INTRODUCTION

INSURANCE INDUSTRY
The history of life insurance in India dates back to 1818 when it was conceived as a means to
provide for English widows. Interestingly in those days a higher premium was for Indian
lives than the Non-Indian lives as Indian lives were considered more risky for coverage. The
Bombay Mutual Life Insurance Society started its business in 1870. It was the first company
to charge same premium for both Indian and Non- Indian lives. The Oriental Assurance
Company was established in 1880.The General Insurance business in India, on the other hand
can trace its roots to the Triton (total) Insurance Company Limited , the first general
insurance company established in the year 1850 in Calcutta by the British. Till the end of
nineteenth century insurance business was almost entirely in the hands of overseas
company’s. Insurance regulation formally began in India with the passing of the Life
Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during
20’s and 30’s sullied insurance business in India. By 1938 there were 176 insurance
companies the first comprehensive legislation was introduced with the Insurance Act of 1938
that provided strict state control over Insurance business. The Insurance business grew at a
faster pace after independence. Indian Companies strengthened their hold on this business but
despite of the growth that was witnessed insurance remained an urban phenomenon.
The Government of India in 1956, brought together over 240 private life Insurers and
provident societies under one nationalized monopoly corporation and Life Insurance
Corporation (LIC) was born. Nationalization was justified on the grounds that that it would
create much needed funds for rapid industrialization. This was in conformity with the
government’s chosen path of state lead planning and development.
The (non-life) insurance business continued to thrive with the private sector till 1972. Their
operations were restricted to organized trade and industry in large cities. The general
insurance industry was normalized in 1972. With this nearly 107 insurers were amalgamated
and grouped into four companies National Insurance Company, New India Assurance
Company, Oriental Insurance Company and United India Insurance Company. These were
subsidiaries of the General Insurance Company (GIC). The general insurance business was
(Normalization) Act, 1972. The post-nationalization general insurance business was
undertaken by the Genera.

ABOUT THE PROJECT

The project deals with comparatives analysis of different insurance products offered by
Insurance Companies.

OBJECTIVE OF THE STUDY

The main objective of this project is to do comparative analysis of different insurance and
investment products, check the awareness level and perception of insurance and investment
by an individual. The project would help in understanding the preference of people regarding
private and public insurance companies as well as the reference regarding the different
mutual funds schemes.

LITERATURE REVIEW
About Insurance Industry
Insurance is a means of protection from financial loss. It is a form of risk management,
primarily used to hedge against the risk of a contingent or uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, insurance
carrier or underwriter. A person or entity who buys insurance is known as an insured or as a
policyholder. The insurance transaction involves the insured assuming a guaranteed and
known relatively small loss in the form of payment to the insurer in exchange for the insurer's
promise to compensate the insured in the event of a covered loss. The loss may or may not be
financial, but it must be reducible to financial terms, and usually involves something in which
the insured has an insurable interest established by ownership, possession, or pre-existing
relationship.
The insured receives a contract, called the insurance policy, which details the conditions and
circumstances under which the insurer will compensate the insured. The amount of money
charged by the insurer to the Policyholder for the coverage set forth in the insurance policy is
called the premium. If the insured experiences a loss which is potentially covered by the
insurance policy, the insured submits a claim to the insurer for processing by a claims
adjuster. The insurer may hedge its own risk by taking out reinsurance, whereby another
insurance company agrees to carry some of the risk, especially if the primary insurer deems
the risk too large for it to carry.
Legal
When a company insures an individual entity, there are basic legal requirements and
regulations. Several commonly cited legal principles of insurance include:-

1. Indemnity – the insurance company indemnifies, or compensates, the insured in the

case of certain losses only up to the insured's interest.
2. Benefit insurance – as it is stated in the study books of The Chartered Insurance
Institute, the insurance company does not have the right of recovery from the party
who caused the injury and is to compensate the Insured regardless of the fact that
Insured had already sued the negligent party for the damages (for example, personal
accident insurance)
3. Insurable interest – the insured typically must directly suffer from the loss. Insurable
interest must exist whether property insurance or insurance on a person is involved.
The concept requires that the insured have a "stake" in the loss or damage to the life
or property insured. What that "stake" is will be determined by the kind of insurance
involved and the nature of the property ownership or relationship between the
persons. The requirement of an insurable interest is what distinguishes insurance
from gambling.
4. Utmost good faith – the insured and the insurer are bound by a good faith bond of
honesty and fairness. Material facts must be disclosed.
5. Contribution – insurers which have similar obligations to the insured contribute in the
indemnification, according to some method.
 6. Subrogation – the insurance company acquires legal rights to pursue recoveries on
behalf of the insured; for example, the insurer may sue those liable for the insured's
loss. The Insurers can waive their subrogation rights by using the special clauses.
7. Causa proxima, or proximate cause – the cause of loss (the peril) must be covered
under the insuring agreement of the policy, and the dominant cause must not
be excluded
8. Mitigation – In case of any loss or casualty, the asset owner must attempt to keep loss
to a minimum, as if the asset was not insured.

Indemnification
To "indemnify" means to make whole again, or to be reinstated to the position that one was
in, to the extent possible, prior to the happening of a specified event or peril.
Accordingly, life insurance is generally not considered to be indemnity insurance, but rather
"contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are
generally three types of insurance contracts that seek to indemnify an insured:

1. A "reimbursement" policy
2. A "pay on behalf" or "on behalf of policy"
3. An "indemnification" policy
From an insured's standpoint, the result is usually the same: the insurer pays the loss and
claims expenses.
If the Insured has a "reimbursement" policy, the insured can be required to pay for a loss and
then be "reimbursed" by the insurance carrier for the loss and out of pocket costs including,
with the permission of the insurer, claim expenses.
Under a "pay on behalf" policy, the insurance carrier would defend and pay a claim on behalf
of the insured who would not be out of pocket for anything. Most modern liability insurance
is written on the basis of "pay on behalf" language which enables the insurance carrier to
manage and control the claim.
Under an "indemnification" policy, the insurance carrier can generally either "reimburse" or
"pay on behalf of", whichever is more beneficial to it and the insured in the claim handling
process.
An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.)
becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means
of a contract, called an insurance policy. Generally, an insurance contract includes, at a
minimum, the following elements: identification of participating parties (the insurer, the
insured, the beneficiaries), the premium, the period of coverage, the particular loss event
covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in
the event of a loss), and exclusions (events not covered). An insured is thus said to be
"indemnified" against the loss covered in the policy.
When insured parties experience a loss for a specified peril, the coverage entitles the
policyholder to make a claim against the insurer for the covered amount of loss as specified
by the policy. The fee paid by the insured to the insurer for assuming the risk is called the
premium. Insurance premiums from many insureds are used to fund accounts reserved for
later payment of claims – in theory for a relatively few claimants – and for overhead costs. So
long as an insurer maintains adequate funds set aside for anticipated losses (called reserves),
the remaining margin is an insurer's profit.

About Mutual Funds Industry

A mutual fund is a professionally managed investment fund that pools money from many
investors to purchase securities. These investors may be retail or institutional in nature.
Mutual funds have advantages and disadvantages compared to direct investing in individual
securities. The primary advantages of mutual funds are that they provide economies of scale,
a higher level of diversification, they provide liquidity, and they are managed by professional
investors. On the negative side, investors in a mutual fund must pay various fees and
expenses.
Primary structures of mutual funds include open-end funds, unit investment trusts,
and closed-end funds. Exchange-traded funds (ETFs) are open-end funds or unit investment
trusts that trade on an exchange. Some close- ended funds also resemble exchange traded
funds as they are traded on stock exchanges to improve their liquidity. Mutual funds are also
classified by their principal investments as money market funds, bond or fixed income funds,
stock or equity funds, hybrid funds or other. Funds may also be categorized as index funds,
which are passively managed funds that match the performance of an index, or actively
managed funds. Hedge funds are not mutual funds; hedge funds cannot be sold to the general
public as they require huge investments. They are more risky than mutual funds and are
subject to different government regulations.
Money market funds
Money market funds invest in money market instruments, which are fixed income securities
with a very short time to maturity and high credit quality. Investors often use money market
funds as a substitute for bank savings accounts, though money market funds are not insured
by the government, unlike bank savings accounts.
In the United States, money market funds sold to retail investors and those investing in
government securities may maintain a stable net asset value of $1 per share, when they
comply with certain conditions. Money market funds sold to institutional investors that invest
in non-government securities must compute a net asset value based on the value of the
securities held in the funds.
In the United States, at the end of 2016, assets in money market funds were $2.7 trillion,
representing 14% of the industry.[18]
Bond funds
Bond funds invest in fixed income or debt securities. Bond funds can be sub-classified
according to:

 The specific types of bonds owned (such as high-yield or junk bonds, investment-
grade corporate bonds, government bonds or municipal bonds)
 The maturity of the bonds held (i.e., short-, intermediate- or long-term)
 The country of issuance of the bonds (such as U.S., emerging market or global)
 The tax treatment of the interest received (taxable or tax-exempt)
In the United States, at the end of 2016, assets in bond funds were $4.1 trillion, representing
22% of the industry.[18]
Stock funds
Stock or equity funds invest in common stocks. Stock funds may focus on a particular area of
the stock market, such as

 Stocks from only a certain industry

 Stocks from a specified country or region
 Stocks of companies experiencing strong growth
 Stocks that the portfolio managers deem to be a good value relative to the value of the
company's business
 Stocks paying high dividends that provide income
 Stocks within a certain market capitalization range
In the United States, at the end of 2016, assets in Stock funds were $10.6 trillion, representing
56% of the industry.[18]
Hybrid funds
Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced funds,
asset allocation funds, target date or target risk funds, and lifecycle or lifestyle funds are all
types of hybrid funds.
Hybrid funds may be structured as funds of funds, meaning that they invest by buying shares
in other mutual funds that invest in securities. Many funds of funds invest in affiliated funds
(meaning mutual funds managed by the same fund sponsor), although some invest in
unaffiliated funds (i.e., managed by other fund sponsors) or some combination of the two.
In the United States, at the end of 2016, assets in hybrid funds were $1.4 trillion, representing
7% of the industry.
Other funds
Funds may invest in commodities or other investments too.
Market capitalization
Market capitalization equals the number of a company's shares outstanding multiplied by the
market price of the stock. Market capitalization is an indication of the size of a company.
Typical ranges of market capitalizations are:

 Mega cap - companies worth $200 billion or more

 Big/large cap - companies worth between $10 billion and $200 billion
 Mid cap - companies worth between $2 billion and $10 billion
 Small cap - companies worth between $300 million and $2 billion
 Micro cap - companies worth between $50 million and $300 million
 Nano cap - companies worth less than $50 million
Net asset value
A fund's net asset value (NAV) equals the current market value of a fund's holdings minus
the fund's liabilities (this figure may also be referred to as the fund's "net assets"). It is usually
expressed as a per-share amount, computed by dividing net assets by the number of fund
shares outstanding. Funds must compute their net asset value according to the rules set forth
in their prospectuses. Most compute their NAV at the end of each business day.
Valuing the securities held in a fund's portfolio is often the most difficult part of calculating
net asset value. The fund's board typically oversees security valuation.