INSURANCE

Insurance is a legal contract between two parties whereby one party called insurer / underwriter undertakes a fixed amount of liability on the happening of a certain event. The other party called insured pays in exchange a fixed some called premium

Premium is the fixed amount of sum paid over the period by insured to insurer in order to secure an insurance policy and to complete the contract of insurance

TYPES OF INSURANCE
INSURANCE

LIFE

FIRE

MARINE

BRIEF HISTORY
HISTORY OF LIFE INSURANCE:
1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

HISTORY OF GENERAL INSURANCE

The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

LIFE INSURANCE
What Is Life Insurance?

Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against.
The contract is valid for payment of the insured amount during: The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilization's partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: That of dying prematurely leaving a dependent family to fend for itself. That of living till old age without visible means of support.

Life Insurance Vs. Other Savings

Contract Of Insurance: A contract of insurance is a contract of utmost good faith technically known as uberrima fides. The doctrine of disclosing all material facts is embodied in this important principle, which applies to all forms of insurance. At the time of taking a policy, policyholder should ensure that all questions in the proposal form are correctly answered. Any misrepresentation, non-disclosure or fraud in any document leading to the acceptance of the risk would render the insurance contract null and void. Protection: Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable. Aid To Thrift: Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy installment' facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half yearly or yearly). For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one's salary. In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.

Life Insurance Vs. Other Savings

Liquidity: In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan. Tax Relief: Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force. Assessee can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise. Money When You Need It: A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time. Children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies. Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).

Who Can Buy A Policy?

Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself and those in whom he/she has insurable interest. Policies can also be taken, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, certain factors such as the policyholders state of health, the proponent's income and other relevant factors are considered by the insurance company.

FIRE INSURANCE
Any one who gains by the preservation of the property and loses by its destruction i.e. a person having insurable interest can take out such insurance. i) Individuals e.g. House owner, Shop owner, Warehouse owner etc. ii) Body Corporate e.g. Manufactures, Trading, Industry etc. iii) Boilers, Lessee etc. DURATION OF COVER: 1. Fire Policies are generally issued for one year. 2. Long term Fire Policies to cover Buildings in course of construction or for Houses/Flats subject to certain conditions.

SCOPE OF COVER

i)

The policy provides protection against damages/fortuities triggered by the following perils:
Fire - Excluding destruction or damage caused to the property insured by a. its own fermentation, natural heating or spontaneous combustion. b its undergoing any heating or drying process. Lightning Explosion/Implosion Excluding destruction or damage caused to the boilers (other than domestic boilers), by its own explosion/implosion Aircraft Damage Destruction or damage caused by Aircraft, other aerial or space devices and articles dropped there from excluding those caused by pressure waves Riot, Strike, Malicious and Terrorism Damage Loss of or visible physical damage or destruction by external violent means directly caused to the property insured Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation Impact Damage Impact by any Rail/Road vehicle or animal by direct contact Subsidence and Landslide including Rock slide Bursting and/or overflowing of Water tanks, Apparatus and Pipes Missile Testing operations Leakage from Automatic Sprinkler Installations Bush Fire excluding destruction or damage caused by Forest Fire.

ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) xii) xiii) xiv) xv)

MARINE INSURANCE
AN OVERVIEW OF RISKS TO WHICH THE CARGO IS EXPOSED DURING TRANSPORTATION Standard risks of transport Exceptional risks of transport (war, strike or similar)

When these risks occur, they may result in either total loss or partial losses. Partial losses can be of two types viz. : 1. Particular Average - The term Particular Average refers to physical damage and loss as well as to any loss in weight or quantity suffered by the insured goods during transit. 2. GENERAL AVERAGE - General Average is a risk specific to marine transport. Therefore, if a vessel is in danger and the only way to prevent the vessel from striking is to throw one persons cargo overboard, then the rest of the cargo owners and the vessel owner will make up the loss to that person in proportion to the value of their goods in relation to the total amount saved.

INSURANCE REGULATORY DEVELOPMENT AUTHORITY (IRDA)

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) (b) (c) a Chairman; five whole-time members; four part-time members,

(all appointed by the Government of India)

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; (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; (f) promoting and regulating professional organisations connected with the insurance and re-insurance business; (g) levying fees and other charges for carrying out the purposes of this Act; (h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business;

Duties, Powers and Functions of IRDA (Contd)

(i) control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938); (j) 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; (k) regulating investment of funds by insurance companies; (l) regulating maintenance of margin of solvency; (m) adjudication of disputes between insurers and intermediaries or insurance intermediaries; (n) supervising the functioning of the Tariff Advisory Committee; (o) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f); (p) specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and (q) exercising such other powers as may be prescribed.

OVERVIEW OF INSURANCE BUSINESS IN INDIA

Insurers Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers: Life Insurers: Life Insurance Corporation of India (LIC) General Insurers: General Insurance Corporation of India (GIC) (with effect from Dec'2000, a National Reinsurer) GIC had four subsidary companies, namely ( with effect from Dec'2000, these subsidaries have been de-linked from the parent company and made as independent insurance companies. The Oriental Insurance Company Limited The New India Assurance Company Limited, National Insurance Company Limited United India Insurance Company Limited

OVERVIEW OF INSURANCE BUSINESS IN INDIA (Contd..)

Yr: 2000-2001 : ( From 2nd April '2000 to 31st December'2001) Insurance Industry in the year 2000-2001 had 19 new entrants, namely: Life Insurers: HDFC Standard Life Insurance Company Ltd, Max New York Life Insurance Co. Ltd, ICICI Prudential Life Insurance Company Ltd, Kotak Mahindra Old Mutual Life Insurance Ltd, Birla Sun Life Insurance Company Ltd, Tata AIG Life Insurance Company Ltd, SBI Life Insurance Company Limited, ING Vysya Life Insurance Company Private Limited, Bajaj Allianz Life Insurance Company Limited, Metlife India Insurance Company Ltd, Future Generali India Life Insurance Company Limited, IDBI Fortis Life Insurance Company Ltd. General Insurers: Royal Sundaram Alliance Insurance Company Limited, Reliance General Insurance Company Limited, IFFCO Tokio General Insurance Co. Ltd, TATA AIG General Insurance Company Ltd, Bajaj Allianz General Insurance Company Limited, ICICI Lombard General Insurance Company Limited, Apollo DKV Insurance Company Limited, Future Generali India Insurance Company Limited Universal, Sompo General Insurance Company Ltd.

OVERVIEW OF INSURANCE BUSINESS IN INDIA (Contd..)

Yr: 2001-2002 : ( From 1st Jan 2001 to Dec. 2002)

Insurance Industry in this year, so far had 5 new entrants; namely

Life Insurers: AMP Sanmar Life Insurance Company Limited, Aviva Life Insurance Co. India Pvt. Ltd. General Insurers : Cholamandalam General Insurance Company Ltd, Export Credit Guarantee Corporation Ltd, HDFC-Chubb General Insurance Co. Ltd Yr: 2003-2004 : ( From 1st Jan 2003 till Date) Insurance Industry in this year, so far has 1new entrants; namely Life Insurers: Sahara India Insurance Company Ltd.

OVERVIEW OF INSURANCE BUSINESS IN INDIA (Contd..)

Yr: 2004-2005 :

Insurance Industry in this year, so far has 1new entrants; namely

Life Insurers: Shriram Life Insurance Company Ltd. Yr: 2008-2009 : Insurance Industry in this year, so far has 2 new entrants in Life and 1 new entry in General ; namely Life Insurers: Aegon Religare Life Insurance Company Ltd, DLF Pramerica Life Insurance Company Ltd. General Insurers: Bharti Axa General Insurance Company Ltd.