INDUSTRY ORIENTED DISSERTATION PROJECT REPORT

ON

‘A STUDY OF GENRAL INSURANCE AND ITS IMPACT IN INDIA’

SUBMITTED

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

DEGREE OF

MASTER IN MANAGEMENT STUDIES

(FINANCE)
OF
UNIVERSITY OF MUMBAI

SUBMITTED BY
POOJA JAGDISH PAWAR
ROLL NO: 170042
(2017-19)

UNDER THE GUIDANCE OF

PROF. SEEMA UNNIKRISHNAN

DR. G D POL FOUNDATION

YMT COLLEGE OF MANAGEMENT
INSTITUTIONAL AREA, SECTOR – 4, KHARGHAR, NAVI MUMBAI

1
 ACKNOWLEDGEMENT

I MS.POOJA PAWAR. Would like to acknowledge and thank to people who made the project
possible PROF. SEEMA UNNIKRISHNAN And friends for providing their help as and when
required to complete the project for their support and encouragement in finding out the
appropriate material for this project report , without their thankless support and effort making
this project would have impossible for me.

I would take this opportunity to thank Larsen & turbo and University of Mumbai for providing
me and opportunity to prepare a project report on “”

I am very much thankful to Director PROF.SWATI PADOSHI for her guidance

THANK YOU ALL

Miss. Pooja jagdish Pawar

2
 CERTIFICATE

This is to certify that the Industry Oriented Dissertation Project titled as “A

STUDY OF GENRAL INSURANCE AND ITS IMPACT IN INDIA”

submitted by “POOJA JAGDISH PAWAR” in partial fulfillment of the

requirements for the degree of Master in Management Studies (Marketing)

of University of Mumbai during 2017-2019 is his/her original work & does

not form any part of the project undertaken previously to the best of our

knowledge.

PROF. Dr.SWATI PADOSHI

FACULTY GUIDE DIRECTOR

DATE:

Institute Seal

3
 DECLARATION

I “POOJA JAGDISH PAWAR” declare that, I have completed Industry

Oriented Dissertation project titled as “A STUDY ONGENRAL

INSURANCE AND ITS IMPACT IN INDIA” which is submitted in partial

fulfillment of the requirements for the degree of Master in Management

Studies (Marketing) of University of Mumbai during 2017-2019

The information presented in this project is original work and does not form

any part of the project undertaken previously to the best of my knowledge.

DATE: Signature

NAME OF THE STUDENT

ROLL NO.___________

4
PART I

5
 1.1 INTRODUCTION

Insurance is a form of 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 allows

individuals, businesses and other entities to protect themselves against significant potential losses

and financial hardship at a reasonably affordable rate. We say "significant" because if the

potential loss is small, then it doesn't make sense to pay a premium to protect against the loss.

After all, you would not pay a monthly premium to protect against a $50 loss because this would

not be considered a financial hardship for most.

Insurance is appropriate when you want to protect against a significant monetary loss. Take life

insurance as an example. If you are the primary breadwinner in your home, the loss of income

that your family would experience as a result of our premature death is considered a significant

loss and hardship that you should protect them against. It would be very difficult for your family

to replace your income, so the monthly premiums ensure that if you die, your income will be

replaced by the insured amount. The same principle applies to many other forms of insurance. If

the potential loss will have a detrimental effect on the person or entity, insurance makes sense.

Everyone that wants to protect themselves or someone else against financial hardship should

consider insurance. This may include:

 Protecting family after one's death from loss of income

 Ensuring debt repayment after death

 Covering contingent liabilities

 Protecting against the death of a key employee or person in your business

 Buying out a partner or co-shareholder after his or her death

6
 Protecting your business from business interruption and loss of income

 Protecting yourself against unforeseeable health expenses

 Protecting your home against theft, fire, flood and other hazards

 Protecting yourself against lawsuits

 Protecting yourself in the event of disability

 Protecting your car against theft or losses incurred because of accidents

7
 1.2 MEANING

Insurance means a promise of compensation for any potential future losses. It facilitates

financial protection against by reimbursing losses during crisis. There are different insurance

companies that offer wide range of insurance options and an insurance purchaser can select as

per own convenience and preference.

Several insurances provide comprehensive coverage with affordable premiums. Premiums are

periodical payment and different insurers offer diverse premium options. The periodical

insurance premiums are calculated according to the total insurance amount.

Mainly insurance is used as an effective tool of risk management as quantified risks of different

volumes can be insured

The meaning of insurance is important to understand for anybody that is considering buying an

insurance policy or simply understanding the basics of finance. Insurance is a hedging instrument

used as a precautionary measure against future contingent losses. This instrument is for

managing the possible risks of the future.

8
 1.3 DEFINITION

Insurance = Collective Bearing Of Risk

The definition of insurance can be made from two points:

1. Functional definition

2. Contractual definition

Functional definition:

insurance is a co-operative device to spread the loss caused by a particular risk over a

number of people, who are exposed to it & who agree to insurance themselves against the

risk. Thus the insurance is:

(A) A co-operative device to spread the risk.

(B) The system to spread the risk over a number of people who are insured against the

risk.

(C) The principle to share the loss of each member of the society on the basis of

probability of loss to their risk.

(D) The method to provide security against losses to the insured. Similarly another

definition can be given. Insurance is a co-operative device of distributing losses, falling

on an individual or his family over a large number of persons, each bearing a nominal

expenditure & feeling secure against heavy loss.

9
Contractual definition:

Insurance has been defined to be that in which a sum of money as a premium is paid in

consideration of the insurer’s incurring the risk of paying a large sum upon a given

contingency. The insurance, thus, is a contract whereby

(A) Certain sum, called premium, is charged in consideration

(B) Against the said consideration, a large sum is guaranteed to be paid by the insurer,

who received the premium,

(C) The payment will be made in a certain definite sum. i.e., the loss or the policy

amount whichever may be &

(D) The payment is made only upon a contingency. More specific definition can be

given as follows- Insurance may be defined as a consisting one party (the insurer) agrees

to pay to the other party (the insured) or his beneficiary, a certain sum upon a given

contingency (the risk) against which insurance is sought.

10
1.4 PROCESS FLOW OF INSURANCE INDUSTRY

11
 1.5 CHARACTERISTICS OF INSURANCE

 It is a contract for compensating losses.

 Premium is charged for Insurance Contract.

 The payment of Insured as per terms of agreement in the event of loss.

 It is a contract of good faith.

 It is a contract for mutual benefit.

 It is a future contract for compensating losses.

 It is an instrument of distributing the loss of few among many.

 The occurrence of the loss must be accidental.

 Insurance must be consistent with public policy.

12
 1.6 ORIGIN OF INSURANCE

The history of insurance dates back to ancient times. There has always been a need for

insurance. The basic concept of insurance is to spread the risk among a large enough pool

so that no one person suffers the entire cost of the loss. Whenever there is uncertainty

there is a risk. We do not have any control over uncertainties which involves financial

losses. The risk may be certain events like death, pension, retirement or uncertain events

like theft, fire, accident, etc.

Insurance is a financial service for collecting the saving of the public and providing them

with risk coverage. It comes under service sector and while marketing this service due

care is taken in quality product and customer satisfaction. The main function of the

insurance is to provide protection against the possible chances of generating losses.

The insurance sector in India has come a full circle from being an open competitive

market to nationalization and back to a liberalized market again. Tracing the development

in the Indian insurance sector reveals the 360-degree turn witness over a period of almost

two centuries.

13
 1.7 BRIEF HISTORY OF INSURANCE SECTOR

The business of life insurance in India in its existing form started in India in the year

1818 with the establishment of the oriental life insurance company in Calcutta

Time Line In Insurance Industry

1928:

The Indian insurance companies act enacted to enable the government to collect

statistical information about both life and non-life insurance business.

1938:

Earlier legislation consolidated and amended to by the insurance act with the objective of

protecting the interests of the insuring public.

1956:

245 Indian and foreign insurer and provident societies taken over by the central

government and nationalized. 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 18 in Calcutta by the British.

14
Some of the important milestone in the general insurance business in India are:

1907:

The Indian mercantile insurance ltd. Set up, the first company to transact all classes of

general insurance business.

1957:

General insurance council, a wing of the insurance association of India, frames a code of

conduct for ensuring fair conduct and sound business practices.

1968:

The insurance act amended to regulate investments and set minimum solvency margins

and the Tariff advisory committee set up.

1972:

The general insurance business (nationalization) act, 1972 nationalized the general

insurance business in India with effect from 1stjanuary 1973.107 insurers amalgamated

and grouped into four companies’ viz. the national insurance company ltd.., the new India

assurance company ltd., the oriental insurance company ltd. And the united India

insurance company ltd. GIC incorporated as a company

15
 1.8 SWOT ANALYSIS IN INSURANCE SECTOR

A tool that identifies the strengths, weaknesses, opportunities and threats of an

organization. Specifically, SWOT is a basic, straightforward model that assesses what an

organization can and cannot do as well as its potential opportunities and threats. The

method of SWOT analysis is to take the information from an environmental analysis and

separate it into internal: strengths and weaknesses and external issues: opportunities and

threats. Once this is completed, SWOT analysis determines what may assist the firm in

accomplishing its objectives, and what obstacles must be overcome or minimized to

achieve desired results.

16
Strengths

The strength must be unique. If most competitors offer quality service, then that is a

necessity not a strength. One of the strengths that a business owner may take for granted

might be something that customers would value and that the competition doesn’t have or

do. Brainstorm first and edit later. Write down words that characterize the business.

Weakness

things the firm does not have, cannot do at all or does poorly. This is the time for brutal

honesty, but also a time for realism. Consider this from an internal and external basis. Do

outsiders perceive weaknesses that the firm does not see? Are competitors doing anything

better? It is best to be realistic now, and face any unpleasant truths as soon as possible.

Opportunities

Look at the strengths and weakness, and evaluate if they can be leveraged into

opportunities. List what the marketplace is not doing. Add items that the marketplace

seems to need, and which the business could perhaps provide. Think in terms of what

would benefit clients—cheaper, easier, more convenient, faster.

Threats

No organization is immune to threats. These could be internal, such as falling

productivity. Or they could be external, such as changes in the direction of the insurance

companies. What obstacles currently exist? Is changing technology threatening the firm’s

position? Carrying out this analysis will often be illuminating—both in terms of pointing

out what needs to be done, and in putting problems into perspective.

17
Industry Example

With the above synapses in mind we would like to apply a SWOT Analysis to the

insurance industry for an example. Keep in mind that this will be written from the

agency’s perspective.

Major Strengths:

• Premium rates are increasing and so are commissions.

• The variety of products is increasing.

• Prospects expect more services from their brokers.

Major Weaknesses

• Insurance companies are often slow to respond to changing needs.

• There is an increasing trend of financial weakness among the companies.

• There are more competitors for agencies to compete with banks and Internet players.

Opportunities

• The ability to cross sell financial services is barely being tapped.

• Technology is improving to the point that paperless transactions are available.

• The client’s increasing need for an “insurance consultant” can open new ways to service

the client and generate income.

Threats

• The increasing cost and need for insurance might hit a point where a backlash will

occur.

• Government regulations on issues like health care, mold and terrorism can quickly

change the direction of insurance. Increasing expenses and lower profit margins will hit

hard on the smaller agencies and insurance companies.

18
 OBJECTIVE OF THE STUDY

 Respond to all commercially viable general insurance requirements of the citizen,

including products for weaker sections of the society of the society at affordable price

within three months from the date on which such a requirement is received.

 Ensure issuance of 100% of documents within a period of seven days and Ensure that

prospectus of the various insurance products are provided to the customers

 Promote customer education in general insurance products/ services by holding

workshops in various centers.

 To set up proper grievances redressed mechanism in every operating office and educate

the clients about the same including the system of grievance redressed through

ombudsman.

19
RESEARCH METHODOLOGY

It consist of published data collected through

 Books
 Website
 News paper
 Magazine

20
LITERATURE REVIEW

21
22
PART II

23
Theoretical Background of The Project

2.1 INSURANCE SECTOR

The opening up of insurance sector was a part of the ongoing liberalization in the

financial sector of India. The changing face of the financial sector and the entry of

several companies in the field of life and non life insurance segment are one of the

key results of these liberalization efforts. Insurance business by way of generating

premium income adds significantly to be the GDP.

The IRDA is the regulatory authority, which looks over all related aspects of the

insurance business. The provisions of the IRDA bill acknowledge many issues

related to insurance sector.

The IRDA bill provides guidance for three levels of players - Insurance Company,

insurance brokers and insurance agent. Life insurance sector is one of the key

areas where enormous business potential exists.

24
 2.2 GROWTH OF INSURANCE SECTOR IN INDIA

Introduction

The insurance industry of India consists of 52 insurance companies of which 24 are in life

insurance business and 28 are non-life insurers. Among the life insurers, Life Insurance

Corporation (LIC) is the sole public sector company. Apart from that, among the non-life

insurers there are six public sector insurers. In addition to these, there is sole national re-insurer,

namely, General Insurance Corporation of India. Other stakeholders in Indian Insurance market

include agents (individual and corporate), brokers, surveyors and third party administrators

servicing health insurance claims.

Out of 28 non-life insurance companies, five private sector insurers are registered to underwrite

policies exclusively in health, personal accident and travel insurance segments. They are Star

Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max

Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK

Health Insurance Company Ltd. There are two more specialized insurers belonging to public

sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and

Agriculture Insurance Company Ltd for crop insurance.

25
Investments

Insurance sector of India needs capital infusion of Rs 50,000 crore (US$ 8.06 billion) to expand,

maintain a healthy capital base and improve solvency standards, according to Insurance

Regulatory Development Authority (IRDA).

The following are some of the major investments and developments in the Indian insurance

sector.

 Life Insurance Corp of India (LIC) has earmarked a total of around Rs 1 trillion (US$

16.12 billion) for investments in bonds, including non-convertible debentures (NCDs),

certificates of deposit (CDs), commercial papers (CPs) and collateralized borrowing and

lending obligations (CBLOs), with primary focus on infrastructure and real estate in the

year to March 31, 2015.

 Aditya Birla Financial Services Group has signed an agreement to form a health

insurance joint venture (JV) with MMI Holdings of South Africa. The two will enter into

a formal JV in which the foreign partner will hold a 26 per cent stake.

 South African financial services group Sanlam plans to increase stake in its Indian JV

Shriram Life Insurance from 26 per cent to 49 per cent.

26
  JLT Independent plans to develop India as a service hub for all countries that are a part of

South Asian Association for Regional Cooperation (SAARC), according to Mr Sanjay

Radhakrishnan, CEO, JLT Independent.

 Kotak Mahindra Bank became the first bank to get the permission from Reserve Bank of

India (RBI) to set up a wholly-owned non-life insurance company.

Government Initiatives

The Government of India has taken a number of initiatives to boost the insurance industry.

Some of them are as follows:

 The Reserve Bank of India (RBI) has allowed banks to become insurance brokers,

permitting them to sell policies of different insurance firms subject to certain conditions.

 The select committee of the Rajya Sabha gave its approval, permitting 49 per cent

composite foreign equity investment in insurance companies. A broad agreement has also

been achieved with the states on most of the issues concerning the implementation of the

single goods and services tax (GST), which is scheduled to be rolled out from April 1,

2016.

 The Government of India plans to implement a Rs 1,900 crore (US$ 306.41 million) e-

governance project called ‘Panch Deep’ to automate transactions of the Employees State

Insurance Corporation (ESIC), said Mr Bandaru Dattatreya, Union Minister for Labour

and Employment with Independent Charge, Government of India. Under the project,

27
 enterprise resource planning (ERP) solution would be installed across the country which

will give a unique card to the employees and facilitate clearance of third party bills.

 The Government of India plans to launch a new insurance scheme to protect farmers and

their incomes against production and price risks.

 Under the Pradhan Mantri Jan Dhan Yojana, it has been decided that even those accounts

which had been opened prior to August 28, 2014 and have zero balance will get Rs

100,000 (US$ 1,612.55) insurance cover.

2.3 INSURANCE REGULATORY AND DEVELOPMENT

AUTHORITY OF INDIA

IRDA refers to:

28
 Insurance Regulatory and Development Authority of India, an agency of Government of

India for insurance sector supervision and development

 Insurance Regulatory and Development Authority of India (IRDA) is an

autonomous apex statutory body which regulates and develops the insurance industry in

India. It was constituted by a Parliament of India act called Insurance Regulatory and

Development Authority Act, 1999 and duly passed by the Government of India.

 The agency operates from its headquarters at Hyderabad, Telangana where it shifted

from Delhi in 2001.

 IRDA batted for a hike in the foreign direct investment (FDI) limit to 49 per cent in the

insurance sector from the erstwhile 26 per cent. The FDI limit in insurance sector was

raised to 49% in July 2014

29
 2.4 HISTORY OF IRDA

The IRDA Act, 1999 was passed as per the major recommendation of the Malhotra

Committee report (7 Jan, 1994) which recommended establishment of an independent regulatory

authority for insurance sector in India. Later, It was incorporated as a statutory body in April,

2000. The IRDA Act, 1999 also allows private players to enter the insurance sector in India

besides a maximum foreign equity of 26 per cent in a private insurance company having

operations in India. The Insurance Bill proposes to raise the FDI limit in insurance sector to 49%.

Proposed by UPA government in July 2013, it is still pending discussion in Rajya Sabha. It

serves as an Authority to protect the interests of holders of insurance policies, to regulate,

promote and ensure orderly growth of the insurance industry and for matters connected

therewith. IRDA role is to protect rights of policy holders & they provide registration

certification to life insurance companies & responsible for renewal, modification, cancellation &

suspension of this registered certificate.

30
 2.5 4I’ S OF INSURANCE SERVICE

The 4I’s refers to the different dimensions of any service. Unlike pure products services have its

own characteristics and its related problems. So the service provider needs to deal with these

problems accordingly. The service provider has to design different strategies according the

varying feature of the service. These 4I’s not only represent the characteristics of different

services but also the problem and advantages attached to it

These 4I’s can be broadly classified as:

 Intangibility

 Inconsistency

 Inseparability

 Inventory

Intangibility:

Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible.

Hence, insurance rightly come under services, which are intangible. Efforts have been

31
made by the insurance companies to make insurance tangible to some extent by

including letters and forms.

Inconsistency:

Services quality is often inconsistent. This is because service personnel have different

capabilities, which vary in performance from day to day. This problem of

inconsistency in services quality can be reduced through standardization, training and

mechanization.

Inseparability

Services are produced and consumed simultaneously. Consumers cannot and do not

separate the delivery of the service from the service itself. Interaction between

consumer and the services provider varies based on whether consumer must be

physically to receive the service.

Inventory

No inventory can be maintained for services. Inventory carrying costs are more

subjective and lead to idle production capacity. When the service is available but

there is no demand, cost rises as, cost of paying the people and overhead remains

constant even though the people are not required to provide services due to lack of

demand. In the insurance sector however, commission is paid to the agents on each

policy that they sell. Hence, not much inventory cost is wasted on idle inventory. As

the cost of agents is directly proportionate to the policy sold.

32
Chapter 3.

General

Insurance

33
 3.1. INTRODUCTION

Insurance other than ‘Life Insurance’ falls under the category of General Insurance. General

Insurance comprises of insurance of property against fire, burglary etc, personal insurance such

as Accident and Health Insurance, and liability insurance which covers legal liabilities. There are

also other covers such as Errors and Omissions insurance for professionals, credit insurance etc.

Non-life insurance companies have products that cover property against Fire and allied perils,

flood storm and inundation, earthquake and so on. There are products that cover property against

burglary, theft etc. The non-life companies also offer policies covering machinery

against breakdown, there are policies that cover the hull of ships and so on. A Marine

Cargo policy covers goods in transit including by sea, air and road. Further, insurance of motor

vehicles against damages and theft forms a major chunk of non-life insurance business.

In respect of insurance of property, it is important that the cover is taken for the actual value of

the property to avoid being imposed a penalty should there be a claim. Where a property is

undervalued for the purposes of insurance, the insured will have to bear arateable proportion of

the loss.

34
For instance if the value of a property is Rs.100 and it is insured for Rs.50/-, in the event of a

loss to the extent of say Rs.50/-, the maximum claim amount payable would be Rs.25/- ( 50% of

the loss being borne by the insured for underinsuring the property by 50% ). This concept is quite

often not understood by most insured’s.

Personal insurance covers include policies for Accident, Health etc. Products offering Personal

Accident cover are benefit policies. Health insurance covers offered by non-life insurers are

mainly hospitalization covers either on reimbursement or cashless basis. The cashless service is

offered through Third Party Administrators who have arrangements with various service

providers, i.e., hospitals. The Third Party Administrators also provide service for reimbursement

claims. Sometimes the insurers themselves process reimbursement claims.

Accident and health insurance policies are available for individuals as well as groups. A group

could be a group of employees of an organization or holders of credit cards or deposit holders in

a bank etc. Normally when a group is covered, insurers offer group discounts.

Liability insurance covers such as Motor Third Party Liability Insurance, Workmen’s

Compensation Policy etc offer cover against legal liabilities that may arise under the respective

statutes— Motor Vehicles Act, The Workmen’s Compensation Act etc. Some of the covers such

as the foregoing (Motor Third Party and Workmen’s Compensation policy ) are compulsory by

statute. Liability Insurance not compulsory by statute is also gaining popularity these days. Many

industries insure against Public liability. There are liability covers available for Products as well.

35
There are general insurance products that are in the nature of package policies offering a

combination of the covers mentioned above. For instance, there are package policies available

for householders, shop keepers and also for professionals such as doctors, chartered accountants

etc. Apart from offering standard covers, insurers also offer customized or tailor-made ones.

Suitable general Insurance covers are necessary for every family. It is important to protect one’s

property, which one might have acquired from one’s hard earned income. A loss or damage to

one’s property can leave one shattered. Losses created by catastrophes such as the tsunami,

earthquakes, cyclones etc have left many homeless and penniless. Such losses can be devastating

but insurance could help mitigate them. Property can be covered, so also the people against

Personal Accident. A Health Insurance policy can provide financial relief to a person undergoing

medical treatment whether due to a disease or an injury.

Industries also need to protect themselves by obtaining insurance covers to protect their building,

machinery, stocks etc. They need to cover their liabilities as well. Financiers insist on insurance.

So, most industries or businesses that are financed by banks and other institutions do obtain

covers. But are they obtaining the right covers? And are they insuring adequately are questions

that need to be given some thought. Also organizations or industries that are self-financed should

ensure that they are protected by insurance.

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

long-term.

36
 3.2 DEFINITION OF GENERAL INSURANCE

Insurance contracts that do not come under the ambit of life insurance are called general

insurance. The different forms of general insurance are fire, marine, motor, accident and other

miscellaneous non-life insurance.

The tangible assets are susceptible to damages and a need to protect the economic value of the

assets is needed. For this purpose, general insurance products are bought as they provide

protection against unforeseeable contingencies like damage and loss of the asset. Like life

insurance, general insurance products come at a price in the form of premium.

Insurance other than life insurance falls under the category of general insurance. General

insurance comprises of insurance of property against fire, burglary etc. personal insurance such

as accident and health insurance, and liability insurance which covers legal liabilities. There are

also other covers suck as error and omissions insurance for professionals, credit insurance etc.

37
3.3 LIFE INSURANCE V/S GENERAL INSURANCE

Life Insurance General Insurance

38
 Life insurance transfers the  General insurance transfers risk away

financial risks associated with from you and your family to an

your death to an insurance insurer for personal matters other

company. than life insurance.

 For example.: You pay the  For example, property and casualty

insurance company a premium insurance transfers the risk of

payment, and the insurer gives damage to your personal property to

you a death benefit promise in an insurance company so that you

return. don't have to pay out of pocket for

any property damage covered under

the terms of the insurance policy.

 With general insurance, such as

property and casualty or health

 With life insurance, a set amount
insurance, the amount of money is
of money is paid out at your
limited to the risks specifically
death, regardless of the costs
named in the policy and to the
associated with your death.

damage actually incurred.

 General insurance agents and

 This requires a considerable
brokers are also licensed by the state
degree of expertise, and life
and might need multiple licenses or
insurance agents must qualify for
certifications depending on the lines

39
state licensure before they can do of insurance they sell.

business.

40
3.4 LIFE INSURANCE

V/S

GENERAL INSURANCE

41
3.5 TYPES OF INSURANCE

42
 (A) FIRE INSURANCE

Insurance that is used to cover damage to a property caused by fire. Fire insurance is a

specialized form of insurance beyond property insurance, and is designed to cover the cost of

replacement, reconstruction or repair beyond what is covered by the property insurance policy.

Policies cover damage to the building itself, and may also cover damage to nearby structures,

personal property and expenses associated with not being able to live in or use the property if it

is damaged.

Homeowners and property owners may consider fire insurance in addition to a property

insurance policy if the property contains valuable items. A best practice would be to document

the property and its related contents, which makes identifying the value of items damaged or lost

much easier after a fire has taken place. A fire insurance policy may contain exclusions based on

the cause of the fire, such as not covering fires caused by wars.

43
The types of losses covered by fire insurance are:-

 Goods spoiled or property damaged by water used to extinguish the fire.

 Pulling down of adjacent premises by the fire brigade in order to prevent the progress of

flame.

 Breakage of goods in the process of their removal from the building where fire is raging

e.g. damage caused by throwing furniture out of window.

 Wages paid to persons employed for extinguishing fire.

The types of losses not covered by a fire insurance policy are:-

 loss due to fire caused by earthquake, invasion, act of foreign enemy, hostilities or war,

civil strife, riots, mutiny, martial law, military rising or rebellion or insurrection.

 loss caused by subterranean (underground) fire.

 loss caused by burning of property by order of any public authority.

 loss by theft during or after the occurrence of fire.

 loss or damage to property caused by its own fermentation or spontaneous combustion

e.g. exploding of a bomb due to an inherent defect in it.

 loss or damage by lightening or explosion is not covered unless these cause actual

ignition which spread into fire.

44
Types of Fire Insurance Policies:-

 Specific Policy:-

Is a policy which covers the loss up to a specific amount which is less than the real value

of the property. The actual value of the property is not taken into consideration while

determining the amount of indemnity. Such a policy is not subject to 'average clause'.

'Average clause' is a clause by which the insured is called upon to bear a portion of the

loss himself. The main object of the clause is to check under-insurance, to encourage full

insurance and to impress upon the property owners to get their property accurately valued

before insurance. If the insurer has inserted an average clause, the policy is known as

"Average Policy".

 Comprehensive Policy:-

Is also known as 'all in one' policy and covers risks like fire, theft, burglary, third party

risks, etc. It may also cover loss of profits during the period the business remains closed

due to fire.

45
 Valued Policy:-

Is a departure from the contract of indemnity. Under it the insured can recover a fixed

amount agreed to at the time the policy is taken. In the event of loss, only the fixed amount is

payable, irrespective of the actual amount of loss.

 Floating Policy:-

Is a policy which covers loss by fire caused to property belonging to the same person but

located at different places under a single sum and for one premium. Such a policy might

cover goods lying in two warehouses at two different locations. This policy is always

subject to 'average clause'.

 Replacement Or Re-Instatement Policy:-

Is a policy in which the insurer inserts a re-instatement clause, whereby he undertakes to

pay the cost of replacement of the property damaged or destroyed by fire. Thus, he may

re-instate or replace the property instead of paying cash. In such a policy, the insurer has

to select one of the two alternatives, i.e. either to pay cash or to replace the property, and

afterwards he cannot change to the other option.

46
 (B) MARINE INSURANCE

Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or

cargo by which property is transferred, acquired, or held between the points of origin and final

destination. Cargo insurance — discussed here — is a sub-branch of marine insurance, though

Marine also includes Onshore and Offshore exposed property, (container terminals, ports, oil

platforms, pipelines), Hull, Marine Casualty, and Marine Liability. When goods are transported

by mail or courier, shipping insurance is used instead.

Coverage against loss of or damage to a ship; and in-transit cargo loss or damage over

waterways, land, and air

A contract of marine insurance is an agreement whereby theinsurer 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

47
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, and

(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.).

48
5 FEATURES OF MARINE INSURANCE

1) Offer & Acceptance:

It is a prerequisite to any contract. Similarly the goods

under marine (transit) insurance will be insured after the offer is accepted by the

insurance company. Example: A proposal submitted to the insurance company

along with premium on 1/4/2011 but the insurance company accepted the

proposal on 15/4/2011. The risk is covered from 15/4/2011 and any loss prior to

this date will not be covered under marine insurance.

2) Payment Of Premium:

An owner must ensure that the premium is paid well in

advance so that the risk can be covered. If the payment is made through cheque

and it is DIPLOMA IN INSURANCE SERVICES

3) Contract Of Indemnity:

Marine insurance is contract of indemnity and the insurance

company is liable only to the extent of actual loss suffered. If there is no loss there

is no liability even if there is operation of insured peril.

49
 Example: If the property under marine (transit) insurance is insured for Rs 20

lakhs and during transit it is damaged to the extent of Rs 10 lakhs then the

insurance company will not pay more than Rs 10 lakhs.

4) Utmost Good Faith:

The owner of goods to be transported must disclose all the

relevant information to the insurance company while insuring their goods. The

marine policy shall be voidable at the option of the insurer in the event of

misrepresentation, mis-description or non-disclosure of any material information.

Example: The nature of goods must be disclosed i.e whether the goods are

hazardous in nature or not, as premium rate will be higher for hazardous goods.

5) Insurable Interest:

The marine insurance will be valid if the person is having

insurable interest at the time of loss. The insurable interest will depend upon the

nature of sales contract.

Example: Mr A sends the goods to Mr B on FOB( Free on Board) basis which means

the insurance is to be arranged by Mr B. And if any loss arises during transit then Mr

B is entitled to get the compensation from the insurance company.

50
TYPES OF MARINE INSURANCE

The different types of marine insurance can be elaborated as follows:

 Cargo Insurance: Cargo insurance caters specifically to the cargo of the ship and also

pertains to the belongings of a ship’s voyagers.

 Hull Insurance: Hull insurance mainly caters to the torso and hull of the vessel along

with all the articles and pieces of furniture in the ship. This type of marine insurance is

mainly taken out by the owner of the ship in order to avoid any loss to the ship in case of

any mishaps occurring.

 Liability Insurance: Liability insurance is that type of marine insurance where

compensation is sought to be provided to any liability occurring on account of a ship

crashing or colliding and on account of any other induced attacks.

51
 Freight Insurance: Freight insurance offers and provides protection to merchant

vessels’ corporations which stand a chance of losing money in the form of freight in case

the cargo is lost due to the ship meeting with an accident. This type of marine insurance

solves the problem of companies losing money because of a few unprecedented events

and accidents occurring.

52
 (C) MISCELLANEOUS INSURANCE

Miscellaneous Insurance refers to contracts of insurance other than those of Life, Fire and

Marine insurance. It covers a variety of risks, the chief of which are:-

Personal Accident Insurance

Personal Accident insurance is insurance for individuals or groups of persons against any

personal accident or illness. The risk insured is the bodily injury resulting solely and directly

from accident caused by violent, external and visible means. In India this type of insurance is

done by the General Insurance Corporation. A contract of personal accident insurance is not a

contract of indemnity and the insurer has to pay a fixed sum of money on the death or total

disablement of the insured or provide medical benefits for recovery from the injury. If risks

against certain specified diseases are also covered, the policy is known as 'Personal Accident and

Sickness Insurance'. For example, personal accident insurance by United India Insurance

Company Limited.

53
Motor Vehicle Insurance

Under it, a personal or commercial vehicle is subjected to combined insurance against the risks

of:-

(i) Loss or damage to the motor vehicle and its accessories on account of

accident or theft;

(ii) Death of or injury to the owner or passenger of the vehicle due to

accident;

(iii) Damages payable to third parties by the owner of the vehicle for

accident. A comprehensive insurance policy may be taken to cover all

these risks. Insurance against the first two types of risks is optional.

But every owner of motor vehicle is required to take out an insurance

policy to cover the third party risks under the Motor Vehicles Act,

1956. Such a policy is known as 'third party insurance or liability

insurance'. Under such a policy, the third party who has suffered any

loss can sue the insurer directly even though he was not a party to the

contract of insurance. For example, motor insurance by United India

Insurance Company Limited. This policy provides insurance cover to

owners of the vehicle, financiers or lessee, who have insurable interest

in a motor vehicle.

54
Fidelity Insurance

Under it, the insurer undertakes to compensate the insured i.e. the employers against the losses

suffered by him due to the employees. The losses may be due to

fraud,dishonesty,misappropriation of funds, goods or damages to property caused by the

employees. In order to avail the protection under it, the employer is required to provide all

material facts about their employees to the insurer and also, notify all changes in the condition of

their service. For example, fidelity insurance by New India Assurance Company Limited. Under

this policy, the insurance company agrees to indemnify the insured (employer) against a direct

pecuniary loss sustained by reason of any act of fraud/dishonesty committed by employee:-

 On or after the date of commencement of this policy.

 During uninterrupted service with the Insured and discovered during the continuance of

this policy or within twelve calendar months of the expiration thereof.

 In the case of death, dismissal or retirement of the employee with twelve calendar months

of such death, dismissal or retirement whichever of these events shall first happen.

55
Credit Insurance

Credit Insurance is a policy taken to cover the loss which may arise due to bad debts or non-

payment of dues by the debtors. It provides protection to businessmen, who sell goods on credit

terms while substantially reducing the overall risk of exposure to non-payment. It protects them

against losses arising out of insolvency of their debtors. It thus enables a business to take

advantage of peak and cyclical selling periods and to safely expand into new product lines or

territories.

For example, credit insurance by New India Assurance Company Limited. They provide two

fold credit management support:-

 Credit Monitoring:- During the policy period the insurance company receives monthly

statements of clients sales and keeps a close watch on client-wise sales and their payment

patterns. This it helps in fixing clients future sales, buyer-wise.

 Credit Control:- While processing the proposal form, they appraise a section of the

clients buyers. This enables them to fix credit limits, both Buyer wise and discretionary.

These limits are authentic indications of clients buyers' paying capacity.

In India, Export Credit and Guarantee Corporation of India Ltd provides credit insurance to

exporters. The export credit insurance is designed to protect exporters from the consequences of

the payment risks, both political and commercial, and to enable them to expand their overseas

business without fear of loss.

56
Workmen's Compensation Insurance

An employer is required to pay compensation to his workers who receive injuries or contract

occupational diseases during the course of their work. Such compensation is payable under

the Workmen's Compensation Act. An employer may obtain an insurance policy to cover such

liability. The premiums are payable usually on the basis of wages. It is also known as

'Employers' Liability Insurance'. For example, workmen's compensation insurance by United

India Insurance Company Limited. This policy provides insurance against the following risks:-

 Indemnity to insured against his liability as an ‘employer' to accidental injuries (including

fatal) sustained by the ‘workman' whilst at work.

 On extra premium-medical, surgical, and hospital expenses including the cost of transport

to hospital for accidental employment injuries.

 Liability in respect of diseases mentioned under the Workmen's Compensation Act, on

additional premium, which arise out of and in the course of employment.

Travel insurance

Travel insurance provides protection cover to all those individuals travelling outside India

against risks such as loss of baggage, travel related accidents including injuries, illnesses and

medical emergencies requiring hospitalization treatment. In India, this insurance policy has

become popular among International travelers. For example, travel insurance by United India

Insurance Company Limited.

57
 3.6 LIST OF GENERAL INSURANCE COMPANIES

Public Sector

1) New India Assurance Company Limited

2) National Insurance Company Limited

3) The Oriental Insurance Co. Ltd.

4) United India Insurance Co. Ltd.

5) Agriculture Insurance Company of India Ltd.

Private Sector

1) Bajaj Allianz General Insurance Co. Ltd.

2) ICICI Lombard General Insurance Co. Ltd

3) IFFCO-Tokio General Insurance Co. Ltd.

4) Reliance General Insurance Co. Ltd.

5) Royal Sundaram Alliance Insurance Co. Ltd

6) TATA AIG General Insurance Co. Ltd.

7) Cholamandalam General Insurance Co. Ltd.

58
 3.7 TOP 5 GENERAL INSURANCE COMPANIES IN INDIA

The New India Assurance Company Limited

New India Assurance Company Limited is an Indian Government owned general Insurance

company. The company has a network of 1600 offices and over 19000 employees and has

presence in more than 22 countries worldwide. It offers a wide range

of general insurance products including cover for oil & energy industries, Petrochemical, power

& steel plants, satellites, aviation fleets, SMEs and almost all the commercial sector.

Reliance General Insurance Company Limited

Reliance General Insurance is a general insurance company of India offering insurance cover to

SME, corporate and individual clients. Rated among the top 10 general assurance providers in

India and its product offering includes student travel, motor, health, travel insurance etc. and

other customized products. Reliance General Insurance Company has a network of 139 offices

spread across 24 states.

59
 Bajaj Allianz General Insurance Company Limited

Bajaj Allianz General Insurance Company Limited, a joint venture between Allianz SE and Bajaj

Finserv Limited is headquartered in Pune. Bajaj Allianz General Insurance Company offers

complex covers through policies like Health insurance which includes Personal Guard,

Star Package, Hospital Cash, Health Guard and Travel insurance which includes Pravasi Bharti

Bima Yojana and Student Companion etc.

Tata AIG General Insurance Company Limited

Formed by the American International Group, Inc. and Tata Group, Tata AIG General Insurance

Company Limited started India operations in 2001. Tata AIG General Insurance Company has

insurance solutions for corporate as well as individuals which includes Health Insurance,

Lifestyle Insurance, Home Insurance, Motor Insurance, Travel Insurance and more.

60
 ICICI Lombard General Insurance Company Limited

Rated highest in customer satisfaction by J.D. Power Asia Pacific in India, ICICI

Lombard General Insurance Company Limited has by far settled over 5.07 million claims and

issued 9.18 million policies. ICICI Lombard General Insurance Company is a joint venture

between Fairfax Financial Holdings and ICICI Bank Ltd.

61
3.8 EQUITY SHARE CAPITAL OF NON-LIFE INSURANCE

COMPANIES (AS ON 31ST MARCH 14)

62
 3.9 FEATURES OF GENERAL INSURANCE

The insurance has the following characteristics which are, generally, observed in case of, marine,

fire and general insurances.

1. Sharing of Risk:

Insurance is a device to share the financial losses which might befall on an individual or his

family on the happening of a specified event. The event may be death of a bread-winner to the

family in the case of life insurance, marine-perils in marine insurance, fire in fire insurance and

other certain events in general insurance, e.g., theft in burglary insurance, accident in motor

insurance, etc. The loss arising nom these events if insured are shared by all the insured in the

form of premium.

2. Co-operative Device:

The most important feature of every insurance plan is the co-operation of large number of

persons who, in effect, agree to share the financial loss arising due to a particular risk which is

insured. Such a group of persons may be brought together voluntarily or through publicity or

through solicitation of the agents.

An insurer would be unable to compensate all the losses from his own capital. So, by insuring or

underwriting a large number of persons, he is able to pay the amount of loss. Like all cooperative

devices, there is no compulsion here on anybody to purchase the insurance policy.

63
3. Value of Risk:

The risk is evaluated before insuring to charge the amount of share of an insured, herein called,

consideration or premium. There are several methods of evaluation of risks. If there is

expectation of more loss, higher premium may be charged. So, the probability of loss is

calculated at the time of insurance.

4. Payment at Contingency:

The payment is made at a certain contingency insured. If the contingency occurs, payment is

made. Since the life insurance contract is a contract of certainty, because the contingency, the

death or the expiry of term, will certainly occur, the payment is certain. In other insurance

contracts, the contingency is the fire or the marine perils etc., may or may not occur. So, if the

contingency occurs, payment is made, otherwise no amount is given to the policy-holder.

Similarly, in certain types of life policies, payment is not certain due to uncertainty of a

particular contingency within a particular period. For example, in term-insurance then, payment

is made only when death of the assured occurs within the specified term, may be one or two

years. Similarly, in Pure Endowment payment is made only at the survival of the insured at the

expiry of the period.

64
5. Amount of Payment:

The amount of payment depends upon the value of loss occurred due to the particular insured

risk provided insurance is there up to that amount. In life insurance, the purpose is not to make

good the financial loss suffered. The insurer promises to pay a fixed sum on the happening of an

event.

If the event or the contingency takes place, the payment does fall due if the policy is valid and in

force at the time of the event, like property insurance, the dependents will not be required to

prove the occurring of loss and the amount of loss. It is immaterial in life insurance what was the

amount of loss at the time of contingency. But in the property and general insurances, the amount

of loss as well as the happening of loss, are required to be proved.

6. Large Number of Insured Persons:

To spread the loss immediately, smoothly and cheaply, large number of persons should be

insured. The co-operation of a small number of persons may also be insurance but it will be

limited to smaller area. The cost of insurance to each member may be higher. So, it may be

unmarketable.

Therefore, to make the insurance cheaper, it is essential to insure large number of persons or

property because the lesser would be cost of insurance and so, the lower would be premium. In

past years, tariff associations or mutual fire insurance associations were found to share the loss at

cheaper rate. In order to function successfully, the insurance should be joined by a large number

of persons.

65
7. Insurance is not a gambling:

The insurance serves indirectly to increase the productivity of the community by eliminating

worry and increasing initiative. The uncertainty is changed into certainty by insuring property

and life because the insurer promises to pay a definite sum at damage or death.

From a family and business point of view all lives possess an economic value which may at any

time be snuffed out by death, and it is as reasonable to ensure against the loss of this value as it is

to protect oneself against the loss of property. In the absence of insurance, the property owners

could at best practice only some form of self-insurance, which may not give him absolute

certainty.

Similarly, in absence of life insurance, saving requires time; but death may occur at any time and

the property, and family may remain unprotected. Thus, the family is protected against losses on

death and damage with the help of insurance.

From the company's point of view, the life insurance is essentially non-speculative; in fact, no

other business operates with greater certainties. From the insured point of view, too, insurance is

also the antithesis of gambling. Nothing is more uncertain than life and life insurance offers the

only sure method of changing that uncertainty into certainty.

Failure of insurance amounts gambling because the uncertainty of loss is always looming. In

fact, the insurance is just the opposite of gambling. In gambling, by bidding the person exposes

himself to risk of losing, in the insurance; the insured is always opposed to risk, and will suffer

loss if he is not insured.

By getting insured his life and property, he protects himself against the risk of loss. In fact, if he

does not get his property or life insured he is gambling with his life on property.

66
8. Insurance is not Charity:

Charity is given without consideration but insurance is not possible without premium. It provides

security and safety to an individual and to the society although it is a kind of business because in

consideration of premium it guarantees the payment of loss. It is a profession because it provides

adequate sources at the time of disasters only by charging a nominal premium for the service.

67
Chapter 4.

General Insurance

Corporation Of India

(GIC)

68
 4.1 INTRODUCTION

GIC of India (GIC Re) is the sole reinsurance company in the Indian insurance market with over

four decades of experience.

GIC Re has its registered office and headquarters in Mumbai.

There are two types of General Insurance Corporation (GIC)

 Domestic GIC

 International GIC

69
 DOMESTIC GIC:

As a sole reinsurer in the domestic reinsurance market, GIC Re provides

reinsurance to the direct general insurance companies in the Indian market. GIC

Re receives statutory cession of 5 % on each and every policy subject to certain

limits. It leads many of domestic companies’ treaty programmes and facultative

placements.

 INTERNATIONAL GIC:

As GIC Re spreads its wings to emerge as an effective reinsurance solutions

partner for the Afro-Asian region and has started leading the reinsurance

programmes of several insurance companies in SAARC countries, South East

Asia, Middle East and Africa. To offer its international clientele an easy

accessibility, efficient service and tailor made reinsurance solutions; GIC has

opened branch offices in London and Moscow. GIC provides following capacities

for Treaty and Facultative business on risk emanating from the international

market based on merits of the business.

70
 4.2 TECHNOLOGY IN GENERAL INSURANCE SECTOR

 Computerization:

In the present scenario everyone is using computer one way or the other and whenever you go to

the market for shopping in any departmental store there you will find billing is computerized.

The most common item now a days is a Mobile phone which uses the information technology to

send the data or store the data like phone numbers or the messages. In the latest mobile sets

songs can also be stored and the mobile phone instrument can be used as computer. The

innovation in the computer field is taking at very high pace. Under this chapter we will not teach

the working of the computer or any language. We are going to explain how the computer can be

useful in the insurance sector.

 Internet:

Technology start-ups, and companies from the insurance industry, are introducing websites that

sell or promote a range of insurance including auto, homeowners and small commercial policies.

These portals, which promise savings by showing consumers many price quotes so they do not

have to shop site by site, are putting pressure on insurance agents, who collect 10 percent or

more of their policyholders’ payments.

Online insurance comparison is still a nascent business, and it has yet to make a dent in the

armies of intermediaries that are the backbone of the trade.

71
The idea of selling insurance online is not new. Lately, though, the boring but lucrative trade has

been attracting big names.

Internet is today used to even sell insurance policies. Internet is in fact, proving to be one of the

widely used distribution network for selling insurance policies. Also internet is used for sending

premium notices to policy holders through e-mails.

Also GIC has a special feature on its website. It has premium calculator which accurately

displays the amount of premium month wise and the remaining balance. One just has to enter the

age, name of the insurance policy, the sum assured and whether there is an accident cover or

not. By keying in this information, the entire premium amounts are shown within no tme. This

has helped the customer in a way so that he/she doesn’t have to travel all the way to thje branch

to ascertain the amount of premium to be paid

 Electronic Clearance service (ECS)

Almost all the big organizations today provide the ECS facility to its customer. A policy holder

having an account in any bank which is a member of the local clearing house can opt for ECS

debit to pay premium. The advantage here is that once the option is exercised, the policy holder

need not visit a branch for paying the premium or collecting the receipts. On the day indicated by

the policy holder, the premium amount will be directly debited to the bank account of the

policyholder and the receipt will be issued by the designated branch office.

72
  Bank ATM’s

Many insurance companies have a tie-up with commercial banks so as to enable policyholder to

use the facility to use the facility of paying premiums through the bank ATM’s. ICICI Lombard

has a tie up with ICICI bank; Bajaj Allianz has a tie up with corporation bank and UTI bank

 Call Centre’s And SMS Services

Almost all the insurance companies have their own call centre’s which cater to the phone based

queries of the policyholders. This service is 24*7 and they have the interactive voice response

system at all branches

Also, LIC and other companies now provide SMS services going with the new trends like SMS

banking in the banking sector

73
4.3 GENERAL INSURANCE CLAIM SETTLEMENT

74
 4.4 IMPACT OF GENERAL INSURANCE ON INDIAN

ECONOMY

Impact of Insurance on India is significant and has rapidly grown in the last decade with

liberalization and private sector entry. The number of people insured with life policies have

vastly increased, medical insurance has become popular and benefited large number of people,

insurance premium as come down as a result of competition, insurance brokers are providing

good service to take insurance to the people and help them get the claims quickly in case of death

or accident, the companies are insuring their factories, offices, vehicles, shops, equipments,

hotels, hospitals, and the households are insuring their properties assets . This has considerable

mitigated the risks of loss and damage to the insurers. The monies collected by the insurance

companies have contributed to economic development as these funds are deployed in industrial

projects, transport and infrastructure projects as well as socially beneficial health and other

projects.

Insurance is a federal subject in India and has a history dating back to 1818. Life and general

insurance in India is still a nascent sector with huge potential for various global players with the

life insurance premiums accounting to 2.5% of the country's GDP while general insurance

premiums to 0.65% of India's GDP. The Insurance sector in India has gone through a number of

phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up

the insurance sector by allowing private companies to solicit insurance and also allowing FDI up

to 26%. Ever since, the Indian insurance sector is considered as a booming market with every

other global insurance company wanting to have a lion's share. Currently, the largest life

75
insurance company in India is still owned by the government. The oldest existing insurance

company in India is National Insurance Company Ltd, which was founded in 1906 and is doing

business even today. Insurance industry earlier comprised of only two state insurers. Life

Insurers i.e. Life Insurance Corporation of India (LIC) and General Insurers i.e. General

Insurance Corporation of India (GIC). GIC had four subsidiary companies. With effect from

December 2000, these subsidiaries have been de-linked from parent company and made as

independent insurance companies: Oriental Insurance Company Limited, New India Assurance

Company Limited, National Insurance Company Limited and United India Insurance Company

Limited. The insurance sector went through a full circle of phases from being unregulated to

completely regulated and then currently being partly deregulated. It is governed by a number of

acts, with the first one being the Insurance Act, 1938. Insurance Regulatory and Development

Authority (IRDA) Act, 1999.

Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt.

of India then introduced the Insurance Regulatory and Development Authority Act in 1999,

thereby de-regulating the insurance sector and allowing private companies into the insurance.

Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance

companies. Besides LIC and GIC and the other 4 public sector general insurance companies, we

have now Tata AIG Life Insurance Company,

76
Export Credit Guarantee Corporation of India, National Insurance Corporation of India, Aviva

India(Life Insurance), MetLife India Insurance, Max New York Life Insurance Co., ICICI

Lombard General Insurance Co, Reliance Life Insurance Co, Star Health & Allied Insurance Co.,

IFFCO-Tokio General Insurance Co., HDFC Standard Life Insurance Co., Birla SunLife

Insurance Co., Bajaj Allianz Life, Tata AIG Life, ICICI Prudential Life Insurance ., HDFC

Standard Life., Birla Sunlife., SBI Life Insurance, Kotak Mahindra Old Mutual Life Insurance,

Aviva Life Insurance, Reliance Life Insurance, Metlife India Life Insurance, ING Vysya Life

Insurance, Max , Shriram Life Insurance, Bharti AXA Life Insurance

77
Chapter 5.

THE NEW INDIA

ASSURANCE COMPANY

LIMITED

78
 5.1 INTRODUCTION

The New India Assurance Co. Ltd., based in Mumbai, is one of the five wholly Government of

India owned assurance companies of India. It is the "largest general insurance company

of India on the basis of gross premium collection inclusive of foreign operations".. It was

founded by Sir Dorabji Tata in 1919, and was nationalized in 1973.

Previously it was a subsidiary of the General Insurance Corporation of India (GIC). But when

GIC became an re-insurance company as per the IRDA Act 1999, its four primary insurance

subsidiaries New India Assurance, United India Insurance, Oriental Insurance and National

Insurance got autonomy.

New India Assurance operates both in India and foreign countries. In the recent past it has

collaborated with some of the leading public sector banks of India such as State Bank of

India, Central Bank of India, Corporation Bank and United Western Bank to increase its

distribution network.

New Indian is a pioneer among the Indian companies on various fronts, right from insuring the

first domestic airlines in 1946 to satellite insurance in 1980.

With a wide range of policies new India has become one of the largest non-life insurance

companies, not only in India but also in the Afro-Asian region.

79
 5.2. SLOGAN, VISSION AND MISSION

Slogan Born to Lead

VISION

 Highest priority to customer needs.

 High standards of public conduct.

 Transparency in operations.

MISSION

 To develop develop general insurance business in the best interest of the community.

 To provide financial security to individuals, trade, commerce and all other segments of

the society by offering insurance products and services of high quality at affordable cost.

80
 Respond to all commercially viable general insurance requirements of the citizen,

including products for weaker sections of the society of the society at affordable price

within three months from the date on which such a requirement is received.

 Ensure issuance of 100% of documents within a period of seven days.

 Ensure that prospectus of the various insurance products are provided to the customers

 Promote customer education in general insurance products/ services by holding

workshops in various centers.

 To set up proper grievances redressal mechanism in every operating office and educate

the clients about the same including the system of grievance redressal through

ombudsman.

81
 CONCLUSION

General insurance covers a wide area of operation. In fact it encompasses all the risk except

those of individual life and group life. Several large and crucial areas which were prone to sever

heavy losses like marine, aviation, engineering, and fire among others fall under the General

Insurance category. One of the biggest constraints facing the general insurance is lack of reach

behind cities. General insurances facing difficulty in getting intermediaries to distribute their

products. General insurance industry has big opportunity to expand, given the large population

and untapped potential. The insurance market in India has witnessed dynamic changes including

entry of a number of global insurers. Challenges such as developing a common industry code of

conduct, contributing to a common industry chalking out agreements between insurers to settle

claims to the benefit of the consumer will require concerted efforts from both sectors.

Competition will surely cause the market to grow beyond current rates, create a bigger “pie” and

offer additional consumer choices through the introduction of new products, services, and price

options.

The market is now in an evolving phase where one can expect a lot of actions in

coming days. The current impediments for foreign participation- like 26% equity cap on foreign

partner, ill defined regulatory role of IRDA in pension business etc.—are expected to be

removed in near future. The early-adopters will then have a clear advantage compared to

laggards in gaining the market share and market leadership. The will need to make sure right

now that their entire infrastructure is in place so that can reap the benefit of an “unlimited

potential.”

82
Public sector companies including NEW INDIA ASSURANCE are systematically important and

receive support from the government of India. Also public sector companies have dominated

aggregate market.

Emerging markets represent a massive opportunity for growth, but operate to a different set of

rules and requirements. Intermediaries are not able to face their customers. Every insurance

agent should sell products depend upon the needs of customers. General insurance is not meant

for savings or investment returns. It is meant for protection. What you pay for protection against

a risk. To approach it as something from which returns should be obtained is not the correct

approach as there is a price to pay for protecting a property worth lakhs for a few hundred

rupees.

83
 BIBLIOGRAPHY

Bibliography

General insurance(vol 1), by ICFAI publications

Non life insurance by K.B.S KUMAR

Indian insurance A profile by H.NARAYAN

Important Website

www.newindia.co.in

www.irda.com

www.google.co.in/indian insurance industry

Newspaper

Times of India

The Economic Times

84