01principale and practises of genral insurance

8/12/2019 01principale and Practises of Genral Insurance

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Flow of Presentation

Definition History of growth of General Insurance in India

Growth of general insurance premium

Classes of General Insurance

Prospects of further growth in India

Important terms used in General Insurance

Underwriting and claim procedures

Insurance and Reinsurance Impact of detariffing rates and products

Role of Regulator

Conclusion


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General Insurance

Insurance is classified into Life and General Any insurance other than human lives comes under the

scope of General Insurance

It is preferable to call this as General Insurance insteadof non-life insurance

There is vast scope and the market is trying to cope upwith the demands of the market

Insurance penetration is improving in India and beingthe second largest developing economy in the world thescope is huge


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General Insurance in India

Marine insurance was being practiced in India from the

beginning of 19thcentury

Offices were established in Kolkata which was the centre

for East India Company

Fire insurance followed in 1825 at Madras

Swadeshi movement also had its impact on Insurance and

first Indian Company was formed in 1907Indian

Mercantile Insurance Company Need to control insurance business was felt by the British

government which introduced the Insurance Act in 1938

and Insurance Rules in 1939


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Development in 1970 Life Insurance business was nationalized in India in the year 1956

General Insurance business was being done by 106 companies

including LIC (GI) On May 13th 1971 an ordinance was promulgated taking state control

of general insurance business with custodians in charge

In 1972 GI Nationalization act was passed allowing the formation ofGIC as the holding company and with 4 subsidiaries each having its

Head Office at one metro 1stJan 1973 GIC and 4 companies were formed taking in them 106

companies and the 4 PSUs were taking care of the general insurancebusiness in the country till 2000 totally. GIC on its own was alsowriting aviation and crop business besides becoming the National &

Asian Reinsurer The objective of nationalization was to spread insurance to nook and

corner of the country and to utilize peoplesmoney for the peoplesgood thus uplifting the socio economic condition of the country


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Liberalisation Following globalization moves Malhotra committee

had been formed to look into the methods ofliberalization of insurance

Based on the report IRA bill was introduced but lateron withdrawn without discussions from the floor ofparliament

Later on the bill in the modified form as IRDA bill wasintroduced in 1999 and the IRDA act was passed.

An independent statutory authority as Regulator forinsurance business came into existence in 1999


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Developments since 2000

Surveyors and loss assessors regulations 2000

Third party administrators regulations 2001

Investment regulations 2001

Policy holders interests regulations 2002

Brokers regulations 2002

Corporate Agents regulations 2002

Manner of receipt of premium 2002

Rural sector 2002

Distribution of surplus 2002


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Insurance councils & Institutes

Two councils which had been reconstitutedlife insurancecouncil

Insurance ombudsman had been appointed

General insurance council

IIISLA has been formed

IIBA- Brokers association

IIRM- Institute of risk management

Intermediaries now allowed-Agents/ corporate agents/

Brokers Institutes for educating the agents/Brokers have been

formed and passing the examination has been mademandatory for carrying out insurance business

Surveyor licensing is being controlled by Regulator


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General Insurance business

done

Year In Crores NA;OIC:UI;NA;GIC

1974 219.99 25.3:25.5:25.5:21.5:2.6

1975 253.75 26.6:26.7:26.7:21.1:2.6

1976 286.51 27.1:26.5:23.4:21.0:2.1

1990 2174.43 29.8:22.4:26.7:20.1:1.0

2000 10272 crores

2006 > 20000 crores 2007 > 24000 crores


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International comparison

Penetration( premium as

% of GDP)

United states 4.32

Canada 3.31 UK 3.05

Germany 3.55

Japan 2.30

South Korea 2.89 China 0.61

India 0.54

Density ( Premium per

capita) USD

USA 1474.4

Canada 700.6 UK 741.5

Germany 913.5

Japan 805.5

South Korea 262.3 China 5.0

India 2.4


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General Insurance

Insurance of property

Insurance of persons

Insurance of liability

Insurance of Interest


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Classes of GI Business

FireProperty damage and business

interruption insurance

Marine- Cargo and Hull

Misc - Motor/ Engineering/Liability/

Aviation/ Space/Energy/ Guarantee/ Bonds/

Rural/ Livestock/ weather/ Crop/

All risks/ accident/ Travel/ Baggage/


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Insurers now licensed by

IRDA GENERAL INSURERS 1. Bajaj Allianz 2. ICICI Lombard

3. Iffco-Tokio General Insurance

4. National Insurance

5. New India Assurance Company

6. Oriental Insurance 7. Reliance General Insurance

8. Royal Sundaram Alliance

9. TATA-AIG General

10.United India Insurance

11. Cholamandalam MS General

12. HDFC Chubb General

13. Export Credit Guarantee

14. Agriculture Insurance Company

15. Star Health & Allied

16.Sompho/ Shri Ram General/AXA/ Apollo DKV


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New Companies licensed

Life

2000 3

2001 7 2002 2

2003 1

2004

2005

2006

2007

General

2000 3

2001 3 2002 3

2003

2004

2005

2006

2007


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Terminology used in General Insurance

Proposer-Insured-Insurer

Risk- Peril

Proposal form

Sum Insured

Premium ( Consideration)

Excess ( Deductible) Indemnity

Cover note

Policy document

Endorsement-for effecting changes in the policy Warranties/ Clauses

Conditions

Underwriting

Renewal

Hazard


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Basic Principles of General Insce

Insurance is a legal agreement entered between

Insured and Insurer due to which due to the

consideration, the Insurer agrees to indemnify the

Insured, for the loss or damage or liability created

due an accident which is covered under the policysubject to the terms and conditions of the contract

All insurance policies are subject to the

warranties, conditions and clauses of the policycontract and claims will be settled accordingly


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Basic principles Utmost good faith- which is embodied in all insurance

contracts and appears in the conditions of the policydocuments.

Since only the Insured who is the owner/possessing theproperty he/she needs to declare the details which are to beconsidered by the Underwriter. To obtain the requisitedetails the Insurer arranges all questions in order in the

proposal form so that he/she knows where to look for therequired details. Material fact is the detail of the risk whichwill influence the mind of the Underwriter to accept/reject;

and if to accept the rate /terms at which the risk is to beaccepted.

Duty of disclosure is on the proposer/Insured and if willfulconcealment/ non-disclosure of facts could be establishedthe claim if any could be denied


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Insurable interest Only the person who has insurable interest can arrange

insurance and seek indemnity due to loss or damage Insurable interest is defined as legal interest in another

persons life or in the protection of property from

injury, loss, destruction or pecuniary damage By virtue of ownership

Tenant who had leased property

Employers interest on employees lives


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Proximate cause Insurer is liable for any loss proximately caused by

a peril insured against, but he is not liable for anyloss which is not proximately caused by a peril

insured against-Judge Lumb

Proximate cause means the active, efficient causethat sets in motion a train of events which brings

about a result, without the intervention of any

force started and working actively from a new and

independent source


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Indemnity Insurance contracts are mostly contracts of indemnity

Insured is entitled to obtain the loss amount suffered

from the insurances he had effected on the property

He is not to be benefited due the loss/damage

If sum insured is on agreed value basis the loss willbe settled on that basis

Extent of indemnity will be based on the market value

of the property at the time of occurrence of the event

which caused the loss/damage or destruction

Subrogation and contribution are the corollaries of

indemnity to ensure that the claim settlement follows

the normal indemnity

U d iti d l i


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Underwriting and claims

Offer and acceptance- Proposal is studied by the Underwriterwho then quotes the premium terms, warranties and conditions

Once accepted by the proposer and premium is paid, the covernote is issued. Later on policy document is issued.

Alterations/ changes are effected by endorsements

Claim is being processed to take into account the salvage,under-insurance and excess under the policy and many timesto deduct the additional premium for restoring the sum insuredto the original level by charging the additional premium on theclaim amount paid from the date of loss till the date of expiry.

Claim will be subject to getting the subrogation rightspreserved against the third parties responsible for making goodthe loss and transferring the same to Insurers


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Changes

Fire insurance; Reinstatement value

(other than stocks) Market value

Marine insurance : Agreed value

Marine hull insurance: Agreed value

Motor insurance: Insured declared value

Engineering insurance: Present day

replacement value Misc insurance: Market value


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Insurances which need to become

popular

Business Interruption insurance

Engineering insurance

Liability insurance- CGL Public /Product

E & O ( PI) liability insurance

D & O liability insurance

PI for Lawyers/CAs/Doctors/ Brokers/Architects/

structural engineers

Overseas travel insurance

Employees benefit policies ( GPA/GMC)


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Detariffing TAC was earlier providing the rates, terms policy wordings

and regulations as to how to conduct the business Nearly 70% of the business was in the purview of the tariff

After liberalizing the market by allowing new players Tariff

rates had been withdrawn w.e.f 1-1-2007 but with some

limitations

From 1-1-2008 it is expected that the policy wordings will

be withdrawn by IRDA which will allow freedom to the

insurers to come out with their policy design wordingsclauses and warranties.

The beneficiary will be the customers/ insured

01principale and practises of genral insurance

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