CHAPTER.

1
INTRODUCTION

Meaning
Insurance is a means of protection from financial loss. It is a form of risk management primarily
used to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, or insurance
carrier. A person or entity who buys insurance is known as an insured or policyholder. The
insurance transaction involves the insured assuming a guaranteed and known relatively small
loss in the form of payment to the insurer in exchange for the insurer's promise to compensate
the insured in the event of a covered loss. The loss may or may not be financial, but it must be
reducible to financial terms, and must involve something in which the insured has an insurable
interest established by ownership, possession, or preexisting relationship.

The insured receives a contract, called the insurance policy, which details the conditions and
circumstances under which the insured will be financially compensated. The amount of money
charged by the insurer to the insured for the coverage set forth in the insurance policy is called
the premium. If the insured experiences a loss which is potentially covered by the insurance
policy, the insured submits a claim to the insurer for processing by a claims adjuster.
Insurance is a form of risk management in which the insured transfers the cost of potential loss to
another entity in exchange of monetary compensation known as the premium. Insurance allows
individuals, businesses and other entities to protect themselves against significant potential losses
and financial hardship at a reasonably affordable rate.

Insurance involves pooling funds from many insured entities (known as exposures) to pay for the
losses that some may incur. The insured entities are therefore protected from risk for a fee, with
the fee being dependent upon the frequency and severity of the event occurring. In order to be
an insurable risk, the risk insured against must meet certain characteristics. Insurance as
a financial intermediary is a commercial enterprise and a major part of the financial services
industry, but individual entities can also self-insure through saving money for possible future
losses.

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It is a commonly acknowledged phenomenon that there are countless risks in every sphere of life
.for property, there are fire risk; for shipment of goods. There are perils of sea; for human life
there are risk of death or disability; and so on .the chances of occurrences of the events causing
losses are quite uncertain because these may or may not take place. Therefore, with this view in
mind, people facing common risks come together and make their small contribution to the
common fund. While it may not be possible to tell in advance, which person will suffer the
losses, it is possible to work out how many persons on an average out of the group, may suffer
losses. When risk occurs the loss is made good out of the common fund .in this way each and
every one shares the risk .in fact they share the loss by payment of premium, which is calculated
on the likelihood of loss .in olden time, the contribution make the above-stated notion
of insurance

2
 CHAPTER. 2
REVIEW OF LITERATURE

Kavitha, Latha, and Jamuna.,(2012)1made a study titled, “Customers’ Attitude towards

General Insurance - A Factor Analysis Approach”, explains that with over a billion people, India
is fast becoming a global economic power. With a relatively youthful population, India will
become an attractive insurance market over the next decades. This study examines the customer
attitude towards the General Insurance. A study has been conducted at Erode district with the
sample of 750 respondents to find out the influencing factor of the policy holders in the study
area. In this context, the respondents’ opinion on the various related statements were collected
with a 5 point scaling. Factor analysis, an important multivariate technique has used to reduce
the large number of factors in a small group of factors. 25 factors which are considered to be the
different type of policy holders conscious. This study helps to find out the various customers
which are having different expectation from the General Insurance Companies in the study
area12 .

Jas Bahadur Gurung, (2011)2 “Insurance and Its Business in Nepal”, this study aims mainly to
analyze the performance of insurance business in Nepal. The data used in this study is mainly
quantitative and analysis has been carried out by using simple percentage and correlation
coefficient. The study reveals that there are altogether 25 insurance companies viz. 8 life
insurance and 16 non-life insurance and one offer both life and non-life services. They have
altogether 340 branch offices in Nepal. The growth of insurance policies for both life and non-
life insurance companies has been increasing and significant during the study period. Similarly,
the prtrend of premium collection reached to 48 percent for non-life and 37.06 percent for life
insurance in FY 2066/67 and contributed 1.70 percent in GDP of the economy. Moreover, the
investment of insurance companies has been positive but fluctuating over the period under study.
However, the correlation coefficient between total premium collection and total investment is
positive with r=0.97 and significant as its PE is only 0.0163. These facts reveal that the
performance of insurance business in Nepal is satisfactory13 .ogressive

3
Altaf Ahmad Dar, (2011)3 made a study titled, “Awareness of Life InsuranceA Study of Jammu
and Kashmir State”, explains that to find out the awareness of life insurance in the population of
Jammu and Kashmir state, a community-based crosssectional study was carried out. A total
number of 242 respondents from 242 households were interviewed by using a pretested
questionnaire after obtaining informed consent from the participants. The awareness of life
insurance was found to be 64.0 per cent. Around 45.0 per cent of the respondents came to know
about life insurance from the media which played an important role in the dissemination of
information. The mean premium amount agreeable to be paid by the respondents for life
insurance was found to be Rs 1804.00; even the low socio-economic group of people was also
willing to part with a reasonable amount of Rs. 697.00 annually for life insurance. The middle
and low socio-economic groups favored government life insurance compared to private life
insurance as they have more faith on Government Company. The findings indicate that
government should come out with a policy, wherethe public can be made to contribute to a life
insurance scheme to ensure unnecessary events and also better utilization of life insurance
facilities14 .

Sundar and Lalitha Ramakrishnan, (2010)4 “A Study on Farmers’ Awareness, Perception and
Willing to Join and Pay for Crop Insurance”, This paper discusses the findings of the study in the
area of crop insurance. Firstly it measures the awareness level and source of awareness, secondly
examines the farmers’ perception, finally identify the farmers willingness in paying for crop
insurance. The study was conducted in Kunichampet village, Puducherry District, India and 140
convenient respondents were chosen and been carried out in June and July, 2012. From the
analysis farmers awareness level about crop insurance was low. Most of the farmers were not
willing to pay for crop insurance because of instable income, premium rate, no or low
compensation, problems with distribution channel and lack of financial knowledge16 .

SanthanaVadivu. N. (2008)5 in his study on, “Insurance industry and its role in Indian
economy”, the present distribution channels of insurance industry and the awareness of insurance
among the Dubai and rural population and the comparative reach of different advertising the
promotional media as being used by the insurance selling companied the insurance product
awareness and the insurance agents performance in different areas the relative faith of the private
and public insurance players in the rural mass and the urban population. The findings of the

4
study were measured to compare insurance in India activities in insurance companies and their
products among the respondents18 .

Raju, S. and Chand, R. (2008)6“Agricultural Insurance in India: Problems and Prospects”. Crop
insurance not only stabilizes the farm income but also helps the farmers to initiate production
activity after a bad agricultural year. It cushions the shockof crop losses by providing farmers
with a minimum amount of protection. In a working paper of National Centre for Agricultural
Economics and Policy Research (Indian Council of Agricultural Research), Raju and Chand
(2008) discussed and explored the problems and prospects of agriculture insurance in the
country. They also empirically examined the perceptions of the farmers in Andhra Pradesh
regarding the Agricultural insurance. Those who availed crop insurance mentioned financial
security as the most important factor for getting their crop insured and wanted quick settlement
of claims. The non loanee farmers mentioned lack of awareness as the major reason for not
availing such insurance19 .

Rajesham.C.H and Rajender. K (2005)7made a study on, “Changing scenario of India

Insurance Sector”, reports that this research is highlighted historical based of insurance,
insurance penetration and density. This research concluded insurance companies of India are
required to come up with multi-benefit policies including tax benefits with quality based timely
customer services and need to focus on health insurance, which is one of the untapped areas of
insurance including services through innovative products, smart marketing and aggressive
distribution with internet facility, with much individual attention, transparency and flexibility to
increase the quality and volume of insurance business24

Reddy, A. (2004)8“Agricultural Insurance in India: A Perspective”. Agricultural production is

an outcome of biological activity which is highly sensitive to changes in weather. The erratic and
uneven distribution of monsoon rains perpetuated yield/price volatility and hence increased
farmer’s exposure to risk and uncertainty. In this scenario of high risk and uncertainty of rain fed
agriculture, allocating risk is an important aspect of decision making to farmers25 .

Singh, S. (2004)9“Crop Insurance in India-A Brief Review”. The risk burden of the farmers can
be reduced through crop insurance, which is primarily a way of protecting farmers against the
element of chance in crop production. Crop insurancespreads the crop losses over space and
time, provides social security to the farmers, helps in maintaining their dignity, offers self-help,

5
encourages large investments in agriculture for improving crop yield and increasing agricultural
production26 .

Punithvathy Pandian (2001)10 in her study entitled, “Impact of Liberalization on the

productivity of LIC agents”, assessed the productivity trend of the LIC agents before and after
the economic liberalization. Based on the secondary data, productivity of agents in terms of the
number of policies sold (coverage productivity) and the sum assured (sum amount productivity)
for a period of 1981-2000 has been analyzed. The linear and the compound growth rates along
with the t-test between the compound growth rates of the productivity of the agents in both the
performance categories were higher during the period after the economic liberalization when
compared to earlier period. The difference between compound growth rates at the number of
policies sold between the pre and post Liberalization period was not significantly. But that of the
sum assured was significant statistically at 5% level 28 .

Selvarani (May 2000)11, studied the “Attitude of Policy holders towards Career Agents” with
the aim to study the various life insurance schemes, to measure the attitude of policy holders
towards rural career agents, to make suggestions based on the study. She used both the primary
& secondary data. The primary data were collected by using interview schedule. There are 150
samples were chosen to do the study. It is suggested that the agents may pay attention to the loan
requirements of policy holders and assist them in getting loan with least difficulty29 .

Sonnentag S.; Kleine B. M.( 2000)12 has studied about ‘Deliberate practice at work: A study
with insurance agents’ with the aim to study about the concept of deliberate practice (Ericsson,
Krampe, &Tesch-Romer, 1993) to work settings. Deliberate practice comprises regularly
performed activities which aim at competence improvement. It is hypothesized that the amount
of deliberate practice is positively related to work performance. Results of a study with 100
insurance agents provided evidence for the occurrence of deliberate practice activities in work
contexts. The amount of current time spent on deliberate practice was significantly related to
supervisory ratings of insurance agents’ work performance. Accumulated amount of time spent
on deliberate practice in the past was not related to work performance30 .

Malliga (2000)13studied on “Marketing of LIC policies - A study on agents of Tirunelveli

Division” attempted to analyze the impact of marketing strategies, socioeconomic factors,
personality traits and attitude of LIC agents in Tirunelveli Division was chosen at random. The

6
study revealed that there was a significant association between the socio-economic factors and
the performance of both the number of policies sold and the sum assured marketing strategies
followed by the agents had significantly influenced the performance. Among personality traits
empathy, introversion, need achievement and dominance - were - found to have no association
with performance. The correlation co-efficient between the attitude of the agents and the
performance was not significant at 5% percent level. It was found that the performance of the
agents was dependent on the nature of the agency (part time & full time) and not on the type
(direct and attached) of agency31 .

Rao (1997)14 in a case study, “Drop outs in life insurance selling” analyzed the drop outs in
relation to age; education, experience and area of operation. The study was limited to a branch
for a period of one year. He found that a large number of agents got terminated every year.
Majority of them were in first year of their agency. Number of termination got reduced over the
years. Eighty two percent of the agents, terminatedwere below 35 years. Though more and more
qualified youth were had studied up to PUC or less were the main stay33 .

Balammal, M. (1996)15in her research entitled, “Job satisfaction of LIC employees - Tenkasi
Branch”, has studied the major factors which effect satisfaction of LIC employees, and level of
job satisfaction among employees of LIC in Tenkasi Branch, and study how the factors affect the
individuals satisfaction regarding their job. The primary data were used for the study and
collected through questionnaire and convenience sampling method has been adopted to frame the
sample. It was concluded that the training methodology must be appropriate to the subject taught
and it should be participative nature and also it must increase the number of training weeks. For
higher satisfaction and productivity, it is extremely important to give the employees participation
in management34 .

Arora and Singh (1995)16has studied about “Growth and Performance of Life Insurance
Corporation of India - A study on Jalandhar Division”, with the aim to appraise the Performance
of LIC Agents in his paper. It covered a period of 10 years from 1980-81 to 1989-90. The result
showed that the LIC and made manifold progress in terms of its business activities at national as
well as divisional levels. The individual business - in - force and the new business had shown
positive growth rates during the study period. However the higher growth rate was observed in
the urban than the rural area 35 .

7
Nagapandy (1994)17in his research entitled,“Performance evaluation of the life insurance
corporation - Madurai division”, has studied the potential tapped from the insurable population
(coverage performance) and the performance-oriented perception of the agents. Both primary &
secondary data were used F-test and chi-square test along with percentage analysis were applied.
It was found that high potential is management group and low potential in agricultural group
were tapped in Madurai division. One way analysis of variance showed that the potential tapped
in the insurable population differs significantly among the different segments. Further the agents
were found to give priority to the policies - Endowment, money back and new Jana Raksha at the
time of canvassing36 .

Thanulingam and Muthupandi (1989)18in the research titled, “Working career agency scheme
in LIC”, highlighted the working of the career agency scheme in Life Insurance Corporation of
India in general and in Madurai city in particular. The data were collected from the publications
and bulletins published by the LIC of India. It was conducted that there was a direct relationship
between the performance of the LIC & the number of career agents. They suggested that instead
of spending much money on advertisements it was advisable to recruit more number of career
agents and give them good training and motivation37 .

Josephine. A (1989)19made a study on, “Role of New India Assurance Company in providing
rural insurance schemes in Tirunelveli Kattabomman District”, this research is highlighted the
study of overall growth of New India Assurance Company, determine the level of utilization of
rural insurance schemes by the weaker section based on quota sampling and convenience
sampling technique in 250 policyholders. Itwas concluded would be appropriate for the
consideration of the company for the benefit of its future business operations38 .

Mishra (1988)20s in his study on, “Appraisal of Marketing Strategies of the Life Insurance
Corporation of India”, the researcher found that the personal attitudes and expertise of the
chairman had influenced the business. The existing strength of the corporation (marketing field
force) was not properly utilized, trained and motivated. He further found that in Indian situation,
sex composition was a significant factor to determine the market potential. Age, residence and
occupational pattern of the population had influenced the potential tapped in the life insurance
market. According to him, the LIC had not given much weightage to customer satisfaction39 .

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 CHAPTER. 3
HISTORY OF INSURANCE IN INDIA

 During 1818 Europeans started the oriental life insurance company in Calcutta. In 1870
the first Indian Insurance company Bombay Mutual Life Insurance was started. In 1870
the British Government enacted the Insurance Act. In 1912, the first Indian Insurance Act
was passed with the enactment again in 1938.
 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. In 1907 the Indian Mercantile Insurance Ltd setup the first company to transact
all classes of general Insurance business. During 1957,
 The General insurance council, a wing of the Insurance association of India framed a
code of conduct for ensuring fair conduct and found business practices.
 The 1968 the Insurance act was amended to regulate investments and set minimum
solvency margins and the Tariff Advisory committee setup. In 1972 the General
insurance Business (Nationalization) Act 1972, nationalized the general insurance
business in India with effect from 1st January 1973.
 April 1993, Government setup a high powered committee headed by Mr. RN Malhotra to
suggest reforms in the insurance sector and make it more efficient and competitive.
 The committee recommended the establishment of a strong and effective insurance
regulatory authority in the form of a statutory autonomous board on the lines of SEBI.
 In December 1999, the insurance sector was thrown open to private sector, followed by
the establishment of IRDA (Insurance Regulatory and Development Authority) in April
2000. Realizing the big potential in Indian market, companies all over the globe rushed to
find a foothold in the Lucrative Indian Market. Development of technology and
convergence of services witnessed the insurance products being offered by banks also.
 It is submitted that the potential for growth of the Indian Insurance industry can be
gauged by the fact that the Indian Insurance market registered the highest growth in the

9
Asian Region even though Indian's Share of the global insurance premium is much less
of compared to developed countries like US, Japan England etc.

10
RISKS

Risk is the potential of gaining or losing something of value. Values (such as physical
health, social status, emotional well-being or financial wealth) can be gained or lost when taking
risk resulting from a given action or inaction, foreseen or unforeseen. Risk can also be defined as
the intentional interaction with uncertainty. Uncertainty is a potential, unpredictable, and
uncontrollable outcome; risk is a consequence of action taken in spite of uncertainty.
Risk perception is the subjective judgment people make about the severity and probability of a
risk, and may vary person to person. Any human endeavor carries some risk, but some are much
riskier than others.

TYPES OF RISKS

Pure Risk

Pure risk is a situation that holds out only the possibility of loss or no loss or no loss. For
example, if you buy a new textbook, you face the prospect of the book being stolen or not being
stolen. The possible outcomes are loss or no loss. Also, if you leave your house in the morning
and ride to school on your motorcycle you cannot be sure whether or not you will be involved in
an accident, that is, you are running a risk. There is the uncertainty of loss. Your motorcycle
may be damaged or you may damage another person’s property or injured another person. If you
are involved in any one of these situations, you will suffer loss.

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Personal Risks

Personal risks are those risks that directly affect an individual.

Personal risks detrimentally affect the income earning power of an individual. They involve the
likelihood of sudden and complete loss of income, or financial assets sharp increase in expenses
or gradual reduction of income or financial assets and steady rise in expenses.

SpeculativeRisk

Speculative risk is a situation that holds out the prospects of loss, gain, or no loss no gain (break-
even situation). Speculative risks are very common in business undertakings. For example, if
you establish a new business, you would make a profit if the business is successful and sustain
loss if the business fails.
If you buy shares in a company you would make a gain if the price of the shares rises in the stock
market, and you would sustain a loss if the price of the shares falls in the market. If the price of
the shares remains unchanged, then, you would not make a profit or sustain a loss. You break-
even. Gambling is a good example of speculative risk. Gambling involves deliberate creation of
risk in the expectation of making a gain. There is also the possibility of sustaining a loss. A
person betting $500 on the outcome of the next weekend English Premier League Match faces
both the possibility of loss and of gain and of no loss, no gain. Most speculative risks one
dynamic risk with the exception of gambling situations.

12
Fundamental Risk

A fundamental risk is a risk which is non-discriminatory in its attack and effect. It is impersonal
both in origin and consequence. It is essentially, a group risk caused by such phenomena like
bad economy, inflation unemployment, war, political instability, changing customs, flood,
draught, earthquake, weather typhoon, tidal waves etc. They affect large proportion of the
population and in some cases they can affect the whole population e.g.weather. The losses that
flow from fundamental risks are usually not caused by a particular individual and the impact of
their effects falls generally on a wide range of people or on everybody. Fundamental risk arise
from the nature of the society we live in or from some natural occurrences which are beyond the
control of man.

Static Risk

Static risks are risks that involve losses brought about by irregular action of nature or by
dishonest misdeeds and mistakes of man. Static losses are present in an economy that is not
changing (static economy) and as such, static risks are associated with losses that would occur in
an unchanging economy. For example, if all economic variables remain constant, some people
with fraudulent tendencies would still go out steal, embezzle funds and abuse their positions. So
some people would still suffer financial losses. These losses are brought about by causes other
than changes in the economy. Such as perils of nature, and the dishonesty of other people.

The Risk Management Process

Risk Management is "the systematic application of management policies, procedures and
practices to the tasks of establishing the context, identifying, analysing, assessing, treating,
monitoring and communicating
It is an iterative process that, with each cycle, can contribute progressively to organizational
improvement by providing management with a greater insight into risks and their impact.
Risk management should be applied to all levels of the University, in both the strategic and
operational contexts, to specific projects, decisions and recognized risk areas. Risk is 'the chance

13
of something happening that will have an impact on objectives'. It is, therefore, important to
understand the objectives of the University, work unit, project or your position, prior to
attempting to analyze the risks.
After that you have determined that you would like to insure against a loss, the next step is to
seek out insurance coverage. Here you have many options available to you but it is always best
to shop around. You can go directly to the insurer through an agent, who can bind the policy.
The process of binding a policy is simply a written acknowledgment identifying the main
components of your insurance contract. It is intended to provide temporary insurance protection
to the consumer pending a formal policy being issued by the insurance company.

14
 CHAPTER. 4
TYPES OF INSURANCE

Insurance is a way of protecting yourself from any cost that may arise from damage to your
property or your health.
Insurance works when you agree to transfer risk by paying specified amount of money, called
premiums. A premium is the amount of money you pay to insurance company to have an
insurance policy. These premium creates a pool of money that guarantees the person holding the
policy will be compensated for losses caused by occurrences such as fire accident, illness, or
death. Insurance companies decide what the risk is on a particular policy and then charge the
appropriate premium. You can pay a premium monthly or annually.
Insurance policy are generally renewed annually so you should shop around at this stage to see if
you are getting the best value for your money.
Different policies have different terms and conditions so make sure you know what the terms and
conditions of your policies are. It is important to understand exactly what your insurance policy
covers when you buy it.

Home Insurance
Home insurance, also commonly called homeowner's insurance is a type of property
insurance that covers a private residence. It is an insurance policy that combines various personal
insurance protections, which can include losses occurring to one's home, its contents, loss of use
(additional living expenses), or loss of other personal possessions of the homeowner, as well
as liability insurance for accidents that may happen at the home or at the hands of the
homeowner within the policy territory.
Home insurance will generally pay for any damage caused to your home by accident or by bad
weather. You are not obliged by law to insure your home but if you have a mortgage, most
lenders will insist that your house is appropriately insured. In general your home should be
insured for damage to contents and for damage to the structure of your home

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Motor Insurance
Vehicle insurance (also known as car insurance, motor insurance or auto insurance)
is insurance for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide
financial protection against physical damage and/or bodily injury resulting from traffic
collisions and against liability that could also arise there from. The specific terms of vehicle
insurance vary with legal regulations in each region. To a lesser degree vehicle insurance may
additionally offer financial protection against theft of the vehicle and possibly damage to the
vehicle, sustained from things other than traffic collisions, such as keying and damage sustained
by colliding with stationary objects.
Auto Insurance in India deals with the insurance covers for the loss or damage caused to the
automobile or its parts due to natural and man-made calamities. It provides accident cover for
individual owners of the vehicle while driving and also for passengers and third party legal
liability.
Auto Insurance in India is a compulsory requirement for all new vehicles used whether for
commercial or personal use. The insurance companies have tie-ups with leading automobile
manufacturers. They offer their customers instant auto quotes. Auto premium is determined by a
number of factors and the amount of premium increases with the rise in the price of the vehicle.
The claims of the Auto Insurance in India can be accidental, theft claims or third party claims.

Health Insurance
Health insurance is insurance against the risk of incurring medical expenses among individuals.
By estimating the overall risk of health care and health system expenses, among a targeted
group, an insurer can develop a routine finance structure, such as a monthly premium or payroll
tax, to ensure that money is available to pay for the health care benefits specified in the insurance
agreement. The benefit is administered by a central organization such as a government agency,
private business, or not-for-profit entity. According to the Health Insurance Association of
America, health insurance is defined as "coverage that provides for the payments of benefits as a
result of sickness or injury. It includes insurance for losses from accident, medical expense,
disability, or accidental death and dismemberment".

16
Health Insurance is used to pay for private care in hospital or from various health professionals
in hospitals or in their practices. There are number of health insurer in India.

Travel Insurance

Travel insurance is insurance that is intended to cover medical expenses, trip cancellation, lost
luggage, flight accident and other losses incurred while traveling, either internationally or
domestically.
Travel insurance can usually be arranged at the time of the booking of a trip to cover exactly the
duration of that trip, or a "multi-trip" policy can cover an unlimited number of trips within a set
time frame. Some policies offer lower and higher medical-expense options; the higher ones are
chiefly for countries that have high medical costs.
Travel Insurance can cover you if you become ill or havean accident while you are on holiday or
while travelling. If you are travelling within EU/EEA you should have a European health
insurance card which allows you to access health care services. In general travel insurance
should supplement the services available to people with a European Health Insurance Card.

Life Insurance
Life insurance (or life assurance, especially in the Commonwealth), is a contract between
an insurance policy holder and an insurer or assurer, where the insurer promises to pay a
designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death
of an insured person (often the policy holder). Depending on the contract, other events such
as terminal illness or critical illness can also trigger payment. The policy holder typically pays a
premium, either regularly or as one lump sum. Other expenses (such as funeral expenses) can
also be included in the benefits.
Life policies are legal contracts and the terms of the contract describe the limitations of the
insured events. Specific exclusions are often written into the contract to limit the liability of the
insurer; common examples are claims relating to suicide, fraud, war, riot, and civil commotion.
A Life Insurance policy provides money for defendants if you die. Life insurance policies are
important if you have dependents such as a partner or children.

17
Auto Insurance
There were over 10-million traffic accidents in the U.S. in 2009 (latest available data) and 33,808
people died in motor vehicle crashes in those accidents, according to data released by the Fatality
Analysis Reporting System (FARS). The number one cause of death for American's between the
ages of 5 and 34 were auto accidents. Over 2.3 million drivers and passengers received treatment
in emergency rooms in 2009, and the costs of those accidents including deaths and disabling
injuries was around $70 billion.

While all states do not require drivers to have auto insurance, most do have requirements
regarding financial responsibility in the event of an accident. Many states do periodic random
checks of drivers for proof of insurance. If you do not have coverage, the fines can vary by state
and can range from the suspension of your license, to points on your driving record, to fines from
$500 to $1,000.
If you drive without auto insurance and have an accident, the fines will probably be the least of
your financial burden. Your car, like your home is a valuable asset you use every day. If your car
is damaged in an accident and you have no auto insurance, you will have no way to replace that
vehicle unless you have a large savings account, and you don't really want to tap into that
savings when auto insurance could cover the cost.

If you, a passenger or the other driver is injured in the accident, your auto insurance will pay
those expenses, and help guard you against any litigation that might result from the accident.
Auto insurance also protects your vehicle against theft, vandalism or a natural disaster such as a
tornado or other weather related incidents.
Again, as with all insurances, your individual circumstances will determine the price of your auto
insurance. The best advice is to seek out several rate quotes, read the coverage provided carefully
and check periodically to see if you qualify for lower rates based on age, driving record or the
area where you live.

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GENERAL INSURANCE

General insurance helps us protect ourselves and the things we value, such as our homes, our
cars and our valuables, from the financial impact of risks, big and small – from fire, flood, storm
and earthquake, to theft, car accidents, travel mishaps – and even from the costs of legal action
against us. And we can choose the types of risks we wish to cover by choosing the right kind
of policywith the features we need.
In general, insurance works by spreading the cost of unexpected risks among a large number of
people in the same region who share similar risks.
When you take out an insurance policy, you pay a monthly or annual premium. That money joins
the premiums of many thousands of other policyholders and goes into a big pool of funds. For
more information on how premiums work click here.
With any luck, you will never need to draw on that pool. But if you happen to be one of the
unlucky ones affected by an unexpected calamity, perhaps through severe weather or accident,
that pool of funds can be used to help you up to the limit you have selected in your policy.
If things go wrong, your insurer may either repair or replace the items that have been lost or
damaged, depending on the terms of your policy. You may also have the choice of receiving
a cashsettlement for the amount of money agreed in your policy.

Types of General Insurance:

Travel Insurance
An insurance product designed to cover the costs and losses, and reduce the risk associated with,
unexpected events you might incur while traveling. It's often pitched as the best protection for
those traveling domestically or abroad. Many online companies selling airplane tickets or travel
packages allow consumers to purchase travel insurance (also known as travelers insurance) as an
added service. Some travel insurance policies cover damage to personal property; rented
equipment, such as a rental cars; or even the cost of paying a ransom in the case of a kidnapping.

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Marine Insurance
A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the
insured, in the manner and to the extent thereby agreed, against transit losses, that is to say losses
incidental to transit.
A contract of marine insurance may by its express terms or by usage of trade be extended so as
to protect the insured against losses on inland waters or any land risk which may be incidental to
any sea voyage.
In simple words the marine insurance includes:
A. Cargo insurance which provides insurance cover in respect of loss of or damage to goods
during transit by rail, road, sea or air. Thus cargo insurance concerns the following :
(i) Export and import shipments by ocean-going vessels of all types.
(ii) Coastal shipments by steamers, sailing vessels, mechanized boats, etc.
(iii) Shipments by inland vessels or country craft.
(iv) Consignments by rail, road, or air and articles sent by post.
B. Hull insurance which is concerned with the insurance of ships (hull, machinery, etc.).

Commercial Insurance
Plain and simple, commercial insurance is insurance that protects businesses. It covers
businesses against losses, arising from things like damage to property or injury to employees,
and is a term commonly used to label core business insurance covers like public liability and
employers’ liability.
Commercial insurance comes in many forms, and what you’ll need will depend upon your
business. Your typical tradesmen would probably need more commercial insurance cover than a
professional writer, for instance, because risks vary from business to business and for some,
they’re likely to be bigger.
Commercial insurance consists of one or more types of coverage designed to protect businesses,
their owners and their employees. Many business insurance policies include basic coverage’s
such as property, liability, crime and commercial auto insurance, as well as other optional
insurance, such as business interruption insurance, equipment breakdown insurance, and workers
compensation. Add Cyber Insurance Employee benefits such as dental, vision, disability and

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group life insurance also fall under commercial insurance, as do surety bonds which help ensure
that contractors stick to the terms of a construction contract and/or follow governmental rules
and regulations, as well as protect against losses stemming from a court decision or employee
theft.

Business Property Insurance

For most businesses, the property that is needed to run the company is very valuable. From a
small office to a large retail company, there is always property that must be protected. Business
property can include everything from the chair and desk you sit at to the stock kept in a
warehouse. Your products, your files, your equipment – all of these things are the property of
your company and needed to run the business.

Property insurance can also cover the building itself if you are the owner. For those who lease
space to run their business, it refers to everything inside the offices, warehouses, and other space
occupied by the company. For many businesses, the loss of this property would be catastrophic.
Property insurance is thus one of the most basic types of commercial insurance and often the first
thing your insurance professional will discuss with you

Liability Insurance for a Business

When it comes to liability, the risks are much higher for a business than for the average citizen.
Especially when you are dealing with the public, the risk of a small mistake that results in a big
problem is very high. Businesses are therefore protected by liability insurance.

When it comes to liability, there are many different types. Most businesses will carry what is
known as a general liability policy. This covers a wide range of potential incidents and can
prevent the company or its employees from facing a serious financial loss in the event of a
lawsuit.

Depending on your type of business, you may need some different forms of liability coverage in
addition to the general policy. Common types are what are known as professional liability
coverage, which comes in a few forms. Some companies require errors & omissions coverage,

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which is a type of liability coverage that protects from mistakes, often in paperwork, made in the
course of helping a client. Often people like tax preparers and lawyers require this type of
coverage. It is similar to another, better known type of liability coverage, malpractice insurance,
but has some differences. Most people think of malpractice in relation to doctors, but it can
actually apply to a wide range of professionals; it protects from errors seen as being below the
standards expected of the professional.

Principles of Insurance

The main objective of every insurance contract is to give financial security and protection to be
insured from any future uncertainties. Insured must never try to misuse this safe financial cover.
Seeking profit opportunities by reporting false occurrence violates the terms and conditions of an
insurance contract. This breaks trust, results in breaching of a contract and invites legal penalties.
An insurer must always investigate any doubtable insurance claims. It is also a duty of the
insurer to accept and approve all genuine insurance claims made, as early as possible without any
further delays and annoying hindrances.

Following are the Principles of Insurance:

1. Nature of contract:
Nature of contract is a fundamental principle of insurance contract. An insurance contract comes
into existence when one party makes an offer or proposal of a contract and the other party
accepts the proposal.A contract should be simple to be a valid contract. The person entering into
a contract should enter with his free consent.
2. Principal of utmost good faith:
The Principle of Utmost Good Faith, is a very basic and primary principle of insurance.
According to this principle, the insurance contract must be signed by both the parties (i.e. insurer
and insured in) an absolute good faith or belief or trust.
Under this insurance contract both the parties should have faith over each other. As a client it is
the duty of the insured to disclose all the facts to the insurance company. Any fraud or
misrepresentation of facts can result into cancellation of the contract.

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3. Principle of Insurable interest:
Under this principle of insurance, the insured must have interest in the subject matter of the
insurance. Absence of insurance makes the contract null and void. If there is no insurable
interest, an insurance company will not issue a policy.
An insurable interest must exist at the time of the purchase of the insurance. For example, a
creditor has an insurable interest in the life of a debtor, A person is considered to have an
unlimited interest in the life of their spouse etc.
4. Principle of indemnity:
Indemnity means security or compensation against loss or damage. The principle of indemnity is
such principle of insurance stating that an insured may not be compensated by the insurance
company in an amount exceeding the insured’s economic loss.
In type of insurance the insured would be compensation with the amount equivalent to the actual
loss and not the amount exceeding the loss.
This is a regulatory principal. This principle is observed more strictly in property insurance than
in life insurance.
The purpose of this principle is to set back the insured to the same financial position that existed
before the loss or damage occurred.

5. Principle of subrogation:
The principle of subrogation enables the insured to claim the amount from the third party
responsible for the loss. It allows the insurer to pursue legal methods to recover the amount of
loss, For example, if you get injured in a road accident, due to reckless driving of a third party,
the insurance company will compensate your loss and will also sue the third party to recover the
money paid as claim.
6. Double insurance:
Double insurance denotes insurance of same subject matter with two different companies or with
the same company under two different policies. Insurance is possible in case of indemnity
contract like fire, marine and property insurance.

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Double insurance policy is adopted where the financial position of the insurer is doubtful. The
insured cannot recover more than the actual loss and cannot claim the whole amount from both
the insurers.
7. Principle of proximate cause:
Proximate cause literally means the ‘nearest cause’ or ‘direct cause’. This principle is applicable
when the loss is the result of two or more causes. The proximate cause means; the most dominant
and most effective cause of loss is considered. This principle is applicable when there are series
of causes of damage or loss.
The principle states that to find out whether the insurer is liable to pay for the loss or not, the
proximate(closest) and not the remote must be looked into.

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 CHAPTER. 5
INSURANCE FRAUD

Insurance fraud is any act committed with the intent to obtain a fraudulent outcome from an
insurance process. This may occur when a claimant attempts to obtain some benefit or advantage
to which they are not otherwise entitled, or when an insurer knowingly denies some benefit that
is due. According to the United States Federal Bureau of Investigation the most common
schemes include: Premium Diversion, Fee Churning, Asset Diversion, and Workers
Compensation Fraud. The perpetrators in these schemes can be both insurance company
employees and claimants.[1] False insurance claims are insurance claims filed with the intent
to defraud an insurance provider.

Insurance fraud has existed since the beginning of insurance as a commercial

enterprise.[2] Fraudulent claims account for a significant portion of all claims received by
insurers, and cost billions of dollars annually. Types of insurance fraud are diverse, and occur in
all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims
to deliberately causing accidents or damage. Fraudulent activities affect the lives of innocent
people, both directly through accidental or intentional injury or damage, and indirectly as these
crimes cause insurance premiums to be higher. Insurance fraud poses a significant problem, and
governments and other organizations make efforts to deter such activities.

CAUSES OF INSURANCE FRAUDS

 The chief motive in all insurance crimes is financial profit. Insurance contracts provide both
the insured and the insurer with opportunities for exploitation.
 Insurance companies are also susceptible to fraud because it's possible for fraudsters to file
claims for damages that never occurred.
 Many times it is observed that false insurance claims can be made to appear like ordinary
claims. This allows the fraudster to file claims for damages that never occurred and so obtain
payment with little or no initial cost.
 To attract maximum customers towards the insurer than competitors.

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 TYPES OF INSURANCE FRAUDS

Many times insurance frauds exist from scamming whether it is auto insurance, life
insurance. All types of insurance frauds divided into:

 Hard Fraud
 Soft Fraud
 Automobile Insurance Fraud
 Life Insurance Fraud
 Property Insurance Fraud
 Internal Fraud
 External Fraud

Hard Fraud:

Hard Fraud includes someone staging a car accident, injury, arson, loss, break-in or someone
writing false bills to Medicare to illegally receive money from their insurance company. This
type of fraud often receives more media attention and it is easier to detect. Hard fraud often
involves criminal activities of insurance company. But, an individual can also be found guilty of
hard fraud.
Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision,
auto theft, or fire that is covered by their insurance policy in order to receive payment for
damages. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of
dollars.

Soft Fraud:
It happens when a person pads their insurance claims by telling “White lies”,
Such as,they are feeling, too ill to come to work, so they can receive workers compensation
benefits that wouldn’t have otherwise. This is more difficult to detect.

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Soft fraud, which is far more common than hard fraud, is sometimes also referred to as
opportunistic fraud. This type of fraud consists of policyholders exaggerating otherwise-
legitimate claims. For example, when involved in an automotive collision an insured person
might claim more damage than actually occurred. Soft fraud can also occur when, while
obtaining a new health insurance policy, an individual misreports previous or existing conditions
in order to obtain a lower premium on his or her insurance policy.

Automobile Insurance Fraud:

Fraud rings or groups may fake traffic deaths or stage collisions to make false insurance or
exaggerated claims and collect insurance money. The ring may involve insurance claims
adjusters and other people who create phony police reports to process claims.

Life Insurance Fraud:

Life insurance fraud may involve faking death to claim life insurance. Fraudsters may sometimes
turn up a few years after disappearing, claiming a loss of memory.
Another example is former British Government minister John Storehouse who went missing in
1974 from a beach in Miami. He was discovered living under an assumed name in Australia,
extradited to Britain and jailed for seven years for fraud, theft and forgery.

Property Insurance Fraud:

Possible motivation for this can include obtaining payment that is worth more than the value of
the property is been destroyed, or to destroy and subsequently receive payments for good that
could not otherwise be sold.The majority of property crimes involves arson.

Health Insurance Fraud:

Health insurance fraud is described as an intentional act of deceiving, concealing, or
misrepresenting information that results in health care benefits being paid to an individual or
group.

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Fraud can be committed either by an insured person or by a provider. Member fraud consists of
claims on behalf of ineligible members and/or dependents, alterations on enrollment forms,
concealing pre-existing conditions, failure to report other coverage, prescription drug fraud, and
failure to disclose claims that were a result of a work-related injury.
Independent medical examinations debunk false insurance claims and allow the insurance
company or claimant to seek a non-partial medical view for injury-related cases.

Internal Fraud:

There are those perpetrated against insurance companies or its policyholders by agents,
managers, executives or other employees.

External Fraud:
There are direct against insurance by individuals or entities as drivers an policyholders, vendors,
beneficiaries, etc.

Automobile Insurance Fraud:

Insurance fraud w.r.t Automobile is widespread, automobiles are supposed to be insured

everywhere. There are numerous types of automobile frauds claims such as:

 Filling a false theft report.

 Filling a False injury report.
 Filling a false accident report.
 Filling a false damage report.

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Life Insurance Frauds:
Life Insurance is very specific. It refers to act of international deception on the part of those
selling 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,
burial, funeral and other final expenses. 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 most
states, a person cannot purchase a policy on another person without their knowledge.
Following are the ways through which fraudsters commit frauds in life insurance.

 Some life insurance fraud is committed by people buying insurance or who already
possess it.
 Common kind is making deliberate misstatement on application for insurance.
 It is observed that many times the information provides by the policy holder are fake or
incomplete with the information of hiding truth.
 E.g. existing disease, age factor, hereditary problem etc.
 Many times the policy holders have fake deaths so that the family members can claim the
policy.
 In many cases, doctors also get involved in the life insurance fraud by acting as a medical
examiners that certify the health of people.
 Vertical frauds: In this agents recruit people with terminal illness to buy numerous
policies, all of which will have an annuity. The *erson gets some money to save it to the
end of his life, but the majority of the funds will end up in the pockets of the third-party
investor’s sifter the person’s death.

Health Insurance Fraud:

Fraudulent behavior designed to solicit money which a person or group is not entitled is called as
health insurance frauds involving, perpetuated by variety of sources, including health insurance
companies, insurance brokers, unscrupulous doctors, allied health professionals, medical
institution and patients.

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Health insurance fraud is described as an intentional act of deceiving, concealing, or
misrepresenting information that results in health care benefits being paid to an individual or
group.
Following are the few examples to commit fraud:
 Falsification of information on forms.
 Filling of false claims, treatments for patients that never occurred.
 Diagnose disease that does not exist and other unnecessary testing.

Property Insurance Fraud:

Homeowner insurance fraud is committed whenever a person knowingly submits a false claim
on a homeowners or renters policy for more than the loss sustained. Common forms of this type
of insurance fraud include: Overstating the value of stolen items after an actual burglary of
a home or vehicle.
 Obtaining payment that is worth more than the value of the property destroyed or to
destroy and subsequently receive payment for goods that could not otherwise be sold.
 Concealing of the information by the insurance company at the time of insurance
contract.
 Intentionally damaging the property and asking for the insurance claims by the policy
holders.
 Payment of exorbitant a commission to the agents for heavy sales and advertisement of
the policies by the insurance companies.

Internal Frauds:
There are those perpetrated against insurance companies or its policy holders by agents,
managers, executives and other insurance employees.
i. Fake documents: Agents or insurer issuing fake policies, certificates, insurance
identifications cards or binders.

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 ii. False statement: Agents or insurer making false statement on a filing with the
insurance department.
iii. Pocketing premiums: Agents or insurer pocketing premiums than issuing a fairy
policy or none at all.

External Fraud:
External Fraud is the risk of unexpected financial, material or reputational loss as the result
of fraudulent action of persons external to the firm. It is a recognized risk category in
regulatory frameworks worldwide.

Disaster fraud:
Disaster fraud, which we'll define as a deliberate act to defraud individuals or the government
after a catastrophe, can be divided into five primary categories: charitable solicitations,
contractor and vendor fraud, price gouging, property insurance fraud, and forgery.

Medical fraud:
Health care fraud includes health insurance fraud, drug fraud, and medical fraud. Health
insurance fraud occurs when a company or an individual defrauds an insurer or government
health care program, such as Medicare (United States) or equivalent State programs.

THE IMPACT OF INSURANCE FRAUD

MANY STATES have enacted ‘victim’s rights’ laws that allow victims to make a statement in
court either during a trial or at sentencing. All victims of insurance frauds are encouraged to take
advantage of this opportunity to spread the word to judges, Juries and others in the court room
including the news media about the nature of this crime. Below are facts and figures that can be
woven into a personal statement of how frauds have affected you and/or your company.
Insurance fraud is a major crime that imposes significant financial and personal cost on
individuals businesses, government and society as a whole. Fraud is wide spread and growing.

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At one level, insurance fraud is an economic crime costing individuals, business and government
billions of dollars a year. But fraud also is a violent crime that can involve a murder, personal
injury and serious property damage. Insurance fraud also imposes other personal cost such as
disrupted lives and families, humiliation and depression, lost jobs and bankruptcy.

Higher Insurance premiums

Frauds combines to higher insurance premiums because insurance companies generally must
pass the cost of the bogus claims and of fighting fraud onto policyholders. This contributes to a
premium spiral that can price essential insurance coverage, often required by state law, beyond
the reach of many consumers and business. For example:
Auto insurance: False injury claims involving deliberately staged car accidents, a major reason
auto insurance premium.
Workers compensation: Workers compensation premiums are rapidly raising rapidly, in part
because of fake injury claims by employee and fraud by some employers to lower their premium.
Many smaller business, especially, report that workers compensation insurance is increasingly
unaffordable.

Rising cost of goods and services

Business must pass the cost of rising insurance premiums onto their customers by raising prices
for goods and services. Many larger corporations also spend millions of dollars a year for
investigation and fraud-prevention programs that aim. This cost also is reflected in higher prices
of products and services.
Lost personal income, savings
Many insurance fraud schemes steal money directly from policyholders. The varied schemes can
cost people from a few dollars to their entire life savings. Here are several examples:
Phone health coverage: Several hundred thousand people, for example, have unknowingly
purchased phony health coverage. They lost the premium money they paid, but many also faced
catastrophic losses when they became ill and had to pay large medical bills themselves because
their policy was worthless.

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Dishonest agents: Dishonest insurance agents will pocket client insurance premium checks
themselves, leaving the clients dangerously uncovered. Dishonest insurance agents also increase
a policyholder’s premiums by secretly adding unwanted coverage to clients policies.
Ruined credit: Many seriously ill people who purchased phony health insurance found their
credit ruined when they couldn’t pay large medical bills after their policy refused to pay.

Diverts government resources

Fighting insurance fraud is a major expense for federal, state and local government. This dilutes
the nation’s overall anti-crime efforts by diverting often limited government resources needed to
fight other crimes.
State Fraud Bureaus: State conducts extensive anti-fraud programs, funded by tax payers and
insurance companies. Most states, for example, have insurance fraud agencies that investigate
suspected swindles and refer cases foe potential prosecution.
Police and other law enforcement: State, local and federal law enforcement all are involved in
investigating insurance fraud cases, often jointly.
Prosecution: Taxpayers funded prosecutors devote considerable time and resources to pursuing
fraud cases in court, many of which are complex and require extensive time to build viable cases.
Federal Government: The Federal Government annually allocates several billion dollars to
fighting fraud in Medicare and Medicaid, the respective public health insurance programs for the
elderly and poor.
Personal Cost
Insurance Fraud can also impose large personal cost on its victims. Many victims feel
embarrassed, humiliated and even violated. Often their lives and families also are disrupted for
long periods of time. Many must recover from serious financial losses or fraud-related physical
injuries. Victims also may have to recover or replace property that was stolen, damaged or
destroyed by schemes. Many victims also must spend considerable assisting law enforcement
and prosecutors as material witnesses.
Diverts from essential services
A Federal and state government fraud- fighting effort costs taxpayers billions of dollars a year,
thus diverting scarce tax money from other essential public services. Fraud against taxpayers

33
funded health program such as Medicare and Medicaid diverts that money from meeting the
heath needs of the elderly and poor.

MEASURES TO PREVENT INSURANCE FRAUDS

It is necessary to adopt “proper fraud prevention programs” to control the rising insurance:
Role of the government
Government should take lead in prevention of fraudulent activities in the main important sector
of insurance, strict actions must be taken against the fraudsters.

Awareness among the consumers

Through proper training programs, street plays, consumer fares the awareness can be created
w.r.t understanding of fraudulent areas in insurance and necessary actions towards it.

Strengthening of low
Fraud is a crime. The low and administration must be strengthened to take strict and quick
actions against fraudsters. This will help to decline the number of fraudulent cases in future.

Role of Media
Media can play an important role in spreading awareness and knowledge w.r.t fraud prevention
programs through newspaper, magazines, TV , radio , information for fraud phones areas
and necessary help towards it can be provided.

Role of Supervisory Authorities

IRDAI, SEBI should prepare an action plan to combat with serious issue of frauds.

Track down the cheaters

Police authorities, CBI should take action lead in tracking down the cheaters.
Insurance Regulatory Development Authority

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The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous,
statutory agency tasked with regulating and promoting the insurance and re-insurance industries
in India. It was constituted by the Insurance Regulatory and Development Authority Act,
1999, an act of Parliament passed by the government of India. The agency's headquarters are
in Hyderabad, Telangana, where it moved from Delhi in 2001.

The IRDAI attempted to raise the foreign direct investment (FDI) limit in the insurance sector to
49 percent from its current 26 percent. The FDI limit in the sector was raised to 49 percent in
June 2016.

There is value. There should a need for a uniform policy and standard which will guide actions
of employees within an insurance company. They are the guidelines for professional conduct. It
also states what the insurance company stands foe and is committed to which company it stands
for and is committed to which values. There should be a reward and punishment for any other
behaviour than that is prescribed.

Section 14 of Act, 1998 lays down the duties power and functions of IRDA:
a. Issuing a certificate of registration to the applicant as well as modify, renew,
withdraw, suspend or cancel any such registration that is deemed unfit.

b. Protecting the interests of the policyholders in matters concerning assigning of

insurance policy, nomination by policyholders, settlement of insurance claim,
insurable interest, surrender value of policy and other terms and conditions based
on contracts of insurance.

c. Specifying requisite qualifications, practical training and code of conduct for

insurance intermediaries, insurance brokers and agents.

d. Specifying the code of conduct for surveyors and loss assessors.

e. Promotion of efficiency in the conduct of insurance business.

35
f. Promoting and regulating professional organizations connected with the insurance
and re-insurance business across India.

g. Levying fees, commission and other charges for carrying out the purposes of this
Act.

h. Calling for data or information from, undertaking inspection of, conducting

enquiries and investigations, conducting audit of the insurers, intermediaries,
insurance intermediaries and other organizations connected with the insurance
business.

i. Specifying the manner and form in which books of account shall be maintained
and statement of accounts, financial statements etc shall be rendered by insurers
and other insurance intermediaries.

j. Keeping a tab, exercising control and regulating investment of funds by insurance

companies.

k. Regulating the maintenance of margin of solvency by the Insurers.

l. To effectively supervise the functioning of the Tariff Advisory Committee.

m. Exercising any such other powers that may be prescribed with passage of time.

n. Specifying the percentage of life insurance business and general (or non-life)
insurance business to be undertaken by the insurance company in the rural or
social sector.

o. Specifying the percentage of premium income of the insurer to finance schemes

for promoting and regulating professional organizations referred to in clause.

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 IRDA’s code of conduct

Proposal seeking insurance cover should be filled in only the persons seeking to be insured, as
per the code of conduct formulated by the IRDA for insurance agents.

1. Every insurance broker shall follow recognized standards of professional conduct and
discharge his functions in the interest of the policyholders.

2. Conduct in matters relating to clients relationship— Every insurance broker shall:

a. conduct its dealings with clients with utmost good faith and integrity at all times;
b. act with care and diligence;
c. ensure that the client understands his relationship with the broker and on whose
behalf the broker is acting;
d. treat all information supplied by the prospective clients as completely confidential to
themselves and to the insurer to which the business is being offered.
 As per the code, it would be necessary for those availing insurance to fill in the
applications themselves. And it would also be made mandatory for the agents to disclose
on demand the commission that that would be entitled to form the proposal.

 The code to govern the intermediaries in insurance companies in the country is like to
direct the agents to provide a copy of the filled proposal application to the client, before
submitting it to the company

 The provision in the code to mainly avoid complaints at larger stage, especially form the
nominees of the insured who at times claim say that discrepancies could have been
avoided if the insured had filled in the application on their own

 For prospective insurance agents, the code is likely to recommend an examination and a
100 hour training course. Additionally, all agents present future will be issued with
identify cards by the IRDA

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Major Activities

a. Promotion of a better understanding of non –life insurance amongst the public,

providing inputs to the media about the developments in the non-life insurance.

b. Presentation of risk and proposal i.e. representing the non-life insurance industry
in the presentation of regulatory reforms request, and of opinions to insurance
administration.

c. Response to social issues i.e. combating automobile theft taking measures to

prevent insurance fraud etc.

d. Consumer services i.e. The GI Council promotes consumers understanding of

insurance and the presence og the general industry in society.

e. Social Responsibility i.e. The GI Council undertakes activities having far reaching
social implication in association with the law enforc

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 CHAPTER. 6
ORGANIZATIONAL PROFILE

1. Edelweiss Tokio Life Insurance, India's fastest growing life insurance company, is a
joint venture between Edelweiss Financial Services, one of India's leading diversified
Financial Services companies and Tokio Marine Holdings Inc.
2. A global leader with over 135 years of experience in the insurance business. This lineage
brings together Edelweiss Group's deep understanding of the Indian customers and Tokio
Life's international benchmarks.
3. The company's approach is to help its customers meet their life-stage financial goals by
providing them innovative insurance products that have been designed with the needs of
the Indian customers in mind.
4. Edelweiss Tokio Life Insurance is expanding its presence in a phased manner.
5. The company is now present in Maharashtra, Gujarat, Delhi, NCR, Chandigarh, Punjab,
Haryana, Goa, Karnataka, Andhra Pradesh, Jharkhand, West Bengal, Orissa, Bihar,
Himachal Pradesh, Madhya Pradesh; Uttar Pradesh, Rajasthan, Tamilnadu and Kerala
with 65 branches pan India.
6. Edelweiss Tokio Life Insurance has engaged a team of professional Personal Finance
Advisors (PFAs) who are trained to adopt the customer centric selling model and
recommend products only after understanding and analyzing customer needs.
7. Established in the year 2011, Edelweiss Tokio Life Insurance Company Ltd is a new age
life Insurance companyin India.
8. It is a joint venture between Edelweiss, a diversified financial services conglomerate in
India, and Tokio Marine, one of the oldest life insurance companies in Japan.
9. Currently, Tokio Marine owns 26% stake in the joint venture, but it received approval in
January 2016 from the Insurance Regulatory Authority of India (IRDAI) to increase its
stake to 49%.
10.Edelweiss Tokio Life Insurance began operations in July 2011 after receiving its
registration certificate from IRDAI in May 2011 and one out of 24 life insurance
companies in India.

39
11.Today, it has a PAN India presence with more than 60 branches and 1,500 employees and
looking consistent growth.
12.Edelweiss Tokio Life offered life insurance cover of Rs 1 crore for all the athletes
representing India at the Rio Olympics 2016.
13.The Edelweiss Group is one of India's leading diversified financial services company
providing a broad range of financial products and services to a substantial and diversified
client base that includes corporations, institutions and individuals.
14.Edelweiss's products and services span multiple asset classes and consumer segments
across domestic and global geographies.
15. Its businesses are broadly divided into Credit Business (Wholesale Credit comprises
of Structured Collateralized Credit to Corporates, Real Estate finance and Distressed
Assets Credit.

40
 CHAPTER. 7
RESEARCH & METHODOLOGY

STUDY ON FRAUDS IN INSURANCE SECTOR

Research and Methodology includes two sources of data:

1. Primary Data:
 Personal Interview.

2. Secondary Data:
 Reference Books
 Standard Textbooks
 Various Websites
 Daily Newspapers

Objectives of the Study:

Following are the objectives to this study:

1. To study the security and privacy issues of insurance study the policies.
2. To study the present status of Insurance services in India.
3. To study the fraud prevention techniques in the Insurance Sector.
4. To understand the risks and frauds involved in the Insurance Sector.
5. To study the various methods used to prevent risks &frauds in Insurance industry.

Limitations of the Study:

The study is limited to:
1. Data was collected through a Personal Interview.
2. Time, length and depth of the study were limited in making of the project, as per the
requirement of the Mumbai University.

41
 CHAPTER. 8

FINDINGS

 The regulatory requirements on insurance companies have changed dramatically

over the last 20 years. There has been increasing regulation of insurance products
rather than simply regulation of the prudential aspects of an insurance company's
business, and the creep of EU regulation into both long-term and general
insurance.
 The products offered have changed too, with the move away from the complex
and opaque with-profits policies to cleaner unit-linked products, for example, and
the establishment of DC pension products with different requirements from the
traditional DB pension insurance products historically offered.
 With increasing regulation, we have been at the forefront of the development of
insurance products – from preparing unit-linked products documentation in plain
English, to some of the first SIPP products, and devising clear and concise
disclosure documentation meeting and exceeding the regulatory standards.
 Insurance companies are looking for ways of improving their balance sheets that
may involve the transfer of businesses to other insurers. We are experienced in the
various methods of achieving this, ranging from the transfers of administration,
reinsurance and court-approved transfers of business, where we have pioneered
techniques for friendly societies so as to allow the terms of business to be
rewritten as part of the transfer.
 We act for a wide range of insurance company clients on a variety of non-
contentious and contentious matters. We have a reputation for innovative product
structuring work for a variety of businesses that issue insurance contracts or have
products with insurance contract components. We also advise institutions seeking
to set up insurance-based investment arrangements.

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 CHAPTER. 9

RECOMMENDATIONS & CONCLUSION

Insurance is an integral part of any personal financial plan. The type of insurance and the amount
of coverage you obtain all depends on your unique financial and family circumstances, and must
be evaluated carefully. When considering purchasing coverage, you should review all the
potential risks and the financial impact of these risks on your financial health. This will help you
determine what options to look for and what questions to ask. What you need to keep in mind is
that you do not want to be underinsured or over insured, which means you have to do your
homework before you buy.
 Insurance is a form is risk management in which the insured transfers the cost of potential
loss to another entity in exchange for monetary compensation known as the premium.
 Insurance works by pooling risks. Because the number of insured individuals is so large,
insurance companies can use statistical analysis to project what their actual losses will be
within the given class. This allows the insurance companies to operate profitably and at
the same time pay for claims that may arise.
 Underwriting is the process of evaluating the risk to be insured. This is done by the
insurer when determining how likely it is that the loss will occur, how much the loss
could be and then using this information to determine how much you should pay to insure
against the risk.
 The insurance contract is a legal document that spells out the coverage, features,
conditions and limitations of an insurance policy.
 In the modern scenario and in an era of globalization, life is full of risks, on every step of
life; there is a risk of life. Being a social animal man always tries to reduce risk.
 The business of insurance is related to the protection of economic values of assets. The
asset is valuable to the owner, because he expects to get some benefits from it.
 Although insurance cannot prevent the occurrence of accident but it provides for the
losses caused thereto.

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 Basically, insurance is a means to identify the risks by the payment of nominal sum of
premium. Hindu philosophy gives the axiomatic truth of the nature of insurance "Yat
bharvathi tat nasyathi' which means whatever is created will be destroyed.
 Thus, creation is inevitably followed by destruction. Destruction is an optimum change to
the worse, in that sense change is natural course and its occurrence involves risk.
 The need for insurance was not felt in India till the 19th century. The Joint family system
and the cohesive living in the villages were working well. As the families, split into
nuclear families, the need for insurance cover becomes stronger and more pronounced.
 Today, insurance business is one of the fast promising financial services, mainly in the
developing nation like India. Insurance business performs remarkable feats by insuring
the insurable public and its properties.
 However, it is submitted that even after six decades of the liberalization, the progress in
insurance sector in India has not been satisfactory.
 It cannot be denied that the modern industrialization society has rendered man and his
property most vulnerably exposed to different kinds and varying 271 degrees of risks and
uncertainties.
 The annual losses to individuals and businessman from premature deaths, health,
problems, fire, water, accident, wind, storm, sea perils, earthquakes, floods, dishonesty,
negligence unemployment etc are beyond estimation and hence indicate the importance
of recognizing and meeting them intelligence.
 In order to avoid these unexpected and unfortunate calamities man has devised various
plans to protect himself. One such rational method is insurance.
 Today, the entry of private players in the Indian insurance market has changed the nature
of competition and the vigorous campaigns of these players have increased customer
awareness.
 This has led to rapid increase in insurance business.

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 CHAPTER. 10

BIBLIOGRAPHY

BOOKS

 Business Ethics and Corporate Governance

By- Anita Bobade

 Organisation of Commerce & Management.

By- N.G. Kale

WEBSITES

www.irda.gov.in
www.insurancehotline.com

REFERENCE

1.Kavitha, Latha, and Jamuna., “Customers’ Attitude towards General Insurance - A Factor Analysis
Approach”, IOSR Journal of Business and Management, Volume.3, Issue.1, 2012, pp.30-36.

2. Jas Bahadur Gurung, “Insurance and Its Business in Nepal”, The Journal of Nepalese Business Studies,
Vol. VII, No. 1, 2011, pp.70-79.

3. Altaf Ahmad Dar, “Awareness of Life Insurance- A Study of Jammu and Kashmir State”, Shiv Shakti,
International Journal in Multidisciplinary and Academic Research (SSIJMAR), Vol. 1, No. 3, September-
October 2011, pp.14-19.

4. Sundar and Lalitha Ramakrishnan, “A Study on Farmers’ Awareness, Perception and Willing To Join
and Pay for Crop Insurance”, International Journal of Business and Management Invention, Vol.13,
Issue.1, 2010, pp. 21-41.

45
5. Sauthanavidivu.N. Insurance Industry and its Role in Indian Economy”, the state level seminar
leveraging insurance for development 2008.

6. Raju, S. and Chand, R. (2008) Agricultural Insurance in India: Problems and Prospects. NCAP
Working Paper No. 8. Retrieved December 12, 2012 from

7. Rajesham.C.H. &Rajender.K., “Changing scenario of India Insurance Sector”, Indian Journal of

Marketing, Vol.5, Issue.3, 2005, pp.12-14.

8. Reddy, A. (2004) Agricultural Insurance in India: A Perspective. Retrieved December 12, 2012 from
http://www.actuariesindia.org/downloads/gcadata/6th%0GCA/pdf/agricul-tural%20
Insurance%20In%20India%20_A%20Perspective.pdf

9. Singh, S. (2004). Crop Insurance in India-A Brief Review.Journal of the Indian Society of Agricultural
Statistics, 57 (special Issue), pp 217-225. Retrieved December 10, 2012 from
http://www.isas.org.in/jsp/volume/vol57/Shivtar%20Singh.pdf

10. Punithvathy Pandian, “Impact of Liberalization on the Productivity of LIC Agents”, Journal of
Bombay Productivity Council, Vol. XXVIII, No.4, April – June 2001, pp. 12-15.

11. T.Selva Rani (2000), “Attitude of Policy holders towards Career Agents”, Sri Parasakthi College for
women, Courtallam.

12. SonnentagS.; Kleine B. M., “Deliberate Practice at Work: A Study with Insurance Agents”, Journal of
Occupational and Organizational Psychology, Volume.73, Number.1, March 2000, pp. 87-102. 31

13. Malliga, “Marketing of LIC Policies - A Study on Agents of Tirunelveli Division”, Indian Journal of
Marketing, August –October 2000, pp. 6-9.

14. Sathyanarayana Rao. R., “Life Insurance Selling- A Case Study of Dropouts”, The Insurance Times,
November 1997, pp. 11-13.

15. Balammal. M. (1996) “Job Satisfaction of LIC Employees - Tenkasi Branch”, Sri Parasakthi College
for Women, Courtallam.

16. Radha shorn Arora and Raghbirsingh, “Growth and Performance of Life Insurance Corporation of
India - A Study on Jalandhar Division”, The Insurance Times, Vol.15, November 1995, pp. 16-18 and
December 1995, pp. 10-12.

17. Nagapandy “Performance Evaluation of the Life Insurance Corporation - Madurai Division”,
Unpublished thesis, Department of Commerce, N.M.S.S. VellaichamiNadar College, Madurai, 1994.

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18. Thanulingam and Muthupandi, “Working Career Agency Scheme in LIC”, The insurance Times,
Vol.19, February 1989, p.3.

19.Josephine . A (1989) “Role of New India Assurance company in providing rural insurance schemes in
TiurnelveliKattabomman District”, Madurai Kamaraj University

20. M.N.Mishra, (1998), Appraisal of Marketing Strategies of Life Insurance Corporation of India”, The
insurance Times, Vol. 8, October 1988, pp. 3-8.

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 CHAPTER. 11
QUESTIONNAIRE

1. What is Insurance Fraud?

 Insurance Fraud is an attempt to obtain money from insurance companies by
arranging a loss or accident or falsifying information on application for insurance
claims. Fraud can range from large, organized operations involving hundreds of
thousands of dollars to an otherwise honest individual who overstates a legitimate
claim.

2. What are the most common types of fraud cases?

 Insurance fraud can be divided into three categories: false claims for injuries;
arson for profit; and false or intentional auto theft and physical damage.

3. What is the penalty for being found guilty of Insurance Fraud?

 In the most of its forms, insurance fraud is a felony. When caught, prosecuted and
found guilty, most fraud perpetrators are required to make restitution and jail time
is also commonly imposed.

4. What is the Insurance Industry doing to reduce fraud?

 The Insurance Industry is committed to reducing fraud by teaching claims
professionals how to recognize suspicious claims and work with law enforcement
and fir services. Insurance companies have units trained to investigate fraud.

5. What can citizens do to reduce fraud?

 People who want to fight back against this crime can call state department of
insurance and report the crime.

6. What effects does fraud have on the average insurance policy holder?
 The insurance industry estimates the size of the insurance fraud to be about 10-15
percent of the premium dollar. This puts the clear cost at an estimated $18billion
nationally. As fraud is reduced or eliminated, claims cost can be lower and those
savings can be passed on to policy holders.

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