Branches of insurance:

Insurance companies are active in the field of life, health and general
insurance business consists of spreading risks over time and sharing them
between person and organizations. The major part of insurance business is
life insurance, the operation of which depends on the laws of the mortality. In
case of life insurance business, the claim is fixed and certain whereas in
general insurance business the claim is uncertain.
1. life insurance:
Life insurance cover the risk that exists in ones life. These risk may be
risk of accidental death, risk of death due to illness or natural death. Life
insurance aims to protect the family of the life insurance so that they may
not suffer from financial consequences on the death of the insured.
Life insurance business has been in India since 1818. There were 245
companies in life insurance business. In 1956 the life insurance business was
nationalized by setting up of life insurance corporation of India. Life
insurance business was entirely in the hands of LIC till 1999, the government
of India allowed the opening up of the insurance sector to private parties by
passing the insurance regulatory and development authority (IRDA) bill.
Foreign companies are also allowed to invest up to 26 percent of equity stake
in the insurance sector in India.
Since 1956, LIC has worked towards spreading life insurance and in the
process the built a wide network across the length and breadth of the
country. It has opened 2048 bran chase 100 divisional officers, 7 zonal offices
and a corporate office. The number of new policies sold every year grew from
14.62 lakhs in 1961 to 1.48 crores in 1999 of which 55% are rural. The
annual premium income rose from Rs. 88.65 crores in 1957 to Rs. 22,805
crores in 1999. The life fund of the corporation also grew from Rs. 410 crores
to Rs. 2,89,895 crores in 2003.
Market share of major players in life insurance as on 31-3-2004
Name of the player
LIC
ICICI PRUDENTIAL
BIRLA SUN LIFE
BAJAJ ALLIANZ
SBI LIFE
HDFC STANDARD

Market share (%)

82.30
5.63
2.56
2.03
1.80
1.36

TATA AIG
MAX NEW YORK
AVIVA
OM KOTAK MAHINDRA
ING VYSYS
OTHERS

1.29
0.90
0.79
0.51
0.37
0.47

The private players has taken numerous new initiatives to tap the rich
market potential. The competition has been highly intensified and the new
entrants have increased their share of the new business.
LIC has been facing intense competition from the new players. Its
performance was dismal in 2002-03. The sum assured witnessed 2 negative
growth at 6.73%. this is due to the fact that the average premium of LIC per
policy is just Rs. 4000 as against Rs. 10,000 of the new entrants. Premium
income of LIC also witnesses 2 negative growth of -21.83%.this is due to the
increased competition and the multichannel distribution system adopted by
new players in the market.
A large number of insurance policies has been introduce d by LIC. As a
financial instrument, life insurance policy is a claim to a future payment of
either a lumpsum or a future stream of income of income less the value of
future premiums. It is possible to withdraw from the obligation to contribute
further premiums and of realizing immediately the present value of the
policy by
(a) surrendering the policy for cash,
(b) assigning it in the open market,
(c) raising loan with the policy as security, or
(d) converting it into 2 free or paid up policy.
The following are few basic type of policies:
(a) Term assurances:
These policy provide insurance cover for a specific term. They are
useful when one has to take a loan and has a future liability for repayment.
Term assurance products are low premium and pure risk products.
(b) Endowment product:

These are the products that can be taken for specific term and at the
end of the term the sum assured is paid to the policyholder along with
returns in the form of bonus.

(c) Whole-life insurance:

Under this plan the premium paying term is 35 years or till the age of
80 whichever is more. The sum assured becomes payable only on death
cover to the dependents for the premium paid. This is the cheapest plan.
(d) Money-back policies:
The aim of money back policies is to provide cash flows at regular
intervals. This is useful to those who are looking for periodic inflow of
income. Normally, the sum assured is paid in four instalments. If death of the
policy-holder occurs during the term of the plan the beneficiaries will receive
the entire sum assured with accumulated bonus, irrespective of the cash
payout made till date. The premiums are slightly higher in this plan.
(e) Annuity plans:
It is 2 term used in respect of pension plans. In this plan, premiums are
paid for specific term and on the completion of the term, the policyholder
gets a certain sum of money every year/month as pension. This amount is
called annuity, which is aimed to provide income after the retirement of the
policy holder.
Every earning person with dependents should have a life insurance cover. a
pure cover or a term plan is ideal, but if the person wants to combine
insurance with saving or investment, he has the option of other products
which are more expensive. Premiums of top 5 different Insurance companies
are as follows:
Term plans ( Premium in Rs. For 25 years)

Age
(Year)

10 lakh
Rs.

20 lakh
Rs.

30 lakh
Rs.

25
30

2,717
3,125

4,463
5,488

6,344
7,779

Top 5 policies based on

Lowest premium per
annum
ICICI-prudential life-1 protect
Kotak life- term plan

35
40
45

4,154
6,072
8,370

7,631
11,391
15,721

10,792
16,029
22,953

AEGON religare-1term
Max Ny life- platinum
ICICI premium life-pure
protect

2. General insurance:
General insurance evolved with the evolution of business and lifestyle
of human beings. With its seeds in the seafaring mariners and ships, today
general insurance covers everything from space expeditions to the voice of
famous singers. The general insurance business in India can be traced its
roots to the triton insurance company Ltd. The first general insurance
company established in the year 1850 in culcutta by the britishers. The India
mercantile insurance Ltd. Was set up in 1907 to transact all classes of
general insurance business. General insurance council, a wing of the
insurance association of India framed a code of conduct in 1957 for ensuring
their conduct and sound business practices. In 1968 , the insurance act was
amended to regulate investments and set minimum solvency margins and
the tariff advisory committee. Was set up. The general insurance business
Act, accordingly in 1973, around 107 insurance companies and firms were
amalgamated and grouped into four companies as follows:
1. Oriental insurance company Ltd.
2. New India assurance company Ltd.
3. National insurance company Ltd.
4. United India insurance company Ltd.
These four companies were wholly-owned subsidiaries of the general
insurance corporation of India, the apex general insurance Act, 1938 and the
general insurance industry, general insurance companies provide insurance
industry. General insurance companies provide insurance coves other than
life insurance which are as follws:
(a) Fire insurance.
(b) Marine insurance.
(c) Motor insurance.
(d) mediclaim.

(e) Benefit policy like accident benefit policy.

(f) Hospital cash critical illness.
(g) Other general products.
With the setting up the IRDA in 2000, more players entered into the
insurance sector. The gross direct premiums of GIC, its four companies and
other private players are in the given in following table:

Gross direct premium (market share) (%) (as on June, 2004)

Insurer
New India
National
United India
Oriental
Total
ICICI Lombard
Bajaj Allianz
ECGC
Tata AIG
IFFCO-Tokio
Royal sundaram
Reliance general
HDFC-chubb
Cholamandalam
Total

Market share (%)

22.23
21.66
17.62
17.23
78.74
4.53
4.32
2.33
2.80
2.82
1.67
1.08
0.78
0.95
100.00

It is clear that the market share of public sector players is

78.74% as compared to 21.26% of the private players. The private sector has
been playing 2 very important role in the area of industrial insurance as a
whole.
General insurance forms the life line of several commerce
and trade related activities. The fundamental essentials of a general
insurance contract are given below:
1. The insurer accepts the risk when the insured pays the premium. The
policy is issured as an evidence of the contract.

2. The proposer makes an offer and the insurer accepts it. Insurance cover
note is treated as av acceptance of the offer.
3. The premium paid by the insured is the consideration of the contract
whereas the consideration for the insured is the indemnity promise made by
the insurer.
4. The purpose of the insurance is not against the public policy.
5. The persons entering into a contract must be authorized and competent to
enter into such contracts.
Traditionally, the concept of general insurance covers the
following categories:
1. Marine insurance:
Marine insurance covers two types of risks. The first one is
the risk to or damage to cargo carried on sea, rail, air and road. The second
one is hull insurance that is damage to ships, vessels, boats and launches.
2. Fire insurance:
The fire insurance covers the insurance of property against
the risk of fire, flood, earthquake. It is also extended to loss of profit due to
damage caused by any of these perils.
3. Accident insurance:
Accident insurance covers all type of risks which are not
covered in any of the above two. This includes burglary, motor, personal
accident, sickness, public liability, fidelity etc.
The concept of general insurance offers highly evolved and
sophisticated forms of business and personal mitigation. The important forms
are as follows:
1. Insurance of property:
The property covers buildings, motor, vehicles, aircraft,
machinery factories, ships, live stocks, houses furniture, cash and securities.
2. Insurance of persons:
This covers personal accident insurance, disability and
health related risk insurance.

3. Insurance of liability:
This covers public liability, product liability, professional
indemnities etc.
4. Insurance of interest:
This covers mainly fidelity guarantee insurance.
5. Specific risks:
This includes the risk that cannot be covered by the general
principles of any of the above four forms. For example, employment
insurance, insurance against loss of skills, space expeditions and exploration
of the poles and jungles.
When you are rearing to buy 2 new car, insurance premium
is a remote consideration in deciding the model of car. You car insurance
premium is lower if you are a doctor or a chartered account. However the
premium can vary markedly depending on several factors, such as car
model, year of manufacture, and fuel option, even unlikely ones like fuel
tank, safety devices and accessories. The difference in premium can range
from 25% to 15% the insurances prefer the following factors for their car:
(a) Petrol engine.
(b) Installed with anti-theft devices.
(c) Safety features like air bags.
(d) High-end models.
(e) Non-commercial usage.
(f) Models that are not accident prone.
(g) Driven in a non-metro.
(h) Recent manufacturing.
(i) Uses Indian spare parts.
So before you press the accelerator and drive off, read fire
print. Know how much insurance cover you have for your car. It is better to
safe than sorry.

General insurance policies are not financial claims. The

essence of general insurance is the collective pooling of risks arising from
uncertain occurrences. The policies in general branch rarely runs for a period
longer than one year. General insurance companies cover property insurance
and they are specialized in fire, marine, vehicles, theft, loss, damage and
liability etc. they have also introduced personal accident policies,
householders comprehensive policies etc. the liabilities of general insurance
companies are mostly short term and unpredictable in nature.
3. Heath insurance: