What is insurance?

The definition of insurance can be made from two

points:
Functional definition.
Contractual definition.

FUNCTIONAL DEFINITION

Insurance is a co-operative device to spread the

loss caused by a particular risk over a number of
persons who are exposed to it and who agree to
insure themselves against the risk.

Contractual Definition
In the words of justice Tindall, Insurance is a
contract in which a sum of money is paid to
the assured as consideration of insurers
incurring the risk of paying a large sum upon
a given contingency.

TYPE OF INSURANCE

INSURANCE
LIFE
GENERAL
INSURANCE INSURANCE

LIFE INSURANCE
Life insurance is a written contract between the
insured and the insurer, that provides for the
payment of the insured sum on the date of the
maturity of the contract or on the unfortunate
death of the insured, whichever occurs earlier.

GENERAL INSURANCE

General insurance or non-life

insurance policies, including automobile
and homeowners policies, provide
payments depending on the loss from a
particular financial event. General
insurance typically comprises any
insurance that is not determined to be
life insurance.

TYPES OF GENERAL
INSURANCE
Health insurance
Business insurance
Automobile insurance
Fire insurance etc.

HEALTH INSURANCE
Just like one looks to safeguard ones
wealth, these policies ensure guarding
the insurer's health against any
calamities that may cause long term
harm to ones life and even hamper ones
earning ability for a lifetime. Some
examples of this type of policy are
mediclaim policy, personal accident,
group accident, traffic accident, etc.

Business Insurance
Risks of loss of profits/business, goods, plant
and machinery are most profound in case of
business. Under this head they cover the
most widely used policies that cover a
business from any loss of the above kind.
Some of these policies are burglary
insurance, shopkeepers insurance, key-man
insurance, marine insurance, public liability
insurance,
workmen
compensation
insurance, air transit insurance, fidelity
guarantee insurance etc.

Automobile Insurance

Auto Policy is required to be taken to

cover the risks that arise to the owner,
vehicle and third party. This includes the
Compulsory Vehicle Policy (In India, by the
Motor Vehicles Act, every car owner is
required to covered against Act risks) and
the Comprehensive Vehicle Policy.

FIRE INSURANCE
This policy is required to be
taken to prevent any loss of
profits / property from incidental
fire. Eg: fire insurance and fire
consequential loss policy.

HISTORY OF INSURANCE IN INDIA

Phase
Phase I
a. Life Insurance

b. General Insurance
Phase II
a.Life Insurance

b.General Insurance

Phase III
Life Insurance and
General Insurance

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Period

Industry

1818 to 1956
(about 138 yrs)

Many (245) private sector companies only,

competitive market.

1850 to 1972
(about 122 yrs)

Many (107) private sector companies only,

competitive market.

1956 to 2000
(about 44 yrs)

Nationalization, public sector

monopoly, only one company.

1972 to 2000
(about 28 yrs)

Nationalization, public sector monopoly, only

one company with its four subsidiaries.

After 2000

or

State

Opened to the entry of private domestic and

foreign companies, mixed sector of public and
private sector units, oligopoly of public sector
companies (14 life insurance and 12 general
insurance companies)
12

HISTORY OF INSURANCE IN INDIA contd..

-1818 First life insurance company Oriental Life Insurance
Company (in Calcutta).
- 1850 First general insurance company Tritan Insurance
Company (in Calcutta)
- Till 1956/1972 life and general insurance industry grown in
terms of number of companies (life 245 and General 107 with
complete private sector ownership), the volume of premium,
investible resources, and so on. And both type of insurance
companies were competitive.
- The insurance was regulated through the Insurance Act, 1938.
- The picture changed after the Independence.

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HISTORY OF INSURANCE IN INDIA contd..

- In 1956, 245 Indian and Foreign life insurers and provident
societies were nationalized, and new single entity namely
LIC was established by passing the LIC Act, 1956.
- Similarly, in 1972, 107 general insurers were nationalized
through the passing of General Insurance Business
(Nationalisation) Act, 1972.
- The existing 107 insurers were amalgamated and grouped into
Five companies, viz., National Insurance Company (NIC),
New India Assurance Company (NIAC), Oriental Insurance
Company (OIC), United India Insurance Company (UIIC),
and General Insurance Corporation (GIC).
- Then insurance industry transformed into monopoly and
Oligopolistic state or public sector insurance industry in India.
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Life Insurance Corporation of India (LIC) was formed in

September 1956 by an Act of Parliament, LIC Act 1956 with
a contribution of Rs. 50 million.
The then Finance Minister Mr. C. D. Deshmukh while
piloting the bill for nationalization outlined the objectives of
LIC thus: To conduct the business with utmost economy with
the spirit of trusteeship; to charge premium no higher than
warranted by strict actuarial considerations; to invest the
funds for obtaining maximum yield for the policy holders
consistent with safety of capital; to render prompt and
efficient service to policy holders thereby making Insurance
widely popular.
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LIC OF INDIA contd

Presently the LIC has a network of seven zones; 100 divisions and
2,048 branches, personnel exceed seven lakhs employees and
over six lakhs agents.
Vision: A trans-nationally competitive financial conglomerate of
significance to societies and Pride of India.
Mission: To explore and enhance the quality of the life of people
through financial security by providing products and services of
aspired attributes with competitive returns and by rendering
resources for economic development.
Values: Caring and Courtesy, Initiatives and Innovation, Integrity
and Transparency, Quality and Returns, Participation and
Relationship, and Trustworthiness and Reliability
Culture: Agility (quickness), Adaptability, Collaboration,
Commitment, Discipline, Empowerment, Sensitivity, and
Excellence.
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LIC OF INDIA contd

Objectives
Spread Life Insurance widely and in particular to the rural
areas.
Maximise mobilization of peoples savings by making
insurance-linked savings adequately attractive.
Deployment of funds to the best of advantage of the investors
as well as the community as whole, keeping in view national
priorities and obligations of attractive return.
Conduct of business at most economy and with the full
realisation that the money belongs to the policyholders.
Act as trustee of the insured public in their individual and
collective capacities.
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PRINCIPLES AND INVESTMENT POLICY OF LICs

1.
2.

Security of funds, and

Maximization of return of investment,

Investment Policy
1. Central Govt. marketable securities being not less than
20%
2. Loans to Housing Bank including above (1) being not less than 25%
3. State Govt. securities including Govt. Guaranteed marketable
securities, inclusive of (2) above being not less than
50%
4. Socially oriented sectors including public sector, co-operative sector
house building by policyholders, own house scheme, inclusive of (3)
above not less than
75%
5. Private corporate sector, loans to policyholders for construction and
acquisition of immovable property
25%

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INVESTMENT POLICY OF
LICs

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INVESTMENT POLICY OF
LICs contd

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20

Working of insurance

LIC Products & Plans

Jeevan Anurag
CDA Endowment Vesting at
21
CDA Endowment Vesting
18
Jeevan Kishore
Child Career Plan

Child Fortune Plus

Komal Jeevan
Marriage Endowment Or
Educational Annuity Plan

Jeevan Chhaya
Child Future Plan

Jeevan Aadhar
Jeevan Vishwas

The Endowment Assurance Policy

The Endowment Assurance Policy-Limited Payment
Jeevan Mitra(Double Cover Endowment Plan)
Jeevan Mitra(Triple Cover Endowment Plan)
Jeevan Anand
New Janaraksha Plan
Jeevan Amrit

Jeevan Shree-I
Jeevan Pramukh

The Money Back Policy-20 Years

The Money Back Policy-25 Years
Jeevan Surabhi-15 Years
Jeevan Surabhi-20 Years
Jeevan Surabhi-25 Years
Bima Bachat

jeevan Bharati-1

The Whole Life Policy

The Whole Life Policy- Limited Payment
The Whole Life Policy- Single Premium
Jeevan Anand
Jeevan Tarang

Two Year Temporary Assurance Policy

The Convertible Term Assurance Policy
Anmol Jeevan-I
Amulya Jeevan-I

Jeevan Saathi Plus

Jeevan Saathi

Jeevan Nidhi
Jeevan Akshay-VI
New Jeevan Dhara-I

New Jeevan Suraksha-I

Wealth Plus
Market Plus I
Profit Plus
Money Plus-I
Child Fortune Plus

Jeevan Saathi Plus

MAJOR PLAYERS

PRIVATE SECTOR COMPANIES

-Several

leading private sector companies have entered in the field

of insurance sector, both in life and non-life insurance.
-There are several MNCs, in Joint Venture with Indian private
sector firms, have started operations in a big way.
Private Players in the Life Insurance Business
Regd.
No.

Date of
Regd.

Name of the
Company

Who Owns it (in percentage)

101

23.10.00 HDFC Standard Life

Standard Life, UK - 18 and HDFC 82

104

15.11.00

Max New York Life

New York Life - 26 and Max India 74

105

24.11.00

ICICI Prudential Life

Prudential, UK - 26 and ICICI Bank 74

107

10.01.01 Om Kotak Mahindra

Old Maruthi, South Africa 26 and Kotak

Mahindra 74

109

31.01.01 Birla Sunlife

Sun Life of Canada26 and Birla Capital 74

110

12.02.01 Tata AIG

AIG, US 26 and Tatas 74

111

30.03.01 SBI Life

Cardif SA, France 26 and State Bank of

India 74

114

02.08.01 ING Vysya

ING, Holland26 and GMR Group, Hyd54

and ING Vysya Bank20

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CURRENT SCENARIO

contd.

Private Players in the Life Insurance Business

Regd.
No.

Date of
Regd.

Name of the
Company

Who Owns it (in percentage)

116

03.08.01

Allianz Bajaj

Allianz AG, Germany 26 and Bajaj Auto 74

117

06.08.01

Metlife

Metlife, US26, Shapoorji Pallonji30 and J&K

Bank25

121

03.01.02

AMP Sanmar

AMP, Australia26 and Sanmar Group, Chennai

74

122

03.01.02

Aviva

Aviva PLC, UK 26 and Dabur Investments 74

***

***

Reliance Life

***

***

Bharathi AXA

127

06.02.04

Sahara
Insurance

India

128

07.11.05

Shriram
Insurance

Life

MARKET SHARE

Growing

at the rate of 15-20% annually

75% population has no insurance
Adds 7% to countrys GDP
LIC market share come down to 75% and private insurers
increased over 24%
Annuity or pension product have over 33% of market
Unity linked insurance scheme have monopoly

GENERAL INSURANCE CORPORATION (GIC)

Prior nationalization there were 68 Indian insurers (including

LIC) and 45 non-Indian insurers did the business.
In Nov. 1972, the general insurance business was nationalized
by the General Insurance Business (Nationalized), Act 1972
(GIBNA) and vested in the hand of the GIC and its four
subsidiaries viz.
1. National Insurance Co. Ltd.,
2. New India Assurance Co. Ltd.,
3. Oriental Fire and General Insurance Co. Ltd., and
4. United India Insurance Co. Ltd.

GIC was incorporated as a holding company in 1992.

General Insurance Business is completely owned by the
government.
The paid up capital of GIC was fully subscribed by the
Government and of four subsidiaries.
It was controlled by a single organization with four subsidiaries.

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G I C contd

GICs four subsidiaries:

1. National Insurance Co. Ltd.,
2. New India Assurance Co. Ltd.,
3. Oriental Fire and General Insurance Co. Ltd., and
4. United India Insurance Co. Ltd.

The Govt of India took over Control, supervision, and policy

making is with GIC.

The premium income for GIC comes mainly through the obligatory
reinsurance premium on a quota share basis from subsidiaries on
their direct business in India (almost 20% of subsidiaries business
come to GIC).
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G I C contd
TYPES AND STRUCTURE OF BUSINESS
- General insurance policies are not financial claims.
- There is no guarantee of renewal of policy on the same terms or
on any terms.
- The contract is short-term contract.
- The general insurance companies do not collect savings.
- Policy claims are unpredictable.
- Assets are held in relatively liquid form.
- GIC meets the requirements of industrial, manufacturing,
commercial, services, household, and agricultural sectors
through wide rage of 115 products, granting insurance coverage.
- GIC has been promoting insurance cover in the field of
livestock, poultry, sericulture, horticulture, pump sets, and
personal accidents.

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PRINCIPLES AND INVESTMENT POLICY GIC

1.

Central Govt. securities being not less than

2.

State Govt. securities and other government guaranteed

securities, including (1) above, being not less than
30%

3.

Loans to HUDCO/DDA/GIC-HF and to state govts. For

housing and fire fighting equipment, not less than
15%

4.

Market sector not more than

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20%

55%

37

IRDA

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IRDAS MISSION
To protect the interests of the policyholders, to regulate,
promote and ensure orderly growth of the insurance industry
and for matters connected therewith or incidental thereto.

Composition of Authority under IRDA Act, 1999

As per the section 4 of IRDA Act' 1999, Insurance Regulatory
and Development Authority (IRDA, which was constituted by
an act of parliament) specify the composition of Authority.
The Authority is a ten member team consisting of
a. a Chairman;
b. five whole-time members;
c. four part-time members,
(all appointed by the Government of India)
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Duties, Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and
functions of IRDA.
1. Subject to the provisions of this Act and any other law for the
time being in force, the Authority shall have the duty to
regulate, promote and ensure orderly growth of the insurance
business and re-insurance business.

2. Without prejudice to the generality of the provisions

contained in sub-section (1), the powers and functions of the
Authority shall include:
a. issue to the applicant a certificate of registration, renew,
modify, withdraw, suspend or cancel such registration;

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Duties, Powers and Functions of IRDA contd

b. protection of the interests of the policy holders in matters
concerning assigning of policy, nomination by policy
holders, insurable interest, settlement of insurance claim,
surrender value of policy and other terms and conditions of
contracts of insurance;
c.

specifying requisite qualifications, code of conduct and

practical training for intermediary or insurance
intermediaries and agents;

d.

specifying the code of conduct for surveyors and loss

assessors;

e. promoting efficiency in the conduct of insurance business;

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Duties, Powers and Functions of IRDA contd

f.

specifying the form and manner in which books of account

shall be maintained and statement of accounts shall be
rendered by insurers and other insurance intermediaries;

g.

regulating investment of funds by insurance companies;

h.

regulating maintenance of margin of solvency;

i.

adjudication of disputes between insurers

intermediaries or insurance intermediaries;

and

j. supervising the functioning of the Tariff Advisory Committee;

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CONCLUSION
Growth of Indian economy is an investment
driven growth
Opens a wide variety of investment
avenues
Companies help to gain knowledge of
products and services
Achieve a better standard for near future
life

THANK YOU

Article on
insurance