CHAPTER 1 INTRODUCTION

Every risk involves the loss of one or other kind. In older time, the
contribution by the person was made at the time of loss. Today, only
one business, which offers all walks of life, is insurance business.
Owing to growing complexity of life, trade and commerce, individual
and business firms and turning to insurance to manage various risks.
Every individual in this world is subject to unforeseen uncertainties
which may make him and his family vulnerable. At this place, only
insurance helps him not only to survive but also recover his loss and
continue his life in a normal manner.

Insurance is an important aid to commerce and industry. Every

business enterprise involves large number of risks and uncertainties.
It may involve risk to premises, plant and machinery, raw material
and other things. Goods may be damaged or may be destroyed due
to fire or flood. Some risk can be avoided by timely precautions and
some are unavoidable and are beyond the control of a business.
These unavoidable risks can be protected by insurance.

1
 HISTORY OF INSURANCE SECTOR

The business of life insurance in India in its existing form started in india in the year 1818 with
the establishment of the Oriental LIFE INSURANCE COMPANY in Calcutta

Some of the important milestones in the life insurance business in india are :

• 1912 :The indian life ASSURANCE companies act enacted as the first status to regulate
the life insurances business .

• 1928: The indian insurances company act enacted to enable the govertement to collect
statistical information about both life and non life insurances business .

• 1938: The earilier legislation consolided and amended to by the insurance act with the
objective of protecting the interest of the insuring public .

• 1956: 245 Indian and foreign insurers provident societies taken over by the central
government and nationalized LIC formend by an ACT of patrliament , viz LIC act ,
1956 with a capital contribution of rs 5 crore from the government of india

• The geranal insurance business in india , on the other hand , can trace its roots to the
triton insurance company LTD., the first gernal insurance company established in the
year 1850 in culcutta by the british

Some of the important milestornes in the gernenal insurances company in india

• 1907: The indian mercantile insurance LTD .set up , the company to transact all classes of
general insurances business .

• 1957: General insurance council ,a win of insurance association of india. Frames a code of
conduct for ensuring fair conduct and sound business partices .

2
• 1968: The insurances act amended to regulate investment and set minimum solvency
margins and the tariff Advisory committee set up .

• 1972 The general insurance business act 1972 nationalized the general insurance business in
india with effort 1st January 1973

• 107: insures amalegamated and grouped into four company viz , the national insurances
company LTD the new india assurance company LTD the original company LTD and the
united india insurances company LTD GIC . incorporated `as a company

3
 What is Insurance?

Insurance may be defined as form of contract between two parties

(namely insurer and insured or assured) whereby one party (insurer)
undertakes in exchange for a fixed amount of money (premium) to pay the
other party (Insured), a fixed amount of money on the happening of certain
event (death or attaining a certain age in case of life) or to pay the amount
of actual loss when it takes place through the risk insured (in case of
property.

Everyone is exposed to various risks. Future is very uncertain, but there

is way to protect one’s family and make one’s children’s future safe. Life
Insurance companies help us to ensure that our family’s future is not just
secure but also prosperous. Life Insurance is particularly important if you are
the sole breadwinner for your family. The loss of you and your income could
devastate your family. Life insurance will ensure that if anything happens to
you, your loved ones will be able to manage financially. This study titled
“Study of Consumers Perception about Life Insurance Policies” enables the
Life Insurance Companies to understand how consumer’s perception differs
from person to person. How a consumer selects organizes and interprets

4
 DEFINITION OF INSURANCE:

Insurance has been defined to be that in, which a sum of money as a

premium is paid by the insured in consideration of the insurer’s bearings the
risk of paying a largesum upon a given contingency. The insurance thus is a
contract whereby: I. Certain sum, termed as premium, is charged in
consideration, ii. Against the said consideration, a large amount is guaranteed
to be paid by the insurer who received the premium, iii. The compensation
will be made in certain definite sum, i.e., the loss or the policy amount which
ever may be, and
iv. The payment is made only upon a contingency More specifically,
insurance may be defined as a contact between two parties, wherein one party
(the insurer) agrees to pay to the other party (the insured) or the beneficiary,
ascertain sum upon a given contingency (the risk) against which insurance is
required. The Insurance Regulatory and Development Authority, an agency
of the Government of India, is the regulatory body for the insurance sector's
supervision and development in India’s

5
 Terminology used in definition of Insurance
Insurer or insurance company – The agency involved in Insurance business is
known as insurer

Insured/ Assured – The person who gets his property/life insured is known as
insured

Policy - The agreement or contract which is put in writing is known as a Policy.

Premium – The consideration in return of which the insurer undertakes to

make goods the loss or give a certain amount in case of life insurance is
known as premium

6
HISTORICAL BACKGROUND OF LIFE INSURANCE BUSINESS IN
INDIA
The life insurance business in India started in the 19th century when the
first Indian company, the Bombay Mutual life assurance society ltd., was
formed at Bombay on December 3, 1870.6 In the beginning, the number of life
insurance companies was small and the scales of operations were also very
limited. In real terms the life insurance business in India began when British
Companies started life insurance transactions in India mainly for the benefit
of European civilians and soldiers. Occasionally, they also issued policies on
Indian lives, but it cannot be termed as Indian insurance in the true sense of
the term.

The very first policy on Indian lives was issued in 1945 by the “Royal”
in favour of ‘Cursetjee Furdoonjee’.7 In 1874, a company, namely, the
Oriental Government Security Life Assurance Company Ltd., was formed
followed by the Indian life of Karachi (1892), The Bharat of Lahore (1896)
and the Empire of India, Bombay (1897). To start with the progress of Indian
insurance companies was slow mainly due to competition from the foreign
companies having longer standing, bigger resources and Governmental
patronage. However, a larger number of companies were formed after the
Swadeshi Movement of 1905.

According to an investigation of life insurance in foreign countries made

by the Consular Officers of the United states in the year 1905, 26 foreign life
insurance companies, including one American life office, operated in Indian
in that year8 . Between 1903 and 1912 alone, 38 life insurance companies were
formed all over the country9 . These included the National (1906), the Asian
(1911) etc. of theses, as many as 26 were closed down within a short period
of time. During the same period about 500 provident societies were floated and
many of them also closed down their business shortly after inception. To
exercise a measure of control, therefore, the Government passed the first
Insurance Act in 1912.

The passage of the Act was a landmark in the history of life insurance in

7
 India. During the First World War, the life insurance in the country suffered
a setback. The investments of the life insurance companies depreciated in
value and so they had to suffer considerable losses. The Swadeshi Movement
led to a resentment for the control of this vital sector of India’s economic life
by foreigners and a number of life insurance companies were set up many
of which were
Role of agent in an insurance company
I. FULL information must be provided to the proponent at the point of sale to enable him to decided
on the best cover or plan to minimize insurances of cooling off by the proponents .

II. An agent should be well versed in all the paln the selling points and also be equipped to asses the
need of client .

III. adherence agent must code of conduct for agent is crucial important agents must there for
familiarize themselves with provision of the code of conduct .

IV. Agents Must Provide the offices with the accrued information about the prospect for a fair
assement of the risk involved . the against confidential report must there for be completed very
carefully .

V. Agents must also possess adequate knowledge of policy servicing and claim settlement procedure
so that the policy holder can be guided correctly .

VI. submission of proposal forms and proposal deposit to the branch office immediately to avoid
delays and to enable the office to taken timely decision .

VII. Aleaflet or brochure containing relevant features of the plan that is being sold should be available
with the agent .

1. If the agent are well conversant with the claim settelement producer and Assis the claimant
in completing the nassary requirement , it would not only quacked the process of claim
settlement and enhance their

2. Professional status but also help the organization to improve upon their

8
 Indian Insurance Market
Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion and
3rd largest in terms of purchasing power parity. With factors like a stable 8-9 per cent
annual growth, rising foreign exchange reserves, a booming capital market and a
rapidly expanding FDI inflows, it is on the fulcrum of an ever increasing growth curve.
Insurance is one major sector which has been on a continuous growth curve since the
revival of Indian economy. Taking into account the huge population and growing per
capita income besides several other driving factors, a huge opportunity is in store for
the insurance companies in India. According to the latest research findings, nearly
80% of Indian population is without life insurance cover, while health insurance and
non-life insurance continues to be below international standards. And this part of the
population is also subjected to weak social security and pension systems with hardly
any old age income security. As per our findings, insurance in India is primarily used
as a means to improve personal finances and for income tax planning; Indians have a
tendency to invest in properties and gold followed by bank deposits. They selectively
invest in shares also but the percentage is very small 4-5%. This in itself is an indicator
that growth potential for the insurance sector is immense. It’s a business growing at
the rate of 15-20% per annum and presently is of the order of $47.9 billion. India is a
vast market for life insurance that is directly proportional to the growth in premiums
and an increase in life density. With the entry of private sector players backed by
foreign expertise, Indian insurance market has become more vibrant. Competition in
this market is increasing with company’s continuous effort to lure the customers with
new product offerings. However, the market share of private insurance co

9
 Nature of Insurance

Following are the main characteristics of insurance which are applicable to

all types of insurance (life, fire, marine and general insurance).

1. Sharing of Risks - Insurance is a device to share the financial losses which

may occur to individual or his family on the happening of certain events
2. Cooperative Device – Insurance is a co-operative device to spread the loss
caused by a particular risk over a large caused by a particular risk over a
large number of persons who are exposed to it and who agree to insure
themselves against the risk.
3. Value of Risk – Risk is evaluated at the time of insurance. There are several
methods of valuing the risk. Higher the risks, higher will be premium
4. Payment on Contingency -If the contingency occurs, payment is made; payment
is made only for insured contingency. If there is no contingency, no payment
is made. In life insurance contract, payment is certain because the death or
the expiry of term will certainly occur. In other insurance contract like fire,
marine, the contingency may or may not occur
5. Amount of Payment of Claim - The amount of payment depends upon the value of
loss occurred due to the particular insured risk. The insurance is there upto that
amount. In life insurance insurer pay a fixed sum on the happening of an event
or within a specified time period.

Example
– In fire insurance, if fire occurs and half the property is destroyed, but
the whole property is insured, then payment of claim will be made only
for that half building that is destroyed not the whole amount of insured.

6. Insurance is different from Charity - In charity, there is no consideration but

insurance is not given without premium
7. Large number of Insured Person - Insurance is spreading of loss over a large
number of persons. Larger the number of persons, lower the cost of insurance
and amount of premium and incase lower the number of persons, higher the.

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Functions of Insurance

I Primary Functions

1. Certainty of compensation of loss: Insurance provides certainty of payment at

the uncertainty of loss. The elements of uncertainty are reduced by better
planning and administration. The insurer charges premium for providing
certainty.

2. Insurance provides protection : The main function of insurance is to provide

protection against risk of loss. The insurance policy covers the risk of
loss. The insured person is indemnified for the actual loss suffered by
him. Insurance thus provide financial protection to the insured. Life
insurance policies may also be used as collateral security for raising loans.

3. Risk sharing : All business concerns face the problem of risk. Risk and
insurance are interlinked with each other. Insurance, as a device is the
outcome of the existence of various risks in our day to day life. It does
not eliminate risks but it reduces the financial loss caused by risks.
Insurance spreads the whole loss over the large number of persons who
are exposed by a particular risk.

II Secondary Functions

1. Prevention of losses : The insurance companies help in prevention of

losses as they join hands with those institutions which are engaged in loss
prevention measures. The reduction in losses means that the insurance
companies would be required to pay lesser compensations to the assured
and manage to accumulate more savings, which in turn, will assist in
reducing the premiums

2. Providing funds for investment : Insurance provide capital for society.

Accumulated funds through savings in the form of insurance premium re

11
achievement of goals. Businessman feel more motivated and encouraged to take
risks to enhance their profit earning. This also helps in improving their efficiencies.

3. Solution to social problems : Insurance take care of many social problems.

We have insurance against industrial injuries, road accident, old age,
disability or death etc.

4. Encouragement of savings : Insurance not only provides protection against

risks but also a number of other incentives which encourages people to
insure. Since regularity and punctuality pf payment of premium is a
perquisite for keeping the policy in force, the insured feels compelled to save.

2.1 Principles of Insurance

The basic principles which govern the insurance are -

(1) Utmost good faith

(2) Insurable interest

(3) Indemnity

(4) Contribution

(5) Subrogation

(6) Causa proxima

(7) Mitigation of loss

1. Principle of utmost good faith : A contract of insurance is a contract of

‘Uberrimae Fidei’ i.e., of utmost good faith. Both insurer and insured
should display the utmost good faith towards each other in relation to the
contract. In other words, each party must reveal all material information
to the other party whether such information is asked or not. There should
not be any fraud, non disclosure or misrepresentation of material facts.

Example – in case of life insurance, the insured must revel the true age

12
 A material fact means important facts which would influence the
judgment of the insurer in fixing the premium or deciding whether he
should accept the risk, on what terms. All material facts should be
disclosed in true and full form

2. Principle of Insurable Interest: This principle requires that the insured must
have a insurable interest in the subject matter of insurance. Insurance
interest means some pecuniary interest in the subject matter of contract of
insurance. Insurance interest is that interest, when the policy holders get
benefited by the existence of the subject matter and loss if there is death
or damage to the subject matter.

For example – In life insurance, a man cannot insured the life of a stranger as he
has no insurable interest in him but he can get insured the life of himself and
of persons in whose life he has a pecuniary interest. So in the life insurance
interest exists in the following cases:-

- Husband in the life of his wife and wife in the life of her husband

- Parents in the life of a child if there is pecuniary benefit derived from

the life of a Child````````````````````````````

- Creditor in the life of debtor

- Employer in the life of an employee

- Surety in the life of a principle debtor

In life insurance, insurable interest must be present at the time when the
policy is taken. In fire insurance, it must be present at the time of insurance and
at the time if loss if subject matter. In marine insurance, it must be present at the
time of loss of the subject matter.

• Principle of Indemnity : This principle is applicable in case of fire and

marine insurance only. It is not applicable in case of life, personal
accident and sickness insurance. A contract of indemnity means that the
insured in case of loss against which the policy has been insured, shall be
paid the actual cost of loss not exceeding the amount of the insurance

13
 policy. The purpose of contract of insurance is to place the insured in the
Benefits of Insurance or Role and Importance of Insurance

Benefit of insurance can be divided into these categories -

1. Benefits to Individual
2 Benefits to Business or Industry
3. Benefits to Society

1
. . Benefits to Individual

(a) Insurance provides security & safety : Insurance gives a sense of security to
the policy holder. Insurance provide security and safety against the loss
of earning at death or in old age, against the loss at fire, against the loss
at damage, destruction of property, goods, furniture etc.

Life insurance provides protection to the dependents in case of death

of policyholders and to the policyholder in old age. Fire insurance
insured the property against loss on a fire. Similarly other insurance
provide security against the loss by indemnifying to the extent of
actual loss.

(b) Encourage Savings : Life insurance is best form of saving. The insured
person must regularly save out of his current income an amount equal to the
premium to be paid otherwise his policy get lapsed if premium is not paid
roviding Investment Opportunity : Life insurance provide different policies in which
individual can invest smoothly and with security; like endowment policies,
deferred annuities etc. There is special exemption in the Income Tax, Wealth Tax
etc. regarding this type of investment

2 Benefits to Business or Industry

(a) Shifting of Risk : Insurance is a social device whereby businessmen shift

specific risks to the insurance company. This helps the businessmen to
concentrate more on important business issues.

(b) Assuring Expected Profits : An insured businessman or policyholder can

enjoy normal expected profits as he would not be required to make

14
CHAPTER 3 TYPES OF INSURANCE

3.1 DIFFERENT TYPES OF INSURANCE

15
16
Insurance cover various types of risks and include various insurance
policies which provide protection against various losses.

There are two different views regarding classification if insurance:-

1.From the business point

of view; and

II From the risk points

view
I. Business point of view

17
The insurance can be classified into three categories from business point of view

1. Life insurance;

2. General Insurance; and

3. Social Insurance.

1. Life Insurance: The life insurance contract provide elements of

protection and investment after getting insurance, the policyholder feels
a sense of protection because he shall be paid a definite sum at the death
or maturity. Since a definite sum must be paid, the element of investment
is also present. In other words, life insurance provides against pre-mature
death and a fixed sum at the maturity of policy. At present, life insurance
enjoys maximum scope because each and every person requires the
insurance.

Life insurance is a contract under which one person, in consideration

of a premium paid either in lump sum or by monthly, quarterly, half
yearly or yearly installments, undertakes to pay to the person (for
whose benefits the insurance is made), a certain sum of money either on
the death of the insured person or on the expiry of a specified period of
time.

Life insurance may be defined as a contract in which the insurer, in

consideration of a certain premium, either in a lump sum or by other
periodical payments, agrees to pay the assured, or to the person for
whose benefit the policy is taken, the assured sum of money, on the
happening of a specified event contingent on the human life. A
contract of life insurance, as in other forms of insurance, requires that
the assured must have at the time of the contract an insurable interest
in his life upon which the insurance is affected. In a contract of life
insurance, unlike other insurance, interest has only to be proved at the
date of the contract, and not necessarily present at the time when the
policy falls due. A person can assure in his own life and every part of it,
18
and can insure for any sum whatsoever, as he likes. Similarly, a wife

19
Endowment Policies with Health Insurance benefits

2. General Insurance: The general insurance includes property

insurance, liability insurance and other form of insurance.
Property insurance includes fire and marine insurance. Property
of the individual and business involves various risks like fire,
theft etc. This need insurance Liability insurance includes motor,
theft, fidelity and machine insurance.
Insurance other than ‘Life Insurance’ falls under the
category of General Insurance. General Insurance
comprises of insurance of property against fire, burglary etc,
personal insurance such as Accident and Health Insurance,
and liability insurance which covers legal liabilities. There
are also other covers such as Errors and Omissions insurance
for professionals, credit insurance etc. Non-life insurance
companies have products that cover property against Fire
and allied perils, flood storm and inundation, earthquake and
so on. There are products that cover property against
burglary, theft etc. The non-life companies also offer
policies covering machinery against breakdown, there are
policies that cover the hull of ships and so on. A Marine
Cargo policy covers goods in transit including by sea, air
and road. Further, insurance of motor vehicles against
damages and theft forms a major chunk of non-life
insurance business. Personal insurance covers include
policies for Accident, Health etc. Products offering Personal
Accident cover are benefit policies. Health insurance covers
offered by non-life insurers are mainly hospitalization
covers either on reimbursement or cashless basis. The
cashless service is offered through Third Party
20
3. Social Insurance: Social insurance provide protection to the
weaker sections of the society who are unable to pay the
premium. It includes pension plans, disability benefits,
unemployment benefits, sickness insurance and industrial
insurance.

attack by enemies, fire etc. Marine insurance insures ship,

cargo and freight.

The following kinds of marine policies are -

- Voyage policy

- Time policy

- Valued policy

- Hull Policy

- Cargo Policy

- Freight Policy

(ii) Miscellaneous Insurance: It includes various forms of

insurance dincluding property insurance, liability insurance,
personal injuries are also insured. The property, goods,
machine, furniture, automobile, valuable goods etc. can be
insured against the damage or destruction due to accident or
disappearance due to theft.

Miscellaneous insurance covers

21
 1. Liability Insurance: The insurer is liable top pay the damage of the
property or to compensate the loss of personal injury or death. It
includes fidelity insurance, automobile insurance and machine
insurance.

The following are types of liability Insurance:-

- Third party insurance

- Employees insurance

- Reinsurance

2. Other forms of Insurance: It include export credit insurance, state

employee insurance etc. whereby the insurer guarantees to pay
certain amount at the happening of certain events.

The following are other form of Insurance-

- Fidelity Insurance

- Credit Insurance

- Privilege Insurance

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 Marine Insurance :

A contract of marine insurance is an agreement whereby

the insurer undertakes to indemnity the assured in a manner
and to the extent thereby agreed, against marine losses, that
is, the losses incidental to marine adventure. There is a
marine adventure when any insurable property is exposed
to marine perils. Marine perils also known as perils of the
seas, means the perils consequent on, or incidental to, the
navigation of the sea or the perils of the seas, such as fire,
war perils, pirates, robbers, thieves; captures, jettisons,
barratry and any other perils which are either of the like kind
or may be designed by the policy. There are different types
of marine policies known by different names according to
the manner of their execution or the risk they cover. They
are : voyage policy, time policy, valued policy, unvalued
policy, floating policy, wager or honour policy. Marine
insurance provides protection against loss of marine perils.
The marine perils are collision with rock, or ship attacks by
enemies, fire and capture by pirates etc. These perils cause
damage, destruction or disappearance of the ship and cargo
and non-payment of freight. So, marine insurance insures
ship (Hull), cargo and freight.

Types of policies are: Voyage policies Time policies

Valued policies Hull insurance Cargo insurance
Freight insurance
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Miscellaneous Insurance :

The process of fast development in the society gave

rise to a number of risk or hazards. To provide security
against such hazards, many other types of insurance also
have been developed. The important among them are i.
Vehicle insurance on buses, cars, trucks, motorcycles, etc.
and made compulsory so that the losses due to accidents
can be claimed from the insurance company. ii. Personal
accident insurance by paying an annual premium Rs.12 on
policy

24
 EVOLUTION OF INSURANCE ORGANIZATION:
With a view to serve the society, the insurance organizations have
been developed in different forms with innovation of insurance practice
for social welfare and development; some of these forms are outlined
here. Self-insurance The arrangement in which an individual or
concern sets up a private fund to meet the future risk. If some losses
happened in the future the firm meets the loss out of the fund. While it
may be called ‘self-insurance’ it is not a single matter of fact, insurance
at all because there is no hedge, no shifting, or distributing the burden of
risk among larger Persons. It is merely a provision to meeting the
unforeseen event. Here the insured become the insurer for the particular
risk. But it can be effectively worked only when there is wide distribution
of risks subjected the same hazard. Partnership A Partnership Firm
may also carry on the insurance business for the sake of profit. Since it
is not an entity distinct from the persons comprising it, the personal
liability of partners in respect to the partnership debts is unlimited. In case
of huge loss the partners may have to pay from their own personal funds
and it will not be profitable to them to starts insurance business .in the
early period before
the advent of joint stock companies many insuranc e
undertakings were partnership firms or unincorporated
companies Joint stock companies

The joint stock companies are those, which are organized by the
shareholders who subscribe the necessary capital to start the business.
These are formed for earning profits for the stockholders who are the
real owners of the companies. The management of a company is
entrusted to a board of directors who is elected by the shareholders from
amongst themselves. The company can operate insurance business and
policyholders have nothing to
25
 insured receives money on survival of the term and is not covered
thereafter. Money back policies Money back policies the nominee
receives money immediately on death of the insured. On survival the
insured receives money at regular intervals during the term. These
policies cost more than endowment with profit policies. Annuities /
Children's policies Annuities / Children's policies the nominee receives
a guaranteed amount of money at a pre- determined time and not
immediately on death of the insured. On survival the insured receives
money at the same pre-determined time.

These policies are best suited for planning children's future

education and marriage costs. Pension schemes Pension schemes are
policies that provide benefits to the insured only upon retirement. If the
insured dies during the term of the policy, his nominee would receive
the benefits either as a lump sum or as a pension every month. Since a
single policy cannot meet all the insurance objectives, one should have a
portfolio of policies covering all the needs

26
EVOLUTION OF INSURANCE ORGANIZATION:
With a view to serve the society, the insurance organizations
have been developed in different forms with innovation of insurance
practice for social welfare and development; some of these forms
are outlined here.  Self-insurance The arrangement in which an
individual or concern sets up a private fund to meet the future risk.
If some losses happened in the future the firm meets the loss out of
the fund. While it may be called ‘self-insurance’ it is not a single
matter of fact, insurance at all because there is no hedge, no shifting,
or distributing the burden of risk among larger Persons. It is merely
a provision to meeting the unforeseen event. Here the insured
become the insurer for the particular risk. But it can be effectively
worked only when there is wide distribution of risks subjected the
same hazard.  Partnership A Partnership Firm may also carry on
the insurance business for the sake of profit. Since it is not an entity
distinct from the persons comprising it, the personal liability of
partners in respect to the partnership debts is unlimited. In case of
huge loss the partners may have to pay from their own personal
funds and it will not be profitable to them to starts insurance
business .in the early period before
the advent of joint stock companies many insuranc e
undertakings were partnership firms or unincorporated
companies  Joint stock companies .

The joint stock companies are those, which are organized by

the shareholders who subscribe the necessary capital to start the
business. These are formed for earning profits for the

27
stockholders who are the real owners of the companies. The
management of a company is entrusted to a board of directors who

INSURANCE SECTOR REFORM

Having looked at the insurance sector, the efforts made

by the government to make the industry more dynamic and
customer friendly. To begin with, the Malhotra committee was set
up with the objective of suggesting changes that would achieve the
much required dynamism. The Malhotra Committee Report In 1993,
Malhotra Committee, headed by former Finance Secretary and RBI
Governor

R. N. Malhotra, was formed to evaluate the Indian insurance

industry and recommend its future direction. In 1994, the
committee submitted the report and gave the following
recommendations: Structure Government stake in the insurance
Companies to be brought down to 50%Government should take
over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations all the insurance
companies should be given greater freedom to operate.

Competition Private Companies with a minimum paid up capital of

Rs.1bn should be allowed to enter the industry No Company should
deal in both Life and General Insurance through a single entity
Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies. Postal Life Insurance
should be allowed to operate in the rural market. Only one State
Level Life Insurance Company should be allowed to operate in
28
each state Regulatory Body The Insurance.

Act should be changed. An Insurance Regulatory body should be

set up. Controller of Insurance (Currently a part from the Finance
Ministry) Investments Mandatory Investments of LIC Life Fund in
government securities to be reduced from75% to 50%.GIC and its
subsidiaries are not to hold more than 5%

29
in any company (There current holdings to be brought down to this
level over a period of time) According to the insurance amendment
bill (2015), the section 24 of the Pension Fund Regulatory and
Development Authority ( PFRDA) Act provides that the foreign
investment limit in the pension sector will be linked with the ceiling
in the insurance sector, which has gone up to 49% from 26%. Under
the legislation, while up to 26 per cent foreign capital will be under
the automatic route, the balance 23 per cent has to secure approval
from the Foreign Investment Promotion Board (FIPB).According to
the General Insurance Business (Nationalization) Act, 1972
(GIBNA, 1972) the four general insurance companies (GICs) had to
be 100% government owned, however The Insurance Laws
(Amendment) Bill, 2015 - passed by the RajyaSabha on March 12
and by the LokSabha. The GICs "are now allowed to raise capital,
keeping in view the need for expansion of the business in the rural
and social sectors, meeting the solvency margin for this purpose and
achieving enhanced competitiveness subject to the government
equity not being less than 51% at any point of time. The amendment
also clearly defines health insurance business to include travel and
personal accident cover. It is also expected that the proposed
increase in the FDI limit will have a follow on impact on other
sectors, including the pension industry creating further momentum.
Customer Service LIC should pay interest on delays in payments
beyond 30 days. Insurance companies must be encouraged to set up
unit linked pension plans. Computerization of operations and
updating of technology to be carried out in the insurance industry.
Overall, the committee strongly felt that in order to improve the
customer services and increase the coverage of the insurance
industry should be opened up to competition. But at the same time,
the committee felt the need to exercise caution as any failure on the
30
part of new players could ruin the public confidence in the industry.
Few Life Insurance policies are: Whole life policies Whole life
policies cover the insured for life. The insured does not receive
money while he is alive; the nominee receives the sum assured plus
bonus upon death of the insured. Money back policies Money back
policies cover the insured for a specific period
insured receives money on survival of the term and is not
covered thereafter. Money back policies Money back policies the
nominee receives money immediately on death of the insured. On
survival the insured receives money at regular intervals during the
term. These policies cost more than endowment with profit
policies. Annuities / Children's policies Annuities / Children's
policies the nominee receives a guaranteed amount of money at a
pre- determined time and not immediately on death of the insured.
On survival the insured receives money at the same pre-determined
time. These policies are best suited for planning children's future
education and marriage costs. Pension schemes Pension schemes
are policies that provide benefits to the insured only upon
retirement. If the insured dies during the term of the policy, his
nominee would receive the benefits either as a lump sum or as a
pension every month. Since a single policy cannot meet all the
insurance objectives, one should have a portfolio of policies
covering all the needs

31
INSURANCE COMPANIES IN INDIA
There are many Life Insurance Companies like:
 LIFE INSURANCE CORPORATION OF INDIA
 BAJAJ ALLIANCE LIFE INSURANCE COMPANY
 ICICI PRUDENTIAL LIFE INSURANCE COMPANY
 HDFC STANDARD LIFE INSURANCE COMPANY
 BIRLA SUN LIFE INSURANCE COMPANY
 ING VYSYA LIFE INSURANCE COMPANY
 METLIFE INSURANCE COMPANY
 TATA AIG LIFE INSURANCE COMPANY
 MAX NEWYORK LIFE INSURANCE COMPANY
 KOTAK MAHINDRA LIFE INSURANCE COMPANY

32
Insurance is considered as one of the important segment of the economy for
its growth and development. This industry provides long term funds
which are essential for the growth and development of the nation .so the
growth of insurance industry largely depends up on the environment in
which they exists. Here I would like to mention about Indian business
environment and their impact on insurance sector. There are two type of
environment which affect the business one is environment which is
internal to the organization (internal environment) and the other one which is
external to the organization (external environment). Internal environment
includes management, technology, competitors, employees, shareholders,
policyholders, marketing intermediary, etc. The external environment of
insurance business has been classified in four parts, namely legal,
economic, financial, and commercial. Let us discus them in detail by taking
one by one

33
THE INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY (IRDA):

The Malhotra Committee felt the need to provide greater autonomy to

insurance companies in order to improve their performance and enable them to
act as independent companies with
Economic motives. For this purpose, it had proposed setting up an
independent regulatory body- The Insurance Regulatory and
Development Authority. Based on the Malhotra committee report in
April 2000 IRDA was incorporated. Since being set up as an independent
statutory body the IRDA has put in a framework of globall y compatible
regulations. Section 14 of the IRDA Act 1999, lays the duties, power and
functions of the authority .the authority shall have the duty to regulate,
promote and ensure orderly growth of the insurance business and
reinsurance business. Reforms and Implications: The liberalizations of
the Indian insurance

34
 Sector has been the subject of much heated debate for
some years. The sector is finally set to open up to private competition.
The Insurance Regulatory and Development Authority bill will clear the
way for private entry into insurance, as the government is keen to invite
private sector participation into insurance. To address those concerns, the
bill requires direct insurers to have a minimum paid- up capital of Rest. 1
billion, to invest policyholder’s funds only in India; and to restrict
international companies to a minority equity holding of 26 percent in any
new company.
Indian Promoters will also have to dilute their equity holding
to 26 percent over a 10-year period. Over the past three year, around 30
companies have expressed interest in entering the sector and many
foreign and Indian companies have arranged alliances. Whether the
insurer is old or new, private or public, expanding the market will present
challenges. A number of foreign Insurance Companies have set up
representative offices in India and have also tied up with various asset
management companies. Some of the Indian companies, which have tied
up with International partners, are Indian Partners International Partners
Bombay Dyeing General Accident, UK Tata American Int. Group, US
Dabur Group Liberty Mutual Funds, US ICICI Prudential, UK Sundaram
Finance Winterthur Insurance, Switzerland Hindustan Times Commercial
Union, UK Ranbaxy Cigna, US HDFC Standard Life, UK CK Birla Group
Zurich Insurance, Switzerland DCM Shriram Royal Sun Alliance, UK
Godrej J Rothschild, UK M A Chidambaram Met Life Cholamandalam
Guardian Royal Exchange, UK SK Modi Group Legal and General,
Australia 20th Century Finance Canada Life Alpic Finance Allianz
Holding, Germany Vysya Bank ING The likely impact of opening up of
India’s insurance sector is that private players may swamp the market.
International insurers often derive a significant part of their business
from multinational operations. Multinational insurers are indeed keenly
interested as; perhaps there home markets are saturated while emerging
countries have low insurance penetration and high growth rates.

35
 Auto Insurance:

Auto insurance is mandatory for all new vehicles, be it for commercial or personal use. Insurance Companies
are coming out with comprehensive policies for its customers. They are also tying up with leading automobile
manufacturers for a swift insurance process. An automobile may be insured against loss or damage by accident,
fire, burglary, while in transit, third party accident etc. Auto insurance companies come out with unique plans
for four wheelers, two wheelers, commercial vehicles.

Types Of Auto Insurance Available:

 Two Wheeler Insurance

 Car Insurance

 Commercial Vehicle Insurance

36
 Two Wheeler Insurance:

Two wheeler insurance provides a kind of personal accidental cover for owners, while driving
the vehicle. The policy generally provides protection from any loss or damage to the vehicle arising out
of natural calamity like fire, protection against third party injury, burglary etc. The amount insured will
depend on the current showroom price multiplied by the depreciation rate fixed by the Tariff Advisory
Committee at the time of commencement of policy period. Fast and easy claim process by most
insurance companies will ensure existing customer loyalty and widen the customer base.

List of Some of Insurance Companies Offering Two Wheeler Ins

37
CAR INSURANCES :-

Car Insurance is the fastest growing segment in the auto insurance category. This is
because insuring car is mandatory for everyone buying a new car. Major car manufacturers are
tying up with leading insurance companies to provide hassle free and quick insurance. Car
insurance includes loss or damage by accident, third party insurance, insurance against
burglary etc The amount of premium will depend on the make and value of the car, state where
the car is registered, year of manufacture etc. Insurance companies are trying hard to make
the claim process simpler and quicker to widen the existing customer base. erms and conditions
may vary in different insurance companies

38
 Commercial vehicle Insurance:

Commercial Vehicle Insurance covers all vehicles not used for personal purpose.
Trucks and HMVs are covered under this insurance. The insurance protects against damage
caused due to accident, third party injury, protection against natural calamity ,burglary etc.
The premium amount depends on a number off actors like showroom price of the vehicle at
the commencement of the insurance period, make of the vehicle, place of registration of the
vehicle etc. Fast and easy claim processing by leading insurance companies is the key to
ensure satisfied and loyal.

39
 Commercial insurance:

Organizations need to reduce both internal and external risks .They also require to
safeguard their business against unforeseen circumstances/events. Insurance companies are
catering to small ,medium and large scale companies to minimize their risk. Good Insurance
advice can save you time, money and worry. Leading insurance companies are coming out
with 'Commercial Insurance Questionnaire' to ascertain the insurance needs of your
commercial. Insurance companies undertake complex procedure to evaluate and review the
impact of any change in commercial

 Calculation of Commercial Insurance Amount/Premium:

Insurance companies keep quite a few factors in mind while calculating the premium
amount to be paid by the client. Nature of business, size of the organization, number of
employees, the type of industry, the organization is a part of, annual turnover of business etc.
The premium is paid on a monthly/quarterly/half yearly/ yearly basis, as the case may be.
Companies also provide with instant commercial insurance quotes for the ease of their
customers.

40
Types of Commercial Insurance:

 Agriculture Insurance
 Life Insurance
 Fire Insurance
 Industrial Insurance
 Marine Insurance
 Shop Insurance

1. Agriculture Insurance

India is an agrarian society with 75% of the population depending on it, for their
livelihood. Agriculture or crop insurance has assumed importance with large scale damage
caused due to pest attacks, crop diseases and vagaries of weather. The objective is to
provide insurance coverage and financial support to the far mers in the event of failure of any
of the notified crop as a result of natural calamities, pests & diseases. The list of crops being
covered for insurance differs from state to state. Generally quite a few Kharif and Rabi
season crops are covered. These crops are insured at the community/block/gram panchayat
levels .Agriculture insurance schemes are of immense help to farmers,
providing them with financial security.L

41
2. Life insurance

Whole life insurance Whole life is a form of permanent insurance, with

guaranteed rates and guaranteed cash values. It is the least flexible form of
permanent insurance. Universal life insurance Universal life is similar to whole life,
except that you can change the death benefit (the money paid to the beneficiary when
the insured person dies), the amount of premiums and how often you pay the
premiums. Variable life insurance Variable life insurance is the riskiest form of
permanent insurance, but it can also give you the best return for your money.
Essentially, the life insurance company will invest your insurance premiums for
you. If the investments do well, the death benefit and cash value of the policy go up. If
they do poorly, they go down. It's a little like putting your savings into the stock
market. Group life insurance Many companies allow their employees to buy group life
insurance through the company. Usually, you can get very good rates for this
insurance but you have to give the insurance up 41 when you stop working there. For
that reason, group insurance can be a good way to buy a little extra life insurance, but it
does not make sense to make it your main policy There are a number of policies for
specific insurance needs.
Some of these include: Family income life insurance This is a decreasing term
policy that provides a stated income for a fixed period of time, if the insured person
dies during the term of coverage. These payments continue until the end of a time
period specified when the policy is purchased. Family insurance A whole life policy
that insures all the members of an immediate family --husband, wife and children.
Usually the coverage is sold in units per person, with the primary wage-earner
insured for the greatest amount. Senior life insurance Also known as graded death
benefit plans, they provide for a graded amount to be paid to the beneficiary.

42
 example, in each of the first three to five years after the insured dies, the death
benefit slowly increases. After that period, the entire death benefit is paid to the
beneficiary. This might be appropriate if the beneficiary is not able to handle a large
amount of money soon after the death, but would be in a better position to handle it a few
years later. Juvenile insurance This is life insurance on a child. Coverage is paid for by
an adult, usually the parents or guardians.

Such policies are not considered traditional life insurance because the child is
not producing an income that needs to be protected. However, by buying the policy
when the child is young, the parents are able to lock in an extremely low premium rate and
allow many more years of tax-deferred cash value build-up Credit life insurance This
insurance is designed to pay off the balance of a loan if you die before you have repaid it.
Credit life insurance is available for many kinds of loans including student loans,
auto loans, farm equipment loans, furniture and other personal loans including credit
cards.

Credit life insurance can be purchased by an individual. Usually it is sold by

financial institutions making loans, like banks, to borrowers at the time they take out the
loan. If a borrower dies, the proceeds of the policy repay the loan directly to the lender
or creditor. Mortgage insurance This decreasing term coverage is designed to pay
off the unpaid balance of a mortgage if you die before the mortgage is paid off.
Premiums are generally level throughout the term of the policy.

The policy is usually independent of the mortgage, meaning that the financial
institution granting the mortgage is separate from the insurance company issuing the
policy. The proceeds of the policy are paid to the beneficiaries of the policy, not the
mortgage company. The beneficiary is not required to use the proceeds to pay off the
mortgage. Annuity An annuity is a form of insurance that enables you to save for your
retirement. Basically, you give the insurance company money for a certain period of
time, and then after you reti ent forms of annuities.re they will pay you a certain amount
of money every year until you die. There are many differ

43
3. Fire insurance:

Fire Insurance is governed by All India Fire Tariff effective from31.3.2001 issued by Tariff Advisory
Committee, a Statutory Body.It is a commercial policy covering building, offices, machinery,contents
and personal belongings of the office. It mitigates therisk of loss of customers arising from fire
breakout. The insuredshould take all possible steps to minimize the loss.

44
 4. Industrial Insurance:

industrial insurance is a comprehensive policy covering a gamutof products. This is a specially designed
policy covering any kindof loss or damage caused to the products it covers. Insurance is a financial
topic of paramount importance for every individual. Insurance is designed to protect the
financial well-being of you and your dependents in the case of unexpected loss. Some forms
of insurance are required by law, while others are optional. Agreeing to the terms of an
insurance policy creates a contract between you and the insurance company. In exchange for
payments from you (called premiums), the insurance company agrees to pay you a sum of
money upon the occurrence of a specific event. That event may be as mundane as a visit to
the doctor or as serious as a car crash, depending on the type of insurance.

Industrial Insurance Claim Process:

Insured should inform the insurer's office by phone, letter or fax
Necessary steps should be taken to minimise the loss
Obtain estimate of repair from repairer of your choice
The claim process takes anywhere between one to three weeks.
Submit this repair estimate and claim form to the surveyor
deputed by the insurance company
After getting clearance from the surveyor, proceed for repairing
machine or ordering for replacement as the case may be

45
 Marine Insurance:

Marine insurance falls under commercial insurance. The policy is

taken to reduce business risks. It caters to small scale business
organisations to large corporates. Policy does not cover loss or
damage due to willful misconduct, ordinary leakage, improper
packing, delay, war, strike, riot and civil commotion.

Marine Insurance Claim Procedure:

In case of loss/damage in transit, a monetary claim should be
lodged with the carrier within the time limit to protect recoveryrights
Appointment of surveyor or claim representative in agreement
with the insurer to determine the nature, cause and extent ofloss/damage
The surveyor informs the insurer of the approximate value of los

46
Shop Insurance:

Shop Insurance is specially designed to meet the needs of smallshopkeepers. It is a comprehensive

insurance, catering todifferent insurance needs of shopkeepers. One policy per shop is
generally given by insurers. It covers damage/ loss to shop due tofire, burglary, riot, strike, loss of money
in transit, fraud committedby client's employees etc. The policy is meant for shops only,
hence restaurants and tea /coffee shops cannot be insured underthis insurance policy.

Documents Required for Shop Insurance :

Copy of FIR in case of theft
List of articles loss/damage
Proof of ownership of shop
Claim form

47
PROFILE OF THE ORGANISATIONS:

Insurance Regulatory and Development Authority of India

(IRDAI): Insurance Regulatory and Development Authority of
India (IRDAI) is an autonomous apex statutory body which
regulates and develops the insurance industry in India. It was
constituted by a Parliament of India act called Insurance Regulatory
and Development Authority Act, 1999 and duly passed by the
Government of India.[4] The agency operates from its headquarters
at Hyderabad, Telangana where it shifted from Delhi in 2001. IRDA
batted for a hike in the foreign direct investment (FDI) limit to 49 per
cent in the insurance sector from the erstwhile 26 per cent.[6] The FDI
limit in insurance sector was raised to 49% in July 2014. MISSION
STATEMENT OF THE AUTHORITY:

To protect the interest of and secure fair treatment to

policyholders; To bring about speedy and orderly growth of the
insurance industry (including annuity and superannuation
payments), for the benefit of the common man, and to provide long
48
term funds for accelerating growth of the economy; To set,
promote, monitor and enforce high standards of integrity, financial
soundness, fair dealing and competence of those it regulates; To
ensure speedy settlement of genuine claims, to prevent insurance
frauds and other malpractices and put in place effective grievance
redressal machinery;

To promote fairness, transparency and orderly conduct in

financial markets dealing with insurance and build a reliable
management information system to enforce high standards of
financial soundness amongst market players; To take action
where such standards are inadequate or ineffectively enforced;
To take action where such standards are inadequate or ineffectively
enforced;

49
 LIFE INSURANCE CORPORATION OF INDIA
Life Insurance Corporation of India was formed in September
1956 by passing LICAct, 1956 in Indian parliament. On the
nationalization of the life insurance in 1956, the premium rating of
Oriental Government security life Assurance company were adopted
by LIC with a reduction of 5% of the tabular premium or Re. 1 per
thousand sum assured, whichever was less. This reduction was
made in anticipation of economies of scale that would emerge on
the merger of different insurers in a single entity. Life Insurance
Corporation Of India - there are many things to consider as Life
Insurance Corporation of India offers various insurance products
which are very complex, but underlying this complexity is a simple
fact. The building blocks for all Life Insurance Corporation of India
are (1) investment return; (2) mortality experience; and (3) expense
management; for your Life Insurance Corporation Of India.
Objectives of LIC

Spread Life Insurance much more widely and in particular to the

rural areas and to the socially and economically backward classes with
a view to reaching all insurable persons in the country and providing
them adequate financial cover against death at a reasonable cost.
Maximize mobilization of people's savings by making insurance-linked
savings adequately attractive. Bear in mind, in the investment of
funds, the primary obligation to its policyholders, whose money it holds
in trust, without losing sight of the interest of the community as a whole;
the funds to be deployed to the best advantage of the investors as well
as the community as a whole, keeping in view national priorities and
obligations of attractive return. Conduct business with utmost
economy and with the full realization that the moneys belong to the
policyholders. Act as trustees of the insured public in their individual

50
 and collective capacities. Meet the various life insurance needs of
the community that would arise in the changing social and economic environment.
Involve all people working in the Corporation to the best of their capability in
furthering the interests of the insured public by providing efficient service with
courtesy. Promote amongst all agents and employees of the

Corporation a sense of participation, pride and job satisfaction through discharge of

their duties with dedication t owards achievement of Corporate Objective VISION:
"A trans-nationally competitive financial conglomerate of significance to societies
and Pride of India “ MISSION: "Explore and enhance the quality of life of people
through financial security by providing products and services of aspired attributes
with competitive returns, and by rendering resources for economic development”
Various policies offered by life insurance corporation of India are 1. Whole Life
Schemes Whole life with profit Limited payment whole life Single Premium
whole life Convertible whole life plan 2. Endowment Schemes Endowment plan
with profit Limited payment Endowment JeevanMitra (Double Cover)
JeevanMitra (Triple cover) BhavishyaJeevan JeevanAnand New Jana

Raksha 3. Term Assurance Plan Every father desires to see that his children are
well settled in life through sound education, leading to good jobs and happy marriage.
These needs arise at ages which can be approximately anticipated. Say when the
children are between 18 to 25 year of age.

51
 offer group retirement schemes. Additionally, the company's group
management division focuses on providing employee benefit solutions. PRODUCTS
The product range of TATA-AIG Life is wide-spread across different segments.
Some of the products are mentioned below.

 Maha life
 Invest Assure
 Health Protector
 Star Kid
 Shubh Life

 Nirvana
 Nirvana Plus

 Money Saver Plan

 Health First
 Assure Golden Life
 Assure 10, 20, 30 years

 Security and Growth

 Assure Educate at 18, 21

 Assure Career Builder Plan at 27
 Assure Golden Years Plan
 Assure 21 Money Saver Plan
 Assure 1/5/10/15/20/25 years/ to age lifelines

 TROP

People who buy policy from TATA AIG that people give highest rank to their insurance
company.TATA AIG have 40% share of their rank. HDFC STANDARD LIFE
INSURANCE: The Partnership: HDFC and Standard Life first came together for a possible
joint venture, to enter the Life Insurance market

52
in January 1995. It was clear from the outset that both companies shared
similar values and beliefs and a strong relationship quickly formed. In
October 1995 the companies signed a 3 year joint venture agreement.
Around this time Standard Life purchased a 5% stake in HDFC, further
strengthening the relationship. The next three years were filled with
uncertainty, due to changes in government and on-going delays in getting the
IRDA (Insurance Regulatory and Development authority) Act passed in
parliament. Despite this both companies remained firmly committed to the
venture. In October 1998, the joint venture agreement was renewed and
additional resource made available. Around this time Standard Life purchased
2% of Infrastructure Development Finance Company Ltd. (IDFC).
Standard Life also started to use the services of the HDFC Treasury department to
advise them upon their investments in India.

Towards the end of 1999, the opening of the market looked very promising and
both companies agreed the time was right to move the operation to the next level.
Therefore, in January 2000 an expert team from the UK joined a handpicked team
from HDFC to form the core project team, based in Mumbai. Around this time
Standard Life purchased a further 5% stake in HDFC and a 5% stake in HDFC
Bank. In a further development Standard Life agreed to participate in the Asset
Management Company promoted by HDFC to enter the mutual fund market. The
Mutual Fund was launched on 20th July 2000. Incorporation of HDFC
Standard Life Insurance Company Limited: The company was incorporated on
14th August 2000 under the name of HDFC Standard Life Insurance Company
Limited.
Companies ambition from as far back as October 1995, was to be the first private
company to re-enter the life insurance market in India. On the23rd of October
2000, this ambition was realized when HDFC Standard Life was the only life
company to be granted a certificate of registration. HDFC are the main
shareholders in HDFC Standard Life, with 81.4%, while Standard Life owns
18.6%. Given Standard Life’s existing investment in the HDFC Group, this is
the maximum investment allowed

53
under current regulations. HDFC and Standard Life have a long and close
relationship built upon shared values and trust. The ambition of HDFC Standard Life
is to mirror the success of the parent companies and be the yardstick by which all
other insurance company’s in India are measured. Products offered by the company
are:
INDIVIDUAL PLAN:

 With Profit EndowmentAssurance

 With Profits MoneyBack

 Single Premium Whole of Life 56

Term assurance Plan Loan Cover Term Assurance Personal Pension Plan
Children’s Plan GROUP PLANS: Group Term Insurance Development Insurance
Plan 57
58. ICICI PRUDENTIAL LIFE INSURANCE COMPANY: ICICI Prudential Life

Insurance Company is a joint venture between ICICI Bank, a premier financial

powerhouse, and prudential plc, a leading international financial services group
headquartered in the United Kingdom. ICICI Prudential was amongst the first private
sector insurance companies to begin operations in December 2000 after receiving
approval from Insurance Regulatory Development Authority (IRDA).ICICI
Prudential’s equity base stands at Rs. 925 crore with ICICI Bank and Prudential plc.
holding 74% and 26% stake respectively. In the quarter ended June 30, 2005, the
company garnered Rs 335 crore of new business premium for a total sum assured of Rs
2,619 crore and wrote 111,522 policies. For the past four years, ICICI Prudential has
retained its position as the No. 1 private life insurer in the country, with a wide range of
flexible products that meet the needs of the Indian customer at every step in life.
Products offered by ICICI Prudential are 1.Savings Plan 58
59. Smart kid Life Time Save ‘n’ Protect Cash Back 2. Protection plan

Life Guard Extra Protection Through Riders 3. Retirement Plans Forever Life

Life link pension Life time pension Reassure 4. Investment Plans Assure

54
Invest Life Link 5. Group plans Group Superannuation Group Gratuity

Group Term Assurance59

60. KOTAK MAHINDRA LIFE INSURANCE COMPANY: Established in 1985 as

Kotak Capital Management Finance promoted by Uday Kotak the company has come
a long way since its entry into corporate finance. It has dabbled in leasing, auto
finance, hire purchase, investment banking, consumer finance, broking etc. The
company got its name Kotak Mahindra as industrialists Harish Mahindra and Anand
Mahindra picked a stake in the company. Kotak Mahindra is today one of India's leading
Financial Institutions Old Mutual plc is an international financial services group based
in London with expanding operations in life assurance, asset management, banking and
general insurance. Old Mutual is 60

61. MARKET SIZE OF INSURANCE INDUSTRY Government's policy of insuring

the uninsured has gradually pushed insurance penetration in the country and
proliferation of insurance schemes are expected to catapult this key ratio beyond 4 per
cent mark by the end of this year, reveals the ASSOCHAM latest paper. The number
of lives covered under Health Insurance policies during 2015-16 was 36 crore which
is approximately 30 per cent of India's total population. The number has seen an
increase every subsequent year as 28.80 crore people had the policy in the previous
fiscal. During April 2015 to March 2016 period, the life insurance industry recorded a
new premium income of Rs 1.38 trillion (US$ 20.54 billion),

55
indicating a growth rate of 22.5 per cent. The general insurance industry recorded a 12 per
cent growth in Gross Direct Premium underwritten in April 2016 at Rs
105.25 billion (US$ 1.55 billion). The life insurance industry reported 9 per cent increase
in overall annual premium equivalent in April-November 2016. In the period, overall
annual premium equivalent (APE)- a measure to normalise policy premium into the
equivalent of regular annual premium- including individual and group business for private
players was up 16 per cent to Rs 1,25,563 crore
(US$ 18.76 billion) and Life Insurance Corporation up 4 per cent to Rs 1,50,456 crore
(US$ 22.48). India’s life insurance sector is the biggest in the world with about 360
million policies which are expected to increase at a Compound Annual Growth Rate
(CAGR) of 12-15 per cent over the next five years. The insurance industry plans to
hike penetration levels to five per cent by 2020. 62
62. The country’s insurance market is expected to quadruple in size over the next 10
years from its current size of US$ 60 billion. During this period, the life insurance market
is slated to cross US$ 160 billion. The general insurance business in India is currently
at Rs 78,000 crore (US$ 11.44 billion) premium per annum industry and is growing at a
healthy rate of 17 per cent. The Indian insurance market is a huge business opportunity
waiting to be harnessed. India currently accounts for less than 1.5 per cent of the
world’s total insurance premiums and about 2 per cent of the world’s life insurance
premiums despite being the second most populous nation. The country is the fifteenth
largest insurance market in the world in terms of premium volume, and has the
potential to grow exponentially in the coming years. CHALLENGES AND
OPPORTUNITIES IN INSURANCE INDUSTRY The wide
range of economic reforms were initiated in the year 1991 through the advent of LPG,
which not only brought forth drastic changes in their functional set up of a country but
also in the structure of insurance sector, routed through the examination carried out by
Malhotra Committee. The recommendations of the committee are mainly fostered to
open up the sector for the players. The objectives of the committee were implemented in
the later part of the year 2000 under the

56
able leadership of Insurance Regulatory Development Authority of India. These new
insurance companies started operating from metros and urban areas. The urban
population got more attention and it led to good insurance penetration in urban areas
as compared to the rural markets. Hence, the rural people didn’t have a chance to learn
more about insurance. The major challenges which have to be channelized for the
growth of insurance sector are the major challenges: Cut Threat Competition:
Liberalization will create acute competition in the insurance market. Fierce
competition to increase volume and market share will continue as more and more
players join the race for the greater Indian insurance. 63

63. Customer Relationship Management: Customer behavior will be influenced

by environmental factors as well as intrinsic personal aspirations. The
environmental factors are socio economic and demographic factors, inputs of
insurance advisors, the company’s efforts to manage customer satisfaction and
experience. Distribution of Products: Segmentation of markets, selling segment
oriented products, focusing on fuller satisfaction of customer’s aspiration misstates
multiple distribution net works. While the traditional channel of tied up agents or
advisors would be the most important distribution channel, insurers should
innovate and find new methods of delivering products to customers. Risk
Management: With the environment changes in the economic scenario of the
country the risk landscape has undergone significant changes. With the opening up of
economy and the entry of MNC in almost all sectors, there has been a surge in the
income levels, especially in the middle class.
64. The globalization has also resulted in cultural exchanges more than in the past.
Untapped Market Segments: It is important to increase the customer base in semi-
urban and rural areas which offer a huge potential. The fact that a major chunk of
business for LIC comes from these areas stand as a testimony to this indisputable fact.
There are difficulties in approaching this segment which will take us back issues of
customer education.
Relationship Management: The relationship management of insurance companies

is mainly trapped by individuals as well as corporate agent. The relationship of the

57
 clients should be ever maintained, but the mistakes of the agent are the major causes in
the relationship management. Human Resource Management: 64
65. The insurance market is now filled with players, who are mature, globally
prominent and big players in the Trans Nationally competitive global competitive
insurance market. Each of them has ability to influence the market. The human
resource competency will be another big challenge. Managing the Regulatory
Authority: As the competition acute, the customer becomes more vulnerable to the
vagaries on market environment. The regulators have a duel responsibility. They has
to ensure that the insure adhere to sound insurance principles and practices as well as
maintain adequate financial resources to meet their liabilities

Promote Awareness: It is necessary to promote more awareness among public about

insurance. Because the level of insurance penetration is very low Customer needs a
good deal of customer education in which the insures have to invest a lot of their
resources in terms of time, effort, infrastructure and money. Though a know ledged
customer is a challenge for the company to convince and sell a product to him, the
brighter side is that his awareness had brought him to the threshold of insurance.
Multiple Channels of Distribution: Distribution being a key determinant of success
for insurance companies. Because at more number of distribution channels the insures
have a large database of their disposal. By data mining prospects can be accurately
together for business. Linking insurance with allied finance products like housing
loan, mutual fund investment in companies, banks credit cards etc are the new
channels for life insurance. It is definite that the new channels will help the insurance
companies to reach out farther, wider and deeper. Professionalism in Insurance
Marketing: 65
66. There are quality insurance advisors in this field due to the passing of IRDA bill.
To obtain an agency license training and written test are necessary. Many
educated youth, retired officials are taking insurance agency as a career. They
guide the customers so that they can select products according to their need,
rather than to force selling. Huge Untapped Market: There is a lot of untapped

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market in the country. This gives space for all players to grow and expand the
insurance industry. Middle class people are having more awareness than the lower class
and high class people. They want to provide money for the education and marriage of
their children and also to meet their old age needs. So there is market expansion for
pension plans and child career plans. Threat to Health and Life: People die due to
natural calamities and terrorism unexpectedly. The environmental pollution affects
the health of mankind. In cities people got employment in industries like IT, ITES etc.
Due to heavy work and occupational stress they get diseases. Hence there is a growing
need for these people to go for different kinds of insurance. Regulations of IRDA:
IRDA regulations enacted for the protection of policy holders interest has also set out
the bench marks for servicing, settlement of claims, grievance redressal and so on. It
also contains matters relating to disclosures in proposal for insurance, statutory
content of a insurance document, duties and responsibilities of the agent etc. The
IRDA watch the insurance companies always. So the companies cannot provide
deficient customer service. 66
68: EMPLOYIBILITY IN INSURANCE INDUSTRY: The industry aims to hike
penetration levels to five per cent by 2020, and has the potential to touch USD 1
trillion over the next seven years. With the new government policy, the cap on
foreign direct investment (FDI) will be increased from 26 per cent to 49 per cent
thus further boosting the market. Insurance Services are the foundation for smooth
functioning of all business and commercial activities. It forms the backbone of
overall economy of the country and the Indian market has grown more than 20 per cent
in last three years making the potential for career development in the sector very
promising. At present the industry employs a million plus people with another five
million associated as agents, consultants, surveyors, loss assessors, underwriters,
claim settlers, salvage dealers, brokers, sub-brokers, etc. This sector can be a great
career option for the youth since it is one of the fastest growing sectors in India. The
engine driving the sales growth of the industry is the

67. leaving the industry without its most knowledgeable and highest-performing
workforce. According to a report by National Skills Development Corporation
(NSDC), there will a requirement for over two million people in insurance and
banking sector by 2021. Another report by ASSOCHEM points towards an estimated

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manpower requirement of 30 lakhs by 2030 for the sectors. With several international
companies coming into India to penetrate the huge potential in the urban and rural
markets, huge manpower will be required to meet its requirements. However, the huge
employability gap in this sector ma y become an obstacle to its growth. Majority of the
employees (on-rolls) in insurance industry are in the highly skilled class with
specialised job responsibilities. Apart from the on-rolls employment there is a huge
number of people employed as selling agents and advisors and they require basic
knowledge on insurance, finance and selling skills. Employability gap is the highest
in the category of agents and advisors as they are without any practical knowledge
about the industry and lack in soft skills.
Considering that this category has the highest potential for employment, it is
important to focus on training them in vocational and soft skills so they can add to the
output of the market. The most important skills required for the candidates include
Lack of product knowledge, Communication skills, Asset classes awareness,
Presentation skills, Aptitude to compliance, to name a few. The agents and consultants
who form a bulk of the workforce in this sector are more like entrepreneurs than
employees and therefore need to be trained appropriately to remain focused and
driven in their work. Soft skills become even more important for them as they are
more of a ‘one-man show’ - needing to convince customers to buy their product, guide
them about it and maintain a long-term relationship with them. Since personal
interaction and understanding is necessary to acquire

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insurance domain skills, developing soft skills along with domain knowledge are
crucial for results. Unfortunately, there is a lack in such 68
68. skills and the industry is struggling to find adequate talent with these traits.
This is due to the lack of many quality courses specifically designed for the sector.
Though there are diploma courses for students being offered by some private colleges,
they lack practical exposure towards domain knowledge making them less productive
as employees. Also, the curriculum do not focus on personality development, attitude
management and motivational trainings, which are crucial in jobs with high levels of
human engagement. Also, they need to deal with sensitive issues like life, health, etc
which require skills other than just domain knowledge; it requires attitude, patience and
empathy to be able to engage with the customers. The business world is realizing that
traits like the ability to recognize, understand, use and manage emotions are crucial
to be a successful insurance professional and unfortunately most of the candidates are
not adequately equipped with them. It is not that organisations do not have soft skills
trainings at all, but perhaps the shortfall with traditional methods is that they fail to
bring out the best in each individual due to their universal approach. Transformational
training, designed for the first time in India by Viztar International aims at filling that
gap. It profiles the students individually; try to evaluate their strengths and weaknesses
and works with them to develop the same. Besides, most training companies do not
keep track of progress after the session but transformational trainers keep in touch with
the students and take their feedback periodically to understand if they are applying or
benefiting from the training provided. Between an aging workforce, dwindling new
recruits and high attrition rates, insurers must boost their ability to retain their best
employees by focusing on employability skills and motivate them to perform better.
With the insurance sector gearing up for a huge growth and enormous career
development opportunities, we need to be preparing a skilled workforce which can do
justice to the demand. With its huge population and general economic development,
India may soon become the 69

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 69. Insurance hub of the world. Career in insurance is more than just direct
selling and requires both analytical and technical skills and is developing into one of
the charted professions in the country. Insurance is also one of the least attractive
industries for college graduates, to turnaround the situation of having an aging
workforce, declining new recruits and high attrition rates, insurers must transform
their human capital strategies to achieve high performance in the challenging
environment. PRESENT SCENARIO Global integration of financial markets
resulted from de-regulating measures, technological information explosion and
financial innovations. Liberalisation and Globalisation have allowed the entry of
foreign players in the Insurance sector. With the entry of private and foreign players
in the Insurance business, people have got a lot of options to choose from. Radical
changes are taking place in customer profile due to the changing life style and
social perception, resulting in erosion of brand loyalty. To
survive, the focus of the modern insurers shifted to a customer- centric relationship. The
paper focuses the current position of insurance industry. Liberalisation and
Privatisation: India's economic development made it a most lucrative Insurance market
in the world. Before the year 1999, there was monopoly state run LIC transacting life
business and the General Insurance Corporation of India with its four Subsidiaries
transacting the rest. In the wake of reform process and passing Insurance Regulatory
and Development Authority (IRDA) Act through Indian parliament in 1999, Indian
Insurance was opened for private companies.
Liberalisation on the Insurance sectors has allowed the foreign players to enter the
market with their Indian partners. Most of the foreign Insurers have joined within the
local market. India 70
70. offers immense possibilities to foreign Insurers since it is the world's most
populous country having over a billion people. Insurance industry had ten and six
entrants in life and non-life sector respectively in the year 2000-2001. The industry
again saw two and three entrants in the life and non-life business respectively in the
year 2001-2002. One additional entrant was made both in the life and in non-

62
life business in 2004 and 2005 respectively. At present there are fourteen companies
each in Life and General Insurance. The Funds earlier generated by the state owned
insurers have been diversified with other new insurers. We should wait and see how the
new players are going to boost up our economy. Competition: Private and Foreign
entrants in the Insurance Industry made others difficult to retain their market. Higher
customer aspirations lead to new expectations and compel him to move towards the
insurer who provides him the best service in time. It becomes less viable for them even
to maintain the functional networks or competitive standards and services. To survive
in the Industry they analyse, the emerging requirements of the policyholders / insurers
and they are in the forefront in providing essential services and introducing novel
products. Thereby they become niche specialists, who provide the right service to the
right person in right time. Information Technology: Insurers are the earlier adopters of
technology.
Because of the Information revolution, customers are free to choose from a wide
range of new and innovative products. The Insurance companies are utilizing the
Information technology applications for better customer service, cost reduction, new
product design and development and many more. New technology gives the
policyholders / insured better, wider and faster access to products and services. The
impact of Information Technology in Insurance business is being felt at an
accelerating.

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