IBSAR INSTITUTE OF MANAGEMENT

STUDIES
KARJAT.

PROJECT REPORT ON
INSURANCE AND GROWTH

SUBJECT:
BANKING & INSURANCE

SUBMITTED TO:
PROF.ASHALATA

Presented by:
RUPESH CHAVAN (30)
RAHUL MEHER (26)
UMESH GAIKWAD (37)

1
 INDEX
SR.NO TOPICS PAGE
NO.
1 HISTORY OF INSURANCE 3

2 MEANING 4
3 REGULATORY ACTS 5
4 INSURANCE BUSINESS IN INDIA 7
5 GROSS DOMESTIC PRODUCT 9
6 INSURANCE PLAYERS IN INDIA 10
7 INSURANCE POLICY IN INDIA 14
8 NEW INSURANCE 22
9 GROWTH OF THE INSURANCE SECTOR 36
10 TAX POLICY AND INSURANCE SECTOR 42
11 SWOT ANALYSIS 43
12 FINDINGS 46
13 RECOMMENDATIONS 47
14 CONCLUSION 48
15 BIBLIOGRAPHY 49

HISTORY OF INSURANCE

2
 The origin of life insurance in India can be traced back to 1818

with the establishment of the Oriental Life Insurance Company in

Calcutta - First Life Insurance Company was established insurance as

Oriental Insurance, mainly to provide for widows of Europeans.

The companies that follow mainly catered to Europeans and charged

extra premium on Indian Lives .

The first insurance company insuring Indian Lives at standard

rates was BOMBAY MUTUAL LIFE INSURANCE COMPANY which

was formed insurance 1870 - The first insurance company insuring

Indian Lives at standard rates was BOMBAY MUTUAL LIFE INSURANCE

COMPANY which was formed insurance 1870 .

The Indian Life Assurance Companies Act enacted as the first

statute to regulate the life insurance business in 1912

In 1956, Government of India brought together 245 Indian and

foreign insurers and provident societies under one nationalised

monopoly corporation and formed Life Insurance Corporation (LIC)

by an Act of Parliament, viz. LIC Act, 1956, with a capital

contribution of Rs.5 crore.

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MEANING OF INSURANCE

Insurance, in general terms refers to the practice of

guaranteeing a sum of money to the owner or possessor of a valuable

asset for a limited period of time, to cover the cost of any damage to

that asset arising out of any contingency.

Insurance is not the sale of products, but servicing customers.It

is a system, by which the losses suffered by a few are spread over

many,Exposed to similar risks. Insurance is a protection against

financial loss arising: on the happening of an unexpected event.

Insurance companies collect premiums to provide for this protection. A

loss is paid out of the premiums collected from the insuring public and

the Insurance Companies act as trustees to the amount collected.

Insurance is the means of managing risk and protection against

financial loss arising as a result of contingencies, which may or may

not occur.

In the process of insurance there must necessarily be two

parties ‘Insurer’ and ‘Insured.’ The insurer is an entity which

guarantees to pay in case of any damage to the personal asset, for

example the Insurance companies. On the other hand, insured is an

individual or an organization whose assets are being covered by the

insurer.

4
REGULATORY ACTS

The Insurance sector is Governed by a number of Acts

The Insurance Act, 1938 –

In 1938, the first comprehensive legislation regarding insurance

was introduced with the passing of Insurance Act 1938 that provided

strict State Control over insurance business

The Life Insurance Corporation Act, 1956 –

In 1956, Government of India brought together 245 Indian and

foreign insurers and provident societies under one nationalised

monopoly corporation and formed Life Insurance Corporation (LIC) by

an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of

Rs.5 crore.

The General Insurance Business (Nationalization) Act, 1972 –

The general insurance remained with the private sector till 1972.

There were 107 private companies involved in the business of general

operations and their operations were restricted to organised trade and

industry in large cities. The General Insurance Business

5
(Nationalisation) Act, 1972 nationalised the general insurance business

in India with effect from January 1, 1973.

The Insurance Regulatory and Development Authority Act,

1999-

Insurance Industry is regulated by the Insurance Regulatory and

Development Authority (IRDA).

ROLE OF IRDA

-Educate public on regulatory safeguards, investment guidelines and

plough back of profits

-Inform public on Social and Rural Obligations of private players .

-By enacting the IRDA act 1999. the Govt of India effectively ended

Lick’s monopoly and opened the door for private insurance companies

Collaboration of Indian Companies with Foreign Companies.

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INSURANCE BUSINESS IN INDIA

Insurance industry, as on 1.4.2000, comprised mainly two players:

1-Life Insurance 2- General Insurance

1-Life Insurance

Life insurance means insuring your life to save for the future of

your family. If you have family members depending on your income

you may invest in life insurance. This is a contract between you and

your insurance company where your insurer agrees to pay a certain

amount of money to your beneficiary in the event of your death .

policies protect individuals against the risk of life .LifeInsurance

policies not only protects the insured’s family against his death but

also provides a good means to avail tax benefit, avail loans from banks

and acts, as a good saving tool to meet future needs.

2- General Insurance

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 General insurance means managing risk against financial loss

arising due to fire,

marine or miscellaneous events as a result of contingencies, which

may or may not occur.

General insurance protects the property and casualty by covering

losses from disasters and accidents thereby protecting from property

damage and liability, providing the means

for victims to resume their lives and businesses and contribute to the

economy.

This sector covers almost everything related to property, vehicle, cash,

household goods, health and also one's liability towards others.

The major segments covered under general Insurance Policy

India are:

a. Marine Insurance

b. Fire Insurance

c. Motor Insurance

d. Miscellaneous Insurance [ Home , Travel , Health ,Shopkeepers &

Engineering ]

Fire and Miscellaneous insurance businesses are predominant. Motor

Vehicle insurance is compulsory.

8
GROSS DOMESTIC PROUCT

Life insurance account to 2.5% and General insurance account to

0.65% of India's GDP in term of premiums.

Insurance penetration of insurance in India

The life insurance penetration in India increased from 1.77 per

cent in 2000 to 4.10 per cent in 06-07, before declining to 4.0 per cent

in 07-08.

The general insurance penetration increased from 0.55 per cent

in 2000 to 0.60 per cent in 06-07 and remained at the same level in

07-08.

Life insurance premium per capita in India

The life insurance density which is premium per capita in US$

terms stood at US$ 40.4 in 07-08 as against US$ 33.2 in 2006-07.

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 The general insurance density was, however, lower at US$ 6.2 in

07-08 as against (US$ 5.20 in 06-07 ).

Insurance Players in India

A-Players in Life Insurance

Public Sector

1- Life Insurance Corporation

Private Sector

1-Bajaj Allianz,

2-SBI Life,

3-Tata AIG Life,

4-HDFC Standard,

5-ICICI Prudential Life Insurance,

6-Birla Sunlife,

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7-Aviva Life Insurance,

8-Kotak Mahindra Old Mutual,

9-Max New York Life and

10-Met Life.

11-DLF Pramerica Life Insurance Co. Ltd

12-IDBI Fortis Life Insurance Company Ltd.

13-Canara HSBC Oriental Bank of Commerce Life Insurance Company

Ltd.

14.Aegon Religare Life Insurance Company Limited

15-Shriram Life Insurance Company Ltd

16-Bharti Axa Life Insurance Company

17-Future Generali India Life Insurance Company Ltd.

18-Sahara India Life Insurance Company Ltd

B-Players in Non- Life Insurance

Public Sector

1-National Insurance Company Limited,

2-Oriental Insurance Limited,

3-New India Assurance Company Limited and

4-United India Insurance Company Limited.

5-ICICI Lombard

6-IFFCO-TOKIO

7-Reliance

8-Royal Sundaram

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9-Tata AIG

10-Universal Sompo

11-Export Credit Gurantee Corporation Ltd

12-Agriculture Insurance Company Of India Ltd

13-Apollo DKV Insurance Company Ltd

14-Shriram General Insurance Company Limited

15-Bharti AXA General Insurance Company ltd.

16-Star Health & Allied Insurance Company Ltd

A- Market share of various Life Insurance Companies

in India at the end of FY2008

Public Sector 48.1% Private Sector 51.9%

LIC - 48.1% ICICI Prudential - 13.7%

Allianz Bajaj - 10.3%

SBI Life - 6.2%
HDFC Standard - 4.1%
Birla Sunlife - 3.4%
Reliance Life - 3.4%
Max New York - 2.4%
OM Kotak - 1.9%
AVIVA - 1.8%
Tata AIG - 1.5%
MetLife - 1.4%
ING Vysya - 1.2%

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 Shriram Life - 0.3%
Bharti Axa Life - 0.2%

B- Market share of Non- Life Insurance Companies in

India at the end of FY2008

Public Sector 60.5% Private Sector – 39.5 %

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Insurance Policy in India

A-There are various types of life Insurance Policy

a. Term Life Policy

b. Whole Life Policy

c. Endowment Policy

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d. Money-back Policy

e. Unit Linked Insurance Plan

f. Pension Plan or Annuities

g. Joint Life Policy

Term Life Insurance

For those who are running on a budget, you can opt for a simple

life insurance. Term life insurance allows the beneficiary death benefits

for a specific period or 'term'. This term may be 1 or more years and

the benefits are paid only in the event of death of the policy holder

within the term of the policy. There are certain term life insurance that

can be renewed for more than one additional term. However, if you do

so, your premiums may go higher. You may even sometimes be

allowed to trade your term life insurance for a whole life insurance

policy.

Whole Life Insurance:

A whole life insurance covers a policy holder for his entire life.

There is no date of expiry like in a term life insurance and the death

benefits will be received by the beneficiary mentioned in the policy

only in the event of the death of the policy holder. If you buy a whole

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life insurance you will have to pay a higher premium as compared to a

term life insurance. The reason for this is that a certain portion of the

premium paid for whole life insurance is put away into a savings

program .

When you compare the total premiums paid for whole life

insurance and the total premiums paid for term life insurance it is seen

that whole life insurance is less expensive. Even if you pay higher

premiums for whole life insurance, the fact is that the premiums

remain the same throughout the tenure of the insurance. But in the

case of term life insurance, you may be paying lesser premiums in the

beginning, but as you renew your term policy, premiums will increase.

Hence, the total value accrued in term policy is bigger than a whole life

insurance.

Certain clauses in a whole life insurance allow you to pay

premiums for a lesser period of time. The greatest advantage in this

policy is that the premiums develop cash values that may be claimed

or used for purchasing rider policies for more protection. Few of the

whole life insurance benefits are:

Guaranteed death benefits

Guaranteed cash values

Fixed annual premiums

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 A whole life insurance also known as "straight life" or "ordinary

life" insurance, is not just an investment for your future alone, but also

for the future of your family.

Endowment Assurance Plan

This policy not only makes provisions for the family of the Life

Assured in event of his early death but also assures a lump sum at a

desired age. The lump sum can be reinvested to provide an annuity

during the remainder of his life or in any other way considered suitable

at that time.

Premiums are usually payable for the selected term of years or until

death if it occurs during the term period.

Being an endowment assurance policy, this plan is apt for

people of of all ages and social groups who wish to protect their

families from a financial setback that may occur owing to their

demise. The amount assured if not paid by reason of his death earlier

will payable at the end of the endowment term where it can be

invested in an annuity provision for the rest of the policyholder's life or

in any other way he may think most suitable at that time.

In short

• Covers death & survival benefits

• Sum assured paid on death or on maturity of policy

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 • Period of policy at the option of proposer

• Most common plan .

Money Back Policy

Money back policy from LIC is a popular insurance policy, as it

provides life coverage during the term of the policy and the maturity

benefits are paid in installments by way of survival benefits in every 5

years. The plan is available with 20 years and 25 years term. In true

sense, we do not think of unfortunate death when we are choosing

Money back plan, but we like to consider this plan as a savings

instrument that takes care of your insurance needs also and therefore,

it also acts as a tax-savings tool.But, we try to avoid taking higher

sized policy due to the incremental increase in monthly premium rate,

although we are capable of paying this small additional amount. We try

to save Rs. 250-300 per month but we do not realize these savings are

not worth enough in long run.Having said that, we will show you

here, why you must go for the higher sized policy. We will

analyze the investments and returns between two options.

Unit Linked Insurance Policies (ULIP)

Unit linked insurance policy is one in which the customer is

provided with a life insurance cover and the premium paid is invested

in either debt or equity products or a combination of the two.In other

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words, it enables the buyer to secure some protection for his family in

the event of his untimely death and at the same time provides him an

opportunity to earn a return on his premium paid.In the event of the

insured person's untimely death, his nominees would normally receive

an amount that is the higher of the sum assured (insurance cover) or

the value of the units (investments).However, there are some schemes

in which the policyholder receives the sum assured plus the value of

the investments.Every insurance company has four to five ULIPs with

varying investment options, charges and conditions for withdrawals

and surrender. Moreover, schemes have been tailored to suit different

customer profiles and, in that sense, offer a great deal of choice.

The advantage of ULIP is that since the investments are made

for long periods, the chances of earning a decent return are high.Just

as in the case of mutual funds, buyers who are risk averse can buy into

debt schemes while those who have an appetite for risk can opt for

balanced or equity schemes.However, the charges paid in these

schemes in terms of the entry load, administrative fees, underwriting

fees, buying and selling charges and asset management charges are

fairly high and vary from insurer to insurer in the quantum as also in

the manner in which they are charged.

Annuity(Pension) Plans

A pension plan or an annuity is an investment that is made

either in a single lump sum payment or through installments paid over

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a certain number of years, in return for a specific sum that is received
every year, every half-year or every month, either for life or for a fixed
number of years.
Annuities differ from all the other forms of life insurance in that
an annuity does not provide any life insurance cover but, instead,
offers a guaranteed income either for life or a certain period.
Typically annuities are bought to generate income during one's retired
life, which is why they are also called pension plans. By buying an
annuity or a pension plan the annuitant receives guaranteed income
throughout his life. He also receives lump sum benefits for the
annuitant's estate in addition to the payments during the annuitant's
lifetime.
Pension plans are perfect investment instrument for a person
who after retiring from service has received a large sum as
superannuation benefit. He can invest the proceeds in a pension plan
as it is safest way of secured income for the rest of his life. One can
pay for a pension plan either through an annuity or through
installments that are annual in most cases.

Joint Life Policy

Joint life policies are similar to endowment policies in as much as

these policies also offer maturity benefits to the policyholders, apart

form covering the risks as all life insurance policies.But these are

categorized separately as these cover two lives together thus offering

a unique advantage in some cases; notable, for a married couple or for

partners in a business firm.

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 Under a joint life policy the sum assured is payable on the first

death and again on the death of the survivor during the term of the

policy. Vested bonuses would also be paid besides the sum assured

after the death of the survivor.If one or both the lives survive to the

maturity date, the sum assured as well as the vested bonuses are

payable on the maturity date.

The premiums payable cease on the first death or on the expiry

of the selected term, whichever is earlier.Accident benefits equivalent

to the sum assured are available under this plan on the first death.

However, if both lives are covered under Double Accident Benefit

(DAB), the surviving life is covered under DAB until the end of the

policy year, in which the first life dies under the cover of the

policy.Particularly for couples .

Joint life policies provide dual-purpose income and risk

protection for both belonging to every income group and class of

society.Under a joint life plan though the premium payment stops after

the first life's death, bonuses continue to accrue on the basic Sum

Assured till Maturity Date or till the death of the second life, if earlier.A

good plan for middle-aged married couples, working couples or

professionals offering financial security for both the lives.

More than 80% of the life insurance business is from

.Endowment Policy & Money-back Policy .

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B- TOTAL NON- LIFE INSURANCE PREMIUM

Total gross premium collected by the General insurance

industry up to July was Rs 11,682.61 crore in 08-09 against Rs 10,938

crore in the corresponding period in 07-08

total premium by Public General insurers up to July was Rs 6920.64

crore in 08-09 against Rs

6367.70 crore in the corresponding period in in 07-08.

Private insurers collected Rs 4761.97 crore up to July in 08-09 against

Rs 4570.76 crore in 07-08.

Gross Premium Segment-Wise

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New Insurance

1-Bancassurance

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 Bancassurance simply means selling of insurance products by

banks.It also sometimes known as Bank Insurance Model [BIM] . India,

the bank branch network encompasses nearly 75,000 branches

inclusive of PSU and private banks. Close to 100,000 branches of co-

operative, district co-operative and regional rural banks also exist.

Normally, commercial banks act as a corporate agent and tie-up with

one insurance company. Both Axis bank and HDFC bank are tying up

with insurance companies vying for better share of the commissions.

The Bank Insurance Model (BIM), also sometimes known

as Bancassurance, is the term used to describe the partnership or

relationship between a bank and an insurance company whereby the

insurance company uses the bank sales channel in order to sell

insurance products.BIM allows the insurance company to maintain

smaller direct sales teams as their products are sold through the bank

to bank customers by bank staff. Bank staff and tellers, rather than an

insurance salesperson, become the point of sale/point of contact for

the customer. Bank staff are advised and supported by the insurance

company through product information, marketing campaigns and sales

training. Both the bank and insurance company share the commission.

Insurance policies are processed and administered by the insurance

company.

2-Credit insurance

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 Protection against usually large losses from unpaid accounts

receivable.Borrowers often fail to repay debts,loans and mortgages

due to certain unavoidable circumstances,credit insurances can be of

great help during such crisis.Credit insurance covers businesses and

an individual’s family members against losses resulting from the

inability to repay a loan.

A credit insurance policy usually provides a security cover for a

specific reason for which a borrower defaults.The premium for trade

credit insurance is calculated on a monthly basis and is generally taken

as a percentage of either sales or outstanding receivables for that

month. This insurance covers the risks associated with insolvency,

nonpayment of bills (should be undisputed), preferential payments,

transfer of assets, work-in-process, contract frustration, inconvertibility

of the buyer’s currency, embargo, war and natural disasters.

Types of Credit Insurance:

Broadly speaking, credit insurance can be of two types, namely trade

credit insurance and credit life insurance.

Trade Credit Insurance:

This credit insurance policy is a credit risk management product

for businesses, and hence is also known as business credit insurance.

Through this insurance, one can secure protection against losses

resulting from the nonpayment for goods or services delivered to

clients. This policy lists the buyers of a policyholder and the insurance

25
company pays the policyholder an agreed percentage of invoices or

account receivables that are left unpaid by any of the buyers in this list

in the event of insolvency, bankruptcy or extended default. Only

business entities are eligible for this type of insurance. This policy can

cover both domestic and export businesses.

Credit Life Insurance:

Whenever a person purchases a big-ticket item, such as a car,

s/he might need to take a loan for a specific period. Since injuries and

death are unpredictable, there is no guarantee that the person will be

able to repay the loan. In case of untimely death, the entire burden of

loan repayment falls on the surviving members of the family. Credit

insurance ensures that the surviving family members are not burdened

by loan liabilities in case of the policyholder’s death. The policy

ensures that the lender receives the rest of the loan amount.

3- Commercial insurance

The convincing boom of corporate sector in India has given a

new definition to commercial insurance in the country. Proper risk

26
management against any kind of disaster is the mantra of successful

business and other commercial ventures. The function of risk

management is to provide safety against any kind of internal or

external hazard. Commercial insurance companies in India offer

products which suit the business and corporate needs and provide the

commercial avenues all kind of safety and security.

The value of premium for providing coverage to commercial

ventures and corporate sectors is determined on the basis of a few

factors which include:

Nature of the commercial venture

Size of the organization

Type of the industry

Strength of the employees

Annual turn over the business

The insurance companies are paid the premium on either monthly,

quarterly, half-yearly or annually basis.There are several renowned

business and commercial insurance companies in India. Leading

among them include:

ICICI Lombard

Bajaj Allianz

The New India Assurance Co

United India Insurance Co

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4- Labor insurance –

This insurance protect labor against accident while working .

There are two types of labor insurance .

Workers accident compensation insurance -

If an insured person becomes ill, suffers injury or dies while

he/she is at work or commuting, the benefits will be paid to the insured

person or his/her family. Any business owners who employ one or more

worker(s) are required to participate in this insurance

Employment insurance-

Employment insurance helps people who have been recently

unemployed to find a new job and also provides them with benefits to

help cover their living expenses until they are employed again. This is

called unemployment benefit Eligible applicants for the unemployment

benefit are those who were enrolled in the employment insurance plan

for 12 months or longer (11 days or longer in each month) in the

preceding two years*, are willing to be employed again, and are

available to work. The application is handled at the public employment

safety offices .

5- Student insurance

A student insurance policy covers a person studying in a school

or a college against expenses arising from ill health, accident and

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travel, among other things. This type of general insurance covers

personal possessions and the finances of a student, as well as the

student himself/herself, in case of an unexpected event .

Types of Student Insurance:

Student insurance is essential in some countries. There are several

types of student insurance that one could opt for:

Student health insurance:

Through this policy, one can pay his/her doctor and hospital bills.

The policy can also cover preventative checkups, medications, dental

care, mental disorders and substance abuse. While selecting a health

insurance policy, check the maximum medical benefits that the

company is offering and your deductibles.

Student renter’s insurance:

This policy helps one protect his/her personal property against

any damage due to fire, natural disaster, vandalism, explosion, riots,

water and theft.

Student liability insurance:

This covers against losses arising from the policyholder being

responsible for hurting someone or damaging another person’s

property.

Student car insurance:

Through this insurance, one can receive cover against accidents

and theft of the car. Car insurance for students is usually costly as

29
young drivers tend to make more claims than older, more experienced

drivers. However, keeping your driving records clean can go a long way

in getting this insurance policy at low premiums.

Student travel insurance:

This insurance offers protection when a student encounters

emergencies while s/he is away from home. One might be studying

abroad or traveling to return home on holidays. A student travel

insurance policy must offer cover for travel interruptions or

cancellations, loss of baggage and injury to a third party.

6- Flood Insurance

An insurance policy that covers property damage due to natural

flooding. Flood insurance is offered by private insurers but is

subsidized by the federal government.

Flood insurance is offered by private insurers but is subsidized by the

federal government. National Flood Insurance Act 1968.

A regular homeowners policy will not pay for damages caused by

flooding. In order to get the coverage, you have to go to some outfit

that writes for the National Flood Insurance Program. Outside of fire,

flooding is the most widespread natural disaster. If your community

participates in NFIPs floodplain management program, you should be

eligible to buy the coverage. The only people who may have trouble

30
finding flood coverage are residents of "coastal barrier resource

system" areas and communities that do not participate in NFIPs

programs. Flood insurance is also available to renters, condominium

owners, and co-op owners.

insurance that protects homeowners against losses from a flood; if a

home is located in a flood plain, the lender will require flood insurance

before approving a loan.

Flood insurance building and contents damaged by water during

storms or other natural flood situations. It may even provide protection

from events such as a sewer line backing up into a house. Additionally,

flood insurance reimburses for preventive actions including

sandbagging and for clean-up expenses. This type of insurance is not

included in a standard homeowners policy and must be purchased

separately. Because flood insurance is expensive and the risk is

relatively low, most people do not buy it.

Flood coverage is particularly important for the most expensive

costs such as building restoration and repair, and appliances such as

the furnace. Flood insurance also reimburses costs for restoration or

replacement of carpeting, furniture and personal possession .

People who avoid buying flood insurance typically believe they will

receive disaster assistance if a flood does occur, but very few floods

are ever officially declared as disasters.Flood insurance is often

31
purchased to supplement a homeowner's policy in the event that

flooding damage occurs.

Which are the Major Flood Prone Areas in India

One of the most common natural disasters in India is flood. The

eastern states, such as Bihar, West Bengal and Orissa,

andhrapradesh,assam are especially susceptible to floods. In 1980, the

National Flood Commission estimated the total flood prone area in

India at 34 million hectares. Annually, the estimated rainfall (including

snowfall) amounts to 4,000 billion cubic meters (BCM) in the nation.

The major four zones in India that are comparatively more susceptible

to floods include.

The policyholder stands to gain a lot out of Indian flood

insurance on financial grounds, since s/he receives compensation for

the loss of property due to flood. Another benefit is that the insured

person can also get his/her personal belongings covered under an India

flood insurance policy. Therefore, an individual will not have to pay for

the replacement of all the contents of a building damaged by flooding.

Individuals only have to pay a very reasonable amount in the form of

deductibles, which is decided at the time of obtaining the flood

insurance India policy for the first time.

Types of coverage available under a Flood Insurance

policy

Building Property Coverage:

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 This type of policy covers the insured building, electrical and

plumbing systems, furnaces, water heaters, centralized air

conditioning system, cooking stoves, refrigerators, built-in appliances,

window blinds and debris removal. This coverage indemnifies against

permanently installed cabinets, paneling, bookcases, wallboard and

carpeting. Garages outside the building can be covered for up to 10%

of the building property coverage, while a separate policy is required

to cover structures outside the building other than garages, such as

gazebos.

Personal Property Coverage:

This type of coverage compensates against the loss of personal

belongings, such as furniture, electronic equipment and clothing. It

also covers curtains, air conditioners (both window and portable),

clothes washers and dryers, portable microwave ovens and

dishwashers, food freezers, including stored food, and carpets that

were included in the building coverage. Furs, original artwork and other

such valuable items can also be covered.

7- Wedding Insurance

Wedding insurance policies are designed specifically to offer

financial protection to couples planning a wedding against losses

resulting from unforeseen circumstances. This form of general

33
insurance covers damage to your wedding attire or photographs,

expenses related to last minute bookings and loss of gifts, among

other things. Most policies also cover losses due to the cancellation or

postponement of the wedding on account of bad weather, illness,

military deployment, sudden death or acts of terrorism.

Weddings usually involve massive expenses on invites, food,

catering, attire, florists, musicians and other service providers. Most of

this money is lost in the event of any delay or cancellation of the

event. This money can be recovered with the help of wedding

insurance.

Wedding Insurance: What Does It Covers

Wedding insurance should be bought as soon as you start making

preparations for your wedding. However, at times, insurance

companies have limitations on how early one can purchase a wedding

insurance policy.

This policy covers losses resulting due to:

Site: The insurance policy covers the cost of the wedding getting

cancelled in case the ceremony and reception site is shut down,

damaged or become inaccessible. The site could become inaccessible

if the way is blocked by an ice storm.

Weather: The policy covers losses resulting from the cancellation of

the ceremony due to extremely bad weather conditions, which prevent

34
the bride, bridegroom or key relatives from reaching the wedding

premises. In this case, this insurance covers expenses involved in

rescheduling the event and arranging for ceremony flowers, reception

food and tent rental.

Sickness or Injury: This policy also covers the cancellation or

postponement of the ceremony in case the bride, bridegroom or key

relatives get injured or fall sick.

No Show of Service Providers: A wedding may have to be cancelled or

postponed in case some essential service provider, such as the

officiate or the caterer, does not show up.

8-Dental insurance

If you opt for an Indian dental insurance plan, the costs incurred

due to dental care would be paid for by the insurer. The Indian dental

insurance sector is in its nascent stages and currently only a handful of

dental insurance plans are available on a stand alone basis. A dental

plan offers cover against sudden financial hardship due to dental

emergencies

Unlike most western countries, specific dental insurance plans

are not common in India. In India, oral health is normally integrated

with the general health insurance schemes. However, some popular

tooth care product companies have forged tie ups with general or

health insurance companies to produce dental insurance products. The

35
efforts of the Indian Dental Association to bring out a comprehensive

Indian dental insurance scheme have seen partial success so far.

Types of Indian Dental Insurance Plans

Indian dental insurance plans are mainly of two types:

Stand alone dental insurance plan:

This type of plan covers the expenses related to general dental

problems, such as periodontitis and extraction of permanent teeth due

to ailments such as caries. In this plan, the amount of expense to be

reimbursed as well as the period of such cover is fixed. This type of

plan is generally provided by the popular dental care product

companies in association with one of the insurance companies.

Dental insurance cover as part of general health insurance plan:

This type of dental insurance is provided by the general

insurance companies as part of their own general health insurance

schemes, such as health advantage policy or student medical policy.

Through this scheme, one can claim dental expenses along with the

other kinds of reimbursements, such as the cost of medicines or

hospitalization. This plan also offers tax benefits up to a certain fixed

amount under the income tax act .

Dental insurance is one of the major areas of medical insurance in the

western world. Almost all the developed countries in the western

hemisphere have a substantial population of their covered under the

36
scheme of dental insurance. As a part of the medical coverage, dental

insurance in India though is yet to be widespread. However, in keeping

with the increasing awareness of the need for dental insurance and

coverage, the process has started. More and more people today are

opting for dental insurance in India. Similarly, new and new policies are

being framed by the medical insurance companies in India who offer

the policy of dental insurance.

Dental insurance in India are nowadays being offered by a number of

companies. While each of the insurance providers has different terms

and riders to the dental insurance coverage, broadly the insurance

companies ensure that the insured individuals do not have to make the

payments directly to the medical care institutions. The said member

institution or the health center will have to offer a discount on the

dental treatment to the insured ones who are covered under the policy

of dental insurance coverage in India.

9- Reinsurance

The sharing of insurance policies among multiple insurers, to

reduce the risk for each.

Practice where an insurance company (the insurer)transfers a portion

of its risks to another (the reinsurer).Legal rights of

the policyholders (insureds) are in no way affected by reinsurance, and

37
the insurer remains liable to the insureds for insurance

policy benefits and claims.

The General Insurance Corporation of India was incorporated in

the year 1972 under the company's act 1956 as a private company. In

November 2000, the company was approved as the "Indian Reinsurer".

Since then the General Insurance Corporation of India has been

providing reinsurance supports to public sector as well as to other

private general Insurance Companies.

General Insurance Corporation of India, a reinsurer, provides

reinsurance and risk management solutions. The company offers

domestic reinsurance in the areas of property, marine, engineering,

motor, rotor and fixed wing aviation, liability, aviation hull, and spares;

and international reinsurance in the areas of treaty and facultative

businesses. It also provides domestic reinsurance in the form of

obligatory cessions, company surplus treaties, market surplus treaties,

excess of loss protection to direct writing companies, and facultative

acceptances. The company serves direct general insurance companies

in the Indian market, as well as in SAARC countries, South East Asia,

the Middle East, and Africa. General Insurance Corporation of India was

incorporated in 1972 and is based in Mumbai, India with

liaison/representative/branch offices in London, the United Kingdom;

and Moscow, the Russian Federation.

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 It is a financial management tool. It is always behind the high

quality insurance program or a complex commercial risk of any good

insurer.

Reinsurance industries are maintaining upward surge all round growth,

both in the domestic and global fronts in the last few years. The

untapped, both in life and non – life insurance, particularly in growing

economies like India and china, is the center of attraction to leading

players in insurance and reinsurance, thanks to globalizations and

liberalizations of financial services particularly in last decades.

It is a tool of risk management, mutually support and supplement

each other in providing risk mitigation to the individuals and

organizations at micro level and to the country. Reinsurance is

instrument of risk transfer and risk financing

Growth of the Insurance Sector

India's insurance sector is zooming to show an unprecedented

progressive growth of more than 200% by the period of 2009-09. The
Associated Chambers of Commerce and Industry of India has clocked
out the fact that during this period, private players in the industry will
see a growth of about 140 per cent, owing to the adoption of the
aggressive marketing techniques in comparison of the growth rate of
35 per cent-40 per cent achieved by the state owned insurance
companies. The chamber is expected to poise the business of
insurance to reach at Rs.2000 billions in coming 2 years from the
present level of Rs. 500 billion. With the result of adoption of the
intense marketing strategies by the private players, the declination has
been witnessed in respect of the share of the state owned insurance

39
companies captured in the market. The market share fallout has been
noticed in context of such companies like GIC, LIC, which have come
down to nearly 70 per cent in the past 4-5 years from the 97 per cent.
The experts have fore casted the more severe competition in the
insurance sector likely to be occurred in the near future. Till recently,
insurance sector was majority driven by the government sector players
but now many private sector multinational players have come into the
picture. Like HDFC, ICICI, Kotak, Mahindra and Birla Sunlife. Insurance
sector has been characterized as the booming sector of the Indian
arena, which has shown the growth rate of more than 15 per cent to 20
per cent. Insurance in India is put under the federal subject and is
governed by the Insurance Act, 1938, the Life Insurance Corporation
Act, 1956 and General Insurance Business(Nationalization) Act, 1972,
Insurance Regulatory and Development Authority(IRDA) Act, 1999 and
by various other acts.

The roots of the insurance sector can be tracked down in the year
1818 in the formation of the life insurance Corporation in Calcutta. The
idea was to provide means to the English widows. During that time
different premiums were charged for the Indian and English people
lives. In 1870, the Bombay Mutual Life Insurance Society started its
insurance business and it charged the same premium from all people
irrespective of whether they were Indian or English. In the year 1912,
insurance regulation was started due to the passing of the Life
Insurance Companies Act and the Provident Fund Act. By the year of
1938, in India there were total 176 insurance companies. In the year of
1938, with the passing of Insurance Act, 1938 there was the
introduction of the first comprehensive legislation. It was passed with
the aim of providing the strict state control over the insurance
business. After the independence, insurance sector in India grew at a
much higher pace. In the year 1956, Indian government combined

40
together 245 Indian and foreign insurers and the provident societies
under the name of nationalized monopoly corporation. It was the same
period when the life insurance corporation (LIC)came into the
existence by the passing of the Act of Parliament and through the
contribution of capital around Rs. 5 crore. Till 1972, private sector has
enjoyed somehow monopoly in the general insurance sector. There
were around 107 private companies in the field. With the effect of the
General Insurance Business (Nationalization) Act, 1972, the general
insurance business got nationalized in the India. Due to the
amalgamation of 107 private insurance companies, 4 new companies,
as the subsidiaries of the General Insurance Company, came into
effect- National Insurance Company, New India Assurance Company,
Oriental Insurance Company and United India Insurance Company.

About Associated Chambers of Commerce and Industry

(ASSOCHAM)
Since 1920, the Associated Chambers of Commerce and Industry of
India is the apex chamber, which is covering the membership of above
2 lakh various companies and professionals in throughout the nation.
The chamber was formed co jointly by various promoters chambers
from different regions of the country.

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, the potential of the Indian insurance
industry is huge. Total value of the Indian insurance market (2004-05)
is estimated at Rs. 450 billion (US$10 billion). According to government
sources, the insurance and banking services’ contribution to the
country's gross domestic product (GDP) is 7% out of which the gross

41
premium collection forms a significant part. The funds available with
the state-owned Life Insurance Corporation (LIC) for investments are
8% of GDP.

Till date, only 20% of the total insurable population of India is covered
under various life insurance schemes, the penetration rates of health
and other non-life insurances in India is also well below the
international level. These facts indicate the of immense growth
potential of the insurance sector.

The year 1999 saw a revolution in the Indian insurance sector, as

major structural changes took place with the ending of government
monopoly and 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.

Though, the existing rule says that a foreign partner can hold 26%
equity in an insurance company, a proposal to increase this limit to
49% is pending with the government. Since opening up of the
insurance sector in 1999, foreign investments of Rs. 8.7 billion have
poured into the Indian market and 21 private companies have been
granted licenses.

Innovative products, smart marketing, and aggressive distribution

have enabled fledgling private insurance companies to sign up Indian
customers faster than anyone expected. Indians, who had always seen
life insurance as a tax saving device, are now suddenly turning to the
private sector and snapping up the new innovative products on offer.

The life insurance industry in India grew by an impressive 36%, with

42
premium income from new business at Rs. 253.43 billion during the
fiscal year 2004-2005, braving stiff competition from private insurers.
This report, “Indian Insurance Industry: New Avenues for Growth
2012”, finds that the market share of the state behemoth, LIC, has
clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4
billion new policies in 2004-05. But this was still not enough to arrest
the fall in its market share, as private players grew by 129% to mop up
Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04.

Though the total volume of LIC's business increased in the last fiscal
year (2004-2005) compared to the previous one, its market share
came down from 87.04 to 78.07%. The 14 private insurers increased
their market share from about 13% to about 22% in a year's time. The
figures for the first two months of the fiscal year 2005-06 also speak of
the growing share of the private insurers. The share of LIC for this
period has further come down to 75 percent, while the private players
have grabbed over 24 percent.

There are presently 12 general insurance companies with four public

sector companies and eight private insurers. According to estimates,
private insurance companies collectively have a 10% share of the non-
life insurance market.

Though the focus of this market research report is on the potential

growth on the Indian Insurance Sector, it also talks about the market
size, market segmentation, and key developments in the market after
1999. The report gives an instant overview of the Indian non-life
insurance market, and covers fire, marine, and other non-life
insurance. The data is supplied in both graphical and tabular format for
ease of interpretation and analysis. This report also provides company
profiles of the major private insurance companies.

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REPORT HIGHLIGHTS
- Gains of Liberalization in Indian Insurance Sector
- Indian Insurance Market Segmentation By Products
- Size of the Market and Market Share Of Life Insurers, In INR (crore)
- Market Share Of Non-Life Insurers
- Forecast of Life Insurance Growth Up to 2012
- Forecast of Non-Life Insurance Growth Up to 2012
- Market Revenue of Both Public and Private Insurers
- Policies and Measures Taken By IRDA To Develop The Insurance
Market
- Research and Development Activities
- Regulation of insurance and reinsurance companies
- Major Challenges That Indian Insurance Sector is Facing
- Profiles of the Major Players

REPORT FEATURES
In the globalize market scenario, companies need to understand and
challenge the competitive markets they operate in the “Indian
Insurance Industry: New Avenues for Growth 2012” is a complete
analysis of the market that will help you in decision making. Chapter 2,
3, and 4 of this report discussed the impact of liberalization of the
market and market shares of public and private sector companies and
polices implemented by IRDA to develop the insurance market in India.
Chapter 5, 6, and 7 deals with market revenue of private and public
players, opportunities and forecasts and policies taken by IRDA to
develop the insurance market. Major challenges of Indian Insurance
Sector along with Profiles of major players are discussed in Chapter 8
and 9.

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Booming Insurance Market in India (2008-2011)

With a huge population base and large untapped market, insurance

industry is a big opportunity area in India for national as well as foreign
investors. India is the fifth largest life insurance market in the
emerging insurance economies globally and is growing at 32-34%
annually. This impressive growth in the market has been driven by
liberalization, with new players significantly enhancing product
awareness and promoting consumer education and information. The
strong growth potential of the country has also made international
players to look at the Indian insurance market. Moreover, saturation of
insurance markets in many developed economies has made the Indian
market more attractive for international insurance players, according
to 'Booming Insurance Market in India (2008-2011)”.

This research report will help the client to analyze the leading-edge
opportunities critical to the success of insurance industry in India.
Based on this analysis, the report gives a future forecast of the market
that is intended as a rough guide to the direction in which the market
is likely to move.

Research Findings
-Total life insurance premium in India is projected to grow Rs 1,230,000
Crore by 2010-11.

-Total non-life insurance premium is expected to increase at a CAGR of

25% for the period spanning from 2008-09 to 2010-11.

-With the entry of several low-cost airlines, along with fleet expansion
by existing ones and increasing corporate aircraft ownership, the
Indian aviation insurance market is all set to boom in a big way in

45
coming years.

-Home insurance segment is set to achieve a 100% growth as financial

institutions have made home insurance obligatory for housing loan
approvals.

-Health insurance is poised to become the second largest business for

non-life insurers after motor insurance in next three years.

TAX POLICY AND INSURANCE SECTOR:

Another factor, which affects the insurance sector, is the tax policy.

The tax reforms

in India are such that it encourages the citizens to invest in the insurance

sector. The tax policy of the government is particular relevant for life

insurance which is a long-term contract and inculcates among the

policyholders the habit of saving.

Taxation of returns on investment influences, investment decisions and

high rates of taxation will discourage the desire to save. Already in India

there are complaints that

the rates of return on life policies are not what they could be. Therefore tax

incentives play a vital role in determining the attractiveness of such policies.

Such tax breaks are available in many countries and have helped in the

development of their life sector. In western countries the gain from the

proceeds of a life insurance policy is paid free of tax. Provided the policy

satisfies certain qualifying conditions. Non qualifying policies get basic rate

tax relief, though higher rate taxpayers may still have to pay tax on the gain,

46
although at a reduced rate. The insurance companies can use such tax

concessions rate. The insurance companies can use such tax concessions to

design products for different categories of taxpayers.

The policyholders obtain Income Tax rebates by paying the insurance

premium. The specified forms of

saving which enjoy a tax rebate, under section 88 of the Income Tax Act,
include Life Insurance

Economic Factors

- Increase in Gross Domestic Savings

- Increase in premium per capita ,

- Interest rate

- Inflation rate

SWOT Analysis
SWOT Analysis is a tool , used in management & strategy formation .It can
help to identify

Strengths , Weaknesses, Opportunities & Threats of insurance industry .

Strengths & Weaknesses

are internal factor that can be measured using internal

Assessment..Opportunities & Threats are

external factor that can’t be controlled .but they emerge from PEST.

Strengths

Government Deregulations

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Intense competition bring Govt. De-regulations & De- tarriffing in insurance
sector has encouraged to bring innovatation in all areas; from underwriting,
marketing, policy holder servicing to record-keeping .e.g the hike in the
insurance foreign direct investment (FDI) limit to 49 per cent from the
present 26 per cent. This move would help the sector to grow bigger as it is
capital-intensive industry

Variety of products

There is wide range of Innovative products which help to satisfy to different

needs of different customers. It is also applicable to all Age & Income group .

Aggressive marketing & distribution strategies

marketing strategies & Distribution channels are the most important part of
the insurance industry. The scenario is continuously changing in this industry.
Aggressive marketing strategies will create consumer awareness of risk and
Innovations in distribution will improve market penetration & expand the
markets for products .Hence thecompanies have to be very careful and
cautious in catering to the needs of these
customers who provides a good amount of business to the insurers.
due to the technological advancement , insurers can now reach the
customers in different way.

Weakness

Shortage of trained insurance professionals &Technician

There Shortage of trained insurance professionals like Insurance

Agent , Insurance Broker & Insurance consultant due to lack of
awareness at all level .

Lack of awareness

In India about 60 % of population is educated & remaining illiterate . Till

date, only 20% of the total population of India is insurable under various life
insurance schemes . the insurance premium per capita,penetration rates of
health and other non-life insurances in India is also well below the
international level. They are not aware about protection against risk.

Falling premium income

Since there is increase in service tax on premium ,there is fall in premium

income .Falling premium income -- without a corresponding reduction in
claims -- is likely to affect profits. Interest rate at bank and interest rate of P.F
variation very much affect to life
insurance industry, because people always attract by higher return.
Therefore, they do
not prefer lower return policy.

48
Opportunities

Technology

Due to the technological advancement , insurers can now reach the

customers in different way. Computers are now being used extensively for
creating a storing data, information with the help of complex and
sophisticated technological tools in insurance business. Consumer
feedback about a particular product as well as suggestions for different
types or covers can also be generated through the Internet . It Increase
operational productivity &Improve quality of services and products.
Technology is improving to the point that paperless transactions are available.

Insurance consultant

Today India is the second fastest growing economy after China. In emerging
Indian economy, insurance industry is rapidly growing .The consumers’s
perception towards Insurance Change in India .thus there is demand for
insurance consultant who engaged in offering life insurance policies, health
insurance, general vehicle insurance according to client's need.This is new
ways to service the client and generate income .

Huge population

Growth in the population is a major factor pushing up the demand. Till date,
only 20% of the total insurable population of India is covered under various
life insurance schemes . These facts indicate the of immense growth potential
of the insurance sector.With a huge population base and large untapped
market, insurance industry is a big opportunity area in India for national as
well as foreign investors. India is the fifth largest life insurance market in the
emerging insurance economies globally and is growing at 32-34% annually.

Threat:

Natural calamities

Natural calamities will always be present; the Indian sub-continent is

Subject to cyclones, floods, the terrorism and earthquakes . natural
calamities taking place now days have created a concern for life insurance
among the public. As today’s human life becomes full uncertain, so they
prefer protection against the risk.

Creates threat among rival firms itself.

Private entrants offering more structured Financial products ,Private entrants

are naturally targeting the profitable and more lucrative segments, by
providing better service, new products and flexibility in the well established

49
metropolitan center. These new entrants succeeded in eating share of the
existing entities. This creates threat among rival firms itself. Increasing
intensity of competition among industry rivals-may cause squeeze (fall)
on profit margins.

Changing consumer’s perception

Due to Aggressive marketing & distribution strategies , the consumers’s

attitude towards Insurance Change in India .They demand innovative product
& more return with less premium.
Insurance companies are not able to respond to changing needs of client due
to Shortage of trained insurance professionals &Technician & proper
feedback

FINDINGS

 The monopoly of LIC has been broken because private Insurance

companies came into the market.

 90% of total populations know about LIC Insurance Company.

More than 10% of total populations are aware of privatization of
Insurance Industry.

 The financial growth of private companies is much more Life

Insurance Companies. The private companies always keep in

50
 touch with their customers with the latest information & their
better services.

 Now, a days people preferred to invest the money in Insurance

policy rather than in Banks because of better benefits of
Insurance policies growth money with life cover

RECOMMENDATIONS

 Advertisement should be done on television and especially

posters and banners. This will greatly help in raising awareness
level .

 Private companies needs to the market their products better and

should create greater awareness about their product and
services. They need extensive market advertisement about the

51
 additional benefit provided by them in comparison to the policies
offered by LIC .

 Agents have got maximum influence on a customers. They are

the one who introduce the prospect to different policies. So
agents should be give fullfledged training

 A public relation officer should be appointed in the company who

with customers and their need .

 Insurance company should show more commitment with the

customer.

Conclusion

• Insurance is an integral part of any personal financial plan.

52
• The type of insurance and the amount of coverage you obtain all
depends on your unique financial and family circumstances, and
must be evaluated carefully.

• When considering purchasing coverage, you should review all

the potential risks and the financial impact of these risks on your
financial health.

• Insurance is a form is risk management in which the insured

transfers the cost of potential loss to another entity in exchange
for monetary compensation known as the premium.

• Life insurance provides you with the opportunity to protect

yourself and your family from personal risk exposures like
repayment of debts after death, providing for a surviving spouse
and children, fulfilling other economic goals (such as putting your
kids through college), leaving a charitable legacy, paying for
funeral expenses, etc.

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BIBLIOGRAPHY

• www.irdaindia.org

• www.licindia.com

• www.lifeinsurancewiz.com

• www.economywatch.com

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