INTRODUCTION

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Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks which can be insured against include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance. DEFINITION : General definition: In the words of John Magee, “Insurance is a plan by which large number of people associate themselves and transfer to the shoulders of all, risks that attach to individuals.”

Fundamental definition:

In the words of D.S. Hansell, “Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payment being made from the accumulated contributions of all parties participating in the scheme.” Contractual definition: In the words of justice Tindall, “ Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency.”

What is Insurance An insurance contract provides risk coverage to the insuree. A purchaser of insurance pays a fixed premium in exchange for a promise of compensation in the event of some specified loss. Insurance is bought because it gives peace of mind to the holders. This comfort level is important in personal and business life. Though the primary purpose of insurance is to provide risk coverage, when the contract period extends over a long time, as in the case of life insurance, premium payments comprise of two components – one for buying risk coverage and the other towards savings. This bundling together of risk coverage and savings is peculiar to life insurance and is more common in developing countries like India. In the industrially advanced countries, this is not necessarily so and short duration life insurance contracts without a savings component are equally popular. In the developing economies because of the savings component and the long nature of the contract, life insurance has become an important instrument of mobilising long-term funds. The savings component puts the life insurance in direct competition with other financial institutions and savings instruments. The total investment portfolio of the insurers in India as at the end of March, 2005 was Rs. 4,65,864 crore. The total premium collected by the insurers both life and non-life in 2004-05 was Rs.1,00,335 crore. The major contribution came from life insurance. The insurance penetration i.e., premia as percentage of GDP was 3.17 per cent in 2004. While this ratio is steadily increasing, it is far below the world average of 8.06 per cent. This shows the vast potential that exists.

Basic functions of Insurance 1. 1. leg of a footballer. In developing economies. insurance means.. 2... factory. and the hand of an author.. the insurance sector still holds a lot of potential which can be tapped. or the voice of a singer. FUNCTIONS OF INSURANCE The functions of Insurance will give you an idea on how to go ahead with the approach of insurance and what type of insurance to choose. In a layman's words. car.Other Functions .Characteristics of insurance :      Sharing of risks Cooperative device Evaluation of risk Payment on happening of a special event The amount of payment depends on the nature of losses Incurred. Tangible or intangible – an individual can insure anything! Be it a house. 3.Secondary Functions 3.Primary Functions 2. Majority of the people in the developing countries remains unaware of the functions and benefits of insurance and it is for this reason that the insurance sector is still to grow. It is possible to insure all these as they have the possibility of becoming non functional by any disaster or an accident.etc. ‘a guard against pecuniary loss arising on the happening of an unforeseen event’.

• Evaluating risk – Insurance fixes the likely volume of risk by assessing diverse factors that give rise to risk. This is done by paying small amount of premium against larger risks and dubiety. • Provide Certainty – Insurance is a device.Primary functions of insurance • Providing protection – The elementary purpose of insurance is to allow security against future risk. installation of automatic sparkler or alarm systems. Insurance is in reality a protective cover against economic loss. restricting unnecessary expenses by the insured. Risk is the basis for ascertaining the premium rate as well. which assists in changing uncertainty to certainty. accidents and uncertainty. Other functions of insurance • Is a savings and investment tool – Insurance is the best savings and investment option. • Helps in the development of larger industries – Insurance provides an opportunity to develop to those larger industries which have more risks in their setting up. • Covering larger risks with small capital – Insurance assuages the businessmen from security investments. • Collective risk bearing – Insurance is an instrument to share the financial loss. . by apportioning the risk with others. Secondary functions of insurance • Preventing losses – Insurance warns individuals and businessmen to embrace appropriate device to prevent unfortunate aftermaths of risk by observing safety instructions. It is a medium through which few losses are divided among larger number of people. etc.

making foreign trade risk free with the help of different types of policies under marine insurance cover. • Risk Free trade – Insurance boosts exports insurance. • Availability of Substitutes: There exist a lot of substitutes in the insurance industry. Big corporate clients like airlines and pharmaceutical companies pay millions of dollars every year in premiums. • Power of Suppliers: Those who are supplying the capital are not that big a threat. home. Majorly.• Medium of earning foreign exchange – Being an international business. There is also a chance that the big players might squeeze the small new entrants. For instance. if someone as a very talented insurance underwriter is presently working for a small insurance company. commercial. . Challenges facing Insurance Industry • Threat of New Entrants: The insurance industry has been budding with new entrants every other day. Therefore the companies should carve out niche areas such that the threat of new entrants might not be a hindrance. there exists a chance that any big player willing to enter the insurance industry might entice that person off. health or life insurance. the large insurance companies provide similar kinds of services – be it auto. any country can earn foreign exchange by way of issue of marine insurance policies and a different other ways. • Power of Buyers: No individual is a big threat to the insurance industry and big corporate houses have a lot more negotiating capability with the insurance companies.

as private players grew by 129% to mop up Rs.43 billion during the fiscal year 2004-2005. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. But this was still not enough to arrest the fall in its market share. the penetration rates of health and other non-life insurances in India is also well below the international level. . 55.04 to 78. 450 billion (US$10 billion).4 billion new policies in 2004-05. 253. According to government sources. The life insurance industry in India grew by an impressive 36%.29 billion in 2003-04.57 billion in 2004-05 from Rs. Till date. These facts indicate the of immense growth potential of the insurance sector. the potential of the Indian insurance industry is huge.87% growth in business at Rs. Total value of the Indian insurance market (2004-05) is estimated at Rs. 24.197. The share of LIC for this period has further come down to 75 percent. has clocked 21. LIC. Though the total volume of LIC's business increased in the last fiscal year (20042005) compared to the previous one. only 20% of the total insurable population of India is covered under various life insurance schemes. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. braving stiff competition from private insurers.86 billion by selling 2. The market share of the state behemoth. The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP. its market share came down from 87.07%. the insurance and banking services’ contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part.Indian Insurance Industry: New Avenues for Growth 2012 With an annual growth rate of 15-20% and the largest number of life insurance policies in force. with premium income from new business at Rs. while the private players have grabbed over 24 percent.

private insurance companies collectively have a 10% share of the non-life insurance market. The up coming products comprise linked products. date of commencement of the policy and their adopting organizations. and covers fire.the Endowment Assurance Products and the Money Back Products. . it also talks about the market size. They are offered the facility to return the policy in case it is not able to satisfy his requirements. The vehicle insurance products rank next to life insurance product in terms of demand. marine. Products and Services offered by Insurance Companies in India: The insurance companies in India dealing in life insurance are mainly engaged in offering two categories of life insurance products. market segmentation. The report gives an instant overview of the Indian non-life insurance market. This report also provides company profiles of the major private insurance companies. Though the focus of this market research report is on the potential growth on the Indian Insurance Sector. It plays a important role in the Indian insurance sector. The products offer various facilities to the investors as for example they are available with free look facility so that the investor gets time to examine the policy within the free look period. The data is supplied in both graphical and tabular format for ease of interpretation and analysis. According to estimates. and key developments in the market after 1999.There are presently 12 general insurance companies with four public sector companies and eight private insurers. INDIAN INSURANCE POLICIES Insurance Policy India provides the clients with the details required for the coverages in the policy. and other non-life insurance.

Endowment Policy: An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on earlier death. Typical maturities are ten. fifteen or twenty years up to a certain age limit. c. Whole Life Policy: A typical whole life policy runs as long as the policyholder is alive.The Insurance Policy India is regulated by certain acts like the Insurance Act(1938). the risk is covered for the entire life of the policyholder. If the insured dies during the term. sometime opens investment options with insurance companies setting high returns and also informs about the tax benefits like the LIC in India. The insurance policy determines the covers against risks. the relevant term. Term insurance is the most inexpensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis. the death benefit will be paid to the beneficiary. . In other words. General Insurance Business (Nationalization) Act(1972). this insurance policy also offers tax planning and investment returns. Life insurance 2. Some policies also pay out in the case of critical illness. b. There are two types of insurance covers: 1. Alongside. There are various types of life Insurance Policy India: a. the Life Insurance Corporation Act(1956). which is why they are know as whole life policies. Term Life Policy: Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time. General insurance Life insurance – this sector deals with the risks and the accidents affecting the life of the customer. Insurance Regulatory and Development Authority (IRDA) Act(1999).

But these are categorized separately as these cover two lives together thus offering a unique advantage in some cases. notable. h. which reduces the loan amount. Pension Plan or Annuities: The individual plans that look into your future and helps to foresee the financial stability during the age of retirement is are the Pension plans. . Similarly. These plans are particularly helpful for those senior citizens and those who plan for a future with security and safety. the bonus is also calculated on the full sum assured. which may have already been paid as money-back components. money back policies provide for periodic payments of partial survival benefits during the term of the policy. Loan Cover Term Assurance Policy: Loan cover term assurance policy is an insurance policy. for a married couple or for partners in a business firm. Group Insurance Policy: Group insurance is an insurance that covers a group of people. usually who are the members of societies.d. which covers a home loan. f. The cover on such a policy keeps reducing with the passage of time as individuals keep paying their EMIs (equated monthly instalments) regularly. Such a policy covers the individual's home loan amount in case of an eventuality. of course so long as the policy holder is alive. An important feature of this type of policies is that in the event of death at any time within the policy term. the death claim comprises full sum assured without deducting any of the survival benefit amounts. or professionals in a common group. Money-back Policy: Unlike ordinary endowment insurance plans where the survival benefits are payable only at the end of the endowment period. g. e. The main aim of these pension plans is that they provide security to the entire family with respect to the financial support during the productive plan and a happy lifestyle to oneself and their spouse at the age of retirement. apart form covering the risks as all life insurance policies. Joint Life Policy: Joint life policies are similar to endowment policies in as much as these policies also offer maturity benefits to the policyholders. employees of a common employer.

as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory. ULIP is life insurance solution that provides for the benefits of protection and flexibility in investment. Unit Linked Insurance Plan: Unit Linked Insurance Plan (ULIP) provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time. vehicle. in this case the risk of incurring medical expenses. It may be provided through a government-sponsored social insurance program. household goods. like other forms of insurance. Home Insurance: is the type of property insurance that covers private homes. which can include losses occurring to one's home. It requires that at least one of the named insureds occupies the home. or from private insurance companies. is a form of collectivism by means of which people collectively pool their risk. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs.i. . It is an insurance policy that combines various personal insurance protections. Health Insurance: Health insurance. b. General Insurance: this sector covers almost everything related to property. loss of its use (additional living expenses). its contents. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV). The major segments covered under general Insurance Policy India are: a. or loss of other personal possessions of the homeowner. health and also one's liability towards others. though in some countries health insurance pools may also be managed by for-profit companies. cash. The collective is usually publicly owned or else is organized on a non-profit basis for the members of the pool.

or a more extensive. either within one's own country.300 per quarter per child is given for a period of four years. or motor insurance) is insurance purchased for cars. 50. Shiksha Sahyog Yojana – a scheme providing an educational scholarship of Rs. travel insurance purchased from travel suppliers tends to be less inclusive than insurance offered by insurance companies. Travel Insurance: Travel Insurance is insurance that is intended to cover medical expenses and financial (such as money invested in nonrefundable prepayments) and other losses incurred while traveling. Temporary travel insurance can usually be arranged at the time of the booking of a trip to cover exactly the duration of that trip.c. Motor Insurance: Vehicle insurance (also known as auto insurance. d. car insurance. Jan Arogya Bima Policy – a scheme for the adults upto the age of 45 years is Rs. The limit coverage is fixed at Rs. Some of the well known Insurance Policy India are: Social Security Group Scheme – a scheme covering the age group of 18-60 years and an insurance of Rs.25000 on due to accidental death.5000 for natural death and of Rs. travel agents or directly from travel suppliers such as cruiselines or tour operators. However. and other vehicles. or internationally. continuous insurance can be purchased from travel insurance companies.5000 per . Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident. trucks. 70 and for children it is Rs.

The premium amount is fixed at Rs.000 for partial disability. with a premium of Rs. Bhagya Shree Child Welfare Bima Yojana – a scheme covering one girl child in a family upto the age of 18 whose parents age does not exceed 60 years.000 for accidental death and 25. .annum.15 per annum. Jana Shree Bima Yojana – this is a coverage of Rs 2. Ashray Bima Yojana – a scheme covering workers in case of loss of jobs. Insurance coverage includes 50. Videsh Yatra Mitra Policy – a scheme covering medical expenses during the period of overseas travel.000 for accidental death.000 on natural death and Rs 50. Mediclaim Insurance Policy – a scheme covering the age group from 5-80 years with a tax benefit of up to Rs 10. Raj Rajeshwari Mahila Kalyan Yojana – a scheme providing protection to woman in the age group of 10 to 75 years with an insurance of Rs.000 and premium Rs. 25. Personal Accident Insurance Scheme for Kissan Credit Card – a scheme covering all the KCC holders up to an age of 70 years.000.15 per annum. 200 for single member.

it would completely negate entrepreneurship. some of these activities will not be carried out at all. The average rate of growth of the economy in the last three years was 8. the demand for general insurance also increases. As a consequence. This strong growth will bring about significant changes in the insurance industry. it is important to note that not all activities can be insured. Insurance is no longer confined to product markets. The economy has moved on to a higher growth path. There is thus a mutually beneficial interaction between insurance and economic growth. If that were possible. At this point. In fact. It is equally true that growth itself is facilitated by insurance. Risk is inherent in all economic activities. it is non-quantifiable risk that leads to profit. the demand for life insurance increases. Professor Frank Knight in his celebrated book “Risk Uncertainty and Profit” emphasized He made a distinction between quantifiable risk and non-quantifiable risk. As the assets of people and of business enterprises increase in the growth process. while the problems of life or of conduct at least. that profit is a consequence of uncertainty. He wrote “It is a world of change in which we live. We live only by knowing something about the future.Insurance and Growth Insurance and economic growth mutually influences each other. To some extent this is also compounded by certain attitudes to life. and a world of uncertainty. Also insurance and more particularly life insurance is a mobilizer of long term savings and life insurance companies are thus able to support infrastructure projects which require long term funds.1 per cent. Without some kind of cover against risk. A well-developed insurance sector promotes economic growth by encouraging risk-taking. As the economy grows. arise from the fact that we know so . they also cover service industries. as the economy widens the demand for new types of insurance products emerges. The low income levels of the vast majority of population has been one of the factors inhibiting a faster growth of insurance in India. the living standards of people increase. According to him.

The India insurance sector is likely to put its foot forward towards more competition with growing importance and recognition. the lower the average risk and lower the premium. However. This is a highly technical area involving theories of probability. This assessment depends upon a variety of factors and actuarial calculations become necessary. A considerable growth rate was also recorded by the private companies. That is why the larger the coverage. for insurance as an activity to succeed. .little. Assessment of Risks An important function of an insurer is to assess the average level of risk borne while offering a product. Diversification is the way to reduce the average risk. The real management challenges are uninsurable risks. risk is avoided at a cost. Indian Insurance – Growth Such a stupendous growth after along wait was well deserved for the insurance companies. In the case of insurable risks. Sharp and excellent market scheme along with wide product bandwidth proved to be a winner among the masses. This is as true of business as of other spheres of activity”. the population to which a product is offered must consist of categories with different degrees of risk. The premium charged by an insurer is based on the calculated average risk. Obviously this premium will be high for people who perceive themselves to be in a low risk category.

the most important function of the regulatory authority will be to ensure quick settlement of claims without unnecessary litigation. regulations will have to be introduced to ensure that insurance companies follow appropriate prudential norms such as solvency margins. the need for an independent regulatory authority was not felt. the need for a regulatory authority becomes paramount. the insured and the economy. The third role should be one of development. (b) to ensure the financial soundness of the insurance industry. insurance is an activity that needs to be regulated. Most importantly. some mandatory products and standardization. if they cannot trust the company to keep its promise. the insurance regulatory authority has become a statutory authority. The regulatory framework in relation to the insurance companies seeks to take care of three major concerns – (a) protection of consumers’ interest. With respect to solvency and financial health. With the passing of the Insurance Development and Regulatory Act in 2000. and (c) to help the healthy growth of the insurance market. Protecting consumer interest involves proper disclosure. it has to make sure that consumers get paid by insurers. So long as insurance remained the monopoly of the Government. The insurance industry in India has a large potential and the framework of regulation must enable the industry to tap this vast potential. From the consumers’ point of view. However. keeping prices affordable. Large funds are under the custody of the insurers and they get invested to produce additional returns. with the acceptance of the idea that there can be private insurance entities. Entry into the insurance industry must also be regulated with suitable capital adequacy norms. The management of these funds is important to the insurer. Insurance products are of little value to customers. . This is so because the smooth functioning of business depends on the trust and confidence reposed by the customers in the solvency of the financial institutions.Regulatory Framework As in the case of all financial institutions.

IRDA over the last decade has brought into force a number of regulations which are well conceived. The growth of the real economy depends upon the efficiency of the financial sector. It has also developed in terms of product innovation and the use of alternative distribution channels. A greater element of competition is being injected into the financial system as well. The insurance industry in our country underwent a big change in 2000 when private participants were allowed into the industry along with a streamlined regulatory and supervisory regime. Regulations lay down norms while controls have a propensity to micromanage institutions. There is evidence to show that competition has done good to insurance industry. Regulators must take care to ensure that regulations do not slide into controls. This is sought to be achieved partly by creating a more competitive environment. All regulators need to keep in mind that there is a fine distinction between regulations and controls. There are at present 14 private life insurance companies along with LIC and 12 entities in non-life sector. The recent decision of IRDA to move to a free tariff regime for several general insurance products is welcome. The basic philosophy underlying the new economic policy is to improve the productivity and efficiency of the system. They have received wide spread appreciation. . The prescription of tariff is contrary to market principles and insurance products need to be priced based on market forces. The reform of the insurance sector is part of the overall economic reform process that is underway. The rate of growth of the industry in the post liberalization period has been faster.

This means the Indian partner of a joint venture will have to bring in a minimum of 74% of additional capital required to do new business. It is also a long-gestation business. In order to mobilize high rates of household savings the industry needs huge sums of capital to continue growing at rates seen in the past five years. On the other hand the foreign partner is unwilling to commit more capital and management resources as they have little say in shaping the business. The law provides for participation of global insurance firms in the Indian market only through joint ventures with Indian partners. Insurance for natural catastrophes is almost negligible. There is also a strong case for raising the FDI cap in reinsurance and auxiliary insurance services such as brokerage and actuarial services. Only an insurance market that has a strong capital base and ample provisions to handle the inherent risks of a major event can respond to the disaster mitigation needs. and innovative distribution channels that help insurers reach a broader spectrum of the population. . In the past decade. FDI in these joint ventures can not exceed 26%. The FDI not only brings in capital but also insurance 'best practices' and new insurance products. Less than one percent of the economic losses resulting from these disasters were insured.FUND MANAGEMENT IN INSURANCE SECTOR Insurance is a capital-intensive industry. The raising of the FDI cap will go a long way in facilitating this. India and China accounted for one-fourth of the global economic losses from natural disasters. India is highly prone to natural catastrophes.

Rs 100 crores as the norm. The IRA is also reported to considering a graded pattern for capitalization of the companies keeping in mind the volume of business likely to be handled by them. 50 crore. These stipulations have resulted in the lack of flexibility in the optimization of its risk and profit portfolio. The multilateral insurance working group (an industry forum representing most of the interested foreign and Indian companies seeking an entry into the insurance sector) has recommended Rs. the manner in which LIC can deploy its funds is stated. The Insurance Potential : . Under sec 27A of the insurance act and its application in the LIC act. Similarly. Under the current guidelines. The Malhotra committee (1994) recommended The Emerging Insurance sector of India. 25% of accretions may be invested by LIC for investments in private corporate sectors. the LIC is required to invest 75% of the accretions through a controlled fund in certain approved investments. it is proposed that the GIC will be subject to the following guidelines: CAPITAL NORMS FOR NEW INSURANCE COMPANIES : One of the contentious issues raised by foreign companies seeking an entry into the insurance sector in India is the minimum paid up capital requirements.INVESTMENT OF INSURANCE FUNDS : Any reform of the insurance sector must necessarily consider aspects related to the investment of insurance funds. loans to policyholders. construction and acquisition of immovable assets. It has been reported that the government is planning to offer greater autonomy to LIC through the following: It is proposed that the deployment of the balance of 50% of the funds will be left to discretion of LIC.

is the vast potential for future business. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in this sector. In this scenario. If we take a look at insurance coverage index for the age group of 20.27% p. MARKET SHARE OF INDIAN INSURANCE INDUSTRY The introduction of private players in the industry has added value to the industry. The market share was distributed among the private players. . Restricted.The following companies has the rest of the market share of the insurance industry. 1997). The decade 1987-97 has witnessed a compounded growth rate of marginally more than 10% in life insurance business.The main reason why the leading insurance companies in the world and the leading corporate group in India have shown a keen interest in the insurance sector.59 years a considerable gap between India and other countries in Asia can be observed. The new players have improved the service quality of the insurance. Though LIC still holds the 75% of the insurance sector but the upcoming natures of these private players are enough to give more competition to LIC in the near future. it is generally felt that the sector can grow exponentially if it is opened up. in a decade 1997-2007 (LIC. As a result LIC down the years have seen the declining phase in its career. LIC market share has decreased from 95% (2002-03) to 81 %( 2004-05). through the operations of the two monopolies (LIC and GIC). The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. naturally insurance companies see a vast potential.a. as the market has been. LIC predicts for itself that its business has potential to grow by 16.

79 0.90 0.29 0.63 2.NAME OF THE PLAYER MARKET SHARE (%) Name of the Player LIFE INSURANCE CORPORATION OF INDIA ICICI PRUDENTIAL BIRLA SUN LIFE BAJAJ ALLIANZ SBI LIFE INSURANCE HDFC STANDARD TATA AIG MAX NEW YARK AVIVA OM KOTAK MAHINDRA ING VYSYA MET LIFE Market share (%) 82.3 5.03 1.21 PRESENT SCENARIO OF INSURANCE INDUSTRY  India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. Saturation of .37 0.36 1.56 2.80 1.51 0.

The insurance sector in India has come to a position of very high potential and competitiveness in the market.markets in many developed economies has made the Indian market even more attractive for global insurance majors. are now suddenly turning to the private sector that are providing them new products and variety for their choice. Direct selling • Corporate agents • Group selling • Brokers and cooperative societies • Bancassurance •  Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. More customers are buying products and services based on their true needs and not just traditional moneyback policies. Indians. The concept is very well established in the country like India but still the increasing use of other sources is imperative. Computerisation of operations and updating of technology has become imperative in the current scenario. Foreign players are bringing in international best practices in service through use of latest technologies  The insurance agents still remain the main source through which insurance products are sold. which is not considered very appropriate for long-term protection . Customers are offered unbundled products with a variety of benefits as riders from which they can choose. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. At present the distribution channels that are available in the market are listed below. have always seen life insurance as a tax saving device.  Consumers remain the most important centre of the insurance sector.

daughter's marriage. in that order.e. However.900 as premium each year. There is lots of saving and investment plans in the market. health products. Conclusion . children's education and good return on savings.  The rural consumer is now exhibiting an increasing propensity for insurance products.500 and Rs 2. A research conducted exhibited that the rural consumers are willing to dole out anything between Rs 3. the study adds. In the insurance the awareness level for life insurance is the highest in rural India. In a study conducted by MART the results showed that nearly one third said that they had purchased some kind of insurance with the maximum penetration skewed in favor of life insurance. but the consumers are also aware about motor. there are still some key new products yet to be introduced . accidents and cattle insurance. The perceived benefits of buying a life policy range from security of income bulk return in future.and savings.g. The study also pointed out the private companies have huge task to play in creating awareness and credibility among the rural populace.

The three guiding principles of the industry must be to charge premium no higher than what is warranted by strict actuarial considerations. (b) appropriate pricing. Technologies are changing and getting replaced at a faster rate. to invest the funds for obtaining maximum yield for the policy holders consistent with the safety of capital and to render efficient and prompt service to policy holders. the mission of widening the spread of insurance can be achieved. In a sense. the insurance industry must pay attention to (a) product innovation. you who are graduating today have an important role in fulfilling this mission. The approach to insurance must be in tune with the changing times.The insurance sector has a vast potential not only because incomes are increasing and assets are expanding but also because the volatility in the system is increasing. we are living in a more risky world. for which enough evidence is available in the recent period. insurance will have an important role to play in reducing the risk burden individuals and businesses have to bear. In this more uncertain world. . With imaginative corporate planning and an abiding commitment to improved service. In the emerging scenario. The mission of the insurance sector in India should be to extend the insurance coverage over a larger section of the population and a wider segment of activities. and (c) speedy settlement of claims. Trade is becoming increasingly global. As I said at the beginning.

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