baggage Delay Passport Loss Personal Accident - Overseas Personal Liability Hijack Relief Benefit

The plan available now with various companies are however not the same as each company has introduced. Some variation in the cover to suit the varying requirements. Types of overseas Mediclaim insurance policy 1) Individual Overseas Mediclaim insurance policy 2) Student Overseas Mediclaim insurance policy 3) Senior Citizen Mediclaim insurance policy.

CHAPTER 10

CHANGING SCENARIO OF GENERAL INSURANCE MARKET

'Looks

to

the

future

with

confidence

and

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

Ltd., and United India Insurance Co Ltd., with a clear cut mission as set out

GIC and its subsidiaries function through a vast country - wide network of around 4100 offices spread across the length and breadth of the country, GIC has taken the benefit of insurance to almost every district, across hilly terrain and often inaccessible areas of the country. The customer interface is made easy through a network of agents, development officers and employees at Branch, Divisional and Regional offices as well as at the corporate level. The GIC and its subsidiaries have a workforce of approximately 86,000. In 1973 tainted at various levels through in house training institutions. Now the total number of employees went up.

The industry has also promoted the National Insurance Academy (NIA), which is the premier training institute in insurance, catering not only to Indian Nationals but also to select foreign nationals. The industry issues around 23 million documents and settles 2 million claims every year. Country wide computerization in the recently past has made the task of policy- holder's servicing easier and rapid. At the same time, profitable lines and premium components increases and we became a investment company. 10.1 Standings of Indian Insurance sector compared to International Insurance Sector Technologically, Indian insurance sector is quiet comparable with the international sector. Our vast resources of skilled and technical manpower, huge market potentiality and technical know-how - all are comparable with the international market. But lacking in the process of computerization and in pricing (premium rate) is also seen. In product, we have demand in less because lack of awareness for adequate insurance cover in India with insuring public. Our marketing strategy is not very modern. But we are trying to rectify both these (Technology and Marketing) areas. The problems faced by Indian Insurance Sector Today: o Lack of awareness for insurance needs. o Lack of penetration due to inadequate marketing/delivery system. o Total computerization still in the process of implementation. o Sophisticated covers do not have adequate demands because of

General attitude to insurance in India.

10.2 The Schemes Recognizing its organizational strengths, the Govt. of India has also entrusted the corporation with the administration of various schemes for social melioration and public welfare. Social security schemes benefiting millions of Citizens below the poverty line. Personal Accident Insurance and Hut Insurance are operated all over the country for which the premiums are paid by the Government. The GIC administers on behalf of Government, the crop Insurance scheme for areas and crops notified under the crop Insurance Scheme. Various low cost mass insurance policies have been evolved over a period of time, e.g. 'Jan Arogya Bima Policy'. Role General Insurance Industry is playing in the growth of economy of the country: The General Insurance Industry has an enviable track record among public sector units. It has a consistent profit and dividend paying record accompanied by a steady growth in its financial resources. Through investments in the- Government sector and: socially - oriented Sectors the Industry has contributed immensely to the nation's

development. The industry is

recognized as one of the largest financial' initiated by the industry in the exceedingly well in

Institutions in the Country. The ventures recent years.

areas of Mutual Fund, Housing Finance have done

To protect the country's foreign exchange reserves, the reinsurance arrangement are so organized that maximum retention is made possible within the country while at the same time protecting interests of the policy holders. The GIC'S inwards reinsurance wing, insurer-accepting risk from all over the globe. called the SWIFT, maximizes the foreign exchange balance by acting as an international

10.3 GIC'S International operation:

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

acknowledged branches associate

international market. The corporation operates in 17 countries through agencies, whereas in another 14 countries, it has subsidiaries and

companies. The GIC has a subsidiary company known as 'India International Insurance Ltd. Pvt, co. Ltd.,' operating in Singapore and a joint-venture company, Kenindia

10.3.1 The impact of liberalization of economy in the activities of GlC. With the liberalization of economy, General Insurance in India is poised for a quantum jump, both in quality and quantity. 10.3.2 GIC's plan - in new business areas: The two new areas that GIC is getting into are the areas of health care and crop insurance. For the health care business, the corporation has received permission to set up a separate management services company. GIC has plans to increase the scope of cover in health care, personal accident and crop insurance and will require expertise in pricing the products.

10.4 Vision for the future:

It is estimated that the industry will outstrip the present rate of growth and reach a premium value of over Rs. l,20,000 millions by taking advantage of the extra-large mega risk and social awareness of insurance in general, even as . a developing country turns into a developed country.

The task before the industry to service the growing number of policyholders would equally see a quantum jump in issuance of documents and settlement of claims. Matching reserves and consequent investment will be a natural corollary. It is expected that the investment portfolio will touch around Rs. 2,50,000 millions by the end of the next decade, with the strength built up over the years since nationalization, GIC new looks to the future with confidence and optimism, takes on global chal1enge with its high standard of service, innovative initiative and a compelling social 10.4.1 The Research & Development activities: perspective.

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

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

CHAPTER 11

TRENDS
Trends in any sector basically refers to the up gradations or acquiring new technologies which has replaced the conventional methods in any organizations. In Todays automated and modernized era any organization cannot take a chance by not maintaining pace with the competition. With the passage of time and taking into consideration todays needs and changing scenario insurance companies should also adopt new technology i.e. it should be trendy enough to meet customer needs and expectations.

o Technological: Trends or use of technology should be such that it is eco friendly enough to be used by customers. Today, right from a grocery shop to I.T sector technologies is explored to the fullest E-Business or E-commerce has sown its seeds in every sector of business which is one of the strongest sign of improvement and technology. As we are dealing here with insurance industry let us see the technology involved in the Insurance sector.

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

o Internet: Internet usage has drastically improved in the last decade. There was a tremendous increase in the use of technology by GIC during the late 1990s. The companies Launched its website in the mid 1990s to offer basic services such as modifying policies (change of address, change of nominee, etc) and querying the status of the policy. But today, the internet has completely changed the service delivery process. Internet is today used to even sell insurance policies. Internet is, in fact, proving to be one of the widely used distribution networks for selling insurance policies. Also internet is used for sending premium notices to policy holders through e-mails. Also GIC has a special feature on its website. It has a premium calculator balance. which One accurately displays the amount of premium month wise and the remaining just has to enter the age, name of the insurance policy, the sum assured and whether there is an accident cover or not. By keying in this information, the entire premium amounts are shown within no time. This has helped the customer in a way so that he/she doesnt have to travel all the way to the branch to ascertain the amount of premium to be paid.

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

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

These MAN centres were connected to each other by a WAN network. This WAN was designed for distributed processing without a central database each division maintained a database of the policyholders. The central office in Mumbai maintained an index of policy numbers and the corresponding IP addresses of the servers where the details of the policy were maintained. o Electronic Clearance Service (ECS): Almost all the big organizations today provide the ECS facility to its customers. A policy holder having an account in any bank which is a member of the local clearing house can opt for ECS debit to pay premiums. The advantage here is that once the option is exercised, the policy holder need not visit a branch for paying the premium or collecting the receipts. On the day indicated by the policy holder, the premium amount willbe directly debited to the bank account of the policyholder and the receipt will be issued by the designated branch office. o Bank ATMs:

Many insurance companies have a tie-up with commercial banks so as to enable policyholders to use the facility of paying premiums through the bank ATMs. ICICI Lombard has a tie up with ICICI bank; Bajaj Allianz has a tie-up with Corporation bank and UTI Bank. o Call Centres and SMS services: Almost all the insurance companies have their own call centres which cater to the phone based queries of the policyholders. This service is 24x7 and they have the Interactive Voice Response (IVR) systems at all the branches. Also, LIC and other companies now provide SMS services going with the new trends like SMS banking in the banking sector.

CHAPTER 12

Claims
The Settlement of claims constitutes one of the important functions in an insurance organisation. The proper settlement of claims requires a sound knowledge of thee law, principles and practices governing insurance contracts and in particular a thorough knowledge of the conditions terms and of the standard policies and various extensions and

modifications there under. The procedure in respect of claim a under various classes of insurance follows a common pattern and may be considered under 3 broad headings

12.1 Preliminary procedure It is essential that early notification of the loss is received by insurance undue delay in notification would adversely affect the position of the insurer. However if there is any delay in notification or not or weather is material will be ultimately decided by the courts based on the facts of the individual cases The notice of loss condition in liability policies provides for two aspects a) Notification of the happening of the accident immediately followed by b) Notification of the receipt of claim or suit filed against the insured. Under certain types of policies (e.g. Burglary) notice is also to be given to police authorities.

12.2 Loss Minimization At common law, there is a duty on the part of the insured to observe good faith .This duty of good faith means that at all times the insured has to act as if he is uninsured. For E.g., the private car package policy provides , among other things , that the insured shall take all reasonable steps to safeguard the motor car

from loss or damage and to maintain it in efficient condition. In the event of any accident or breakdown the motor car shall not be left unattended without proper precautions being taken to prevent further damage or loss.

12.3 Procedural On receipt of intimation of loss or damage insurers check that: a) The policy is in force on the date of occurrence of the loss or damage b) The loss or damage is by a peril insured by the policy. c) Notice of loss received without undue delay. After this check up the loss is allotted a number and entered in the claims register. 12.4 Claim Forms The contents of the claim form vary with each class of insurance .In general the claim in general the claim form is designed to elicit full information regarding the circumstances of the loss such as date of loss, time, cause of loss, extent of loss etc claim forms are miscellaneous insurance. invariably sued in fire and

12.5 Investigation and Assessment On receipt of the claim form duly completed from the insured the insurers

decide about the investigation and assessment of loss if the loss is small the investigation to determine the cause and extent of loss is done by an officer of the insurers. Some times even this may be waived and the loss settled he basis of the claim form only. The investigation of larger or complicated claims is entrusted to independent professional surveyors who are specialist in their line the appointment of a surveyor is intimated to the claimant the surveyor is furnished with all relevant claim papers such as claim form policy copy, et cetera. However, many a times surveyor is appointed and survey is carried immediately on receipt on notice of loss, that is even before claim form could be issued. 12.6 Claims documents In addition to the claim form independent survey report certain documents are claims registration, copy police report, etc. required for to be submitted by the insurers to substantiate the claim for example for fire fire claims a report for the fire brigade for motor claims, driving license

12.7 Arbitration

It is distinct from litigation and is a method of settling disputes under contract in accordance and conciliation act 1996.

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

CHAPTER 13

Case Study
26/7/2005 - Mumbai under water

Mumbai will never be the same again. And so will the insurance sector in Mumbai after the 26/7 floods. Torrential rains which killed thousands and rendered many homeless, also led to loss of business and vehicles. The Facts: As fallout of the torrential rains, the non-life insurance sector was flooded with more than 10000 claims totalling over Rs. 2000 crores. However, these did not include the 50000 cars that have been damaged in Maharashtra. While the top four private sector general insurance companies, ICICI Lombard General Insurance, Bajaj Allianz General Insurance, Iffco Tokio General Insurance and Tata AIG have together received claims worth over Rs 1,000 crore; the four state-owned general insurance companies New India Insurance, Oriental Insurance, United Insurance and Insurance received claims close to Rs 1,500 crore. Private insurer, Bajaj Allianz General Insurance Company Ltd (BAGICL) alone had received claims for at least 10,000 motor vehicles after the recent floods in Mumbai. As several companies temporarily closed down their operations and godown stocks went missing, corporate claims were the highest, in terms of value. Next came claims for cars and household goods and from shopkeepers and National

traders for their warehouses. A majority of individuals and small and medium entrepreneurs also submitted claims.

ONGC's insurance claim is considered to be the largest given its loss of $ 500 million after fire gutted the Bombay High rig. Insurance firms set up special cells to visit victims and settle claims. In many firms, the special teams worked round-the-clock to take stock of the loss and speed up the settlement process. Bajaj Allianz settled claims worth about Rs 200 crore without any documentation, to the victims of the recent floods in Mumbai. After the natural calamity, the Finance Minister sought speedy redressal of claims. He directed the Chairmen and Managing Directors of the four public sector general insurance companies that claims below Rs 50,000, arising out of the recent floods in Maharashtra and Gujarat, should be settled by August 31. Public sector player, National Insurance Company received 3,000 claims for Rs 350 crore from its customers in Mumbai for damage to property caused by the recent rains. While some insurers had taken a re-insurance cover, some have not. Mumbai floods brought to fore the ill-preparedness both among the mega

polis administrative officials and the insurance sector. While the latter seems to have realized the damages, the former is still grappling with the situation. As death toll continues to rise, insurance firms have realized the need to better manage natural calamities. The premium for flood covers may rise in coming years.

The Effect: Heres a warning to the lakhs of Mumbaikars who are planning to insure their houses in the wake of the recent deluge. One will have to read the fine print carefully. Public sector insurance firms are quietly planning to drop the word flood from the policy. As of now, a household insurance policy is basically a fire insurance policy, which also incorporates a flood insurance policy. However, with 10,000 policy-holders filing claims totalling Rs 1,500 crores, insurance firms are looking at new ways to keep their heads above water. After the last calamitythe Latur quake of 1993 insurance firms had earthquakes from the household insurance policy. Those wanting to insure their homes against flooding may now have to pay a separate premium. The insurance sector has suffered losses of about Rs 1,500 crore. These companies may not get re-insurance for these policies as they had not taken re-insurance for these small individual polices. dropped

Questionnaire

Q1.) What according to you, Is the General Insurance market growing to its maximum level or some more products/dimensions are yet to be discovered? Q2.) According to what are the trends in General Insurance? Q3.) On an average how much time does it take to settle a claim (period)? Q4.) How important is re-insurance according to you? Q5.) In General Insurance Corporation, public Sector companies are dominating past many years? Why? Q6.) What are Challenges faced by General Insurance companies? Q7.) What are the future prospects of General Insurance?