Insurance

Insurance In the contract of insurance, the insurer agrees/undertakes the consideration of a sum of money, to make good the loss suffered by the insured against a specified risk such as fire and any other similar contingency or compensate the insured/beneficiaries on the happening of a specified event such as accident or death.  There are two parties Insured  Insurer

Insurance Depending on the subject matter, the insurance policies can be classified into two types Life Insurance  General Insurance

Life Insurance

Under which a specified amount becomes payable on the death of the insured or upon the expiry of a specified period of time, which ever is earlier

Types of Life Insurance Policies
1. Endowment policy  The insured amount is payable either at the end of a specified number of years or upon death of the insured person, which ever is earlier. 2. Whole – Life Policy  The premium continues to be paid through the life of the assured, but the amount becomes payable only after death. 3. Limited – payment life Policy  Similar to the whole –life policy  The premium is to be paid only for a certain number of years.

Types of Life Insurance Policies
4. Joint Life Policy  The policy money becomes payable either on maturity of the policy or on the death of any of the persons jointly insured. 5. Convertible Whole Life Policy  The rate of premium is quite low initial.  After some time, the assured is given an option to convert the policy into endowment policy. 6. Double – Accident Indemnity Policy  The assured dies of an accident his survivors get double the amount of the policy

General Insurance

General Insurance which covers losses caused by fire, accident and marine adventures and so on

Fire Insurance Policies

Is a contract under which the insurer agrees, in consideration of a premium, to pay loss or damage by fire during specified period.

Types of Fire Insurance Policies
1. Specific Policy  The loss suffered by the assured is covered only up to a specific amount, which is less which is less than the real value of the property. 2. Comprehensive Policy  It is also known as an all-in-one policy  It covers losses arising from any kind risks such as fire, theft, burglary and so on 3. Valued Policy  The insurer agrees to pay fixed sum of money irrespective of the amount of loss to the insured

Types of Fire Insurance Policies

4. Floating Policy  It covers property lying at different places against lose by fire  E.g. goods placed in two godowns at two different places.

Marine Insurance Policies

A contract of marine insurance is a contract under which the insurer indemnifies the insured against losses that is, losses relating to marine adventure or to navigation or commerce on sea.

Types of Marine Insurance Policies

1. Voyage Policy  It insures the subject matter “at and from or “ from one place to another” 2. Time Policy  The subject matter is insured for a definite time not exceeding a year. 3. Mixed Policy  It covers the risk during a particular voyage for a specified period.

Types of Marine Insurance Policies

4. Valued Policy  it is a policy which specifies the agreed value of the subject matter. 5. Open and Unvalued Policy  The value of the subject matter is not specified  In case of any loss, it is ascertained subject to the limit of sum insured. 6. Floating Policy

Privatization of Insurance
India opened insurance sector for private sectors in the year 1998-99.  Indian companies can start insurance business with foreign collaboration.  To control the insurance business IRDA Act was enacted in the year 1999.  After 2000 many private insurance companies entered both in life insurance and general insurance  After 2000 private players captured nearly 10-15% of the shares

Legislative measures
1. 2. 

Insurance Act 1938 Insurance Regulatory Authority Following the recommendations of the Malhotra Committee, the enactment of a comprehensive legislation, on February 23, 1996, the govt, of India approved the setting up of IRA under the over all control of the Ministry of Finance to regulate the insurance sector in the place of controller of Insurance

Legislative measures
Features of IRA  The chairman of IRA was the ex-officio COI under the Insurance Act 1938 and the exercised all the powers vested with the COI.  The govt. could assign such additional nonstatutory functions as may be considered necessary to the IRA, to enable it to effectively regulate, promote and ensure the orderly growth of the insurance industry

3. Insurance Regulatory Development Authrity Act (IRDA) 1999

The IRDA Act enacted in 1999 to provide for the establishment of IRA to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and to amend the Insurance Act 1938, The LIC act 1956 and the general Insurance Business Act 1972.

Powers and Functions

 

Issue to the applicant a certificate of registration, to renew, modify, withdraw, suspend or conceal such registration. Protection of the interests of the policy holder. Specifying requisite qualifications and practical training for insurance intermediaries and agents. Specifying the code of conduct for surveyors and loss assessors. Promoting and regulating professional organizations connected with the insurance and reinsurance business.

Powers and Functions

Promoting and regulating professional organizations connected with the insurance and reinsurance business. Undertaking inspection of insurers, intermediaries and other organizations connected with the insurance business. Control and regulation of the rates, terms and conditions that may be offered by insurers in respect of general insurance business, not so controlled by insurance Act 1938 Specifying the form and manner in which books of account be maintained.

Powers and Functions

Regulating investment of funds by insurance companies. Settlement of disputes between insurer and intermediaries. Specifying the percentage of premium income of the insurer. Specifying the percentage o life insurance business and general insurance business. Exercising such other powers as may be prescribed.

Role of IRDA in Privatization

To control especially, private insurance players IRDA Act was enacted in the year 1999. It issued many guidelines for the private insurance players to start their business as per the Malhothra committee recommendations. The new entrants should write a specified portion of their business in rural areas. The minimum paid –up capital of a new entrant should be Rs. 100 crore.

Role of IRDA in Privatization

Foreign players allowed only joint venture with Indian companies No single company should be allowed to transact both life and general insurance business.

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