insurance sector parvesh aghi. overview of insurance sector

Insurance sector Parvesh Aghi

OVERVIEW OF INSURANCE SECTOR

Introduction: Insurance = Collective bearing of Risk. Basic Human trait is to be averse to the idea of risk taking. Insurance, whether life or non-life, provides people with a reasonable degree of security and assurance that they will be protected in the event of a calamity or failure of any sort.

DIVISION OF INSURANCE SECTOR INSURANCEGENERAL INSURANCE FIRE INSURANCE MARINE INSURANCE MEDICLAIM MOTOR VEHICAL LIFE INSURANCE

Till end of FY 1999-2000, two state-run insurance companies, namely, Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were the monopoly insurance providers in India. Under GIC there were four subsidiaries National Insurance Company Ltd. Oriental Insurance Company Ltd. New India Assurance Company Ltd. United India Assurance Company Ltd.

O RIGIN AND GROWTH OF INSURANCE SECTOR In fiscal 2000-01, the Indian government lifted all entry restrictions for private sector investors. Foreign investment insurance market was also allowed with 26 percent cap. GIC was converted into India's national reinsure from December, 2000 All the subsidiaries working under the GIC umbrella were restructured as independent insurance companies.

Life Insurers: Allianz Bajaj Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd. HDFC Standard Life Insurance Co. Ltd. ICICI Prudential Life Insurance Co. Ltd. ING Vysya Life Insurance Co. Pvt. Ltd. Life Insurance Corporation of India. Max New York Life Insurance Co. Ltd. Metlife India Insurance Co. Pvt. Ltd. Om Kotak Mahindra Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. Tata AIG Life Insurance Co. Ltd.

Non-Life Insurers: Bajaj Allianz General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. IFFCO Tokyo General Insurance Co. Ltd. National Insurance Co. Ltd. New India Assurance Co. Ltd. Oriental Insurance Co. Ltd. Reliance General Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd. Tata AIG Life Insurance Co. Ltd. United India Insurance Co. Ltd Reinsurers: General Insurance Corporation of India.

WHAT IS INSURANCE

INSURANCE - AN INTRODUCTION INSURANCE IS A TOOL WHICH PROVIDES FINANCIAL PROTECTION AGAINST LOSS TO ASSETS.

Need of Insurance Life creates needs and needs are satisfied with assets. Assets such as cars, buildings, shops, machinery and stocks generate income and are exposed to risk. Life is also an asset.

INTRODUCTION CONTINUES Insurance does not prevent the risk or perils. Insurance does not protect the assets. Insurance only helps to reduce the adverse financial effect of loss to assets

TYPES OF INSURANCE INSURANCE IS OF TWO TYPES LIFE INSURANCE NON-LIFE INSURANCE NON-LIFE INSURANCE HAS THREE MAIN CLASSES 1. FIRE2. MARINE3. MISC.

WHAT IS RISK Risk is the possibility of loss. Mainly of two types: Pure risk Speculative risk

WHAT IS PERIL Losses are caused by perils, which may be natural or manmade. Examples of natural peril: Flood, storm, earthquake, lightning, fire, tempest, landslide etc. Examples of manmade peril: Accidents, theft, terrorist damage, riots, strikes etc.

HOW INSURANCE WORKS

How Insurance Works Insurance is based on sharing, spreading of losses of the few amongst the contribution of many. Business of Insurance is to bring together persons with common Insurance interest (sharing the same risks), collecting the share or contribution (called premium) from them all, and paying out compensations (claims) to those who suffer financial losses.

How Insurance Works Example: In a village, there are 400 houses. Value of each house - Rs.20,000/- Every year on an average 4 houses get burnt Total lossRs.80,000/- i.e. Total fund needed- Rs.80,000/- If all 400 owners contribute to share the loss, contribution from each = 80,0000/400 = Rs.200/- Thus, with contribution (from each of the 400 owners) of Rs.200/-, loss of each of the 4 will be shared. Loss of the few (i.e. 4) is spread on many (i.e. 400) Loss of individuals is spread on groups.

SHARING/ SPREADING OF LOSSES EXAMPLE No. of persons aged 50 yrs.- 1000 No. of persons dying during the year - 10 Compensation to be paid to each - Rs.20,000/- Total loss during one year = 20,000 X 10 = 2 lakhs a) If all 1000 persons insured then contribution would be-2,00,000/1000= Rs.200/- b) If only 500 persons insured then contribution would be - 2,00,000/500= Rs.400/- c) If 10,000 people insured then contribution would be 2,00,000/10,000= Rs.20/-

How Insurance Works Loss of the few (i.e. 4) is spread on many (i.e. 400) Loss of individuals is spread on groups. Thus we see that bigger the group the lesser will be the contribution that will have to be paid by each member of the group.

CONTRACT ACT

A CONTRACT IS AN AGREEMENT BETWEEN TWO OR MORE PARTIES TO DO OR ABSTAIN FROM DOING AN ACT TO FORM A LEGALLY BINDING RELATIONSHIP.

ESSENTIALS OF A VALID CONTRACT All valid contracts must comply with the following essentials: Offer and acceptance Consideration Competency Consensus ad idem (common mind) Legality of object

PRINCIPLES OF GENERAL INSURANCE

In addition to the above insurance contracts are subject to the following additional legal principles. Utmost Good Faith Insurable Interest Indemnity & its two corollaries subrogation and contributions Proximate Cause

UTMOST GOOD FAITH A positive duty to voluntarily disclose, accurately and fully all FACTS MATERIAL to the risk being proposed whether solicited or not.

WHY IN INSURANCE This is necessary, as underwriter knows nothing about the risks and the man who comes to ask him to insure knows every thing. Therefore, it is the duty of the assured to make full disclosure to the underwriter of all material circumstances without being even asked.

Material Facts Material fact is every circumstance or information, which would influence the judgment of a prudent Insurer in assessing the risk. EXAMPLES OF MATERIAL FACTS: In Fire Insurance: construction, nature of use In Motor Insurance: type of vehicle, model, Cubic capacity, and purpose of use In Marine Insurance: type of packing, mode of carriage, and nature of goods In Personal Accident Insurance: age, height, weight, occupation, habits etc. In Burglary Insurance: nature of stocks, value of stocks, and type of security precautions

DISCLOSEABLE FACTS Facts, which show that a risk represents greater exposure than expected from its nature. External Factors that makes the risk greater than normal. Facts which would make the amount of loss greater than normal History of Insurance Existence of other Insurances

FACTS, WHICH NEED NOT TO BE DISCLOSED Facts of Law Facts which lessen the Risk Facts of common knowledge Facts which could be reasonably discovered Facts which the insurer representative fails to notice Facts covered by policy conditions

DURATION OF DUTY OF DISCLOSURE Through out entire negotiation stage Whenever an alteration is made At the time of renewal BREACHES OF UTMOST GOOD FAITH MISREPRESENTATIONNON-DISCLOSURE INNOCENT INNOCENT INTENTIONAL INTENTIONAL (FRAUDULENT)(CONCEALMENT)

INSURABLE INTEREST LEGAL RIGHT TO INSURE ARISING OUT OF FINANCIAL RELATIONSHIP RECOGNIZED UNDER LAW, BETWEEN THE INSURED AND THE SUBJECT MATTER OF INSURANCE.

Essentials of Insurable Interest There must be some property, right, interest, life, limb or potential liability capable of being insured. Any of these must be subject matter of insurance The Insured must stand in formal relationship with subject matter of Insurance, whereby he benefits from its safety and loses by its destruction. Relationship between insured and the subject matter must be recognized under law

CREATION OF INSURABLE INTEREST By Common Law By Contract By Statute Examples: Ownership Mortgages and Mortgagers Bailees Trustees Part Ownership Agents Husband & Wife Creditors Liability

When Must Insurable Interest Exist In Life Must exist at inception In Marine Must exists at the time of loss Other policies - Both at the time of inception and at the time of loss

INDEMNITY Defined as financial compensation sufficient to place the insured in the same financial position after a loss as he enjoyed immediately before the loss occurred.

IMPORTANCE OF INDEMNITY Indemnity prevents the insured from recovering more than the amount of his pecuniary loss Indemnity relies heavily on the financial evaluation of the loss. An Insurance may be for less than a complete indemnity but it may not be for more than it.

DEVIATIONS FROM THE APPLICATION OF PRINCIPLE OF INDEMNITY Agreed Value Policy where the insurer agrees that they will accept the value of the Insured property as stated in a policy as the true value and will indemnify the insured to this extent. Reinstatement policy in fire Insurance where the property is insured for the current replacement value and insurer agrees he shall replace damaged property with a new one or shall pay for the replacement in full. In the case of life and disablement it is not possible to be precise in terms of money.

INDEMNITY PROVIDED The Insurers normally provide indemnity in the following manner and the choice is entirely of the insurer Cash Payment Repair Replacement Reinstatement

CONDITION OF AVERAGE Application of this principle makes the insured his own Insurer to the extent of underinsurance. Claim payable by Insurance Company is Claim = Loss X (Sum Insured/ Market Value)

EXCESS AND FRANCHISE: Case IA [excess Rs.1000/-]B [franchise Rs.1000/-] Loss Amount 800800 Claim AmountNILNIL Case II Loss Amount 12001200 Claim Amount 200(1200-1000)1200

SALVAGE Damaged property or remains of the damaged property becomes the property of the Insurer once they have indemnified the Insured.

SUBROGATION Defined as the transfer of legal rights of the insured to recover, to the Insurer.

SUBROGATION WHEN? According to common law the right of subrogation arises once the Insurers have admitted the claim and paid it. But Insurance Companies give themselves this right before the claim is paid but the limitation is that they cannot recover from the third party unless they have indemnified the insured.

CONTRIBUTION Defined as the right of Insurers who have paid a loss to recover a proportionate amount from other Insurers who are also liable for the same loss.

CONDITIONS FOR CONTRIBUTION Two or more policies of Indemnity should exist The policies must cover a common interest The policies must cover a common peril which is the cause of loss The policies must cover a common subject matter The policies must be in operation at the time of loss

PROXIMATE CAUSE The active efficient cause that sets in motion a train of events which bring about a result without the intervention of any force started and working actively from a new and independent source.

PROXIMATE CAUSE There are three types of perils related to a claim under an Insurance policy Insured Perils Excepted Perils Uninsured Perils: Insurers are liable to pay claims arising out of losses caused by Insured Perils only.

Losses can occur in the following manners Loss due to a single cause. A series or chain of events one following and resulting from the other causing the loss Event starting the chain should be insured peril. A series or chain of events, which is broken by a new event independently from a different source causing the loss Broken sequence. The event interrupting and causing the loss should be insured peril. A contribution of two or more events occurring simultaneously and resulting in loss All events should be insured perils.

INSURANCE DOCUMENTS

THERE ARE VARIOUS DOCUMENTS IN INSURANCE. PROPOSAL FORM COVER NOTE POLICY DOCUMENT RENEWAL NOTICE

PROPOSAL FORM Proposal form is an application for insurance cover and designed to elicit all material information about the risk proposed for Insurance. The nature of questions varies according to the class of Insurance. In marine cargo Insurance, it is not the practice to use a proposal form but a questionnaire or a declaration form duly completed is required. In fire Insurance, practice about use of proposal form varies. Proposal forms are not generally used for large industrial risk where inspection of risk is ranged before acceptance of the risk. Forms are used for simple risks and in respect of risks, which are normally declined but have to be accepted to retain the goodwill of the client. In miscellaneous Insurance proposal forms are invariably required and they incorporate a declaration which extends the common law duty of good faith.

Common Questions in Proposal Form Proposers name in full Proposers address Proposers profession, occupation or business Previous and present Insurance (history) Claims history or loss experience Sum Insured Signature, date, declaration Agents recommendation (Agents; confidential report) In addition to the above other questions specific to the class of Insurance are required to be answered e.g. In Motor Insurance, the type & use of vehicle. In Personal Accident, age/ occupation etc. of the person. In Marine Cargo Insurance, nature of goods/ nature of packing/ voyage/ name of carrier etc.

PURPOSE OF PROPOSAL FORM The purpose of proposal form is to provide all material information to the insurer and secondly it includes a declaration by the insured that the information is true and accurate and that the form shall be the basis of the Insurance contract. Any wrong information will give the right to insurer to avoid the contract

COVER NOTE Cover note is a document issued in advance of the policy when the policy cannot be issued for some reasons or the other immediately. Cover note is a confirmation of acceptance of risk It is for a temporary period and is invalidated as soon as the policies issued. It is an unstamped document but it represents the same insurance as that provided by the policy.

POLICY DOCUMENT The policy is a document, which provides evidence of Insurance. It has to be stamped as per the provisions of the Indian Stamp Act 1899. The document is divided into the following distinct sections. Heading: Giving the insurers name and registered office address. Preamble or Recital Clause: It introduces the parties to the contract i.e. insurer and insured. It also makes a reference that the Insurance is based upon the declaration made in proposal form and the premium paid by the insured in consideration.

POLICY DOCUMENT continues. Operative or Insuring Clause: It specifies the perils insured under the policy and the circumstances in which the insurer will become liable to make payment to the insured. The perils specially excluded are mentioned and also a reference is made to the sum insured or the limits of liability. Schedule: This section contains all the type written information applicable to the contact e.g. insured and his address. Policy No.& Date of Issue Agency Code Risk Covered & Rate of Premium Period of Insurance & Property Insured etc

CONDITIONS Conditions: All fire and misc. policies contain conditions, which are printed on the policy and are called Express conditions without which the policy would be subject to only Implied Conditions which relate to utmost good faith, insurable interest etc.

EXPRESS & IMPLIED CONDITIONS The express and implied conditions can be classified as Conditions precedent e.g. disclosure of all material facts before conclusion of contract Condition subsequent e.g. notification of alteration in the risk during currency of policy Conditions precedent to liability e.g. notice of loss within the prescribed time.

RESULT IN CASE OF BREACH OF CONDITIONS A breach of a condition precedent will enable the insurer to avoid liability from its commencement. A breach of condition subsequent will entitle the insurer to avoid the policy after it has come into force. A breach of condition precedent to liability will prevent the insured from recovering a particular loss, the policy remaining unaffected.

THEORY AND PRACTICE OF RATING

Rate of premium is fixed according to certain principles. Firstly premium varies according to degree of hazard. Secondly assess variation in the degree of hazard i.e. classification of property according to hazard involved. Thirdly degree of hazard is assessed on the basis of previous loss experience.

DEGREE OF HAZARD The first principle says that greater the risk the higher should be the premium More probable the loss and more severe it is likely to be the higher should be the premium. E.g. buildings of wooden construction are more exposed to the risk of fire than concrete buildings hence higher premium is charged

Classifications of Risks The second principle says that rates of premium should be equitable and fair. Strictly speaking each individual should be charged a premium according to the hazard to which he is exposed but this is not practically possible therefore classification of risks in broad categories is adopted.

EXAMPLE In Motor Insurance vehicles are classified into private cars, motorcycles and scooters and commercial vehicles. In Fire Insurance risks are categorized into dwellings, shops, godowns, manufacturing goods etc. on the basis of occupation. These broader categories are further subdivided according to hazard involved. For example (1) Private cars are classified according to the cubic capacity of the engine. Higher the CC higher the premium rate. (2) In fire Insurance godowns are classified according to the nature of goods stored e.g. non-hazardous, hazardous, extra hazardous etc.

Past Loss Experience The third principle says that the rate of premium is arrived on the basis of past loss experience and therefore statistical data for past losses is most essential for purpose of calculation of rates. The mathematical formula is L/V X 100 where L refers to Sum Total of Losses and V Sum Total Value.

EXAMPLE Value of a motorcycle Rs.50,000/-. Loss experience out of 1000 cycles, 50 cycles are stolen in the past 10 years i.e. on an average 5 motorcycles become total losses due to theft. Applying the formula Losses (Rs.50,000 X 5) Rs.2,50,000 X 100 = % Value (Rs.50,000 X 1000) 5,00,00,000 Therefore the rate of premium that a motorcycle owner pays is % of Rs.50,000/- i.e. Rs.250/- per year. This is called the pure premium, which is enough to pay only for the losses

OPERATING COSTS Insurance Companies add the following operating costs to the pure rate of premium to arrive at the final premium, which is to be charged. Loss payments Loss expenses (e.g. survey fee) Agency commission Expenses of management Margin for reserves for unexpected heavy losses Margin for profits

LEGISLATIVE AND REGULATORY MATTERS

IMPORTANT CHANGES AFTER DETARIFFING AFTER WITHDRAWL OF THE TARIFF SYSTEM w.e.f 01.01.07 THE INSURER ARE FREE TO DECIDE THEIR OWN RATES EXCEPT IN CASE OF MOTOR THIRD PARTY LIABILITY INSURANCE WHICH EVERY INSURER HAVE TO PROVIDE AT THE RATE PRESCRIBED BY THE AUTHORITY.

LEGISLATIVE AND REGULATORY MATTERS Insurance Act 1938 Originally passed in 1938 and amended several times the latest amendment being made by IRDA Act 1999. By the latest amendment the IRDA has become the authority to perform many tasks required to be done under the Insurance Act, which used to be done by the Controller of Insurance.

IMPORTANT PROVISIONS Every Insurer is required to obtain a certificate of registration, which has to be renewed annually. For registration the paid up capital of the insurer has to be Rs.100 crore for Life Insurance or General Insurance Business and Rs.200 crore for Reinsurance Business.

Insurance Act 1938 Every Insurer must deposit with the Reserve Bank of India in cash or approved securities a sum equivalent to 1% (Life Insurance), 3% (General Insurance) of the Total Gross Premium in any financial year commencing after 31st March2000 not exceeding Rs.10 crores. For reinsurance business the deposit is Rs.20 crores. Insurer must prepare Separate accounts of all receipts and payments in respect of each class of Insurance business viz. Fire, Marine or Misc. Balance sheet and Profit & Loss A/c

Insurance Act 1938 Insurers must invest their assets only in approved investment as provided under the Act and submit returns to the IRDA in the prescribed format. Every insurer has to do minimum Insurance business in rural and social sector as specified. The IRDA can order an investigation into the affairs of any insurer by an Investigating Authority. No person can work as an Insurance Agent unless he has obtained a license from the Authority.

Insurance Act 1938 No claim for a loss equal to or exceeding Rs.20,000/- can be settled by an insurer without a report from a licensed surveyor. No person can act as a surveyor or loss assessor unless he has obtained a license from the Authority. Limits have been laid down for the extent of expenses of insurer. Commission to agent shall not exceed 15% of the premium payable under fire, marine or misc. Insurance policies

Insurance Act 1938 Prohibition on offering rebates (rebate is not only parting of commission by the agent but also charging less than the tariff rate of premium). Provision for maintaining adequate solvency margin and how assets and liability have to do be determined. Advance payment of premium or alternatively an advance deposit of such amount as may be prescribed.

Insurance Act 1938 Premium collected by the agent should be deposited or dispatched within 24 hours of the collection. Refund of premium to be paid directly to the insured by crossed cheque or postal money order and in no case to be credited to the agents account.

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ACT 1999 (IRDA) The object of the Act is to provide for the establishment of an Authority to Protect Policyholders interests Regulate Insurance Industry Promote and ensure orderly growth of the Industry

IRDA Under the Act the Insurance Regulatory and Development Authority has been established in 1999 and it consists of A Chairperson Not more than 5 whole time members Not more than 4 part time members All the members are appointed by the Central Government from persons of ability, integrity and standing who have knowledge or experience in Life Insurance, General Insurance, Actuarial Science, Finance, Economic, Law, Accountancy, Administration or any other discipline which the Govt. feels may be useful to the Authority

DUTIES, POWER AND FUNCTION OF IRDA Registration of Insurers, Intermediaries and Agents Regulating returns and conditions of contract of Insurance Promoting and regulating professional organizations connected with Insurance and Reinsurance business Monitoring investment of funds and solvency margin of Insurance Company. Authority to be advised by a committee known as Insurance Advisory Committee (IAC), which shall consist of not more than 25 members representing the interests of commerce, industry, transport, agriculture, consumer fora, surveyors, agents, intermediaries, organizations engaged in safety and loss prevention, research body and employees association of the Insurance Sector

DUTIES, POWER AND FUNCTION OF IRDA Only Indian Insurance Companies incorporated under the Company Act 1956 and in which not more than 26% of the paid up capital is held by a foreign company shall be registered. Paid-up capital of company wanting to transact life or general Insurance business will not be less than 100 crores and 200 crores in the case of reinsurance business.

DUTIES, POWER AND FUNCTION OF IRDA Every Insurance Company will have to maintain the assets, which are not less than specified limits depending upon its liability. Every Company has to appoint an actuary to be approved by the IRDA whose duty will be to Valuate assets in appropriate manner Valuate liability as required Insure maintenance of prescribed solvency margin. Regulation for advertisements whether issued by insurance company or an insurance intermediary including an agent.

CONSUMER PROTECTION ACT 1986 Act provides for better protection of the interest of consumers and for settlement of consumers disputes. This Act applies to all consumers of goods and services unless exempted by Govt. Insurance is defined as a service for the purpose of the act and every buyer of Insurance is a consumer. A consumer who feels that the service given to him was deficient meaning faulty, imperfect, defective in quality or sub- standard can file a complaint

CONSUMER PROTECTION ACT 1986 Under the act before the respective forum for redressal. District Forum-Complaints upto 20 lacs State Forum-Complaints upto I CRORE National Commission-Above 1 CRORE Appeal against decision of District forum can be filed before state forum within 30 days of date of award. Appeal against decision of State forum before national commission within 30 days. Appeal against decision of National commission before Supreme Court within 30 days.

INSURANCE OMBUDSMAN Insurance ombudsman appointed by Central Govt. under Redressal of Public Grievances Rules 1998 to receive and consider complaints in respect of following matters: Any partial or total repudiation of claims by an insurer. Any dispute in regard to premium paid or payable in terms of policy. Any dispute on the legal construction of the policy in so far as such disputes relate to claims. Delay in settlement of claims. Non-issue of any Insurance document to customers after receipt of premium.

IMPORTANT POINTS Complaint can only be filed before the ombudsman If a written representation has been made to the insurer earlier and no satisfactory response has been received from them. If the complaint is not outstanding in any court or arbitration or Consumer Forum. To be filed in within 12 months. Decision of Ombudsman is binding upon the insurer.

FIRE INSURANCE

To Constitute a Fire within the meaning of a fire Insurance Policy, three requirements must be Complies with:- There must be actual ignition. The fire must be accidental or fortuitous in origin. There must be something on fire which ought not to be on fire.

PROPERTY COMPRISES OF Buildings Machinery and accessories Stock and stock in - process Furniture and other contents

SCOPE OF COVER Fire Excluding destruction or damage caused to the property insured by - its own fermentation, natural heating or spontaneous combustion. spontaneous combustion. - its undergoing any heating or drying process. - burning of property insured by order of any public authority. Lightning Cont.

SCOPE OF COVER Explosion/ Implosion- It Excludes loss, destruction of or damage to boilers, other than domestic boilers, economizers or other vessels, machinery or apparatus ( in which steam is generated) or their contents resulting from their own explosion/ implosion. & damage caused by centrifugal forces. Explosion/ Implosion Riots, Strikes, Malicious Damage. Storms, Cyclone, Typhoon, tempest, hurricane, tornado, flood and inundation Impact Damage.- Loss of or visible physical damage or destruction caused to the property insured due to impact by any Rail/ Road vehicles or animals by direct contact not belonging to owned by: a) the insured or any occupier of the premises or b) their employees while acting in the course of their employment.

SCOPE OF COVER Aircraft Damage- Damage ( by fire or otherwise) by aircraft or ariel or space devices such as balloons, artificial satellites etc and articles dropped there from. Damage by pressure waves is excluded. For example, damage to window paves by vibrations from low- flying planes or from Sonic or Super- Sonic bans is excluded. Subsidence and Landslide including Rock slide- Loss, destruction or damage directly caused by subsidence of part of the site on which the property stands or Land Slide/ Rock Slide excluding the normal cracking, settlement or bedding down of new structures, the settlement or movement of made up ground, coastal or river erosion, defective design or workmanship or use of defective materials, demolition, construction, structural alteration or repair of any property or groundwork's or excavations.

SCOPE OF COVER Bursting and/ or overflowing of water Tanks, Apparatus and pipes. Missile Testing operations Leakage from Automatic Sprinkler Installations Excluding loss, destruction or damage caused by repairs or alterations to the buildings or premises, Repairs, Removal or extension of the sprinkler Installation and defects in construction known to the insured. Bush fire Excluding loss, destruction or damage caused by forest Fire

SPECIAL POLICIES FLOATER POLICY The Policy covers stocks in more than one specified building or in the open, under a single sum insured. DECLARATION POLICIES To take care of the frequent fluctuations in stocks/ stocks value, declaration policy can be granted FLOATER DECLARATION POLICY For the compliance with the Rules for floater policies and Declaration Policies,a Floater Declaration policy is issued.

Important points to remember Loss or destruction or damage to bullions or unset precious stones, any curious or works of art for an amount exceeding Rs. 10000/- Architect, surveyors and consulting Engineers fees( in excess of 3% of the claim amount) The Policy will not cover (not applicable to policies covering dwellings) Excess amount.Excess amount which is five percent of claim amount subject to max of Rs 10,000/ due to act of God perils

ADD-ON COVERS Forest Fire Spontaneous combustion Deterioration of Stocks in cold storage Earthquake (Fire & Shock) Terrorism Impact damage due to Insureds own Rail/ Road Vehicles, fork Lifts, Cranes, stackers and the like and articles dropped there from

MARINE INSURANCE

MARINE: CARGO HULL CARGO THROUGH VARIOUS MODES AIR SEA INLAND TRANSIT CAN BE THROUGH RAIL/ POST/ WATERWAYS/LORRY

Marine Insurance - Defined A contract of Marine insurance is a contract whereby the Insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure.

PRODUCT RANGE INLAND TRANSIT SPECIFIC VOYAGE POLICY OPEN POLICY SPECIAL DECLARATION POLICY IMPORT & EXPORT SPECIFIC VOYAGE OPEN COVER CUSTOM DUTY POLICY INCREASED VALUE POLICY SELLERS CONTIGENCY POLICY

Covers available under the Institute Cargo Clause ( C) loss of or damage to the subject-matter insured reasonably attributable to Fire or explosion Vessel or craft being stranded grounded sunk or capsized. Overturning or derailment of land conveyance Collision or contact of vessel craft or conveyance with any external object other than water Discharge of cargo at a port of distress Jettison general average sacrifice

EXCLUSION Willful Misconduct of the Assured Ordinary Leakage, wear &tear Insufficiency of packing Inherent vice Delay-even if delay is caused by a peril insured Insolvency or financial default of owner manager charterer etc Arising from use of nuclear weapons Malicious damage-only in ICC-B&C Unseaworthiness of vessel Un cargo worthiness of the vessel The underwriters waive any breach of this warranty unless the assured or their servant is privy to such Unseaworthiness or un cargo worthiness War/capture seizure arrest/derelict mines Caused by strikers/resulting from strikes/terrorist. War and strikes covers are buy back covers except damages resulting from strikes.

Covers available under the Institute Clause ( B) fire or explosion vessel or craft being stranded grounded sunk or capsized. Overturning or derailment of land conveyance Collision or contact of vessel craft or conveyance with any external object other than Water Discharge of cargo at a port of distress Earthquake, volcanic eruption or lightning. loss of or damage to the subject-matter insured caused by general average sacrifice jettison or washing overboard Entry of Sea Lake or river water into vessel craft hold conveyance container lift van or place of storage. Total loss of any package lost overboard or dropped whilst loading on to, or unloading from vessel or craft

EXCLUSION Willful Misconduct of the Assured Ordinary Leakage, wear &tear Insufficiency of packing Inherent vice Delay-even if delay is caused by a peril insured Insolvency or financial default of owner manager charterer etc Arising from use of nuclear weapons Malicious damage-only in ICC-B&C Unseaworthiness of vessel Un cargo worthiness of the vessel The underwriters waive any breach of this warranty unless the assured or their servant is privy to such Unseaworthiness or un cargo worthiness War/capture seizure arrest/derelict mines Caused by strikers/resulting from strikes/terrorist. War and strikes covers are buy back covers except damages resulting from strikes.

Covers available under the Institute Clause (A) The insurance covers all risks of loss or damage to the subject-matter insured except EXCLUSIONS

EXCLUSIONS Willful Misconduct of the Assured Ordinary Leakage, wear &tear Insufficiency of packing Inherent vice Delay-even if delay is caused by a peril insured Insolvency or financial default of owner manager charterer etc Arising from use of nuclear weapons Malicious damage-only in ICC-B&C Unseaworthiness of vessel Un cargo worthiness of the vessel The underwriters waive any breach of this warranty unless the assured or their servant is privy to such Unseaworthiness or un cargo worthiness War/capture seizure arrest/derelict mines Caused by strikers/resulting from strikes/terrorist. War and strikes covers are buy back covers except damages resulting from strikes.

CONCEPT OF INSURABLE INTEREST What is insured ? goods or merchandise (i.e., interest insured) - pecuniary interest of the Assured ( i.e., insurable interest ) Definition of Insurable Interest (Sec 7 of MIA) means some relation of the assured to the physical object (goods etc) exposed to maritime perils recognized by law in consequence of which Assured either benefits by its preservation or is prejudiced by its loss. The existence of interest is a condition to effective Insurance. - as per provisions of MIA, every person has Insurable Interest who is interested in a maritime adventure.

INLAND TRANSIT (RAIL OR ROAD) CLAUSE - C RISK CLAUSE - 1 Covers physical loss or Damage by 1. Fire 2. Lightning

I.T.C. (C) EXCLUSIONS Willful misconduct of Assured Ordinary leakage, loss of weight or volume Insufficiency or unsuitable packing etc. Delay even if delay is caused due to risk insured against Inherent vice War, Civil War, Revolution, Rebellion, insurrection, civil strife Capture, seizure, arrest or detainment etc. Derelict, mines, bombs, other weapons of war. Strikers, Locked out workmen taking part in labour disturbance, riot or civil commotion. Terrorist or persons acting with political motive

INLAND TRANSIT (RAIL OR ROAD) CLAUSE - B Fire Lightning Breakage of Bridges Collision with or by the carrying vehicle Overturning of the carrying vehicle Derailment or accidents of like nature to carrying railway wagon / vehicle

I.T.C. (B) EXCLUSIONS Willful misconduct of Assured Ordinary leakage, loss of weight or volume Insufficiency or unsuitable packing etc. Delay even if delay is caused due to risk insured against Inherent vice War, Civil War, Revolution, Rebellion, insurrection, civil strife Capture, seizure, arrest or detainment etc. Derelict, mines, bombs, other weapons of war. Strikers, Locked out workmen taking part in labour disturbance, riot or civil commotion. Terrorist or persons acting with political motive

INLAND TRANSIT (RAIL OR ROAD) CLAUSE - A ALL RISK OF PHYSICAL LOSS OR DAMAGE TO SUBJECT MATTER INSUED EXCEPT PROVIDED IN EXCLUSIONS

I.T.C. (A) EXCLUSIONS Willful misconduct of Assured Ordinary leakage, loss of weight or volume Insufficiency or unsuitable packing etc. Delay even if delay is caused due to risk insured against Inherent vice War, Civil War, Revolution, Rebellion, insurrection, civil strife Capture, seizure, arrest or detainment etc. Derelict, mines, bombs, other weapons of war. Strikers, Locked out workmen taking part in labour disturbance, riot or civil commotion. Terrorist or persons acting with political motive

SPECIFIC POLICY SPECIFIC POLICY IS A NEGOTIABLE DOCUMENT ISSUED TO COVER PARTICULAR SINGLE TRANSIT IT CAN BE ISSUED TO COVER BOTH INLAND & OVERSEAS TRANSIT(IMPORT OR EXPORT) SPECIFIC POLICY IS ISSUED EVEN IF THERE ARE MULTIPLE STAGES OF TRANSIT e.g. HUMBERG TO MUMBAI BY SEA AND THEREAFTER TO DELHI BY ROAD.

Marine Open cover OPEN COVER IS ISSUED TO PROVIDE AUTOMATIC AND CONTINUOUS INSURANCE PROTECTION TO A REGULAR EXPORTER/IMPORTER ENGAGED IN INTERNATIONAL TRADE. THE COVER IS GRANTED FOR A SPECIFIED PERIOD OF TIME(NORMALLY ONE YEAR) THIS IS AN UNSTAMPED DOCUMENT WHICH IS ISSUED INCORPORATING THE BROAD TERMS OF COVER, INCL PREMIUM RATE,MAX LIMIT PER SENDING,VESSEL RESTRICTIONS ETC. INDIVIDUAL SPAMPED CERTIFICATES ISSUED FOR EACH TRANSIT AFTER INSUREDS DECLARATION.

OPEN POLICY OPEN POLICY IS A STAMPED DOCUMENT ISSUED FOR AN AMOUNT REPRESENTING INSUREDS ESTIMATED TURNOVER FOR A PARTICULAR PERIOD, IN RESPECT OF A SERIES OF CONSIGNMENTS WHICH HAVE TO BE PERIODICALLY DECLARED. THE SUM INSURED GETS DIMINISHED BY AMOUNT OF EACH DECLARATION TILL THE TOTAL SI IS EXHAUSTED & THE SAME CAN BE REPLENISHED THEREAFTER FOR CONTINUOUS COVER. DECLARATIONS CAN BE SUBMITTED SEPARATELY FOR EACH TRANSIT OR PERIODICALLY FOR ALL TRANSITS. CARE HAS TO BE TAKEN TO MONITOR THE BALANCES FOR ENSURING 64VB COMPLIANCE. INDIVIDUAL CERTIFICATES ARE NOT STAMPED AS THIS IS MORE FOR INLAND TRANSIT WHERE SUCH STAMPED DOCUMENTATION IS NOT REQUIRED.

TYPES OF CLAIMS IN MARINE INSURANCE Total loss Actual total loss: When the goods are irretrievably lost Constructive total Loss: commercial Total loss wherein the expenditure on repair will exceed the value of damaged goods Arranged total loss Partial loss Particular average General average: The word average connote chargeable damage or loss Average may be general or Particular. Where more than one entity is affected by maritime peril it is General Average Loss minimization expenses: Sue and Labor- Efforts carried out short of destination to minimize loss is paid subject to reasonability

MOTOR INSURANCE

THE MOTOR VEHICLE ACT 1939 Types of Motor Vehicles Private Cars Motorized Two Wheelers and Commercial Vehicles Types of Policies Liability Only Policy including PA cover for Owner-Driver) Package Policy (incl own damage, third party liability and PA to owner/driver.

Scope of Cover Section I (Loss or Damage to the Vehicle insured) by Fire, Explosion, Self ignition or Lightning by Burglary, Housebreaking or Theft by Riot & Strike by Earthquake by Flood, Storm, Inundation, Cyclone by Accidental external means by Malicious Act by Terrorism Whilst in transit by road, Inland waterway, lift, elevator or air

COMPULSARY INSURANCE OF THIRD PARTY LIABILITY INCL. DEATH & BODILY INJURY RO A THIRD PARTY DAMAGE TO PROPERTY OF THIRD PARTY DEATH OF BODILY INJURY OF ANY PASSENGER OF A PUBLIC SERVICE VEHICLE LIABILITY UNDER WC ACT 1923 IN RESPECT OF DEATH OR BODILY INJURY TO PAID DRIVER/CONDUCTOR/TICKET EXAMINER/WORKERS CARRIED IN GOODS CARRYING VEHICLE. IN CASE OF DEATH/BODILY INJURY THE LOABILITY IS UNLIMITED, WHEREAS IN CASE OF DAMAGE TO THIRD PARTY PROPERTY THE LIABILITY IS LIMITED TO RS 6000/-

NO FAULT LIABILITY THE VICTIM DOES NOT HAVE TO PROVE THE NEGLIGENCE OF THE MOTORIST COMPENSATION PAYABLE IS RS 50,000/ IN CASE OF DEATH AND RS 25,000/- IN CASE OF PARMANENT DISABILITY HOWEVER THE VICTIM CAN PERSUE UNDER OTHER PROVISIONS OF THE ACT

MOTOR ACCIDENT CLAIM TRIBUNAL MACT HAVE BEEN CONSTITUTED BY DIFFERENT STATE GOVT. FOR SPEEDY AND LOW COST SETTLEMENT. SOLATIUM FUND HAS BEEN SET UP BY CENTRAL GOVT TO PROVIDE COMPENSATION TO THE VICTIMS OF HIT & RUN CASES. THE COMPENSATION PAYABLE IN CASE OF DEATH RS 25,000/- AND RS 12,500/- IN CASE OF GRIEVOUS INJURY.

Personal accident coverage for owner- driver In case of two wheeler the owner/driver of the vehicle should be compulsorily insured for Rs 1 lacs. In case of private cars and commercial vehicle the owner/driver of the vehicle should be compulsorily insured for Rs 2 lacs.

Important points to remember In case of motor-cycles and commercial vehicles the loss/damage to accessories by burglary or housebreaking or theft is not payable unless the vehicle is stolen at the same time. The sum of Rs 300/- for two wheelers, Rs 750/- for three wheelers and Rs 1500/- for cars will be paid by the insurer towards reasonable cost of protection and removal to the nearest repairer and redelivery to the insured. Emergency repair charges up to Rs 500 for cars and Rs 150 for two wheelers will be reimbursed by the company.

PERSONAL ACCIDENT INSURANCE

What is covered Injuries caused by an accident Permanent partial/total disability due to accident Temporary total disablement

How much is the compensation Death 100%of Capital Sum Insured (CSI) Loss of Sight of both eyes Two limbs 100% of CSI One limb and one eye Loss of Sight of one eye/ one limb Hearing in both ears/speech Permanent total disablement 100% of CSI Other permanent disablement as assessed by a Doctor Temporary total disablement 1% of CSI per week subject to a maximum of Rs. 6000/-

CUMULATIVE BONUS THE SUM INSURED WILL INCREASE BY 5% ON EVERY RENEWAL PROVIDED THE POLICY IS RENEWED WITHIN 30 DAYS OF EXPIRY. MAX ACCUMULATION IS 50 %

SPECIAL FEATURES COVER IS ON WORLDWIDE BASIS PREMIUM IS BASED ON THE OCCUPATION OF THE PERSON. AGE LIMIT IS 5YEARS TO 70 YEARS FAMILY PACKAGE IS ALSO AVAILABLE WITH DISCOUNTED RATES GROUP POLICY CAN ALSO BE ISSUED FOR AN EXISTING GROUP.

RATING RATING IS BASED ON OCCUPATION OF THE PERSON. SO THE OCCUPATIONS ARE CLASSIFIED IN THREE RISK GROUP ACCORDING TO DEGREE OF HAZARD RISK GROUP-I: DOCTORS, LAWYERS, ARCHITECTS,TEACHERS,BANKERS ETC. RISK GROUP-II: BUILDERS, CONTRACTORS, ENGINEERS ETC RISK GROUP-III: WORKERS EMPLOYED IN UNDERGROUND MINES, EXPLOSIVE INDUSTRY JOKKIES, CIRCUS EMPLOYEES ETC.

HEALTH INSURANCE

The Individual Medishield Policy covers Hospitalisation Expenses & Domiciliary Hospitalisation (treatment at home in case patient is not in condition to be moved to hospital) incurred for treatment of disease / injury sustained during policy period

COVERAGES Hospitalization expenses including Room, Board, Nursing, Doctors fees, Cost of Medicines, Pathological Tests, etc. Pre-existing disease after 3 continuous claim free Policy years with the same insurer. Prosthetic Devices like Pacemaker, Artificial Limbs etc. Transplants including Donors treatment and cost of organs

COVERAGES Daily Allowance for defraying miscellaneous expenses for the duration of Hospitalization Dental surgery and treatment following an accident Pre-Hospitalization and Post Hospitalization expenses including authorized home nursing for 60 days each. Health check up after every block of 4 claim free years. Ambulance service expenses

IMPORTANT POINTS Hospitalization should be for a minimum period of 24 hours except for specific treatments such as eye surgery, lithotripsy, tonsillectomy etc. There is provision for Cumulative Bonus whereby Basic Sum Insured gets enhanced by 5% each year on renewal (maximum 50%) subject to no claims being lodged under the Policy. Family Discount is available for insuring two or more family members under the Policy.

IMPORTANT POINTS Section 80 D benefit under Income Tax Act is available on Medishield premium paid by cheque for self and/or family (consisting of self, spouse, dependent children and dependent parents) There is a sub-limit under the Policy for Domiciliary Hospitalization where expenses of treatment at home are reimbursed under specified conditions. Limits are also specified under the Policy for daily Room/ICU/ITU rents, Ambulance Charges and Daily Allowance during Hospitalization

GROUP MEDICLAIM INSURANCE THE COVER IS SAME AS IN INDIVIDUAL MEDICLAIM POLICY. CUMULATIVE BONUS IS NOT AVAILABLE AND MATERNITY COVER CAN BE GRANTED AT EXTRA PREMIUM.

OTHER HEALTH POLICIES CANCER POLICY (CPAA): CAN BE GRANTED TO THE MEMBERS OF CANCER PATIENTS AID ASSOCIATION CRITICAL ILLNESS INSURANCE POLICY IS ALSO AVAILABEL WHICH PAY ONLY IF SOME CRITICAL ILLNESS IS FOUND. OVERSEAS MEDICLAIM INSURANCE: PAYS MEDICAL EXPENSES IN RESPECT OF ILLNESS AND INJURY BY INDIAN RESIDENTS DURING THERE OVERSEAS TRIPS. EMPLOYMENT AND STUDY POLICIES HAS BEEN DESIGNED FOR INDIAN CITIZEN TEMPORARILY POSTED ABROAD AS STUDENT FOR PERSUING STUDIES.

LIABILITY INSURANCE

The Liability Policies cover Insureds legal liability to pay compensation to third parties for death, injury or property damage claims arising out of accidents in connection with insureds business financial loss claims arising out of errors and omissions caused in Insureds professional or official activities

VARIOUS TYPE OF POLICIES AVAILABLE COMPULSORY PUBLIC LIABILITY: An Act Policy providing immediate relief to persons affected by accidents occurring at applicable units. No fault Liability Cover Compulsory for all units handling hazardous substances with threshold limits defined in the act.

COMPULSORY PUBLIC LIABILITY Fatal accident Rs 25,000/- per person. Permanent disability Rs 25,000/- per person Permanent partial disability on basis of percentage of disability Temporary partial disability fixed monthly relief of Rs 1000 per month upto max of 3 months

COMPULSORY PUBLIC LIABILITY Actual medical expense up to Rs 12,500/- Damage to property Rs 6000/- Rate of premium is based on limit of indemnity and turnover. Every insurer has to pay the environment relief fund an amount equivalent the premium received by the insurer.

PRODUCT LIABILITY Definition: Any tangible property (after it has left the custody or control of the Insured) which has been designed, manufactured, sold, supplied or serviced by the insured.

LIABILITIES COVERED Policies shall cover all sums which the insured shall become legally liable to pay as damages in consequence of accidental death/ bodily injury or disease to Third parties Loss of or damage to Third Party property arising out of any defect in the products manufactured and covered under the policy after such products have left the Insureds premises

RATING The rates of premium depends on the risk group, limit of indemnity and ratio of indemnity AOA to AOY. Exports can be covered as extension of the policy or a separate policy can also be issued

Professional indemnity Policies are designed to provide insurance protection to the professionals against the legal liability to pay damages arising out of negligence in the performance of their professional duties. E.g. doctors, lawyers, architects

DIRECTORS & OFFICERS LIABILITY POLICY Policy is designed for directors & officers who hold position of trust and responsibility and may become liable to pay damages to shareholders, employees and creditors etc. for wrongful acts committed by them. The policy provides protection against the civil liability.

ENGINEERING INSURANCE

Contractors all risk Erection all risk Marine cum erection Machinery breakdown Boilers & pressure plant Machinery loss of profits Advance loss of profits Electronic equipment policy Deterioration of stocks policy

CONTRACTOR ALL RISK THE POLICY IS DESIGNED TO PROTECT THE INTEREST OF CONTRACTOS AND PRONCIPLES IN RESPECT OF CIVIL ENGINEERING PRODUCTS. E.G BUILDING, BRIDGES, TUNNELS ETC

ERECTION ALL RISK POLICY IS DESIGNED TO COVER RISKS INVOLVED WITH ERECTION OF ELECTRICAL PLANT AND MACHINERY OR EQUIPMENT INVOLVING NO OR VERY LESS CIVIL WORK.

MARINE CUM ERECTION MARINE CUM ERECTION COVER POLICY STARTS FROM THE MOVEMENT THE EQUIPMENT LEAVES THE MANUFACTURERS WAREHOUSE WITHIN THE COUNTRY OR OVERSEAS AND CONTINUES DURING THE VOYAGE AND THERE AFTER DURING ERECTION, TESTING AND COMMISSIONING.

MACHINERY BREAKDOWN POLICY COVERS ELECTRICALS AND MACHANICAL EQUIPMENTS AGAINST UNFORSEEN AND SUDDEN PHYSICAL DAMAGES BY ANY CAUSE

BOILER PRESSURE PLANT POLICY COVERS THE BOILERS AND PRESSURE VESSELS AGAINST DAMAGE TO THE BOILER AND SURROUNDING POLICY OF THE ASSURED INCL THIRD PARTY LIABILITY. FIRE RISK IS EXCLUDED

MACHINERY LOSS OF PROFIT POLICY IS DESIGNED TO REDUCE THE LOSSES OF THE INSURED INCURRED BECAUSE OF INERRUPTION OF BUSINESSES DUE TO MACHINERY BREAKDOWN. POLICY CAN ONLY BE ISSUED IN CONJUCTION WITH MACHINERY BREAKDOWN.

ADVANCE LOSS OF PROFIT ALSO KNOWN AS DELAY IN START UP POLICY AND COVERS FINANCIAL CONSEQUENCES OF A PROJECT BEING DELAYED BECAUSE OF ACCIDENTAL DAMAGE TO THE PROJECT MATERIAL.

DETERIORATION OF STOCKS COVERS THE RISK OF DETERIORATION OF STOCK FOLLOWING OF BREAKDOWN OF REFRIGERATION PLANT AND MACHINERY.

ELECTRONIC EQUIPMENT POLICY THE POLICY COVERS 3 SECTIONS: SECTION-I: COVER APPLIES TO UNFORSEEN AND SUDDEN PHYSICAL LOSS RESULTING IN REPAIR OR REPLACEMENT OF EQUIPMENT SECTION-II: EXTERNAL DATA MEDIA COVER SECTION-III: INCREASED COST OF WORKING

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Contribution to growth: Currently, the insurance sector size is estimated at Rs.500 billion. On account of intense marketing strategies adopted by private insurance players, the market share of state owned insurance companies like GIC, LIC and others have come down to 70% in last 4-5 years from over 97%. The private insurance players despite the sector is still regulated has been offering rate of return (RoR) to its policy holders which is estimated at about 35% as against 20% of domestic insurance companies.

Contribution to growth: Currently, the insurance sector size is estimated at Rs.500 billion. On account of intense marketing strategies adopted by private insurance players, the market share of state owned insurance companies like GIC, LIC and others have come down to 70% in last 4-5 years from over 97%. The private insurance players despite the sector is still regulated has been offering rate of return (RoR) to its policy holders which is estimated at about 35% as against 20% of domestic insurance companies

Contribution to growth: LIC and GIC have limited number of policies to offer to their subscribers Private insurance companies offer many policies and the premium amount as well as the maturity period is much competitive as against those of government insurance companies. The private sector insurance players have started exploring the rural markets in which until recently, the state owned companies had the monopoly. Indias life insurance premium, as a percentage of GDP is 1.8%

Future of the Sector: Indian insurance sector is likely to register unprecedented growth of 200% and attain a size of Rs. 2000 billion by 2009-10 A private sector insurance business will achieve a growth rate of 140% as a result of aggressive marketing technique being adopted by them against 35-40% growth rate of state owned insurance companies. In rural markets, the share of private insurance players would increase substantially as these have been able to generate a faith among their rural consumers.

Insurance Sector - Emerging Areas: Demand for Pension Plans Two relatively modern trends affect life insurance business in India significantly: Joint Family System and elderly are increasingly having to fend for themselves Separateness of Banking and Insurance Bancassurance Role of Information Techno-logy Using Postal Network Creating Insurance awareness Innovative Products

CHANGE IN TRENDS FROM PRICE POINT OF VIEW DIFFERENT COMPANIES ARE PROVIDING POLICES OF INSURANCE AT COMPETETIVE PRICES EVEN THE ALLOCATION CHARGES UNDER POLICIES IS ALSO DECREASED THE INSURANCE AGENT COMISSION IS ALSO FIXED AAND REDUCED SO THAT THE CUSTOMER CAN GET THE BEST.

FROM CUSTOMER AND SERVICE POINT OF VIEW Globalization - "The Dynamic Force" MNCs - "The New Path Maker" More customer oriented Mostly better service oriented More competitive Better satisfaction More value addition Strategic development

FROM PROMOTION POINT OF VIEW Computerization Internet Electronic Clearance Service (ECS) Call Centres and SMS services

INDIAN INSURANCE IN 21ST CENTURY 2000: IRDA starts giving licenses to private insurers: ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy 2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002: Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode 2007: First Online Insurance portal, https:/// set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt Ltd. The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Minimum capital requirement for direct life and Non-life Insurance company is INR1000 million and that for reinsurance company is INR 2000 million. In the 2004-05 budgets, the Government proposed for increasing the foreign equity stake to 49%, this is yet to be effected. Under the current guidelines, there is a 26 percent equity cap for foreign partners in direct insurance and reinsurance Company

Currently, a US$41 billion industry, India is the world's fifth largest life insurance market and growing at a rapid pace of 32- 34% annually as per Life Insurance Council studies.

Currently, in India only two million people (0.2 % of the total population of 1 billion) are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. With more and more private companies in the sector, the situation may change soon.

Legal frame work 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. The Insurance Act of 1938 [ was the first legislation governing all forms of insurance to provide strict state control over insurance business.

TPA A Third Party Administrator (TPA) is an organization that processes insurance claims or certain aspects of employee benefit plans for a separate entity. This can be viewed as "outsourcing" the administration of the claims processing, since the TPA is performing a task traditionally handled by the company providing the insurance or the company itself.

Reinsurance The practice of insurers transferring portions of risk portfolios to other parties by some form of agreement in order to reduce the likelihood of having to pay a large obligation resulting from an insurance claim. The intent of reinsurance is for an insurance company to reduce the risks associated with underwritten policies by spreading risks across alternative institutions. Also known as "insurance for insurers" or "stop- loss insurance".

Overall, the reinsurance company receives pieces of a larger potential obligation in exchange for some of the money the original insurer received to accept the obligation. The party that diversifies its insurance portfolio is known as the ceding party. The party that accepts a portion of the potential obligation in exchange for a share of the insurance premium is known as the reinsurer.

TYPES OF INSURANCE POLICIES

Insurance provides compensation to a person for an anticipated loss to his life, business or an asset. Insurance is broadly classified into two parts covering different types of risks: 1. Long-term (Life Insurance) 2. General Insurance (Non-life Insurance

General Insurance Also known as non-life insurance, general insurance is normally meant for a short- term period of twelve months or less. Recently, longer-term insurance agreements have made an entry into the business of general insurance but their term does not exceed five years. General insurance can be classified as follows:

Fire Insurance Fire insurance provides protection against damage to property caused by accidents due to fire, lightening or explosion, whereby the explosion is caused by boilers not being used for industrial purposes. Fire insurance also includes damage caused due to other perils like storm tempest or flood; burst pipes; earthquake; aircraft; riot, civil commotion; malicious damage; explosion; impact.

Marine Insurance Marine insurance basically covers three risk areas, namely, hull, cargo and freight. The risks which these areas are exposed to are collectively known as "Perils of the Sea". These perils include theft, fire, collision etc.

Marine Cargo: Marine cargo policy provides protection to the goods loaded on a ship against all perils between the departure and arrival warehouse. Therefore, marine cargo covers carriage of goods by sea as well as transportation of goods by land

Marine Cargo: Marine cargo policy provides protection to the goods loaded on a ship against all perils between the departure and arrival warehouse. Therefore, marine cargo covers carriage of goods by sea as well as transportation of goods by land.

Marine Hull: Marine hull policy provides protection against damage to ship caused due to the perils of the sea. Marine hull policy covers three-fourth of the liability of the hull owner (shipowner) against loss due to collisions at sea. The remaining 1/4th of the liability is looked after by associations formed by shipowners for the purpose (P and I clubs).

Miscellaneous As per the Insurance Act, all types of general insurance other than fire and marine insurance are covered under miscellaneous insurance. Some of the examples of general insurance are motor insurance, theft insurance, health insurance, personal accident insurance, money insurance, engineering insurance etc.

Life insurance Long-term Insurance Long term insurance is so called because it is meant for a long-term period which may stretch to several years or whole life-time of the insured. Long-term insurance covers all life insurance policies. Insurance against risk to one's life is covered under ordinary life assurance. Ordinary life assurance can be further clasified into following types:

Whole Life Assurance In whole life assurance, insurance company collects premium from the insured for whole life or till the time of his retirement and pays claim to the family of the insured only after his death

Endowment Assurance In case of endowment assurance, the term of policy is defined for a specified period say 15, 20, 25 or 30 years. The insurance company pays the claim to the family of assured in an event of his death within the policy's term or in an event of the assured surviving the policy's term.

Assurances for Children Child's Deferred Assurance: Under this policy, claim by insurance company is paid on the option date which is calculated to coincide with the child's eighteenth or twenty first birthday. In case the parent survives till option date, policy may either be continued or payment may be claimed on the same date. However, if the parent dies before the option date, the policy remains continued until the option date without any need for payment of premiums. If the child dies before the option date, the parent receives back all premiums paid to the insurance company.

Annuities Annuities are just opposite to life insurance. A person entering into an annuity contract agrees to pay a specified sum of capital (lump sum or by instalments) to the insurer. The insurer in return promises to pay the insured a series of payments untill insured's death. Generally, life annuity is opted by a person having surplus wealth and wants to use this money after his retirement. There are two types of annuities, namely: Immediate Annuity: In an immediate annuity, the insured pays a lump sum amount (known as purchase price) and in return the insurer promises to pay him in instalments a specified sum on a monthly/quarterly/half-yearly/yearly basis. Deferred Annuity: A deferred anuuity can be purchased by paying a single premium or by way of instalments. The insured starts receiving annuity payment after a lapse of a selected period (also known as Deferment period).

Money Back Policy Money back policy is a policy opted by people who want periodical payments. A money back policy is generally issued for a particular period, and the sum assured is paid through periodical payments to the insured, spread over this time period. In case of death of the insured within the term of the policy, full sum assured along with bonus accruing on it is payable by hte insurance company to the nominee of the deceased.

insurance sector parvesh aghi. overview of insurance sector

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