This action might not be possible to undo. Are you sure you want to continue?
History of insurance
The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business. 1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices. 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies.
Meaning of insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
Nav nirman institute of management Page 1
 The business model is to collect more in premium and investment income than is paid out in losses. Profit can be reduced to a simple equation: Profit = earned premium + investment income . Underwriting performance is measured by something called the "combined ratio" which is the ratio of expenses/losses to premiums. and to also offer a competitive price which consumers will accept.Insurance & IRDA Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. such as those produced by ACORD. the amount of premium collected and the investment gains thereon. A company with a combined ratio over 100% may nevertheless remain profitable due to investment earnings. it is the actual "product" paid for. while anything over 100 indicates an underwriting loss. is the insurer's underwriting profit on that policy. Claims may be filed by insureds directly with the insurer or through brokers or agents. Through underwriting. Claims and loss handling is the materialized utility of insurance. Nav nirman institute of management Page 2 . Insurers make money in two ways: 1. In order to be insurable. The insurer may require that the claim be filed on its own proprietary forms. Upon termination of a given policy. with the fee being dependent upon the frequency and severity of the event occurring. 2. The insured entities are therefore protected from risk for a fee. By investing the premiums they collect from insured parties. the risk insured against must meet certain characteristics in order to be an insurable risk.incurred loss underwriting expenses. or may accept claims on a standard industry form. Insurance is a commercial enterprise and a major part of the financial services industry. the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks. minus the amount paid out in claims. A combined ratio of less than 100 percent indicates an underwriting profit. but individual entities can also self-insure through saving money for possible future losses.
and appear in person or over the telephone with settlement authority at a mandatory settlement conference when requested by the judge. and claims overpayment leakages. Incoming claims are classified based on severity and are assigned to adjusters whose settlement authority varies with their knowledge and experience. determines if coverage is available under the terms of the insurance contract. Disputes between insurers and insureds over the validity of claims or claims handling practices occasionally escalate into litigation (see insurance bad faith). and authorizes payment. where claims may be complex. If a claims adjuster suspects under-insurance. and if so. who is under no contractual obligation to cooperate with the insurer and may in fact regard the insurer as a deep pocket. the plaintiff. monitor litigation that may take years to complete. usually in close cooperation with the insured. fraudulent insurance practices are a major business risk that must be managed and overcome. called loss recovery insurance. the condition of average may come into play to limit the insurance company's exposure. the insured may take out a separate insurance policy add on. Adjusting liability insurance claims is particularly difficult because there is a third party involved.Insurance & IRDA Insurance company claims departments employ a large number of claims adjusters supported by a staff of records management and data entry clerks. the reasonable monetary value of the claim. Types of insurance Nav nirman institute of management Page 3 . administrative handling expenses. The policyholder may hire their own public adjuster to negotiate the settlement with the insurance company on their behalf. In managing the claims handling function. For policies that are complicated. The adjuster must obtain legal counsel for the insured (either inside "house" counsel or outside "panel" counsel). The adjuster undertakes an investigation of each claim. As part of this balancing act. which covers the cost of a public adjuster in the case of a claim. insurers seek to balance the elements of customer satisfaction.
Insurance & IRDA Auto insurance Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own. Liability coverage. 2. is compulsory in some countries • • • Disability insurance Long-term disability insurance Disability overhead insurance Page 4 Nav nirman institute of management . In the US and Canada. insurers offer a package which may include liability and legal responsibility for injuries and property damage caused by members of the household. for damage to or theft of the car. for the legal responsibility to others for bodily injury or property damage. In some countries. sickness and unemployment insurance Workers' compensation. In some geographical areas. especially for people who rent housing. such as flood or earthquake. for the cost of treating injuries. like medical insurance protects policyholders for dental costs. The policy may include inventory. rehabilitation and sometimes lost wages and funeral expenses. or this can be bought as a separate policy. Medical coverage. along with health insurance. Coverage typically includes: 1. Property coverage. Dental insurance. Maintenance-related issues are typically the homeowner's responsibility. dental insurance is often part of an employer's benefits package. including pets. Health insurance Health insurance policies cover the cost of medical treatments. Accident. the policy may exclude certain types of risks. such as in a traffic collision. that require additional coverage. Home insurance Home insurance provides coverage for damage or destruction of the policyholder's home. 3. or employers' liability insurance.
and some liability insurances. such as auto. are the mirror image of life insurance. are regulated as insurance. Certain life insurance contracts accumulate cash values. Life insurance Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary. and may specifically provide for income to an insured person's family. In many countries. which may be taken by the insured if the policy is surrendered or which may be borrowed against. It is a broad spectrum of insurance that a number of other types of insurance could be classified. In that sense. However. are financial instruments to accumulate or liquidate wealth when it is needed. not necessarily tied to any specific property. the tax on interest income on life insurance policies and annuities is generally deferred. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. workers compensation. and require the same kinds of actuarial and investment management expertise that life insurance requires. such as the US and the UK. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies. the tax law provides that the interest on this cash value is not taxable under certain circumstances. In the US. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. such as annuities and endowment policies. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. in some cases the benefit derived from tax deferral may be offset by a Nav nirman institute of management Page 5 . Some policies.Insurance & IRDA • • Total permanent disability insurance Workers' compensation insurance Casualty insurance Casualty insurance insures against accidents. burial. from an underwriting perspective. they are the complement of life insurance and. funeral and other final expenses.
market return. Roth IRAs) may be better alternatives for value accumulation. flood insurance. to propose recommendations for reforms in the insurance sector. preferably a joint venture with Indian partners. Moreover. They stated that foreign companies be allowed to enter by floating Indian companies. theft or weather damage.. Property insurance This tornado damage to an Illinois home would be considered an "Act of God" for insurance purposes Property insurance provides protection against risks to property. 401(k) plans. In 1993. 2000. while ensuring the financial security of the insurance market. other income tax saving vehicles (e.g. earthquake insurance. Nav nirman institute of management Page 6 .The objective was to complement the reforms initiated in the financial sector. IRAD(Insurance Regulatory and Development Authority) This millennium has seen insurance come a full circle in a journey extending to nearly 200 years.Insurance & IRDA low return. IRAs. the Government set up a committee under the chairmanship of RN Malhotra. such as fire. The committee submitted its report in 1994 wherein . the type of policy and other variables (mortality. former Governor of RBI. among other things. home insurance. it recommended that the private sector be permitted to enter the insurance industry. The IRDA was incorporated as a statutory body in April. the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. This may include specialized forms of insurance such as fire insurance.). The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums. etc. This depends upon the insuring company. in 1999. Following the recommendations of the Malhotra Committee report. inland marine insurance or boiler insurance.
Foreign companies were allowed ownership of up to 26%. which was amended in 2002 to incorporate some emerging requirements. 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests. The insurance sector is a colossal one and is growing at a speedy rate of 15-20%." In 2010. the Government of India ruled that the Unit Linked Insurance Plans (ULIPs) will be governed by IRDA. A welldeveloped and evolved insurance sector is a boon for economic development as it provides long.Insurance & IRDA The IRDA opened up the market in August 2000 with the invitation for application for registrations. Mission of IRDA as stated in the act is "to protect the interests of the Policyholders. 2000. 2002. and not the market regulator Securities and Exchange Board of India Duties.powers and functions of IRDA: Nav nirman institute of management Page 7 . 1999 laysdown the duties. Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country. Parliament passed a bill de-linking the four subsidiaries from GIC in July. based in Hyderabad. The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India.term funds for infrastructure development at the same time strengthening the risk taking ability of the country. insurance services add about 7% to the country’s GDP.Powers and Functions of IRDA Section 14 of IRDA Act. In December. the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. to regulate. promote and ensure orderly growth of the Insurance industry and for matters connected therewith or incidental thereto. The Authority has the power to frame regulations under Section 114A of the Insurance Act. Together with banking services. It was formed by an act of Indian Parliament known as IRDA Act 1999.
12. supervising the functioning of the Tariff Advisory Committee. 1938 (4 of 1938). promoting and regulating professional organisations connected with the insurance and re-insurance business. withdraw. advantages. conducting enquiries and investigations including audit of the insurers. intermediaries. 5. regulating investment of funds by insurance companies. undertaking inspection of. protection of the interests of the policy holders in matters concerning assigning of policy. insurance intermediaries and other organisations connected with the insurance business. the powers and functions of the Authority shall include. Subject to the provisions of this Act and any other law for the time being in force. calling for information from.Insurance & IRDA 1. 3. 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. 4. 6. promoting efficiency in the conduct of insurance business. 8. 10. settlement of Insurance claim. 2. adjudication of disputes between insurers and intermediaries or insurance intermediaries. suspend or cancel such registration. Without prejudice to the generality of the provisions contained in sub-section (1). regulating maintenance of margin of solvency. issue to the applicant a certificate of registration. nomination by policy holders. terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act. 2. 11. control and regulation of the rates. renew. 14. promote and ensure orderly growth of the insurance business and re-insurance business. surrender value of policy and other terms and conditions of contracts of insurance. code of conduct and practical training for intermediary or insurance intermediaries and agents. 7. 1. the Authority shall have the duty to regulate. Nav nirman institute of management Page 8 . specifying requisite qualifications. modify. 9. specifying the code of conduct for surveyors and loss assessors. levying fees and other charges for carrying out the purposes of this Act. insurable interest. 13.
Research is limited to opinion seeking through legacy channels. Advisory committee IRDA consists of a Chairman and some permanent as well as part time members. specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector. Individual incumbents decide the pace and extent of utilization of prudential and statutory bodies. F & I). specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f).Insurance & IRDA 15. Ramaprasad (Nonlife Member). are enacted under the guidance of a statutory advisory committee. IRDA Journal is available as soft copy in its website. The advisory committee consists of following individuals and ex-officio authorities: • • Chairman: Hari Narayan J. Actuary) and Sri R. Market waits for revision of insurance act and establishment meaningfully functioning regulatory organs devoid of excess delegation and subjective localization of development agencies.K. Unlike other Indian administrative Regulatory Agencies IRDA is perceived as a silent regulator with activities confined to its local existence. Sri G Prabhakara (Life Member). The regulations. and 17. Dr R Kannan(Member. Full force and utility of various institutions like Advisory Committee and self-regulatory organizations are not yet realized as the regulator seems to be in a long learning mode. There is provision for a panel of other members and part time members. however. Due to over delegations. Nav nirman institute of management Page 9 . exercising such other powers as may be prescribed from time to time. they are Mr M. Full-time Members: Currently. 16. Nair (Member. IRDA formed a high powered Insurance Law Reforms Committee known as KPN Committee with important insurance advisors like Mr N Govardhan and Dr K C Mishra as its members. is the current Chairman of IRDA. There were also a few non-advisory committee members like Mr Liaquat Khan and Mr T Viswanathan etc.
• IFFCO Tokio General Insurance Co. • Apollo DKV Insurance Company Limited • Future Generali India Insurance Company Limited • Universal Sompo General Insurance Company Ltd. • Bharti Axa General Insurance Company Ltd. Nav nirman institute of management Page 10 . • Bajaj Allianz General Insurance Company Limited • ICICI Lombard General Insurance Company Limited. Ltd. • Export Credit Guarantee Corporation Ltd. • Cholamandalam General Insurance Company Ltd. Ltd. the regulations are enacted under the guidance of a statutory advisory committee. IRDA regulates private insurance companies in India such as • Royal Sundaram Alliance Insurance Company Limited • Reliance General Insurance Company Limited. • Raheja QBE General Insurance Co. Ltd. Ltd • TATA AIG General Insurance Company Ltd. • HDFC-Chubb General Insurance Co.Insurance & IRDA Insurance Regulatory and Development Authority (IRDA) in India consists a Chairman and some permanent and part time members in the administration. • Shriram General Insurance Co. However.
wikipedia.org/wiki/Insurance Nav nirman institute of management Page 11 .2CP owers_and_Functions_of_IRDA http://en.org/wiki/Insurance_industry http://en.wikipedia.org/wiki/Insurance_Regulatory_and_Development_Authority#Duties.org/wiki/Insurance_Regulatory_and_Development_Authority#Advisory_ committee http://en.wikipedia.Insurance & IRDA Bibliography http://en.wikipedia.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.