Sahil's MPR

Oriental insurance co.
MINOR PROJECT REPORT
ORIENTAL INSURANCE COMPANY
PROJECT GUIDE: SUBMITTED BY: MISS SHIKHA TOMAR ARORA ASSISTANT PROFESSOR 04721201810 DEPT.BUSINESS ADMINISTRATION N I) 3RD SEM. 2ND SHIFT BBA (B SAHIL
MAHARAJA SURAJMAL INSTITUTE

Affiliated to GGS Indraprastha University, Delhi
CERTIFICATE
This is to certify that SAHIL ARORA of BBA (B N I) 3rd SEMESTER provision. has accomplished the project report title ORIENTAL INSURANCE COMPANY under my guidance and
He has submitted this project in the partial fulfilment of requirement as per the GURU GOBIND SINGH INDTRAPRASTHA UNIVERSITY.
I further certify that this is an original work. All sources of information and help have been duly mentioned and acknowledged.
MISS SHIKHA TOMAR SAHIL ARORA ASSISTANT PROFESSSOR 04721201810 ADMINISTRATION SHIFT
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DEPT. OF BUSINESS BBA(B N I) 3RD SEM. 2ND
MAHARAJA SURAJMAL INSTITUTE
ACKNOWLEDGEMENT
This project has been possible through the direct and indirect cooperation of various people who bear the imprints of their efforts for my work. I take this opportunity to acknowledge the invaluable assistance of the people who helped me in the completion of this project report.
I humbly convey my sincerest gratitude to my internal guide

MISS SHIKHA TOMAR
for her guidance,
suggestions and unintended support, without which the project would not have been possible. I would also like to thank the faculty members who provided me all the necessary information in the completion of the project report.
Last but not the least; I would like to place a word of thanks for all those who directly or indirectly helped me in the successful completion of the project.
SAHIL ARORA BBA (B N I)

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3RD SEM. 2ND SHIFT
TABLE OF CONTENTS
Chapter No. Topic Page No.
1.
INTRODUCTION

5 10 11
OBJECTIVE RESEARCH METHODOLOGY
SCOPE AND LIMITATIONS
12
2. 13
PROFILE
3. 33
ANALAYSIS AND
INTERPRETATION
4. 38
CONCLUSIONS,RECOMMENDATIONS
AND BIBLOGRAPHY
CHAPTER-I
INTRODUCTION
nsurance is a subject listed in the concurrent list in the Seventh Schedule to the Constitution of India where both centre and states can legislate.In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
Insurance involves pooling funds from many insured entities (known as exposures) to pay for the losses that some may incur. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also selfinsure through saving money for possible future losses.
Insurance allows individuals, businesses and other entities to protect themselves against significant potential losses and financial hardship at a reasonably affordable rate. We say "significant" because if the potential loss is small, then it doesn't make sense to pay a premium to protect against the loss. After all, you would not pay a monthly premium to protect against a $50 loss because this would not be considered a financial hardship for most. Insurance is appropriate when you want to protect against a significant monetary loss. Take life insurance as an example. If you are the primary breadwinner in your home, the loss of income that your family would experience as a result of our premature death is considered a significant loss and hardship that you should protect them against. It
would be very difficult for your family to replace your income, so the monthly premiums ensure that if you die, your income will be replaced by the insured amount. The same principle applies to many other forms of insurance. If the potential loss will have a detrimental effect on the person or entity, insurance makes sense.
The Oriental Insurance Company Ltd." earlier known as "The Oriental Fire & General Insurance Co. Ltd" was incorporated at Bombay on 12th September, 1947. The Company was a wholly owned subsidiary of The Oriental Government Security Life Assurance Company limited and was formed to carry out General Insurance business. The Company was promoted by Sir Purushothamdas Thakurdas, Chairman of Oriental Government Security Life Assurance Company Ltd., which was transacting life insurance business for nearly 75 years. The Company's Head Office was located in Bombay. The premium of the Company in the first year of its operation was only INR 99950 (US $3000). On nationalization of Life Insurance business in India, in 1956, the company became a subsidiary of Life Insurance Corporation of India (LIC). Subsequently on nationalization of general insurance business in India in the year 1973, the company became one of the subsidiaries of General Insurance Corporation of India (GIC). 10 Indian and 12 Foreign Insurance companies merged with Oriental Fire & General Insurance Co. Ltd. At the time of Nationalization in 1973, the Company's Gross Direct Premium was Rs. 580 Millions ( US $ 16.57 Millions ).The Company's Registered and Head Office was shifted from Bombay to New Delhi.
The name of the Company was changed in the year 1984 to The Oriental Insurance Company Ltd. However, after the passage of the Insurance Amendment Bill (2002), Oriental Insurance Company Limited was delinked from GIC and in 2003 the shares of the company so far held by GIC have been transferred to Central Government.
An insurance contract provides risk coverage to the insuree. A purchaser of insurance pays a fixed premium in exchange for a promise of compensation in the event of some specified loss. Insurance is bought because it gives peace of mind to the holders. This comfort level is important in personal and business life. Though the primary purpose of insurance is to provide risk coverage, when the contract period extends over a long time, as in the case of life insurance, premium payments comprise of two components one for buying risk coverage and the other towards savings. This bundling together of risk coverage and savings is peculiar to life insurance and is more common in developing countries like India. In the industrially advanced countries, this is not necessarily so and short duration life insurance contracts without a savings component are equally popular. In the developing economies because of the savings component and the long nature of the contract, life insurance has become an important instrument of mobilising long-term funds. The savings component puts the life insurance in direct competition with other financial institutions and savings instruments.
The total investment portfolio of the insurers in India as at the end of March, 2005 was Rs. 4,65,864 crore. The total premium collected by the insurers both life and non-life in 2004-05 was Rs.1,00,335 crore. The major contribution came from life insurance. The insurance penetration i.e., premia as percentage of GDP was 3.17 per cent in 2004. While this ratio is steadily increasing, it is far below the world average of 8.06 per cent. This shows the vast potential that exists.
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OBJECTIVES OF THE STUDY
1. The main objective was to briefly study and understand the concept of working of ORIENTAL INSURANCE COMPANY as a whole, comprising the issues and challenges as well.
2. To analyze the concept of insurance in india.
3. To analyze the strength, weakness, opportunities and threats to the ORIENTAL INSURANCE COMPANY 4. To know about the advantages ORIENTAL INSURANCE 5. To analyze various problems confronted by the
COMPANY holds for the growth. policyholders Oriental Insurance Company. 6. To study the service quality being offered by Oriental
Insurance Company
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RESEARCH METHODOLOGY
Information was collected through both primary and secondary sources. Primary Data: In some cases the researchers may realize the need for collecting the first hand information. As in the case of everyday life, if we want to have first hand information or any happening or event, we either ask someone who knows about it or we observe it ourselves, we do the both. Thus, the two method by which primary data can be collected is observation and communication. Secondary Data: Any data, which have been gathered earlier for some other purpose, are secondary data in the hands of researcher. Those data collected first hand, either by the researcher or by someone else, especially for the purpose of the study is known as primary data. The data collected for this project has been taken from the primary as well as secondary source.
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SCOPE OF INSURANCE
The insurance sector has a vast potential not only because incomes are increasing and assets are expanding but also because the volatility in the system is increasing. In a sense, we are living in a more risky world. Trade is becoming increasingly global. Technologies are changing and getting replaced at a faster rate. In this more uncertain world, for which enough evidence is available in the recent period, insurance will have an important role to play in reducing the risk burden individuals and businesses have to bear. In the emerging scenario, the insurance industry must pay attention to (a) product innovation, (b) appropriate pricing, and (c) speedy settlement of claims. The approach to insurance must be in tune with the changing times. The mission of the insurance sector in India should be to extend the insurance coverage over a larger section of the population and a wider segment of activities. The three guiding principles of the industry must be to charge premium no higher than what is warranted by strict actuarial considerations, to invest the funds for obtaining maximum yield for the policy holders consistent with the safety of capital and to render efficient and prompt service to policy holders. With imaginative corporate planning and an abiding commitment to improved service, the mission of widening the spread of insurance can be achieved.
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CHAPTER 2 PROFILE
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LINES OF BUSINESS
The Company underwrites all non-life insurance business in Fire, Marine, Engineering, Health, Motor and other misc classes of business taking care of needs of industrial Giants as well as common man. The Company has more than 100 different products for The cross-section of the economy.
PRESENT SET-UP & STATUS

The company has grown over the years and at present operates from 900+ offices in India with nearly 16,000 committed and dedicated employees with international presence in Dubai, Nepal and Kuwait. It has continued to achieve highest growth rate among the public sector non-life insurance companies for the years 2005-06 and 200607. Its gross premium income has reached the level of Rs. 4020 crores (US $ 100 billion approximately) in the year 2006-07 with operating profit of Rs. 630 crores. As of March 31, 2007, Orientals investment portfolio is of Rs 10,869 crore as against Rs 11,262 crore on March 31, 2006. Oriental Insurance issued 99,24,462 policies in 2006- 07 and settled 555,302 claims during the same period. Orientals record of settling customer grievances satisfactorily is an impressive 94.46 %. National Consumer Week was observed from 24.12.2006 to 30.12.2006. During 2006-07 Oriental Insurance registered a growth of 11.39%, the highest among all public sector general insurers, for the second year in succession. As Indias insurance sector is fast changing, with the IRDA dismantling the tariff regime with effect from 1st January 2007 for Fire, Engineering & Motor portfolios allowing insurers to freely price their products--Oriental Insurance is already prepared with its new software system the Integrated Non- Life Insurance Application Software. This software will enable all offices to be interconnected through a central data center. The software is implemented successfully in 262 offices as at 31st March 2007 and the Company plans to achieve 100 % implementation by the end of financial year 2007- 2008. For its Investment Portfolio, Company has procured a SAP based module which provides integrated approach to management of investments. We have a Reinsurance accounts module based on Unix / Unify platform which has been running successfully for the
past 15 years. To arm its officers with the skills critical in a free pricing system, Oriental has imparted rigorous training. To ensure that relationships with its customers are built and strengthened Oriental has put in place an efficient grievance mechanism at every level. Expansion of Orientals reach has been made possible by using more platforms. Towards this end, it has tied up with various scheduled banks like Dena Bank, Oriental Bank of Commerce, Indusind Bank. It is also using the nationwide network of post offices to reach more people.
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RESULTS 2006-07
The Companys Gross Direct Premium Income in India during the year 2006-07 (Audited) was Rs.3928.52 crores and the Premium Income outside India was Rs.92.26 crores. The Gross Direct Premium in India & abroad showed a growth of 11.39%. The Net Premium Income (Domestic and Foreign), on the other hand grew by 15.17% from Rs. 2500.46 crores in 2005-06 to Rs. 2879.74 crores in 2006-07. The companys operations in Nepal, Dubai and Kuwait yielded a Gross Direct Premium of Rs. 92.26 crores during the year 2006-07 as against Rs. 82.66 crores during the previous year. The net premium on foreign operations stood at Rs. 86.77 crores and as against this, the Net Incurred Claims during this year in respect of foreign operations were Rs.36.96 crores at 42.60%. The foreign operations have resulted in an overall surplus of Rs.19.06crores. After taking into account the income from Interest, Dividend & Rent of Rs. 560.08 crores and Profit on sale of Investments of Rs. 600.01, we have posted a pre-tax profit of Rs. 629.64 crores & post-tax profit of Rs. 497.27 crores for the year 2006-07. The Company had a documents issuance ratio of more than 98% during the year, having issued 99.24 lacs documents approximately. The claims disposal ratio for non-suit claims settlement ratio was 86.82%.
CORPORATE MISSION
To contribute to the socio economic objectives of the nation by being a vibrant and viable organization catering to the growing insurance needs of the community. Towards this end we will strife for management of business operations.
CORPORATE OBJECTIVES
To serve better the insurance needs of the entire community, keeping CUSTOMER as the focus. To strengthen our tradition of being CUSTOMER-FRIENDLY, in order to provide quality service. To manage Business profitably, manage funds judiciously and deploy investible funds for optimum yield. To optimize the retention of Indian business and conduct reinsurance and international operations in the best interest of the country. To work towards minimization of losses and develop Risk Management Technologies. To function as a strong and dynamic non-life insurer
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NEW CORPORATE VISION

WE ORIENTAL WILL: Be a financially strong leader in industry both in market share and profits; brand image being synonymous with general insurance. Be a recognized for best in class customer service with transparent and ethical practices. Be an innovative company with latest technology enablement and having full range of empowered distribution channels. Be a public listed company; continuously creating value for its employees and shareholders. Be a top employer with highest employee productivity and progressive HR policies. Be a company with a core value system based on trust, integrity and performance culture.
PARTICULARS OF ORGANISATION
DATE OF INCORPORATION 12TH September 1947 MODE OF INCORPORATION Incorporated as a Public Limited company under the Indian Companies Act, VII of 1913 ADMINISTRATIVE MINISTRY Ministry of Finance PRESENT STATUS A Government company within the meaning of Sec. 617 of the Companies act, 1956 SHRE CAPITAL: AUTHORISED ISSUED AND SUBSCRIBED Rs. 200 Crores Rs. 100 Crores PRESENT SHAREHOLDING President of India (100%)
FUNCTIONS AND DUTIES

The Oriental Insurance Company Limited carries out its functions and duties in accordance with the objectives defined in its Memorandum & Articles of Association and the guidelines laid in Insurance act 1938, General Insurance (Nationalization) Act 1972 (since amended in 2002) and IRDA Act 1999.
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POWERS AND DUTIES OF OFFICERS AND EMPLOYEES

The powers & duties of the officers and employees of the Company are derived mainly from the provisions of the Insurance Act 1938, General Insurance (Nationalization) Act 1972(since amended in 2002) IRDA Act 1999 and Memorandum & Articles of Association of the Company. Oriental Insurance Company Limited, a non-life insurance Company, is a commercial organization. The officers & employees of the Company are appointed for carrying out the business operations of the Company, which are in line with the objectives specified in the Memorandum of Association of the Company. The powers & duties of the officers and employees of the Company are derived mainly from the job descriptions, manuals, terms and conditions of appointment and delegation of authority. The powers and duties of the officers & employees of the Company are limited only to carry out the business operations of the Company. While discharging duties and responsibilities, officers & employees of the Company are complying with the applicable provisions of the Constitution of India and other applicable Statues and rules & regulations framed.
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PROCEDURES FOLLOWED IN THE DECISION-MAKING PROCESS, INCLUDING CHANNELS OF SUPERVISION AND ACCOUNTABILITY
The decision making process of the Company follows Channels
Board of Directors
General Managers
Executives
Overall management of the Company is vested with the Board of Directors of the Company. The Board of Directors is the highest decision making body within the Company. As per the provisions of the Companies Act 1956 certain matters require the approval of the shareholders of the Company in General Meeting The Oriental Insurance Company Limited being a Public Sector Undertaking (PSU), the Board of Directors of the Company is accountable to the Government of India. The Powers, which are not delegated, are exercised by the Board of Directors subject to the restrictions and provisions of the Companies Act 1956, Insurance Act-1938, General Insurance Business (Nationalisation) Act 1972 (since amended in 2002) and IRDA Act1999.
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THE NORMS SET FOR DISCHARGE OF FUNCTIONS

The Company has well defined procedure and guidelines for discharge of various functions as under: 1) Delegation of Powers: The officers of the company at various levels discharge their functions & responsibilities within the powers delegated to them by the Board of Directors as per Financial Standing Order-2006. The delegation of powers is subject to observance of Memorandum of Association, Articles of Association, relevant policy guidelines and administrative instructions of the company and should not infringe the Companies Act, Insurance Act, GIBN Act IRDA Act, Govt. Guidelines and any other statutory/regulatory requirement. 2) Laid down Policies and Guidelines: The Oriental Insurance Company Limited is having laid down policies and guidelines governing major activities of the Company. While discharging the functions the officers need to follow these laid down policies and guidelines. 3) Manuals: The Oriental Insurance Company Limited has procedural manual for most of its activities. These Manuals ensure carrying of activities in a systematic and standardized manner. While discharging the functions covered by these Manuals, the officers need to follow the provisions of these Manuals. 4) Guidelines of Insurance Regulatory & Development Authority: The Oriental Insurance Company Limited being a Public Sector Insurance Company follows the guidelines of IRDA issued from time to time. 5) Guidelines of Chief Vigilance Commission: The Oriental Insurance Company Limited being a PSU follows the guidelines of Chief Vigilance Commission (CVC). 6) Compliance of Provisions of Statutes etc.: While discharging the respective functions, officers are required to comply with the applicable provisions of Indian Constitution, Statues and Rules & Regulations.
PARTICULARS OF ARRANGEMENT FOR CONSULTATION WITH THE MEMBERS OF THE PUBLIC IN RELATION TO THE FORMULATION OF POLICY OR IMPLEMENTATION THEREOF
Oriental Insurance Company Limited is a non-life insurance company and its policies relating to its internal management are formulated in accordance with governing statues, regulations and Memorandum and Articles of Association of the company and hence there is no arrangement for consultation with the members of the Public prior to their formulation.
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However, if people dealing with the Company in its business transactions have complaints or grievances they can approach the Customer Services Department or send their complaints or grievances at following e-mail addresses for redressal: 1. oic@orientalinsurance.co..in 2. csd@orientalinsurance.co.in.
BUDGET ALLOCATION & EXPENDITURE

Budget is the companys formal short term planning process for the acquisition and investment of Capital. The Revenue Expenditure and Capital Expenditure of The Oriental Insurance Company Limited for the financial year 2006-07 and Budget Expenditure for 2007-08 is as below:
Budget sanctioned by the Board 2006 07 Management Expenses Rs.827.15 Crores
Final Expenditure 2006 07
Budget sanctioned by the Board 2007 - 08 Rs.901.62 Crores Rs.6.00 Crores
Capital Rs.0.00 Crores Expenditure : (a) Immovable Property (b) Other than Rs.43.28 Immovable Crores Property
Rs.148.83 Crores
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Oriental Insurance Company Limited does not undertake any subsidy programme under CSR.
The Oriental Insurance Company Limited (Company) is one of the four public sector General Insurance companies, conducting general insurance business in India. The Companyfs main activities include: (i) Underwriting of risks under Fire, Marine, and Miscellaneous portfolios; (ii) Settlement of claims arising on these policies; (iii) Reinsurance of the risks underwritten by the Company; and (iv) Investment operations in both primary and secondary markets. The Company is regulated by the Insurance Regulatory and Development Authority (IRDA). IRDA, however, deregulated tariff for all portfolios w.e.f. 1 January 2007. The tariff for collection of premium under Fire, Motor and Engineering portfolios was being decided by the Tariff Advisory Committee (TAC). Report No. CA 10 of 2008 40
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Computerisation in the Company

The Company introduced front office computerisation (FOC) in 1994 for issue of policies, settlement of claims and capturing accounts data. This application software was implemented in 943 of the 945 operating offices of the Company. The FOC system served well over the years as per the prevalent IT. The Company decided (2002) to switchover to Integrated Non-Life Insurance Application Software (INLIAS) with the following objectives: (i) Real time availability of information for decision-making. (ii) Integration of data across 943 offices. (iii) Ability to handle large volumes of transactions per day. (iv) Ability to rapidly respond to market feedback and regulatory body notifications and implement changes across all offices. (v) Single repository for real time, online MIS, Decision Support System at corporate and other controlling offices. (vi) Highly secure and flexible system with the ability to cope with frequently changing insurance regulations, in the shortest possible timeframe. (vii) Availability of changes in business rules to all the offices simultaneously and quickly. (viii) Easy rollout of future upgrades without worrying about compatibility or overwriting existing/specific features. (ix) Consolidation of financial information at various levels in the organisation. The four major business requirements (MBR) envisaged by Company for INLIAS were:(i) Underwriting; (ii) Claim; (iii) Accounts; and (iv) Re-Insurance. An agreement for implementation of INLIAS, was signed (August 2002) with M/s ICICI Infotech Services Limited, now known as M/s 3i Infotech Limited (M/s 3i), and four more contracts were entered into simultaneously with other agencies for implementation of different requirements. The Company incurred Rs.68.29 crore against total cost of Rs.116.63 crore for the pilot and Phase-I of the project and had operationalised Underwriting and Claim modules (up to June 2007).
Scope of Audit
The scope of audit covered locations where the implementation of the Underwriting and the Claims modules was complete. Development and implementation of INLIAS and linkage of the two fully developed modules with accounts module were also examined.
Audit objectives
The main objectives of the IT Audit were: Report No. CA 10 of 2008 41 (i) To assess that the objectives set by the Company for introduction of the package were achieved economically and effectively; (ii) To review the in-built System Controls in the developed software (iii) To assess the integrity of data; and
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(iv) To review the status of implementation of the project.
Audit methodology
The methodology included: . Questionnaire and personal interviews with officers of the IT and user departments of the Company. . Database analysis of the dump of the Underwriting and Claims modules through Computer Aided Audit Techniques. . Analysis of reports generated from live data through INLIAS and further test checks with dummy entries on the training server.
Audit criteria
The criteria adopted were as follows: (i) Objectives set by the Company at the time of conceptualisation of INLIAS; (ii) Compliance of regulations issued by IRDA; (iii) Compliance of rates and guidelines of TAC and the Company; and (iv) Business rules and procedures followed by the Company.
Delay in implementation of INLIAS

The implementation of INLIAS was stipulated for completion within two years from the date of agreement (August 2002). A steering committee and a number of core implementation groups (CIGs) with domain expertise from various disciplines of the Company were constituted. Each CIG was responsible for recommending user requirements for incorporation in INLIAS software. Despite regular meetings of CIGs, the Company was not able to ensure the scheduled implementation of INLIAS and only 285 operating offices had become live on INLIAS (July 2007) covering the Claims and Underwriting modules. The Management attributed the delay in implementation of INLIAS to various reasons like: (i) User requirements were found to be far more extensive than envisaged during the gap analysis exercise; (ii) ORACLE announced release of new software tools; (iii) Hardware sizing problem, shifting of base software from Oracle 8i to 9i and again from 9i to 10g; Report No. CA 10 of 2008 42 (iv) The attrition rate of IT experts at M/s 3i side added to this delay because on various occasions their interface with the CIG was changed and caused communication gap; and (v) From the Companyfs side, most of the members from almost all CIGs were replaced with new ones causing delay in the project. The reasons cited by the Management are not convincing as URS were improperly framed (July 2001) without gap analysis which was conducted later on and the steering committee constituted for the purpose did not discharge its role of overseeing the project of INLIAS effectively. The system software failed to meet all the end-users for requirements as discussed in the following paragraphs.
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Business continuity and disaster recovery plan The Company did not have a business continuity and disaster recovery plan to meet a system failure or disaster. The Company had its main processing centre at Vashi, Mumbai and the backup taken by the Company in tapes was located within the main processing centre campus. Moreover, the offsite storage centre located at Belapur, Mumbai, is not far away from the main data centre premises and therefore exposed to the same risks (natural disasters) as the main processing centre. Reply of the Management is awaited (September 2007).
Change management control

The Company has a Self Supporting Portal (SSP) for lodging any problem faced by users while working in INLIAS. This was an arrangement for effecting change management in software, essential for effective preparation, distribution, control and maintenance for any conversion or correction and enhancement to any module of the software. It was observed that: (i) In three cases, updating patch of INLIAS software that was loaded by M/s 3i to correct the errors in calculation of premium and agency commission was deficient and the problem could not be rectified. It was observed that the subsequent corrections were made to the data rather than in the application on the central server which meant that the change management programme was ineffective and posed a risk of recurrence of the problem. (ii) There was delay of two days in updating of service tax rates from 10.2 to 12.24 per cent which resulted in short collection of service tax to the extent of Rs.4.17 lakh in 49 operating offices under the Regional Office in New Delhi. The deficiencies in loading the updated patches were a result of inadequate change management control and raised the risk of short-charging of premium. The Management accepted (August 2007) the audit observation and assured that suitable changes in the system would be made at the earliest.
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Access controls
A review of access controls in operating offices revealed that: (i) Minimum character size for password had not been specified; (ii) The system had no restriction on user Id and the password being same; (iii) The system allowed unlimited incorrect log-in attempts; (iv) Periodic change of password had not been prescribed; and (v) No idle time-out had been specified after logging into INLIAS. The Management accepted (June 2007) the observations partially. It stated that it was not necessary to have minimum or maximum characters for a password and there was no need to limit password trials. The reply indicates Managements lack of appreciation of the risk of unauthorised access to the system.
Input controls and validation checks

Proper validation checks and input controls are essential for ensuring correct and authenticated data entry into the system for various transactions so as to generate reliable output. A review of the database revealed weakness in input controls and validation checks resulting in data being incorrect and unreliable in cases noted below.
Discrepancies in the cover notes

As per Rule 142, Sub-Rule (1) of Central Motor Vehicles Rules 1989, a Cover Note.(CN) shall be valid for a period of 60 days. If a backdated policy is issued on a CN, the date on the CN will be the cut off date for assumption of risk cover by the Company. The software application was found to be in contravention of this rule in the following cases: (i) The system generated policies against time barred CNs. In 162 cases there was a gap of more than 60 days between the date of issue of CN and the date of approval of the policy. In respect of 12 cases, the policies were issued even after a lapse of 365 days from the date of issue of CN. (ii) Only one policy was to be issued against one CN. In 17 of the 60 cases reviewed from the given data more than one policy was found issued against the same CN. (iii) Populating date field in the CN had not been made mandatory. Verification of 60 policies revealed that in eight cases, the date of assumption of risk was prior to the date of the issue of policy indicating a deficient validation check. Thus the possibility of an irregular practice of assuming of risk prior to the date of issue of CN could not be ruled out. (iv) In a test check of the CNs issued by DO-XIV, New Delhi it was noticed that there were gaps in the sequence of the serial numbers of the CNs issued. In 7 of the 50 CNs issued to two development officers, it was found that no corresponding policies were issued against those CNs. Further, there was no record that these CNs were cancelled subsequently. Assured code is generated after creating profile of a new policyholder and is the key to identify the policyholder.
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Audit observed that: (i) In 25 cases of the reviewed data, the same assured code has been assigned to more than one policyholder. (ii) In eight cases out of given data, policies had been generated with 0 as Assured Code as well as 0 in the Assured Name and Assured Address. Thus, in absence of validation checks and input controls, the data on policyholders in the system was not reliable. The Management accepted (June 2007) the audit observation and assured (August 2007) to do the needful in INLIAS.
Agents commission on lapsed licenses

According to Regulation 8 (ii) (a) of IRDA (Licensing of Insurance Agents) Regulations, 2000, no insurance agent shall solicit or procure insurance business without holding a valid license. While analysing the commission bills of three New Delhi based divisional offices viz. DOIV, XI and XIV, Audit observed that business was procured from 20 agents whose licenses had expired and an amount of Rs.46.17 lakh was released to them as commission as the system did not have an appropriate validation check. The Management accepted (July 2007) the audit observation and assured (August 2007) that such a check would be implemented.
Irregular allowance of No claim discount in motor policies

During analysis of claim summary of DO-III, New Delhi for January 2007 on INLIAS Live, one case was noticed where No claim discount was allowed even though a claim existed on the previous policy issued to the insured by the Company indicating lack of validation checks in the system. The Management assured (August 2007) that such a check would be implemented.
Refund of premium on the expired policy

A test check of the endorsements passed on the policies issued by DO-XIV, New Delhi revealed that in one case, the premium amount collected from the policyholder was found refundable by passing a cancellation endorsement after the policy had expired. It resulted in coverage of risk for the full period and thereafter refund of the premium amount to the policyholder indicating that appropriate validations to check refund of premium after the expiry of the policy period was not built into INLIAS. The Management accepted (August 2007) the observation and assured that a functionality to restrict the cancellation of an expired policy would be introduced.
Irregular issuance of motor policies

As per the India Motor Tariff, the cubic capacity (CC) of a vehicle is one of the crucial factors for determining the premium payable. Audit, however, observed that the field of CC is open to manipulation for any Make and Model. Audit analysed the given data and observed that in six cases, at the time of renewal, the policies were created without any validation with the CC of the same vehicle from the policy of the previous period.
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Thus, a CC, different from the CC of the same vehicle for the previous period, could be entered, leading to the manual intervention and risk of short collection of premium. The Management accepted (June 2007) the audit observation and assured (August 2007) that suitable corrections would be made.
Defective user requirement specifications

Standard fire and special perils policy (storage risks) According to All India Fire Tariff (AIFT), premium in storage risks of standard fire and special perils policy depends upon the nature of stock covered. The stored goods has been broadly categorised under (i) Non-Hazardous; (ii) (ii) Hazardous CategoryI; (iii) (iii) Hazardous CategoryII; and (iv) Hazardous CategoryIII. Each of these categories has a distinct list of goods. The rates of premium chargeable are lowest for Non-Hazardous goods and highest in Hazardous CategoryIII. On a test check of policies issued by Division-IV, New Delhi of the Company for storage of goods, Audit observed that the Company lost an amount of Rs.75.01 lakh on account of short collection of premium, since the stored goods were Hazardous Category-I items whereas the Company categorised them as Non-Hazardous. Thus, the category was selected without reference to the description of the stocks covered in the policy. Absence of a provision, of selecting the type of goods from a list, as per the TACs List of Hazardous Goods and the premium to be charged as per the categorisation of the good, resulted in the loss on account of short-charged premium. The Management accepted (July 2007) the audit observation and assured (August 2007) to consider the incorporation of list of values.
Non-fulfilment of IRDAs prescribed data format

As per IRDA circular dated 8 November 2006, it is mandatory for a general insurance company to submit data in respect of eleven portfolios. In the formats prescribed by the TAC with effect from 1 April 2007. Audit observed that the necessary data formats were not built into the system due to defective URS resulting in the manual preparation of the returns by the Company. Thus, the Company was not able to consolidate the data collected from the operating offices on Time and accurately. The Management assured (August 2007) implementation of this check. Deficient control for monitoring deposits in appeal court cases According to Section 173 of the Motor Vehicles Act, 1988 (MV Act) an appeal against any award of a Claims Tribunal would be entertained, provided Rs.25,000 or 50 per cent of the amount so awarded, whichever is less, is deposited in the manner directed by the High Court.
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Audit observed that the system did not have the provision to capture separately the details of deposits relating to Motor Accident Claims Tribunal (MACT) appeal cases made by the Company due to defective URS as a result of which the Company was not able to monitor the cases in appeal and the deposits lying in the courts. The Management accepted (July 2007) the audit observation and assured (August 2007) provision of a facility to capture data regarding amount deposited in the High Court in respect of MACT appeal cases.
Deficiencies in system design

In a relational database, normalisation is the process of taking data from a problem and reducing it to a set of relations while ensuring data integrity and eliminating data redundancy. This ensures that the data is stored only once and storing data that can be calculated from other data already held in the database is avoided. During the process of normalisation redundancy is removed but not at the expense of breaking data integrity rules. It was seen that the given data had 27 tables, which contained all the information about policies and claims. A test check of 10 tables revealed that one of the tables had 242 fields containing information about the underlying risk in all types of policies. There was another table that contained 207 fields. There were 38 fields that were common in the two tables indicating that there was data redundancy built into the database. Moreover, there were 31387 cases, where the records were also not matching. Thus inadequate normalization of the database led not only to data redundancy but also to weakness in data integrity. Reply of the Management was awaited (September 2007).
Non-utilisation of normalisation concept
Irregular allowance of No Claim Bonus

As per General Rules of India Motor Tariff, in the event of a policyholder transferring his insurance from one insurer to another insurer, the transferee insurer may allow the same rate of No Claim Bonus (NCB) which the policyholder would have received from the previous insurer. Evidence of the policyholders NCB entitlement either in the form of a renewal notice or a letter confirming the NCB entitlement from the previous insurer is required for this purpose. Where the policyholder is unable to produce such evidence, the claimed NCB may be allowed after obtaining a declaration from the policyholder, as per the aforesaid tariff. While checking NCB details from the given data, Audit noticed that evidence of the policyholder's NCB entitlement had not been correctly authorised and validated. Audit analysed the cases where NCB allowed was more than Rs.100/- and found that the operating offices allowed NCB in 54970 Motor policies involving a total NCB of Rs.7.49 crore.
29
In these cases, the system was not able to capture the declaration given by the policyholder and verification of the same from the previous insurer at the time of registering a claim in the policy. Thus, the system did not assist in deciding the admissibility of the claim. Failure to cancel motor policies in respect of cash loss/total loss In case vehicle is totally damaged or when the net cost of repair is almost close to the market value or the insured estimated value (IEV) or the vehicle is stolen, the claim can be considered as a total loss. If loss is extensive but does not warrant consideration of the claim on Total Loss basis, claim can be settled on Cash Loss basis. According to Claims Settlement Manual of the Company, in such cases, the policy should be cancelled and Regional Transport Office informed by registered post about the cancellation of the policy. Audit, however, noticed that the system does not have appropriate controls to ensure cancellation of policy after settling such claims leading to the risk of further claims being acknowledged on the same policy. The Management assured (August 2007) implementation of this check. Non-Provision of excluded diseases of mediclaim policies The mediclaim cover is a hospitalisation cover and reimburses the medical expenses incurred in respect of covered disease and surgery however, certain diseases/charges are excluded from the scope of the cover. Audit, however, observed that these exclusions had not been provided in the system. As a result, it was not possible to validate the claims at the time of registering the claim against the policy and consequently, the admissibility of the claim could not be decided. The Management accepted (August 2007) the observation and assured to provide list ofvalues in the claims module to enable the system to recognise the excluded diseases/charges.
Deficient control for protection of recovery rights in marine claim.

As per the circular (May 1990) of the loss control measures department of the Company, Where there is loss of recovery rights by the policyholder/claimant, the settlement of claim on non-standard basis should take into account the loss of probable recovery from the carriers and loss should be settled deducting that amount which would have been recovered had the recovery rights been preserved. Statutory time limits have been prescribed in the guidelines of the Company for disposal of claims. If the claim is not lodged by the policyholder on the carrier within the statutory time limit, the recovery rights of the insurers are not protected. In that case, the claim has to be settled on NonStandard basis. Audit, however, observed that the guidelines of the Company for disposal of claims on Standard/Non standard basis were not incorporated in the Claims module. In the absence of this, the operating offices of the Company were not able to decide the admissibility of marine claim where recovery rights were not protected. The Management while accepting the audit observations assured (August 2007) implementation of this check.
Inadequate process controls

30
Irregularities in consolidated general ledger summary

As per clause 8.1.2.18 pertaining to Accounts module of business requirement specifications of the agreement between the Company and M/s 3i for implementation of INLIAS, consolidation of accounts at various levels up to the generation of Balance Sheet as per IRDA guidelines was to be done by the system. A test check of consolidated General Ledger Summary (GL) and consolidated Trial Balances (TB) of New Delhi based Regional Offices (NRO-I and NRO-II) for the year 2006-07, revealed that the balances of GL did not tally with the TB figures. Due to this, there was a difference of Rs.41.20 crore in NRO-I and Rs.18.73 crore in NRO-II between the GL balances and TB figures. The Management stated (August 2007) that based on audit observation, necessary corrections had been carried out in the report. During discussion, the Management agreed to take necessary measures to ensure that similar errors do not occur in other consolidated reports before freezing the Accounts Module. Audit, however, subsequently observed (September 2007) that the Management had rectified only the data relating to NRO-I and NRO-II and not the entire system as it was seen in the RO-I, Mumbai that the General ledger of RO-I was still not tallying with the TB figures.
Irregularities in terrorism pool data

Terrorism risk in India is covered by the Terrorism Pool, which is managed by General Insurance Company (GIC). The pool gets its underwriting capacity from the general insurance companies in India. The general insurance companies furnish the terrorism pool data to GIC on quarterly basis for quarters ending June, September, December and March and annually at the end of the financial year. During review of the reports generated from INLIAS, Audit observed that the Terrorism Pool data relating to premium for quarters ending June 2006, September 2006, December 2006 and March 2007 pertaining to DO-XI, DO-VII and CBO-19, New Delhi did not tally with the annual figures of the same data for 2006-07. Thus there was an excess cession of premium to pool amounting to Rs.61.70 lakh. Besides, Audit observed (September 2007) that the Terrorism Pool Data for the year 2006-07 did not tally with the data contained in the Annual Premium Register, generated by the system. Reply of the Management was awaited (September 2007).
31
Non-collection of stamp duty on short period policies

As per the Companys circular of 1 June, 2004, the stamp duty on the short period policies should be borne by the policy holder. Audit noticed that in 3 of the 25 cases relating to DO-XIV, New Delhi that were examined, system did not calculate the correct stamp duty amount when the policies were issued for short period. Consequently, the Company could not collect the required stamp duty amount from the policy holders. The Management accepted (June 2007) the audit observation and assured (August 2007) that the field for Period of Insurance would be categorised as default for the purpose of calculation of stamp duty.
Other points of interest

Eficient control for day end process on daily basis
According to Section 64VB of the Insurance Act, 1938, no risk can be assumed from a date earlier than a date on which the premium has been received in cash/cheque. The collection of premium has to be accounted for daily and the Daily Cash Book (DCB) has to be closed before office hours. Audit observed that the DCB of Division-XIV New Delhi in INLIAS was open up to two days. Non-closure of DCB on daily basis was fraught with the risk of misuse, as listed below: (i) The premium may be accounted for only after the claim becomes due.
32
(ii) If there is no claim, the cheque may be returned to the party causing loss of business to the Company. (iii) The cheque may be held if money is not available in the partys account. (iv) Back dated entries in the Cash book can be made and policies with back date can also be generated after giving a cover note number. It is therefore, recommended that the daily closing may be monitored through central server of INLIAS and the timeliness strictly ensured. The Management assured (August 2007) that the DCB would be processed on the same day.
Avoidable expenditure of Rs.8.51 lakh on virtual private network

The Company took virtual private network (VPN) connectivity in order to launch INLIAS on real time basis by networking all the offices. VPN tariff was applicable from the time the connectivity was provided. Data migration into INLIAS takes three to four hours per operating office and after migration the office may become live on INLIAS from the next working day. Audit observed that there was a delay ranging between 6 days to 633 days in sending 246 offices live on INLIAS (March 2007) resulting in payment of connectivity charges without working on INLIAS. The Management stated (July 2007) that the delay should be seen with reference to the date of commencement of parallel run and date of port activation. Managements reply is not tenable because even if the delay is counted up to the parallel run date, the delay ranged from 6 to 375 days. The tariff for minimum and maximum charges was Rs.257 and Rs.1425 per day, respectively. Thus the minimum recurring charges paid for providing connectivity to operating offices (excluding the offices with delay of less than six days) resulted in avoidable loss of Rs.8.51 lakh.
Creation of policy without proper authorisation

As per Company policy, only class-I officers are authorised for approving a policy proposal. Audit, however, observed that: (i) The system allowed creation and approval of a policy proposal by the same user thus raising the risk of acceptance of bad risks by the creators of the proposal, who were not authorised by the Management to accept the same. (ii) In 11 cases, policies were issued without the details of the users of the system that processed the policies. While replying to the observation, the Management stated (August 2007) that even though the person entering the data gives the approval, the policy is checked and signed by another person. The reply was not acceptable as the control built into the system were deficient and posed a risk of unauthorised acceptance of proposals by the Company especially when the audit trail was not ensured as brought out in (ii) above.
33
Non-utilisation of system functionality for creating provisions for claims

To satisfy the awards of MACT the provisions for outstanding motor (Third party) claims are to be made on the basis of guidelines/circulars issued by the Technical Department of the Company. Audit observed that New Delhi RO-I and RO-II kept provisions of Rs.62.22 crore and Rs.95.31 crore, respectively for MACT claims outstanding as on 31 March 2007. These provisions in the final accounts were made on the basis of statement of Motor Third Party claims paid during the year 2006-07 and outstanding as on 31 March 2007, which was prepared manually despite the fact that this functionality was available in the INLIAS system. It was also seen that provisions for outstanding MACT claims did not depict accurate figures on the basis of aforesaid criteria for provisioning of the same in the system. Thus, the Company carried out the summarisation of the statement outside the system. This not only led to non utilisation of a functionality in the system but also created a risk to the confidentiality and integrity of the data and results of the statements generated. The Management accepted (July 2007) the audit observation and assured (August 2007) to implement the same when INLIAS will be completely implemented.
34
CHAPTER 3 ANALYSIS AND INTERPETATION
35
RATINGS
The companys financial health is evident in the fact that CRISIL has consistently, for many years, given the company a AAA rating. ICRA an Associate of Moodys Investor Service has also rated Oriental as iAAA, indicating the highest claim-paying ability. This rating also reflects the companys strong liquidity position. For two years in succession, Company has also got financial strength rating of B++(Good) and issuer credit rating (ICR) of bbb+ since 2006 from A.M.Best, UK. The solvency ratio of the company as on March 31, 2007 was a very healthy 2.17 times.
AWARDS
Our Company has been voted Consumer Superbrand 2006-07 status by the independent Superbrands Council for the second year in succession. The Company had been awarded the prestigious International Marine Insurance award of Lloyds list 2006 for rendering exceptional professional services at a colorful ceremony held in Dubai. Our CMD Shri M.Ramadoss was recently adjudged as the Best CA Professional Manager in Public Sector companies by The Institute of Chartered Accountants of India. The Company made its presence felt in IT world when Shri S.K.Chanana, GM (IT) was awarded CIOL (Extended Manager) award for the year 2007. The Company was ranked 3rd by Business Today for its top visibility and image score in General Insurance category. The Company was also honored by the Central Excise & Service tax Department as one of the highest tax payers in India.
Loss of Rs.3.27 crore due to undercharge of premium

The Oriental Insurance Company Limited incurred a loss of revenue of Rs.3.27 crore in underwriting a Group Personal Accident Policy due to under loading of the premium during the period June 2002 to May 2005.
36
As per General Insurance Public Sector Association (GIPSA) guidelines (June 2001), the rate of the premium quoted were to be suitably loaded on claim experience of each year so as to bring the incurred claim ratio to 70 per cent in case of tariff and non tariff portfolios. However, Oriental Insurance Company Limited (Company) did not frame any specific guidelines in this regard. The premium was fixed at a flat rate of Rs.0.25 per mille and a sum of Rs.63.41 lakh was received by the Company. The policy was further renewed for the years ended 31 May 2004 and 31 May 2005. It was observed in Audit (January 2004) that the incurred claim ratio in respect of the above policy was 423.5 per cent in the first year. At the time of renewal of the policy, the instructions of GIPSA were not adhered to and the premium was loaded only by 80 per cent. Similarly, in the second year the claim ratio was 419.22 per cent and at the time of subsequent renewal the loading was only 100 per cent. The Head Office of the Company, at the time of examining the renewal proposal for the year 2004-05, observed (September 2004) that the premium should be loaded in such a way that the incurred claim ratio is maintained at 90 per cent. However, the DO did not take any action on this directive and the policy was allowed to continue without suitable loading. The incurred claim ratio in respect of the third year was 364.22 per cent and the policy was not renewed further. Even if the most conservative view was taken to load the premium to safeguard the financial interests of the Company and maintain a minimum level of profitability in the portfolio, the DO should have loaded the premium at the time of the renewals to maintain the claim experience at 90 per cent. Failure to load the premium appropriately resulted in undercharge of premium by Rs.1.64 crore and Rs.1.63 crore in the second and the third year respectively and there was a loss of revenue of Rs.3.27 crore. Further analysis of the portfolio in Audit revealed that against the total premium of Rs.2.88 crore collected in three years of coverage, the Company paid claims of Rs.12.60 crore and incurred loss of Rs.9.72 crore. Appropriate loading of the premium on renewals in the second and the third year would have reduced the loss by Rs.3.27 crore. The Management stated (May 2006) that overall claim experience with the insured was less than 90 per cent. The Managements contention was not tenable in view of its Head Office instructions issued to the Regional Office in January 2005 on maintaining the claim ratio at 90 per cent in each policy individually. The matter was reported to the Ministry in November 2006; reply was awaited (January 2007).
Loss due to undercharge of premium

The Company undercharged premium by Rs.1.82 crore under its Group Mediclaim Policy issued to the Godrej Group of Companies due to not loading premium based on their previous adverse claims ratio. The prospectus on Group Mediclaim Insurance Policy issued by the Company, inter alia, provides that the total premium payable at the time of renewal of the group policy will be loaded at the prescribed scale depending upon the incurred claims ratio for the entire group for the preceding three completed years excluding the year immediately preceding the date of renewal. The Godrej Group of Companies (Insured) approached (August 2005) the Company for Group Mediclaim Policy cover for their employees for the year 2005-06. Divisional Office 21, Mumbai issued the Group Mediclaim Policy to the Insured covering an aggregate of 8,871 employees for the period from 6 August 2005 to 5 August 2006 and
37
collected a total premium of Rs.5.27 crore (including service tax). The policy included the coverage of floater pre-existing ailments, children and dependent parents of the employees (irrespective of their age) and post retirement medical benefits, if opted for by the employee. It was observed in Audit in December 2005 that while computing the premium at the time of issuing the policy, the Company had loaded the premium by 85 per cent instead of applicable 150 per cent based on actual claims ratio during the policy years 2001-02 to 2003-04 resulting in under charge of premium by Rs.1.82 crore. Further, approval of the competent authority for inadequate loading of premium was not on record/made available to Audit. In response, the Regional Office, Mumbai stated in June 2006 that loading under the policy was restricted to 85 per cent only in order to secure other profitable business viz. fire, engineering and miscellaneous from the Insured. Reply of the Management was not tenable as fire and engineering business were tariff business and cross subsidisation thereof defeats the very purpose of prescribing tariff. Further, issue of policy in violation of the terms of prospectus without approval of the competent authority reflects on the efficacy of the internal control mechanism of the Company. The matter was reported to the Ministry in November 2006; reply was awaited (January 2007).
Undercharging of premium under Group Mediclaim policy

Disregarding the scale prescribed in the prospectus for the Group Mediclaim Insurance Policy, the Company did not load the premium based on previous adverse claim ratio and allowed excess discounts to Dell Computers India Private Limited resulting in undercharge of premium by Rs.1.28 crore. The prospectus for Group Mediclaim Insurance Policy issued by The Oriental Insurance Company Limited (Company), inter alia, prescribed a discount of 10 per cent if the number of persons under the policy ranged between 2,001 and 10,000. The premium would be loaded by 25 per cent if the claim ratio for the preceding three completed years or such shorter period as the case may be but excluding the year immediately preceding the date of renewal, ranged between 70 and 100 per cent. The loading of premium would be 55 per cent in case the claim ratio ranged between 101 and 125 per cent. The City Divisional Office, Mumbai renewed the Group Mediclaim Policy of Dell Computers India Private Limited on family floater basis for the period 7 November 2005 to 6 November 2006 covering 8,397 employees for a sum insured of Rs. two lakh per family and realised a premium of Rs.2.32 crore. While computing the premium, the Company allowed a group discount of 35 per cent as against 10 per cent applicable to a group of 8,397 employees and loaded the premium by 25 per cent on account of adverse claim ratio instead of applicable 55 per cent for an adverse claim ratio of 105.15 per cent for the three years from 2001-02 to 2003-04. This resulted in undercharge of premium by Rs.1.28 crore. The Management in reply stated (April 2006) that the claim loading was restricted to 25 per cent in view of the application of sub limits for various benefits under the policy though it was marginally higher than the maximum permissible ratio of 100 per cent for restricting the loading to 25 per cent. Further, the group discount allowed and the premium charged were 20 per cent and Rs.2.38 crore respectively while Audit had stated these as 35 per cent and Rs.2.32 crore respectively.
38
Reply of the Management was not tenable as the Divisional Office violated the terms of the prospectus without the approval of the Head office. Further, the figures stated by the Management were from initial internal proposals while figures taken in Audit were from the policy finally issued by the Company. The matter was reported to the Ministry in November 2006; reply was awaited (January 2007).
Short collection of premium

Contrary to the provisions of all India tariff on Storage cum Erection insurance, the Company collected premium on increase in the sum insured during the currency of the policy on pro-rata basis, resulting in short collection of premium by Rs.30.98 lakh. According to the General Regulations of the All India Tariff on Storage cum Erection (SCE) policies, in case the sum insured under an SCE policy is increased during the policy period, the premium should be collected on the additional sum insured at applicable rates for the entire policy period and not on pro rata basis. The Divisional Office 7 of the Company at Mumbai issued (June 2005) an SCE Policy to Reliance Industries Limited (Insured) for their Hazira 3-PTA Plant with sum insured of Rs.446 crore covering the period 1 June 2005 to 30 June 2006 at a premium of Rs.1.53 crore. In disregard of the General Regulations, at the time of issue of the policy, the Divisional Office agreed (June 2005) to charge premium on any increase in the sum insured during the currency of the policy on pro rata basis. While the project was in progress, the Insured requested (October 2005) the Divisional Office for an increase in the sum insured by Rs.275 crore from 24 October 2005. Accordingly, an additional premium of Rs.55.90 lakh reckoned on pro rata basis was collected (October 2005) as against applicable premium of Rs. 86.87 lakh. The decision of the Divisional Office to charge pro rata premium on the increase in sum insured during the policy period was in disregard of the General Regulations and resulted in short collection of premium of Rs.30.98 lakh. The matter was reported to the Management and the Ministry in May 2006 and October 2006 respectively; replies were awaited (January 2007).
39
CHAPTER 4
CONCLUSIONS RECOMMENDATIONS AND BIBLOGRAPHY
40
Conclusion
Implementation of INLIAS in the Company was delayed by more than 23 months and was still to be implemented in all the operating offices of the Company. The collection of premium, issue of policies and settlement of claims were the major risk prone areas of the business, which were to be mapped through INLIAS. Lack of complete customisation, inconsistencies and inadequacies in the design, lack of input controls and validation checks resulted in manual interventions that made the system vulnerable to manipulations and errors besides not conforming to the relevant provision of rules and regulations. Incorrect data fed into the system led to unreliability of the database. Thus there was underutilisation of the application in achieving the objectives of availability of on-line and accurate information for improved decision making.
Recommendations
Data table size should be in consonance with the business requirements and normalised so as to facilitate quick generation of reports/ queries. System design deficiencies along with change management procedures should be institutionalised to carry out the necessary modifications in INLIAS. Required rectification of the inadequacies in INLIAS working relating to input controls, application controls and process controls as indicated in Audit review should be carried out in a time bound manner. The IT security should be strengthened through formulation and implementation of an IT Policy. The system should prompt for password change at defined intervals to ensure its use only by the authorised users. In the areas of input control and business continuity plan, the Company should evolve suitable security policies with clearly defined procedures and responsibilities. Its implementation by the operating offices should be closely monitored by Head Office. The end-users URS, mapping of business rules and regulations and compliance of statutory provisions should be incorporated in the software. The matter was reported to the Ministry (December 2007), its reply was
awaited.
41
BIBLOGARPHY (SOURCES OF DATA)

Primary data
Interview Survey Questionnaires
Secondary data BOOKS:

Principle and Practices of Insurance by M.N Mishra Insurance customer service by Mr. K .B. S Kumar. Life Insurance In India - Its History, Law, Practice And Problems by R. M Ray. Law and practice of life insurance in India - by T. S Mann
WEB SITES:

http://www.orientalinsurance.org.in/ www.google.com
indiainfoline.com www.bimaonline.com
42
43
Annexure Customer Problem In Life Insurance Survey Questionnaire Oriental insurance co. Note:- This information will exclusively be used for research purpose and in no case will be disclosed to anybody. A. General Information Customer Name ---------------Name------------------------Company Type : Type of Account: Other Gender: Marital Status: Age: Male Marriage Under 20 41-50 yrs Qualification: Graduate Female Single 21-30 yrs Above 50 yrs Post Graduate Below Rs. 15000 Rs.15,00031-40 yrs Private Saving Public Salary Any Insurance Company
Income (Monthly): Dependent Rs. 25,000
Profession: Housewife
Employee
Student
Businessman
B. Please tick ( 5, 4, 3, 2, 1 against the appropriate box where, ) 1 = Highly satisfied; 2 = Satisfied;
44
0 = Neither satisfied/nor dissatisfied; - 2 = Dissatisfied
Q1. According to survey are having problem with the Insurance Company statement?
INTERPETATION (1) Highly satisfied (2) (0) (-2) (-1) Satisfied Neither satisfied/nor dissatisfied Dissatisfied Highly dissatisfied 20% 35% 18% 9% 18%
Q2. According to survey are having problem with the services provided by the Insurance Company as promised?
45
INTERPETATION
(1) Highly satisfied (2) (0) (-2) (-1) Satisfied Neither satisfied/nor dissatisfied Dissatisfied Highly dissatisfied
20% 42% 16% 18% 6%
46
Q3. According to survey are having problem with the services of handling customers services problem?
47
Q4. According to survey are having problem with the way Insurance Company informs about the time when service will be performed?
48
Q5. According to survey are having problem with the record maintaining procedure of your accounts
49
Q6. According to survey are having problem with the promptness in providing service to you?
INTERPETATION (1) Highly satisfied 10%
50
(2) (0) (-2) (-1)
Satisfied Neither satisfied/nor dissatisfied Dissatisfied Highly dissatisfied
42% 17% 11% 20%
Q7. According to survey are having problem with the willingness of employees to help customers?
INTERPETATION (1) Highly satisfied (2) (0) Satisfied Neither satisfied/nor dissatisfied
51
24% 46% 10%
(-2) (-1)
Dissatisfied Highly dissatisfied
15% 5%
Q8. According to survey are having problem with the Insurance Company service of sending timely Insurance Company statement?
INTERPETATION (1) Highly satisfied

52
14%
(2) (0) (-2) (-1)
Satisfied Neither satisfied/nor dissatisfied Dissatisfied Highly dissatisfied
60% 12% 8% 6%
Q9. According to survey are having problem with the way employees behave with you?
INTERPETATION (1) Highly satisfied (2) (0) (-2) (-1) Satisfied Neither satisfied/nor dissatisfied Dissatisfied Highly dissatisfied
53
22% 38% 14% 16% 10%
Q10. According to survey are having problem with the employees eagerness of instilling confidence in customers?
INTERPETATION (1) Highly satisfied (2) (0) (-2) (-1) Satisfied Neither satisfied/nor dissatisfied Dissatisfied Highly 54 dissatisfied
27% 47% 10% 9% 4%
Q11. According to survey are having problem with the employees behavior of showing consistently courteousness towards you?
INTERPETATION (1) Highly satisfied (2) (0) Satisfied Neither satisfied/nor dissatisfied
55
23% 35% 17%
(-2) (-1)
Dissatisfied Highly dissatisfied
18% 7%
Q12. According to survey are having problem by Insurance Company of providing customers best interest at heart?
INTERPETATION
(1) Highly satisfied (2) (0) (-2) (-1) Satisfied Neither satisfied/nor dissatisfied Dissatisfied Highly dissatisfied
56
24% 33% 14% 14% 11%
Q13. According to survey are having problem with the Insurance Company services of providing the product that best suits you?
INTERPETATION (1) Highly satisfied (2) Satisfied (0) Neither dissatisfied (-2) Dissatisfied (-1) Highly dissatisfied 15% 14% 24% 37% satisfied/nor 14%
57
Q14. According to survey are having problem with the overall service quality of your Insurance company?
58
Q15. According to survey are having problem with the premises appealing? of the Insurance Company? Is it visually
59
Q16.
According
to
survey
are
having of
problem the
with
technologist Company?
up-to-date
equipments
Insurance
60
Q17. According to survey are having problem with the way of employees dress?
Q18. According to survey are having problem with the pamphlets distributed by the Insurance Company? Are they
61
clean
and
give
complete
information?
INTERPETATION
(1) Highly satisfied (2) Satisfied (0) Neither

62
27% 30% satisfied/nor 20%
dissatisfied (-2) Dissatisfied (-1) Highly dissatisfied 17% 6%
63

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Oriental insurance co.

MINOR PROJECT REPORT

ORIENTAL INSURANCE COMPANY

MAHARAJA SURAJMAL INSTITUTE

Oriental insurance co.

DEPT. OF BUSINESS BBA(B N I) 3RD SEM. 2ND

MAHARAJA SURAJMAL INSTITUTE

Oriental insurance co.

Oriental insurance co.

I humbly convey my sincerest gratitude to my internal guide

for her guidance,

SAHIL ARORA BBA (B N I)

Oriental insurance co.

3RD SEM. 2ND SHIFT

OBJECTIVE RESEARCH METHODOLOGY

SCOPE AND LIMITATIONS

Oriental insurance co.

Oriental insurance co.

Oriental insurance co.

Oriental insurance co.

Oriental insurance co.

Oriental insurance co.

OBJECTIVES OF THE STUDY

2. To analyze the concept of insurance in india.

Oriental insurance co.

Oriental insurance co.

Oriental insurance co.

Oriental insurance co.

PRESENT SET-UP & STATUS

Oriental insurance co.

Oriental insurance co.

NEW CORPORATE VISION

FUNCTIONS AND DUTIES

Oriental insurance co.

POWERS AND DUTIES OF OFFICERS AND EMPLOYEES

Oriental insurance co.

Oriental insurance co.

THE NORMS SET FOR DISCHARGE OF FUNCTIONS

Oriental insurance co.

BUDGET ALLOCATION & EXPENDITURE

Budget sanctioned by the Board 2006 07 Management Expenses Rs.827.15 Crores

Final Expenditure 2006 07

Budget sanctioned by the Board 2007 - 08 Rs.901.62 Crores Rs.6.00 Crores

Oriental insurance co.

Oriental insurance co.

Computerisation in the Company

Oriental insurance co.

(iv) To review the status of implementation of the project.

Delay in implementation of INLIAS

Oriental insurance co.

Change management control

Oriental insurance co.

Input controls and validation checks

Discrepancies in the cover notes

Oriental insurance co.

Agents commission on lapsed licenses

Irregular allowance of No claim discount in motor policies

Refund of premium on the expired policy

Irregular issuance of motor policies

Oriental insurance co.

Defective user requirement specifications

Non-fulfilment of IRDAs prescribed data format