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Manish Lotankar

IV Semester
General Insurance Index
 Definition
 History of growth of General Insurance in India
 Growth of general insurance premium
 Classes of General Insurance
 Prospects of further growth in India
 Important terms used in General Insurance
 Underwriting and claim procedures
 Insurance and Reinsurance
 Impact of detariffing rates and products
 Role of Regulator
 Conclusion
General Insurance
 Marine insurance was being practiced in India from the
beginning of 19th century

 Offices were established in Kolkatta which was the centre for

East India Company

 Fire insurance followed in 1825 at Madras

 Swadeshi movement also had its impact on Insurance and

first Indian Company was formed in 1907 – Indian Mercantile
Insurance Company

 Need to control insurance business was felt by the British

government which introduced the Insurance Act in 1938 and
Insurance Rules in 1939
Insurance In India
 Insurance is classified into Life and General

 Any insurance other than human lives comes under the

scope of General Insurance

 It is preferable to call this as General Insurance instead of

non-life insurance

 There is vast scope and the market is trying to cope up with

the demands of the market

Insurance penetration is improving in India and being the

second largest developing economy in the world the scope is
Development in 1970
 Life Insurance business was nationalised in India in the year 1956
 General Insurance business was being done by 106 companies
including LIC (GI)
 On May 13th 1971 an ordinance was promulgated taking state control
of general insurance business with custodians in charge
 In 1972 GI Nationalisation act was passed allowing the formation of
GIC as the holding company and with 4 subsidiaries each having its
Head Office at one metro
 1st Jan 1973 GIC and 4 companies were formed taking in them 106
companies and the 4 PSUs were taking care of the general insurance
business in the country till 2000 totally. GIC on its own was also writing
aviation and crop business besides becoming the National & Asian
 The objective of nationalisation was to spread insurance to nook and
corner of the country and to utilise people’s money for the people’s good
thus uplifting the socio economic condition of the country
Developments since 2000
 Surveyors and loss assessors regulations 2000
 Third party administrators regulations 2001
 Investment regulations 2001
 Policy holder’s interests regulations 2002
 Brokers’ regulations 2002
 Corporate Agents regulations 2002
 Manner of receipt of premium 2002
 Rural sector 2002
 Distribution of surplus 2002
Insurance councils & Institutes
 Two councils which had been reconstituted life
insurance council
 Insurance ombudsman had been appointed
 General insurance council
 IIISLA has been formed
 IIBA- Brokers association
 IIRM- Institute of risk management
 Intermediaries now allowed-Agents/ corporate agents/
 Institutes for educating the agents/Brokers have been
formed and passing the examination has been made
mandatory for carrying out insurance business
 Surveyor licensing is being controlled by Regulator
General Insurance business done
Sr no. Year In Crores
1 1974 219.99
2 1975 253.75
3 1976 286.51
4 1990 2174.43
5 2000 10272
6 2007 20000
7 2008 4000
International comparison

Penetration ( premium as % of GDP) Penetration ( premium as % of GDP)

 United states 4.32  United states 1474.4

 Canada 3.31  Canada 700.6
 UK 3.05  UK 741.5
 Germany 3.55  Germany 913.5
 Japan 2.30  Japan 805.5
 South Korea 2.89  South Korea 262.3
 China 0.61  China 5.0
 India 0.54  India 2.4
General Insurance

Insurance of property

Insurance of persons
Insurance of liability
Insurance of Interest
Insurers now licensed by IRDA
1. Bajaj Allianz 1. Bajaj Allianz
2. Birla sun life 2. ICICI Lombard
3. HDFC Std life 3. Iffco-Tokio General Insurance
4. ICICI Prduential 4. National Insurance
5. ING Vysya 5. New India Assurance Company
6. LIC 6. Oriental Insurance
7. Max New York Life 7. Reliance General Insurance
8. Metlife 8. Royal Sundaram Alliance
9. Kotak Mahindra OM 9. TATA-AIG General
10. SBI Life 10.United India Insurance
11. TATA-AIG Life 11.Cholamandalam MS General
12. Reliance Life 12.HDFC Chubb General
13. AVIVA life 13.Export Credit Guarantee
14. Sahara India life 14.Agriculture Insurance Company
15. Shri Ram Life 15.Star Health & Allied
16. Bharti AXA Life 16.Sompho/ Shri Ram General/AXA/
Apollo DKV
Terminology used in
 Proposer-Insured-Insurer General Insurance
 Risk- Peril
 Proposal form
 Sum Insured
 Premium ( Consideration)
 Excess ( Deductible)
 Indemnity
 Cover note
 Policy document
 Endorsement-for effecting changes in the policy
 Warranties/ Clauses
 Conditions
 Underwriting
 Renewal
 Hazard
Basic Principles of
General Insurance
 Insurance is a legal agreement entered between Insured
and Insurer due to which due to the consideration, the
Insurer agrees to indemnify the Insured, for the loss or
damage or liability created due an accident which is covered
under the policy subject to the terms and conditions of the

 All insurance policies are subject to the warranties,

conditions and clauses of the policy contract and claims will
be settled accordingly
 UTMOST GOOD FAITH- which is embodied in all
insurance contracts and appears in the conditions of the
policy documents.
 Since only the Insured who is the owner/possessing the
property he/she needs to declare the details which are to be
considered by the Underwriter. To obtain the requisite
details the Insurer arranges all questions in order in the
proposal form so that he/she knows where to look for the
required details. Material fact is the detail of the risk which
will influence the mind of the Underwriter to accept/reject;
and if to accept the rate /terms at which the risk is to be
 Duty of disclosure is on the proposer/Insured and if wilful
concealment/ non-disclosure of facts could be established the
claim if any could be denied
Insurable interest

 Only the person who has insurable interest can arrange

insurance and seek indemnity due to loss or damage

 Insurable interest is defined as legal interest in another

person’s life or in the protection of property from injury,
loss, destruction or pecuniary damage

 By virtue of ownership

 Tenant who had leased property

 Employer’s interest on employees lives

Proximate cause

 Insurer is liable for any loss proximately caused by a peril

insured against, but he is not liable for any loss which is not
proximately caused by a peril insured against-Judge Lumb

 Proximate cause means the active, efficient cause that sets

in motion a train of events which brings about a result,
without the intervention of any force started and working
actively from a new and independent source
 Insurance contracts are mostly contracts of indemnity
 Insured is entitled to obtain the loss amount suffered from
the insurances he had effected on the property
 He is not to be benefited due the loss/damage
 If sum insured is on agreed value basis the loss will be
settled on that basis
 Extent of indemnity will be based on the market value of
the property at the time of occurrence of the event which
caused the loss/damage or destruction
 Subrogation and contribution are the corollaries of
indemnity to ensure that the claim settlement follows the
normal indemnity
Underwriting and claims
 Offer and acceptance- Proposal is studied by the Underwriter
who then quotes the premium terms, warranties and conditions

 Once accepted by the proposer and premium is paid, the cover

note is issued. Later on policy document is issued.
 Alterations/ changes are effected by endorsements
 Claim is being processed to take into account the salvage,
under-insurance and excess under the policy and many times to
deduct the additional premium for restoring the sum insured to
the original level by charging the additional premium on the claim
amount paid from the date of loss till the date of expiry.
 Claim will be subject to getting the subrogation rights
preserved against the third parties responsible for making good
the loss and transferring the same to Insurers

 Fire insurance; Reinstatement value

(other than stocks) Market value
 Marine insurance : Agreed value
 Marine hull insurance: Agreed value
 Motor insurance: Insured declared value
 Engineering insurance: Present day replacement
 Misc insurance: Market value
Insurances which need to
become popular

 Business Interruption insurance

 Engineering insurance
 Liability insurance- CGL Public /Product
 E & O ( PI) liability insurance
 D & O liability insurance
 PI for Lawyers/CAs/Doctors/ Brokers/Architects/
structural engineers
 Overseas travel insurance
 Employees benefit policies ( GPA/GMC)

 TAC was earlier providing the rates, terms policy

wordings and regulations as to how to conduct the business
 Nearly 70% of the business was in the purview of the
 After liberalising the market by allowing new players
Tariff rates had been withdrawn wef 1-1-2007 but with some
 From 1-1-2008 it is expected that the policy wordings will
be withdrawn by IRDA which will allow freedom to the
insurers to come out with their policy design wordings
clauses and warranties.
 The beneficiary will be the customers/ insureds
Thank You!