UNIVERSITY OF MUMBAI

"STUDY ON ACCOUNTING AND

STATUTORY REQUIREMENTS OF
INSURANCE COMPANIES"
Master of Commerce
(M.Com)
Programmer Guidelines for
Project Work At
Second Year Semester III

Under Choice Based Credit,

Grading and Semester System
(To be implemented from
Academic Year 2021-2022)
Faculty of Commerce
 "STUDY ON ACCOUNTING AND
STATUTORY REQUIREMENTS OF
INSURANCE COMPANIES"

A Project Submitted to
University of Mumbai for partial completion of the
Degree of
Master in Commerce

Under the Faculty of Commerce

By
UMAIR AAMIR SAKHARKAR

Under the Guidance of

Prof HEMANT PATIL

D.G. Ruparel College of Arts, Science and Commerce

Matunga, Mumbai, Maharashtra,
400016
November 2021
 D.G. Ruparel College of Arts, Science and
Commerce
Matunga, Mumbai, Maharashtra,
400016

CERTIFICATE
This is to certify that Mr UMAIR AAMIR SAKHARKAR has worked and
duly completed his project work for the degree of Master in Commerce under
the faculty of commerce in the subject" ADVANCED FINANCIAL
ACCOUNTING "and his project entitled “STUDY ON ACCOUNTING
AND STATUTORY REQUIREMENTS OF INSURANCE
COMPANIES" under my supervision.

I further certify that the culture work has been done by the letter under my
guidance and that no part of it has been submitted previously for any Degree
of any University.
It is his own work and facts reported by his personal lending and
investigations,

Prof. HEMANT PATIL

(Guidance Teacher)

Date of Submission

3
 DECLARATION BY
LEARNER

I the undersigned Mr UMAIR AAMIR SAKHARKAR hereby, declare That

the work embodied in this project work titled "STUDY ON ACCOUNTING
AND STATUTORY REQUIREMENTS OF INSURANCE
COMPANIES” forms my own contribution to the research work carried out
under the guidance of Prof. HEMANT PATIL is a result of my own research
work and has not been previously submitted to any other University for any
other Degree to this or any other University.

Wherever reference has been made to previous works of others, it has

been clearly indicated as such and included in the bibliography

I, hereby further declare that all information of this document has been
Obtained and presented in accordance with academic rules and ethical
conduct.

UMAIR AAMIR SAKHARKAR

Certified by

Prof. HEMANT PATIL (Guiding teacher).

4
 ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so

numerous and the depth is so enormous.

I would like to acknowledge the following as being idealistic

channels and fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for

giving me chance to do this project.
I would like to thank my Principal, Dr. DILIP MASKE for
providing the necessary facilities required for completion of
this project.

I take this opportunity to thank our Coordinator

Dr.RAVINDAR NETAWATE for her moral support and
guidance

I would also like to express my sincere gratitude towards my project

guide. Prof. HEMANT PATIL Whose guidance and care made the
project successful

I would like to thank my College Library, for having

provided various reference books and magazines related to my
project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.

5
 INDEX
Chapter Chapter Sub Topic
No Name Point
1 Introduction
1.1 Introduction
1.2 Definition
1.3 Functional
1.4 History
1.5 Features
1.6 Importance
1.7 Advantages & Disadvantages
1.8 Scope
1.9 Research Problems
1.10 Types
1.11 Insurance Act, 1938
2 Research
Methodology
2.1 Source of data
2.2 IRDA Regulation for financial
Statements
2.3 Accounting
2.4 Schedule ‘B’ [General Insurance]
Part I-Accounting Principles
Part II - Disclosures Forming Part
Of Financial Statements
Part III-General Instructions
Part V - Preparation Of Financial
Statements
2.5 Schedule C-Auditor's Report
2.6 Special Items In Insurance Accounts
Unexpired Risks Reserve
Re-Insurance
Co-Insurance
2.7 Life Insurance

6
 Types of Policies
Financial Statement
Special Items In Accounts
2.8 Schedule A [Life Insurance]
Part I Accounting Principles For
Preparation Of Financial
Statements
Part II -Disclosures Forming Part of
Financial Statements
Part III - General Instructions for
Preparation Of Financial
Statements
Part V-Preparation of Financial
Statements

3 Review Of
Literature
3.1 Review Of Insurance

4 Data Analysis
4.1 Survey Question
4.2 Survey Reponses and Chart
4.3 Case Study

5 Conclusion
5.1 Conclusion
5.2 Suggestions
5.3 Reference
5.4 Bibliography

7
Chapter No. 1
Introduction

8
 1.1 INTRODUCTION

Under an insurance contract, one party, called insurer, undertakes to

indemnify the losses suffered for some specified causes, by the other
party called insured, in consideration for a fixed premium. Insurance
contracts may be characterized generally by the following:
(a) The purchaser of an insurance contract makes an initial payment
or deposit to the insurance company in advance of the possible
occurrence of an insured event.
(b) When the insurance contract is made, the insurance company does
not know if, how much, or when amounts will be paid under the
contract.
The document that contains terms of insurance contract is called
Insurance Policy. The amount payable by the Insured to the Insurer is
known as Premium. Premium for the first year of the policy is known
as the first year's premium

9
Premium for subsequent year is known as renewal premium. The
amount payable by the Insurer to the Insured is known as claim. In the
case of life insurance, claim may arise on death of the insured or
maturity of the policy. In case of general insurance, claim arises only
on loss.

Insurance business in India is governed by the Insurance Act, 1938,

Insurance Regulatory and Development Authority Act, 1999 and
Insurance Regulatory and Development Authority Regulations, 2002.

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” enable les the Life Insurance Companies to
understand how consumer’s perception differs from person to person.
How a consumer selects, organizes and interprets the service quality
and the product quality of different Life Insurance Policies, offered by
various Life Insurance Companies.

10
 Insurance is a tool by which fatalities of a small number are
compensated out of funds (premium payment) collected from
plenteous. Insurance companies pa y back for financial losses arising
out of occurrence of insured events e.g. in personal accident policy
death due to accident, in fire policy the insured events are fire and
other allied perils like riot and strike, explosion etc. hence insurance
safeguard against uncertainties.

It provides financial recompense for losses suffered due to incident of

unanticipated events, insured with in policy of insurance. Moreover,
through a numb r of acts of parliament, specific types of insurance are
legally enforced in our country e.g. third party insurance under motor
vehicles Act, public liability insurance for hand leers of hazardous
substances under environment protection Act. Etc. 3 WHAT IS
INSURANCE It is a commonly acknowledged phenomenon that there
are countless risk s in every sphere of life .for property, there are fire
risk; for shipment of goods. There are perils of sea; for human life
there are risk of death or disability; and so on .the chances of
occurrences of the events causing losses are quite uncertain because
there may or may not take place. Therefore, with this view in mind,
people facing common risks come together and make their small
contribution to the common fund.

11
 1.2 DEFINITION

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 large sum upon a given contingency.
The insurance thus is a contract whereby: a. b. and c.
Certain sum, termed as premium, is charged in consideration, Against
the said consideration, a large amount is guaranteed to be paid by
insurer who received the premium, The compensation will be made in
certain definite sum, i.e., the loss or the policy amount which ever
may be, and d. 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, a certain sum upon a given
contingency (the risk) against which insurance is required

12
 1.3 FUNCTIONAL

Insurance is a cooperative device to spread the loss caused by a

particular risk over some persons exposed to it and who agree to
insure themselves against the risk.

Thus, the insurance is;

1. A co-operative device to spread the risk;

2. The system to spread the risk over many persons who are insured
against the risk;
3. The principle to share the loss of each member of the society based on
the probability of loss to their risk; and
4. The method to provide security against losses to the insured.

Similarly, another definition can be given.

Insurance is a cooperative device of distributing losses falling on an

individual or his family over many persons, each bearing a nominal
expenditure and feeling secure against heavy loss.

13
 1.4 HOW DID INSURANCE GET STARTED?

Insurance has a history that dates back to the ancient world. Over the
centuries, it has developed into a modern business of protecting
people from various risks. The industry has been profitable for many
years and has been an important aspect of private and public long-
term finance.

In the ancient world, the first forms of insurance were recorded by the
Babylonian and Chinese traders. To limit the loss of goods, merchants
would divide their items among various ships that had to cross
treacherous waters. One of the first documented loss limitation
methods was noted in the Code of Hammurabi, which was written
around 1750 BC. Under this method, a merchant receiving a loan
would pay the lender an extra amount of money in exchange for a
guarantee that the loan would be cancelled if the shipment were
stolen. The first to insure their people were the Achaemenian
monarchs, and insurance records were submitted to notary offices.
Insurance was also noted for gifts of substantial value. These gifts
were given to monarchs. By recording their gifts in a register, givers
would receive help from a monarch by proving the gift’s existence if
they were in trouble.

14
As the ancient world evolved, maritime loans with rates based on
favourable seasons for traveling surfaced. Around 600 BC, the Greeks
and Romans formed the first types of life and health insurance with
their benevolent societies.

These societies provided care for families of deceased citizens. Such

societies continued for centuries in many different areas of the world
and included funerary rituals. In the 12th century in Anatolia, a type
of state insurance was introduced. If traders were robbed in the area,
the state treasury would reimburse them for their losses.

Standalone insurance policies that were not tied to contracts or loans

surfaced in Genoa in the 14th century. This is where the first
documented insurance policy came from in 1347. In the following
century, standalone maritime insurance was formed. With this type of
insurance, premiums varied based on unique risks. However, the
separation of insurance from contracts and loans was a major change
that would influence insurance for the rest of time.

The first book printed on the subject of insurance was penned by

Pedro de Santarem, and the literature was published in 1552. As the
Renaissance ended in Europe, insurance evolved into a much more
sophisticated form of protection with several varieties of coverage.
Until the late 17th century, many areas were still dominated by
friendly societies that collected money to pay for medical expenses
and funerals. However, the end of the 17th century introduced a rapid
expansion of London’s importance in the world of trade.

15
This also increased the need for cargo insurance. London became a
hub for companies or people who were willing to underwrite the
ventures of cargo ships and merchant traders. Lords of London, one of
London’s leading insurers, is still a major insurance business in the
city.

Modern insurance can be traced back to the city’s Great Fire of

London, which occurred in 1666. After it destroyed more than 30,000
homes, a man named Nicholas Barbon started a building insurance
business. He later introduced the city’s first fire insurance company.
Accident insurance was made available in the late 19th century, and it
was very similar to modern disability coverage.

In U.S. history, the first insurance company was based in South

Carolina and opened in 1732 to offer fire coverage. Benjamin
Franklin started a company in the 1750s, which collected
contributions for preventing disastrous fires from destroying
buildings. As the 1800s arrived and passed, insurance companies
evolved to include life insurance and several other forms of coverage.

No type of insurance was mandatory in the United States until the

1930s. At that time, the government created Social Security. In the
1940s, GI insurance surfaced. It helped ease the financial difficulties
of women whose husbands died while fighting in World War II. It
wasn’t until the 1980s that the need for car insurance grew enough
that steps were taken to make it mandatory. Although insurance is an
established business, it is still changing and will change in the future
to meet the evolving needs of consumers.

16
 1.5 Features
From the above explanation, we can find the following characteristics,
which are generally observed in life, marine, fire, and general
insurances.

1. Sharing of Risk

Insurance is a device to share the financial losses which might befall

an individual or his family on the happening of a specified event.

The event may be the death of a breadwinner to the family in the case
of life insurance, marine-perils in marine insurance, fire in fire
insurance, and other certain events in general insurance, e.g., theft in
burglary insurance, accident in motor insurance, etc. The loss arising
from these events, if insured, are shared by all the insured in the form
of a premium.

17
2. Co-operative Device

The most important feature of every insurance plan is the cooperation

of a large number of persons who, in effect, agree to share the
financial loss arising due to a particular risk that is insured

Such a group of persons may be brought together voluntarily or

through publicity or solicitation of the agents.

An insurer would be unable to compensate for all the losses from his
own capital. So, by insuring or underwriting a large number of
persons, he can pay the amount of loss.

Like all cooperative devices, there is no compulsion here on anybody

to purchase the insurance policy

3. Value of Risk

The risk is evaluated before insuring to charge the share of an insured,

herein called, consideration or premium. There are several methods of
evaluation of risks.

If there is an expectation of more loss, a higher premium may be

charged. So, the probability of loss is calculated at the time of
insurance.

18
4. Payment at Contingency

The payment is made at a certain contingency insured. If the

contingency occurs, payment is made.

Since the life insurance contract is a contract of certainty, because the

contingency, the death, or the expiry of the term will certainly occur,
the payment is certain. The contingency is the fire or the marine
perils, etc., may or may not occur in other insurance contracts.

So, if the contingency occurs, payment is made. Otherwise, no

amount is given to the policy-holder. Similarly, in certain policies,
payment is not certain due to the uncertainty of a particular
contingency within a particular period.

5. Payment of Fortuitous Losses

Another characteristic of insurance is the payment of fortuitous

losses. A fortuitous loss is unforeseen and unexpected and occurs as a
result of chance. In other words, the loss must be accidental.

The law of large numbers is based on the assumption that losses are
accidental and occur randomly.

For example, a person may slip on an icy sidewalk and break a leg.
The loss would be fortuitous. Insurance policies do not cover
intentional issues.

19
6. Amount of Payment

The amount of payment depends on the value of loss due to the

particular insured risk provided insurance is there up to that amount.
In life insurance, the purpose is not to make good the financial loss
suffered. The insurer promises to pay a fixed sum on the happening of
an event.

If the event or the contingency takes place, the payment does fail due
if the policy is valid and in force at the time of the event, like property
insurance, the dependents will not be required to prove the occurring
of loss and the amount of loss.

It is immaterial in life insurance what was the amount of loss was at

the time of contingency. But in the property and general insurances,
the amount of loss and the happening of loss is required to be proved.

7. A large number of Insured Persons

To spread the loss immediately, smoothly, and cheaply, a large

number of persons should be insured. The co-operation of a small
number of persons may also be insurance, but it will be limited to the
smaller area.

The cost of insurance for each member may be higher.

So, it may be unmarketable. Therefore, to make the insurance

cheaper, it is essential to ensure many persons or property because the
lessor would be the cost of insurance, so the lower would be
premium.

20
 1.6 IMPORTANCE
The world we live in is full of uncertainties and risks. Individuals,
families, businesses, properties and assets are exposed to different
types and levels of risks. These include risk of losses of life, health,
assets, property, etc. While it is not always possible to prevent
unwanted events from occurring, financial world has developed
products that protect individuals and businesses against such losses by
compensating them with financial resources. Insurance is a financial
product that reduces or eliminates the cost of loss or effect of loss
caused by different types of risks.

Apart from protecting individuals and businesses from many kinds of

potential risks, the Insurance sector contributes significantly to the
general economic growth of the nation by providing stability to the
functioning of businesses and generating long-term financial
resources for the industrial projects. Among other things, Insurance
sector also encourages the virtue of savings among individuals and
generates employments for millions, especially in a country like India,
where savings and employment are important In life, there is no such
thing as a guarantee. There may be a loss of life, as well as some
business accidents. The loss is difficult to bear in both of these cases.
As a result, insurance provides

21
 1.7 ADVANTAGES

Financial protection

In the event of death, he/she family member may be able to receive

financial assistance from insurance. In the event of a business loss,
insurance provides financial assistance to help the company recover
and rebuild. In the case of health insurance, he or she may be eligible
for financial assistance in treating his or her health.

Distribution of Risk/Spreading of Risk

The underlying concept of insurance is to spread the risk across a
large number of people. People pay a certain amount to an insurance
company up to a certain time or lifetime and receive a refund if a loss
occurs. Risk in life or business cannot be eliminated, but it can be
reduced, distributed, or shared. So, in this case, insurance companies
bear risks in order to redistribute business and individual risks among
insurance companies.

22
Stability of Living Standard
Insurance provides financial support to ensure that people can sustain
and maintain stability in living standards against an unforeseen risk of
losses.

Encouragement to Savings
In insurance, people pay a certain amount of money for a fixed time
or lifetime based on an agreement and this helps to develop a habit of
saving money. Knowing the importance of saving, people start doing
saving in various fields.

Job Opportunities
Insurance, like any other business, is a successful business model. It
targets many entrepreneurs and business owners. As a result, there is a
lot of cash flow in the business. They need employees to handle and
maintain cash flow and run the business, so they open vacancies in
various positions based on qualifications and provide job
opportunities.

Promotes foreign/international trades

many years ago, people were afraid to engage in international trade
because of the possibility of accidents while transporting goods via
ships, roads, or other modes of transportation. However, in today's
competitive global economy, insurance companies bear all of those
risks and compensate for losses. They also protect an exporter of
goods and services from non-payment by a foreign buyer.

23
Loan Facilities

If a company has purchased insurance, banks are more likely to lend

to that company. No, the problem for large businesses is getting a
loan from a bank, but if you have a small business or a start-up and
have done business insurance, your chances of getting a loan from a
bank increase.

Stability of Business

Even if your company suffers unexpected losses, insurance can help

you manage your losses. Taking out an insurance policy for your
employees will encourage them to come into the office. As a result,
insurance aids in the smooth operation of the office. And business
will become more stable.

Competitiveness

If you have insurance, then there will not be any tension related to
business, and life, and health. so, you can focus on your task and
compete with others.

Society and Country Welfare

The insurance company collects a large amount of money from an
insured and they invest in the development of trade and industry,
which finally leads the society and country toward development.

24
Preserves Confidentiality
If there is some death in the family then the death benefit or to whom
the death benefits is payable will not be recorded publicly. This helps
to preserve confidentiality for the beneficiary of the policy.

Tax-free money
Another advantage of insurance is that the funds are often tax-
delayed. The benefits and all other earnings you may earn under the
policy are tax-free, except in the case of employer insurance schemes
where benefits are regarded as normal taxable income.

Short Term Coverage

The insurance coverage period can be changed. If you have short-term
needs then you can choose shorter-length insurance.

Long Term Coverage

Long-term insurance is an option if you have long-term needs. It may
be more cost-effective in some situations in the long run compared to
short-term coverage. You can use life insurance to pay for other
policies such as pensions or long-term care without paying taxes on
the difference. Furthermore, by utilizing features such as this, you can
improve your cash accumulation by increasing your life insurance
death benefit.

25
Easy to Apply
There are many genuine sources where you can get insurance
information and compare insurance of one company with another and
can apply online form as well.

1.7 DISADVANTAGES

Term and Conditions

Insurance does not cover every type of loss that can happen to an
individual or a business. They have terms and conditions, and they
only provide financial assistance based on those terms. Please read the
terms and conditions of any insurance before purchasing it. Also, seek
assistance from the appropriate person in order to obtain accurate
information about an insurance policy.

Long Legal formalities

It may take a long legal procedure for receiving your claims.

Fraud Agency

There are lots of fraud agencies available in the market so, before
taking any type of insurance does exercise you or take the help of an
expert.

26
Potential crime incidents

It could lead to social crimes as the users of the policy are tempted to
commit crimes to get the insured money.

Temporary and Termination

Insurance is temporary and will be
terminated when the individual no longer belongs to the group.

Can be Expensive
Often, the cost can vary depending on the policy and other factors.
However, if you buy at the right time, for the right reasons, and with
the right coverage, you may be able to get the best price.

Rise in Subsequent Premium

Many insurance firms have different subsequent premium rates, and
you should pay special attention to them. Before you purchase a
policy, ensure that you know at the start, whether your premium is
guaranteed throughout the policy, or whether inflation shifts from
time to time.

27
Adds Expense for Some Projects
In some construction projects where compensation for the workers for
injuries are common, then insurance for this company can be
expensive. They are expensive as compared to other IT and
accounting offices.

Annoying and Frustration

many claims in insurance are required fulfilling and checking all of
them takes time and energy which annoys the people and may lead to
frustration. So, it's better good to know insurance you have done
properly.

In general, in all types of insurance, Cash surrender values are

typically lower than premiums paid in the first few years of the
policy, and a policy owner may not be able to recover all of the
premiums paid if the policy is surrendered.

28
 1.8 SCOPE
The main aim of a life insurance cover is to secure the needs of
dependents after one’s untimely death. In addition to the emotional
suffering, the financial insecurity arising out of losing the primary
earner can be immense. This is the reason why most personal finance
experts suggest that life insurance should be the main part of one’s
investment planning. In India, life insurance is yet to reach its full
potential as the awareness about life insurance products is pretty low.
While the Indian life insurance industry has witnessed a lot of
transformation ever since the entry of private players, it still has a
long way to go in terms of protecting the entire population of our
country.

29
 1.9 RESEARCH PROBLEMS

1. Lack of trust

This is a reason why many individuals don`t bother with insurance.

Many insurance firms fail to pay claims, and they don`t own up to
offering some benefits. Therefore, most people just see insurance as
one of the unnecessary expenses. Many insurance firms do shut down
because of financial challenges and individuals who are the victims of
the loss don`t even think twice about purchasing insurance policies.

2. Competition

Today, there are many insurance firms on the market and therefore
there is an intensive challenge for insurers. Each company looks for
the best way of selling their insurance products in the best possible
way and targets a particular group of individuals. Most insurance
businesses, especially the new ones are the most doubted companies.
In fact, most people trust some of the existing insurance firms
compared to the new businesses since the new enterprises are
operated on a thin line between failure and success—and no one will
want to take such risks with the little among of money that they have.

30
3. Mismanagement

As the owner of the insurance business, one is solely responsible for

all issues that his or her clients may have regarding the management
of the insurance business. All insurance firms that are mismanaged
can`t hide their faults for a longer time without the clients noticing.
As time move, there will be a constant increase in the number of
clients` complaints, and if his or her insurance firm is not transparent,
then he or she will lose more customers. Also, incompetent
management may cost the company a lot, particularly if they have
poor communication with their clients.

4. Economic instability

When the country`s economy is down, all insurance companies will

be affected. At such situations, the rates can be affected such that the
insurance companies might be forced to increase their rates, just like
interest rates on credit facilities provided by financial institutions.

Of course, no client will appreciate this, even if it is stated clearly in

the contract that the insurance rates might change from time to time.
Therefore, such situations might create a bad image for a company
since costumers can spread the information about a service or product
they were not happy with very fast.

31
5. Weak manpower
Non-professionals run many of the insurance companies today. In
fact, many people think that what it takes to be an insurance
professional is just some knowledge of monetary studies with no
specialized training. Indeed, this has majorly affected the
dependability and operations of insurance firms in this century.

6. Excessive politicization of the insurance industry

Without a doubt, politics play a significant role in insurance

companies` operations depending on the power play & calculations
that are dominant in the operating domains of the insurance firms.
The premiums to pay, the outcomes of risk investigations, and the
damages and benefits to pay depend on political conspiracy
sometimes.

These are some of the biggest challenges that are faced by insurance
companies. They include mismanagement, economic instability, lack
of trust, and competition among others.

32
 1.10 TYPES

Insurance business is basically of two types - Life and

General. These terms are defined under the Insurance Act,,
1938 as follows.

(i) "Life insurance business" means the business of effecting contracts

of insurance upon human life, including any contract whereby the
payment of money is assured on death (except death by accident only)
or the happening of any contingency dependent on human life and
shall be deemed to include the granting of disability and indemnity
benefit; annuities upon human life, and superannuation allowance and
annuities [S. 2(11)].

(ii)"General insurance business" means fire, marine or miscellaneous

insurance business, whether carried on singly or in combination with
one or more of them [S. 2(6B)].

33
EXHIBIT 1:
LIFE INSURANCE VS GENERAL INSURANCE
S.N Particulars Life Insurance Other Insurance
1 Timing of Insurable amount is Reimbursement of
Payment of payable either on the loss or liability
Claim happening of the event incurred will be paid
(death) or at the maturity.at the happening of
the uncertain event
only
2 Value of Insurance can be done for The sum payable
Policy any value depending under it is limited to
upon the premiums the the amount of loss
insured is willing to pay actually suffered or
the liability incurred,
notwithstanding the
amount of policy.
3 Duration of These are long term These are only for
Contract contracts running over one year though
the number of renewable after year.
Years.
4 Assurance Life insurance is known Other policies are
also by another term known as insurance.
'assurance' since the
insured gets an assured
sum.
5 Determinat Actuaries periodically A portion of the
ion of estimate the liability premium is carried
Liability under existing policies. forward as a
On that basis a valuation provision for
balance sheet is prepared unexpired liability
to determine the profit. and the balance net of
claims and expenses
is taken as profit or
loss.

34
General Insurance:

"General insurance business" means fire, marine or miscellaneous

insurance business, whether carried on singly or in combination with
one or more of them [S. 2(6B)].

Fire Insurance:

“Fire insurance business” means the business of effecting, otherwise

than incidentally to some other class of insurance business, contracts
of insurance against loss by or incidental to fire or other occurrence
customarily included among the risks insured against in fire insurance
Policies [S. 2(6A)].
Fire insurance provides protection against damage to property caused
by accidents due to fire, lightening or explosion, whereby the
explosion is caused by boilers not being used for industrial purposes.
Fire insurance also includes damage caused due to other perils like
storm, tempest or flood; burst pipes; earthquake; aircraft; riot, civil
commotion; malicious damage; explosion; impact and so on.

35
Marine insurance:

"Marine insurance business" means the business of effecting

contracts of insurance upon vessels of any description, including
cargoes, freights and other interests which may be legally insured, in
or in relation to such vessels, cargoes and freights, goods, wares,
merchandise and property of whatever description insured for any
transit, by land or water, or both, and whether or not including
warehouse risks or similar risks in addition or as incidental to such
transit; and includes any other risks customarily included among the
risks insured against in marine insurance policies [S. 2(13A)].

Marine insurance basically covers three risk areas, namely, hull, cargo
and freight. The risks which these areas are exposed to are
collectively known as "Perils of the Sea".

Marine cargo policy provides protection to the goods loaded on a ship

against all perils between the departure and arrival warehouse.
Therefore, marine cargo covers carriage of goods by sea as well as
transportation of goods by land.

36
Marine hull policy provides protection against damage to ship caused
due to the perils of the sea. Marine hull policy covers three-fourth of
the liability of the hull owner (ship-owner) against loss due to
collisions at sea. The remaining 1/4th of the liability is looked after by
associations formed by ship-owners for the purpose (P and I Clubs).
Marine Freight policy provides protection against risk of loss of
freight of the shipping company where the owner of goods promises
to pay the freight when the cargo is safely delivered at the port of
destination and the cargo is destroyed on the way.

Miscellaneous Insurance:

"Miscellaneous insurance business" means the business of effecting

contracts of insurance which is not principally or wholly of any kind
or kinds included in clause (6A), (11) and (13A) [S. 2(13B)]. As per
the Insurance Act, all types of general insurance other than fire and
marine insurance are covered under miscellaneous insurance. Some of
the examples of miscellaneous insurance are Motor, Workmen's
Compensation / Employers Liability, Public/ Product Liability,
Engineering, Aviation, Personal Accident, Health, Money insurance,
etc.

37
While it may not be possible to tell in advance, which person will
suffer the losses, it is possible to work out how many persons on an
average out of the group, may suffer losses. When risk occurs, the
loss is made good out of the common fund .in this way each and every
one shares the risk .in fact they share the loss by payment of premium,
which is calculated on the likelihood of loss .in olden time, the
contribution make the above.

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 meet s 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 a
mong larger Persons. It is merely a provision to meeting the
unforeseen event. He re the insured becomes the insurer for the
particular risk. But it can be effectively worked only when there is
wide distribution of risks subjected the same hazard. b) Partnership A
partnership firm may also carry on the insurance business for the sake
of prof it. 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 start s
insurance business

38
 1.11 INSURANCE ACT, 1938

The provisions of insurance Act, 1938 as amended up-to

date, relevant to Insurance Accounting, are summed up
below

SEPARATION OF ACCOUNTS AND FUNDS (S. 10)

Where the insurer carries on business of more than one of the

following classes, namely, life insurance, fire insurance, marine
insurance or miscellaneous insurance, he shall keep a separate
account of all receipts and payments in respect of each such class of
insurances business and where the insurer carries on business of
miscellaneous insurance whether alone or in conjunction with
business of another class, he shall, unless the Authority waives this
requirement in writing, keep a separate account of all receipts and
payments in respect of each of such sub classes of miscellaneous
insurance business as may be prescribed in this behalf.

39
ACCOUNTS AND BALANCE SHEET [S. 11]

Every insurer, in respect of insurance business transacted by him and

in respect of his shareholders’ funds, shall, at the expiration of each
financial year, prepare with reference to that year

 A balance-sheet,
 A profit and loss account.
 A separate account of receipts and payments,
 A revenue account in accordance with the regulations made
by the IRDA.
 A separate account relating to funds of shareholders; and
 A separate account relating to funds of policy-holders.

AUDIT (S. 12)

The balance sheet, profit and loss account, revenue account and profit
and loss appropriation account of every insurer, shall, unless they are
subject to audit under the Indian Companies Act, be audited annually
by an auditor, and the auditor shall in the audit of all such accounts
have the powers of exercise the functions vested in, and discharge the
duties and he subject to the liabilities and penalties imposed on,
auditors of companies by the Indian Companies Act.

40
REGISTER OF POLICIES AND REGISTER OF
CLAIMS[S-14]

Register of Policies: Every insurer shall maintain a register or record

of policies, in which shall be entered, in respect of every policy issued
by the insurer, the name and address of the policyholder, the date
when the policy was effected and a record of any transfer, assignment
nomination of which the insurer has notice
Register of Claims: Every insurer shall maintain a register or record
of claims, in which shall be entered every claim made together with
the date of the claim, the name and address of the claimant and the
date on which the claim was discharged, or, in the case of a claim
which is rejected, the date of rejection and the grounds therefor

INVESTMENTS (S. 27 & S. 27B]

No insurer carrying on general insurance business shall invest any

part of his assets otherwise than in the approved investments listed in
this S. 27B

41
LIMITS ON COMMISSION [S. 40]

No person shall pay any remuneration or reward whether by way of

commission or otherwise for soliciting or procuring insurance
business in India to any person except an insurance agent or an
intermediary or insurance intermediary

No insurance agent shall be paid or contract to be paid by way of

commission or as remuneration in any form an amount exceeding, in
the case of general insurance business of any other class, fifteen per
cent of the premium

42
 Chapter No. 2
Research Methodology

43
2.1 SOURCE OF DATA

The study was conducted by the means of personal interview with

respondents and the information given by they were directly recorded
on questionnaire. For the purpose of analysing the data it is necessary
to collect the vital information. There are two types of data, this are

1. Primary Data
2. Secondary Data

PRIMARY DATA:

Primary data is collected from books, internet and questionnaire. The

data is collected from questionnaire. The questionnaire is filled from
Friend, Family and Colleagues through Google forms them.

SECONDARY DATA:

Secondary data is collected from social networking sites, books, etc.

44
2.2 IRDA REGULATIONS FOR FINANCIAL
STATEMENTS

The Insurance Regulatory and Development Authority (Preparation of

Financial Statements and Auditor's Report of Insurance Companies)
Regulations, 2002, provide that -

(1) An insurer carrying on general insurance business shall comply

with the requirements of Schedule B. This sub-regulation shall apply,
mutatis mutandis, to reinsurers, until separate regulations are made.

(2) The report of the auditors on the financial statements of every

insurer and reinsurer shall be in conformity with the requirements of
Schedule C, or as near thereto as the circumstances permit.

45
2.3 ACCOUNTING

Premium: In case of Tariff business such as fire insurance, motor

insurance etc., the premium is charged as per tariff. In case of non-
tariff business the premium is charged as per the guideline rates fixed
by the respective technical departments of Head Office of the insurer
with certain discretion to the operating offices while underwriting
such business. According to section 64VB of the Insurance Act, 1938;
no risk can be assumed by an insurer unless premium is received in
advance.

Recently, in addition to collection of premium by

cash/cheque/DD/BG/CD, IRDA has permitted to collect the premium
by other manner of receipt of premium such as credit card/ Debit
card/E-transfer etc. However, the same has to be collected before
assumption of the risk Sometimes, same business is shared by more
than one insurer as desired by the insured (co insurance). The lead
insurer has to collect the full premium.

46
However, only own share of premium is accounted as premium
income and the balance is shown as amount due to other co-insurers.
Premiums from short-duration insurance contracts, such as most
general insurance contracts, are intended to cover expected claim
costs resulting from insured events that occur during a fixed period of
short duration. Therefore, premiums from short-duration contracts
ordinarily are earned and recognized as revenue evenly as insurance
protection is provide

As per IRDA Regulation, the premium has to be recognised as

income over the contract period or the period of risk, whichever is
appropriate. Most of the general insurance policies are annual
contracts and hence the earned premium is worked out by 1/365
method. Where the same is not practicable, the same is worked out
either 1/24 or 1/12 method. At the end of the financial year, the
unearned premium is compared with the reserve for unexpired risks as
required under section 64V (1) (ii) (b) of the Insurance Act, 1938 and
the shortfall if any is accounted as unearned premium.

47
Commission: Commission is paid at different rates on different
classes of insurance business. No commission is paid on certain
classes of business. Commission becomes payable as soon as business
is underwritten. However, the same is paid on monthly basis. In case
of cancellation of a policy due to cheque dishonour or any other
reason, commission/brokerage payable is reversed or recovered if
already paid to the agent/broker.

Claims: Claims outgo is the major outgo of an insurance company.

Claim processing is done by the respective technical department and
approved by the competent authority. The payment and accounting of
the claims is done by the accounts department. In case of claims on
policies involving co-insurance arrangements, the full amount of
claim is paid by the lead insurer, but only own share of claim is

Accounted as claims cost and the balance is shown as amount

recoverable from the co-insurers. Where a claim is reported but not
settled by the end of the financial year, an adequate provision is made
for such outstanding claims. At the end of each financial year, as
required by IRDA the actuarial valuation of the claims liability of an
insurer is made by the appointed actuary, and the shortfall, if any is
provided as Claims Incurred But Not Reported (IBNR)/ Claims
Incurred But Not Enough Reported (IBNER).

48
Expenses of Management: For managing insurance business
certain administrative expenses are incurred such as Employees'
remuneration and welfare benefit, managerial remuneration, travel,
conveyance, rent, rate and taxes, repairs, printing and stationery,
communication, legal and professional charges, medical fees, auditors
fees & expenses, advertisement and publicity, interest and bank
charges, depreciation, and others. These expenses are first aggregated
and then apportioned to each class of business viz. Fire, Marine and
Miscellaneous revenue account on a reasonable and equitable basis.
Any major expenses (5 laces or in excess of 1% of net premium,
whichever is higher) are required to be shown separately. Section 40C
of the Insurance Act, 1938 prohibits an insurer to spend as expenses
of management in excess of the limits prescribed in the Act. An
adequate provision for outstanding expenses is made in the accounts
at the end of the financial year. A provision for leave encashment,
gratuity etc. at the end of each financial year is made on actuarial
basis

Co-Insurance: The lead insurer accounts its own share as premium

and balance is shown as payable to other co-insurers. Similarly in
case of claim, the entire claim amount is paid by the lead insurer to
the policy holder, but only his own share is accounted as claims
expense and the balance is shown as amount due from the co-insurer.
Lead insurer also recovers certain percentage of the co-insurer's share
for managing co-insurance arrangement as a leader. Co-insurance
accounts are settled as per the agreement between the co-insurers.

49
Usually, there is a provision for charging of interest for delayed
settlement of accounts. At the end of each financial year, provision for
outstanding claims, if any is communicated by the lead insurer and
balance confirmation certificates are exchanged by all co-insurers.

Investments: Investments are assets held by an insurer for earning

income by way of dividends rent and interest or for capital
appreciation or for other benefits to the insurer. An insurance
company makes investment, apart from earning income, to comply
with the statutory requirements and also for meeting any unforeseen
contingences and claims. There are two main sources of investible
funds viz., surplus funds arising out of the business and income from
interest and dividends on existing investments. Sections 27B, 27C and
27D of the Insurance Act, 1938 lays down certain norms for
investment of the funds by an insurance company. The procedure to
determine the value of investments is laid down in the IRDA's
Regulations for preparation of financial statements. Further IRDA has
also issued detailed guidelines under IRDA (Investment) Regulations,
2001 for making investments by the insurer

50
IRDA prohibits any investment abroad out of policyholders' funds.
Accounting entries for investments are involved for buying selling
investments, receipts /

accrued and outstanding of interest, dividends, rent, and recording

impairments, write off and write down of certain investments. 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. Endowment policies - Cover the insured for a specific
period. The insured receives money on survival of the term and is not
covered thereafter. 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 - 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 - 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

51
2.4 SCHEDULE ‘B’ [GENERAL INSURANCE]

PART I-ACCOUNTING PRINCIPLES

The following Accounting Principles are relevant for preparation of

financial statements.

Applicability of Accounting Standards: Every Balance Sheet,

Revenue Account, Receipts and Payments Account [Cash Flow
statement] and Profit and Loss Account of an insurer shall be in
conformity with the Accounting Standards (AS) issued by the ICAI,
to the extent applicable to insurers carrying on life insurance business,
except that:

• Accounting Standard 3 - Cash Flow Statements shall be prepared

only under the Direct Method.

• Accounting Standard 17 - Segment Reporting shall apply to all

insurers irrespective of the requirements regarding listing and
turnover mentioned therein.

52
Premium: Premium shall be recognised as income when due.
Premium shall be recognised as income over the contract period or the
period of risk, whichever is appropriate. Premium received in
advance, which represents premium income not relating to the current
accounting period, shall be disclosed separately in the financial
statements.

Reserve for Unexpired Risk: A reserve for unexpired risks shall be

created as the amount representing that part of the premium written
which is attributable to, and to be allocated to the succeeding
accounting periods and shall not be less than as required under section
64 V(1) (ii) (b) of the Act, i.e.
Reserves for unexpired risks in respect of –

(i) Fire and miscellaneous business, 50 per cent.,

(ii) Marine cargo business, 50 per cent., and

(iii) Marine hull business, 100 per cent of the premium, net of re
insurances, during the preceding twelve months.

53
Premium Received in Advance, which represents premium received
prior to the commencement of the risk, shall be shown separately
under the head 'Current Liabilities' in the financial statements.

Premium Deficiency: Premium deficiency shall be recognised if the

sum of expected claim costs, related expenses and maintenance costs
exceeds related reserve for unexpired risks.

Acquisition Costs: Acquisition costs, if any, shall be expensed in the

period in which they are incurred. Acquisition costs are those costs
that vary with, and are primarily related to, the acquisition of new and
renewal insurance contracts. The most essential test is the obligatory
relationship between costs and the execution of insurance contracts
(i.e. commencement of risk)

Claims: The components of the ultimate cost of claims to an insurer

comprise the claims under policies and specific claims settlement
costs. Claims under policies comprise the claims made for losses
incurred, and those estimated or anticipated under the policies
following a loss occurrence. A liability for outstanding claims shall be
brought to account in respect of both direct business and inward
reinsurance business.

54
The liability shall include:

(a) Future payments in relation to unpaid reported claims;

(b) Claims Incurred but Not Reported (IBNR) including inadequate

reserves [sometimes referred to as Claims Incurred But Not Enough
Reported (IBNER)], which will result in future cash/ asset outgo for
settling liabilities against those claims. Change in estimated liability
represents the difference between the estimated liability for
outstanding claims at the beginning and at the end of the financial
period.

The accounting estimate shall also include claims cost adjusted for
estimated salvage value if there is sufficient degree of certainty of its
realisation. Claims made in respect of contracts where the claims
payment period exceeds four years shall be recognised on an
actuarial basis, subject to regulations that may be prescribed by the
Authority,

In such cases, certificate from a recognised actuary as to the fairness

of liability assessment must be obtained. Actuarial assumptions shall
be suitably disclosed by way of notes to the account

55
Procedure to determine the value of investments: An insurer shall
determine the values of investments in the following manner:

(a) Real Estate - Investment Property: The value of investment

property shall be determined at historical cost, subject to revaluation
at least once in every three years. The change in the carrying amount
of the investment property shall be taken to Revaluation Reserve. The
insurer shall assess at each balance sheet date whether any
impairment of the investment property. has occurred. Gains/losses
arising due to changes in the carrying amount of real estate shall be
taken to equity under 'Revaluation Reserve'. The bases for revaluation
shall be disclosed in the notes to accounts. The Authority may issue
directions specifying the amount to be released from the revaluation
reserve for declaring bonus to the policyholders. For the removal of
doubt, it is clarified that except for the amount that is released to
policyholders as per the Authority's direction, no other amount shall
be distributed to shareholders out of Revaluation Reserve Account.
An impairment loss shall be recognised as an expense in the Revenue/
Profit and Loss Account immediately, unless the asset is carried at re-
valued amount. Any impairment loss of a re-valued asset shall be
treated as a revaluation decrease of that asset and if the impairment
loss exceeds the corresponding revaluation reserve, such excess shall
be recognised as an expense in the Revenue/Profit and Loss Account.

56
(b) Debt Securities: Debt securities, including government securities
and redeemable preference shares, shall be considered as "held to
maturity" securities and shall be measured at historical cost subject to
amortisation.

(c)Equity Securities and Derivative Instruments that are traded

in active markets: Listed equity securities and derivative instruments
that are traded in active markets shall be measured at fair value on the
balance sheet date. For the purpose of calculation of fair value, the
lowest of the last quoted closing price at the stock exchanges where
the securities are listed shall be taken. The insurer shall assess on each
balance sheet date whether any impairment of listed equity
security/derivative instrument has occurred. Unrealised gains/ losses
arising due to changes in the fair value of listed equity shares and
derivative instruments shall be taken to equity under the head 'Fair
Value Change Account". The Authority may issue directions
specifying the amount to be released from the Fair Value Change
Account for declaring bonus to the policyholders. For the removal of
doubt, it is clarified that except for the amount that is released to
policyholders as per the Authority's prescription, no other amount
shall be distributed to shareholders out of Fair Value Change
Account.

57
Also, any debit balance in Fair Value Change Account shall be
reduced from profit/free reserves while declaring dividends. The
insurer shall assess, on each balance sheet date, whether any
impairment has occurred. An impairment loss shall be recognised as
an expense in Revenue/Profit and Loss Account to the extent of the
difference between the re-measured fair value of the
security/investment and its acquisition cost as reduced by any
previous impairment loss recognised as expense in Revenue/Profit
and Loss Account. Any reversal of impairment loss, earlier
recognised in Revenue/Profit and Loss Account, shall be recognised
in Revenue/Profit and Loss Account.

(d) Unlisted and other than actively traded Equity Securities and
Derivative Instruments: Unlisted equity securities and derivative
instruments and listed equity securities and derivative instruments that
are not regularly traded in active markets shall be measured at
historical cost. Provision shall be made for diminution in value of
such investments. The provision so made shall be reversed in
subsequent periods if estimates based on external evidence show an
increase in the value of the investment over its carrying amount. The
increased carrying amount of the investment due to the reversal of the
provision shall not exceed the historical cost. For the purposes of this
regulation, a security shall be considered as being not actively traded,
if as per guidelines governing mutual funds laid down from time to
time by SEBI, such a security is classified as "thinly traded'.

58
Loans: Loans shall be measured at historical cost subject to
impairment provisions. The insurer shall assess the quality of its loan
assets and shall provide for impairment. The impairment provision
shall not be lower than the amounts derived on the basis of guidelines
prescribed from time to time by the Reserve Bank of India that apply
to companies and financial institutions.

Catastrophe Reserve: Catastrophe reserve shall be created in

accordance with norms, if any, prescribed by the Authority.
Investment of funds out of catastrophe reserve shall be made in
accordance with prescription of the Authority.

59
PART II - DISCLOSURES FORMING PART OF
FINANCIAL STATEMENTS

A. The following shall be disclosed by way of notes to the Balance

Sheet:

1. Contingent Liabilities:
 Partly-paid up investments
 Underwriting commitments outstanding
 Claims, other than those under policies, not acknowledged as
debts
 Guarantees given by or on behalf of the company
 Statutory demands/liabilities in dispute, not provided for
 Reinsurance obligations to the extent not provided for in
accounts
 Others (to be specified)

60
2. Encumbrances to assets of the company in and outside India.

3. Commitments made and outstanding for Loans, Investments and

Fixed Assets

4. Claims, less reinsurance, paid to claimants in/outside India.

5. Actuarial assumptions for determination of claim liabilities in the

case of claims where the claims payment period exceed four years.

6. Ageing of claims - distinguishing between claims outstanding for

more than six months and other claims.

7. Premiums, less reinsurance, written from business in/outside India.

8. Extent of premium income recognised, based on varying risk

pattern, category wise, with basis and justification therefore, including
whether reliance has been placed on external evidence.

61
9. Value of contracts in relation to investments, for:

 Purchases where deliveries are pending;

 Sales where payments are overdue.

10. Operating expenses relating to insurance business: basis of

allocation of expenditure to various classes of business.

11. Historical costs of those investments valued on fair value basis.

12. Computation of managerial remuneration.

13. Basis of amortisation of debt securities.

14. (a) Unrealised gain/losses arising due to changes in the fair value
of listed equity shares and derivative instruments are to be taken to
equity under the head 'Fair Value Change Account' and on realisation
reported in profit and loss Account.
(b) Pending realisation, the credit balance in the 'Fair Value Change
Account' is not available for distribution.

62
15. Fair value of investment property and the basis therefor.

16. Claims settled and remaining unpaid for a period of more than six
months as on the balance sheet data.

B. The following accounting policies shall form an integral

part of the financial statements:

1. All significant accounting policies in terms of the accounting

standards issued by the ICAI, and significant principles and policies
given in Part I of Accounting Principles. Any other accounting
policies followed by the insurer shall be stated in the manner required
under Accounting Standard AS 1 issued by the ICAI.

2. Any departure from the accounting policies as aforesaid shall be

separately disclosed with reasons for such departure.

63
C. The following information shall also be disclosed:

1. Investments made in accordance with any statutory requirement

should be disclosed separately together with its amount, nature,
security and any special rights in and outside India.

2. Segregation into performing/ non performing investments for

purpose of income recognition as per the directions, if any, issued by
the Authority.

3. Percentage of business sector-wise.

4. A summary of financial statements for the last five years, in the

manner as may be prescribed by the Authority.

5. Accounting Ratios as may be prescribed by the Authority.

6. Basis of allocation of Interest, Dividends and Rent between

Revenue Account and Profit and Loss Account.

64
PART III-GENERAL INSTRUCTIONS

Following general instructions are relevant for preparation of

financial statements.

1. The corresponding amounts for the immediately preceding

financial year for all items shown in the Balance Sheet, Revenue
Account and Profit and Loss Account should be given.

2. The figures in the financial statements may be rounded off to the

nearest thousands

3. Interest, dividends and rentals receivable in connection with an

investment should be stated as gross value, the amount of income tax
deducted at source being included under advance taxes paid'.

4. Income from rent shall not include any notional rent.

5. (1) for the purposes of financial statements, unless the context

otherwise requires -

65
(a) The expression provision' shall, subject to note II below mean any
amount written off or retained by way of providing for depreciation,
renewals or diminution in value of assets, or retained by way of
providing for any known liability or loss of which the amount cannot
be determined with substantial accuracy;

(b) the expression "reserve" shall not, subject to as aforesaid, include

any amount written off or retained by way of providing for
depreciation, renewals or diminution in value of assets or retained by
way of providing for any known liability;

(c) the expression capital reserve shall not include any amount
regarded as free for distribution through the profit and loss account;
and the expression "revenue reserve" shall mean any reserve other
than a capital reserve;

(d) The expression "liability" shall include all liabilities in respect of

expenditure contracted for and all disputed or contingent liabilities.

66
(II) Where:

 Any amount written off or retained by way of providing for

depreciation, renewals or diminution in value of assets, or

 Any amount retained by way of providing for any known

liability is in excess of the amount which in the opinion of the
directors is reasonably necessary for the purpose, the excess
shall be treated for the purposes of these accounts as a reserve
and not as a provision

6. The company should make provisions for damages under lawsuits

where the management is of the opinion that the award may go
against the insurer.

7. Extent of risk retained and reinsured shall be separately disclosed.

8. Any debit balance of Profit and Loss Account shall be shown as

deduction from uncommitted reserves and the balance if any, shall be
shown separately.

67
PART V - PREPARATION OF FINANCIAL
STATEMENTS

1. An insurer shall prepare the Revenue Account, Profit and Loss

Account [Shareholders' Account] and the Balance Sheet in Form B-
RA, Form B-PL, and Form B-BS, or as near thereto as the
circumstances permit.
Provided that an insurer shall prepare Revenue Accounts separately
for fire, marine, and miscellaneous insurance business and separate
schedules shall be prepared for Marine Cargo, Marine - Other than
Marine Cargo and the following classes of miscellaneous insurance
business under miscellaneous insurance and accordingly application
of AS 17-Segment Reporting – shall stand modified.

(i) Motor
(ii) Workmen's Compensation/Employers' Liability
(iii) Public/Product Liability
(iv) Engineering
(v) Aviation
(vi) Personal Accident
(vii) Health Insurance
(viii) Others

68
2.5 SCHEDULE C-AUDITOR'S REPORT

The report of the auditors on the financial Statements of every insurer

shall deal with the matters Specified herein:

1. That they have obtained all the information and

explanations which, to the best of their knowledge and
belief were necessary for the purposes of their audit and
whether they have found them satisfactory;

(a) Whether proper books of account have been maintained by the

insurer as far as appears from an examination of those books;

(b) Whether proper returns, audited or unaudited, from branches and

other offices have been received and whether they were adequate for
the purpose of audit;

(c) Whether the Balance sheet, Revenue account, Profit and Loss
account and the Receipts and Payments Account dealt with by the
report are in agreement with the books of account and returns;

69
(e) Whether the actuarial valuation of liabilities is duly certified by
the appointed actuary including to the effect that the assumptions for
such valuation are in accordance with the guidelines and norms, if
any, issued by the Authority, and/or the Actuarial Society of India in
concurrence with the Authority.

2. The auditors shall express their opinion on:

(a) (i) Whether the balance sheet gives a true and fair view of the
insurer's affairs as at the end of the financial year/period;

(ii) Whether the revenue account gives a true and fair view of the
surplus or the deficit for the financial year/period;

(iii) Whether the profit and loss account gives a true and fair view of
the profit or loss for the financial year/period;

(iv) Whether the receipts and payments account gives a true and fair
view of the receipts and payments for the financial year/period;

70
(b) The financial statements stated at (a) above are prepared in
accordance with the requirements of the Insurance Act, 1938 (4 of
1938), the Insurance Regulatory and Development Authority Act,
1999 (41 of 1999) and the Companies Act, 1956 (1 of 1956), to the
extent applicable and in the manner so required.

(c) Investments have been valued in accordance with the provisions of

the Act and these Regulations.

(d) The accounting policies selected by the insurer are appropriate and
are in compliance with the applicable accounting standards and with
the accounting principles, as prescribed in these Regulations or any
order or direction issued by the Authority in this behalf.

3. The auditors shall further certify that:

(a) They have reviewed the management report and there is no

apparent mistake or material inconsistencies with the financial
statements;
(b) The insurer has complied with the terms and conditions of the
registration stipulated by the Authority.

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4. A certificate signed by the auditors [which shall be in
addition to any other certificate or report which is
required by law to be given with respect to the balance
sheet] certifying that:

(a) They have verified the cash balances and the securities relating to
the insurer's loans, reversions and life interests (in the case of life
insurers) and investments;

(b) To what extent, if any, they have verified the investments and
transactions relating to any trusts undertaken by the insurer as trustee;
and

(c) No part of the assets of the policyholders' funds has been directly
or indirectly applied in contravention of the provisions of the
Insurance Act, 1938 (4 of 1938) relating to the application and
investments of the policyholders' funds

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2.6 SPECIAL ITEMS IN INSURANCE ACCOUNTS

UNEXPIRED RISKS RESERVE

In most cases General Insurance policies are renewed annually except

in some cases where policies are issued for a shorter period. Since
insurers close their accounts on a particular date, not all risks under
policies expire on that date. Many policies extend into the following
year during which the risk continues. Therefore on the closing date,
there is unexpired liability under various policies which may occur
during the remaining term of the policy beyond the year and
therefore, a provision for unexpired risks is made at normally 50% in
case of Fire Insurance, Miscellaneous Insurance and Marine Cargo
Insurance; and 100% of in case of Marine Hull Insurance. This
reserve is based on the net premium income earned by the General
Insurance Company during the year

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 RE-INSURANCE

If an insurer does not wish to bear the whole risk of policy written by
him, he may reinsure a part of the risk with some other insurer. In
such a case the insurer is said to have ceded a part of his business to
other insurer. The reinsurance transaction may thus be defined as an
agreement between a *ceding company' and 'reinsurer' whereby the
former agreed to 'cede' and the latter agrees to accept a certain
specified share of risk or liability upon terms as set out in the
agreement.

A ceding company is the original insurance company which has

accepted the risk and has agreed to *cede' or pass on that risk to
another insurance company or a reinsurance company. It may
however be emphasised that the original insured does not acquire any
right under a reinsurance contract against the reinsurer. In the event of
loss, therefore, the insured's claim for full amount is against the
original insurer. The original insurer has to claim the proportionate
amount from the reinsurer.

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There are two types of reinsurance contracts, namely, facultative
reinsurance and treaty reinsurance. Under facultative reinsurance each
transaction has to be negotiated individually and each party to the
transaction has a free choice, i.e., for the ceding company to offer and
the reinsurer to accept. Under treaty reinsurance a treaty agreement is
entered into between ceding company and the reinsurer whereby the
volume of the reinsurance transactions remain within the limits of the
treaty

The concepts regulation and supervision are often mixed. In this module,
regulators establish “the rules of the game,” such as regulations and guidelines
related to an Insurance Act (or Acts). Supervisors are the “referees” with the
function of overseeing that these rules are complied with and dealing with
consequences of non-compliance. This often requires supervisors to apply
judgement when making their determinations and decisions. Understanding this
difference in the context of the specific allocation of responsibilities for the
regulatory and supervisory functions in a supervisor is useful. The word
“supervisor’ is used to include both regulators and supervisors. It also assumes
that supervisors are insurance supervisors. Supervisors, as determined by the
context, may be either the individuals working for a supervisory entity or
authority or the entity itself.

75
 CO-INSURANCE

In cases of large risks the business is shared between more than one
insurer under co-insurance arrangements at agreed percentages. The
leading insurer issues the documents, collects premium and settles
claims. Statements of Account are rendered by the leading insurer to
the other co-insurers. Accounting for premium, claims etc. under co-
insurance is done in the same manner as that of the direct business
except in respect of the following peculiar features.

Incoming co-insurance
(i) Premium: The co-insurer books the premium based on the
statement received from the leading insurer usually by issuing dummy
documents. Entries are made in the Premium Register from which the
Premium Account is credited and the Leading Insurer Company's
Account debited. In case the statement is not received, the premium is
accounted for on the basis of advices to ensure that all premium in
respect of risk assumed in any year is booked in the same year; share
of premium relatable to further extension/endorsements on policies by
the leading insurer are also accounted for on the basis of subsequent
advices. Reference to the relevant communications should be made
from the concerned companies to ensure that premium collected by
them and attributable to the company is recorded.

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(ii) Claims Paid: Normally, on the basis of claims paid, advices
received from the leading insurer, the Claims Paid Account is debited
with a credit to the co-insurer. All such advices are entered into the
Claims Paid Register. It is a practice to treat all claims paid advices
relating to the accounting year received up to 31st January of the
subsequent year from leading insurer as claims paid.

(iii) Outgoing co-insurance: The share of the insurer only for both
premium and claims has to be accounted under respective accounts.
The share of other co-insurers is credited or debited, as the case may
be, to their personal accounts and not routed through revenue
accounts .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 do with the management of the
concern. But in life insurance it is the practice to share certain portion
of profit among the certain policyholders. 11 d) Mutual fund
companies The mutual fund companies are co- operative association
formed for the purpose of effecting insurance on the property of its
members. The policyholders are themselves the shareholders of the
companies each member is insured as well as insured

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2.7 LIFE INSURANCE

TYPES OF POLICIES

(1) Life Insurance Contract: Life insurance is a contract between

the insurer and insured. The person who insures his life is called the
insured. The company which insures his life is called insurer. The
insured is required to pay some amount of money in regular intervals.
These payments are referred as premiums. A sum of assured money is
paid to the insured in case the policy holder successfully makes all the
payments and the policy comes to an end. On the contrary if the
insured dies of an unexpected event the sum assured is paid to his
dependents irrespective of full payment of the policy amount. The
insurance company pays the money on death or after the policy period
whichever occurs first. If an insured is unable to continue to paying
premiums on his life policy, he has two options –

(i) He may discontinue the payment and convert the policy into a
"Paid-up" policy, which matures in the normal course; or

(ii) He may surrender the policy and in lieu thereof is paid an amount
calculated according to a fixed formula adopted by the company.

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(2) Term Life Insurance: A term insurance policy is a pure risk
cover for a specified period of time. The sum assured is payable only
if the policyholder dies within the policy term. For instance, if a
person buys 2 lakh policy for 15-years, his family is entitled to the
money if he dies within that 15-year period. If he survives the 15-year
period, then he is not entitled to any payment; the insurance company
keeps the entire premium paid during the 15-year period. There is no
element of savings or investment in such a policy. It is a 100 per cent
risk cover. It simply means that a person pays a certain premium to
protect his family against his sudden death. He forfeits the amount if
he outlives the period of the policy. Therefore the Term Insurance
Policy comes at the lowest cost.

(3) Whole Life Policy: A Whole Life Policy is an insurance cover

against death, irrespective of when it happens. Under this plan, the
policyholder pays regular premiums until his death, following which
the money is handed over to his family.

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(4) Endowment Policy: In an Endowment Policy, the sum assured is
payable even if the insured survives the policy term. If the insured
dies during the tenure of the policy, the insurance firm has to pay the
sum assured just as any other pure risk cover. A pure endowment
policy is also a form of financial saving, whereby if the person
covered remains alive beyond the tenure of the policy. He gets back
the sum assured with some other investment benefits.

(5) Money back Policies: These policies are structured to provide

sums required as anticipated expenses (marriage, education, etc.) over
a stipulated period of time. A portion of the sum assured is payable at
regular intervals. On survival the remainder of the sum assured is
payable. In case of death, the full sum assured is payable to the
insured. The premium is payable for a particular period of time.

(6) Annuities: In an annuity, the insurer agrees to pay the insured a

stipulated sum of money periodically. The purpose of an annuity is to
protect against risk as well as provide money in the form of pension at
regular intervals. A person entering into an annuity contract agrees to
pay a specified sum of capital (lump sum or by instalments) to the
insurer. The insurer in return promises to pay the insured a series of
payments until insured's death. Generally, life annuity is opted by a
person having surplus wealth and wants to use this money after his
retirement. There are two types of annuities, namely, immediate and
deferred. In an immediate annuity, the insured pays a lump sum
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Amount (known as purchase price) and in return the insurer promises
to pay him in instalments a specified sum on a monthly/quarterly/half-
yearly/yearly basis. A deferred annuity can be purchased by paying a
single premium or by way of instalments. The insured starts receiving
annuity payment after a lapse of a selected period (also known as
Deferment period). The amount paid to an insurance company as
consideration for the payment of annuities is classified under the head
- "consideration for the payment of annuities" - in the Revenue
Account.

(7) Pension Plans: Insurance companies offer two kinds of pension

plans - endowment and unit linked. Endowment plans invest in fixed
income products, so the rates of return are very low. Unit-linked
Insurance Plans (ULIPS), introduced by the private players, are
hugely popular, because they combine the benefits of life insurance
policies with mutual funds. A certain part of the premium is invested
in listed equities/debt funds/bonds, and the balance is used to provide
for life insurance and fund management expenses.

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(8) With or Without Profit: An insurance policy can be with' or
'without' profit. In the former, bonuses declared, if any, after
periodical value allotted to the policy and are payable along with the
contracted amount. In 'without pro the contracted amount is paid
without any addition. The premium rate charged for a "with w is
therefore higher than for a 'without' profit policy. Apart from the
guaranteed death benefit assurance companies give the 'with-profits'
policyholders bonuses during the policy period which are allocations
of surplus arising from the life fund (see Para 9.3 below). There are
usually two types of bonuses: reversionary bonuses and terminal
bonuses. Reversionary bonuses are declared, often annually, during
the policy term, normally as a proportion of the sum assured (simple
reversionary bonuses) or as a proportion of the sum assured and
previously declared bonuses (compound reversionary bonuses). They
increase the policyholders' claim entitlement but are actually paid
only when a claim arises. Terminal bonuses are paid in addition to the
ordinary reversionary bonuses and are allocated only to policies
becoming claims by death or maturity.

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 FINANCIAL STATEMENTS

(1) Fund Accounting: Life Insurance Accounting follows the

principles of Fund Accounting. There are two main funds
(i) Life Insurance Fund (also known as Policyholders Fund) and
(ii) Shareholders Fund. The balances of the Funds and their
investments are shown separately in the Balance Sheet. The changes
or movements in the funds/investments are shown separately in the
Revenue / Profit and Loss Account.

(2) Revenue Account: The movements during the accounting year in

the Life Insurance Fund (or Policyholders Fund) are shown in the
Revenue Account. Revenue account is also known as Policyholders
Account - Technical Account. The Revenue Account sets out all
income and expenses relating to the insurance business accrued
during the accounting year (see Para 10.5/Form A RA). The balance
of Revenue Account shows, not the 'profit', but the closing balance of
the Life Insurance Fund.

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(3) Profit and Loss Account (Shareholders' Account - Non-
Technical Account): The movements during the accounting year in
the Shareholders Fund are shown in the Profit and Loss Account. It is
also known as Shareholders' Account - Non-Technical Account. It
shows all income and expenses relating to Shareholders' Account. It
shows those items not relating to insurance business (see Para
10.5/Form a-PL).

(4) Balance Sheet: (i) the balances of Shareholders' Fund and Policy
Holders Fund; as well as the related Fund Investments are shown in
the balance sheet (see Para 10.5/ Form A-BS).

(ii) Shareholders Fund includes share capital less preliminary

expenses, reserves and surplus and fair value change account.

(iii) Policyholders' Fund consists of Policy liabilities, Fair value

change relating to policy fund investments, Insurance reserves,
Provision for linked liabilities, Funds for future appropriations,
Surplus allocated to shareholders etc. The balance in the 'Funds for
future appropriations' represents funds, the allocation of which, either
to participating policyholders or to shareholders has not been
determined at the balance sheet date.

84
(iii)Transfers to and from this fund reflect the excess or deficiency of
income over expenses and Appropriations in each accounting period
arising in the Company's policy- holder fund.

(iv)The Investments of a Life Insurance Company must be in

accordance with the provisions of Section 27 of the Insurance Act,
1938, read with Rule 3 of the IRDA (Investment) Regulations, 2000.
Accordingly, the controlled fund of the company has to be invested in
the specified securities. The assets relating to Pension business,
Annuity business and Linked Life Insurance business shall not form
part of Controlled Fund. Separate norms are formulated for investing
funds of Pension business and Annuity business. The funds relating to
Unit Linked Insurance business are to be invested as per the pattern of
investment offered to and approved by the policyholders. However,
the total investment in other than approved category of investments
shall at no time exceed 25% of the Fund.

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 SPECIAL ITEMS IN ACCOUNTS

(1) Life Insurance Fund / Policyholders Fund: S. 10 of Insurance

Act, 1938 states that where the insurer carries on the business of life
insurance all receipts due in respect of such business, shall be carried
to and shall form a separate fund to be called the life insurance fund.
It is also known as Policyholders Fund. The assets of Life Insurance
Fund shall be kept distinct and separate from all other assets of the
insurer. The deposit made by the insurer in respect of life insurance
business shall be deemed to be part of the assets of such fund. The life
insurance fund shall be the security of the life policy holders and shall
not be liable for any non-life insurance contracts of the insurer and
shall not be applied directly or indirectly for any purposes other than
those of the life insurance business of the insurer. The Policyholders
Fund needs to maintain adequate level of solvency at all times.
Separate Funds are maintained for different types of policies like
Participating Fund, Pension Fund etc.

The solvency level is also to be maintained for declaration of bonuses

to Participating Fund and Non-participating Fund. During the initial
period, company starts with Shareholders Fund. In order to meet with
the above requirements of the Policyholders' Fund, the company
needs to transfer funds from Shareholders' Fund

86
Such transfer from Shareholders' Fund to Policyholders' A/c is
irreversible in nature and at no point of time, such amount can be
recouped (credited back) to the Shareholders' Fund. Transfer of such
funds is shown in Revenue Account and it adds to the revenue of the
Technical Account. The same amount treated us expenditure in
Profits & Loss account (Shareholders Account-Non Technical

2) Bonus: A life insurance policy may be "with profit" or "without

profits". The bolder of a "without profits policy is entitled to receive
on maturity only the amount specified in the policy, but on a with
profits" policy he is entitled to receive in addition, the amount of
bonuses declared on each valuation date. On each valuation date, the
amount standing to the credit of Life Fund which is in clever met
liability, as determined by the actuary, is distributed first among the
policyholders and then among the shareholders. The share of the
policyholders is paid to them as bonus, either cash on declaration or
by reduction of future premiums, or on maturity of the policy.
If the bonus is not payable in cash immediately but is to be payable at
the time of the claim, it is described as Reversionary bonus. The
amount of Reversionary Bonus is included in claims interim Bonus in
a bonus paid to a policyholder for a period for which valuation is not
complete and, therefore, the exact profit or bonus has not been
determined. Such a bonus is also included claims. Terminal Bonus is
payable only on maturity of the policy

87
(3) Valuation Balance Sheet: Section 49 of the Insurance Act, 1938
provides that no insurer shall declare bonus to the policyholders
except out of a surplus shown in the Valuation Balance Sheet which
may arise is a result of actuarial valuation of the assets and liabilities
of the insurer, nor shall such surplus be increased by contributions out
of any reserve fund or otherwise unless such contributions have been
brought in as revenue through the Revenue Account on or before the
nor of valuation. Revenue Account of a Life Insurance Company does
not show the profit or loss for a given year. For the purpose of
ascertaining the profit or loss of a Life Insurance Company, a
Valuation Balance Sheet is prepared periodically Valuation Balance
Sheet is prepared by expert sales known as actuaries. The steps in
valuation are as follows
A frequent problem for supervisors in jurisdictions where investments
are primarily in real estate is to obtain appropriate valuations of
buildings and properties that are owned by insurers. Valuation
approaches that rely on estimates of future cash flows may or may not
be objective and must be analysed carefully by the supervisor. In
contrast, valuation methods that emphasise the sale of similar
properties to independent third-party buyers potentially have greater
objectivity because they do not involve estimates by persons who may
have an incentive to maximise the appraisal value. A preferred
alternative could involve the use of both methods to validate each
other

88
(1) Calculate present (discounted) value of premium receivable on
current policies

(2) Calculate present (discounted) value of claims payable on current

policies.

(3) Calculate net liabilities which is equal to (1)-(ii).

(4) Deduct Net Liability from Life Insurance Fund which will be
equal to Surplus or Deficit.

Distribution of Surplus (Bonus): The provisions laid down under

the Insurance Regulatory and Development Authority (Actuarial
Report and Abstract) Regulations, 2000, regarding bonus by Life
Insurance Companies are summed up below

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Valuation date: "Valuation date means as respects any valuation the
date as at which the actuarial valuation is made

Inter Valuation Period: "Inter valuation period" means, as respects

any valuation, the period to the valuation date of that valuation from
the valuation date of the preceding valuation in connection with
which an abstract was prepared under the Act.

Statement: A statement of Composition of Surplus and Distribution

of Surplus in respect of Policyholders' funds is prepared by the Life
Insurance Company showing total amount of surplus arising during
the inter-valuation period, and the allocation of such surplus, for
participating business and for non-participating business, with the
particulars as mentioned below

Composition of Surplus:
Surplus for the year after provision for loss tax, etc. Inter Buses paid
during the inter-valuation period Terminal Bonuses paid during the
inter-valuation period Loyalty Additions or other forms of bonuses, if
any, paid during the inter valuation period Sum transferred from
shareholders' funds during the inter-valuation period Amount of
surplus, from policyholders' funds, brought forward from preceding
valuation. Total Surplus [total of the items (a) to (f)]

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Distribution of Surplus:
Policyholders' Fund:
To Interim Bonuses paid
To Terminal Bonuses
To Loyalty Additions or any other forms of bonuses, if any
Among policyholders with immediate participation
Among policyholders with deferred participation
Among policyholders in the discounted bonus class
To every reserve fund or other fund or account (sums passed through
the accounts during the inter valuation period to be separately stated);
As carried forward unappropriated.

Shareholders 'Fund:
To the shareholders' funds (sums passed through the accounts during
the inter valuation period to be separately stated);

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 2.8 SCHEDULE A [LIFE INSURANCE]

PART I ACCOUNTING PRINCIPLES FOR

PREPARATION OF FINANCIAL STATEMENTS

1. Applicability of Accounting Standards: Every Balance Sheet,

Revenue Account [Policyholders' Account]. Receipts and Payments
Account [Cash Flow statement] and Profit and Loss Account
[Shareholders' Account] of an insurer shall be in conformity with the
Accounting Standards (AS) issued by the ICAI, to the extent
applicable to insurers carrying on life insurance business, except that:

• Accounting Standard 3 - Cash Flow Statements shall be prepared

only under the Direct Method

• Accounting Standard 17 - Segment Reporting shall apply to all

insurers irrespective of the requirements regarding listing and
turnover mentioned therein.

2 Premium: Premium shall be recognised as income when due. For

linked business the due date for payment may be taken as the date
when the associated units are created.

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3. Acquisition Costs: Acquisition costs, if any, shall be expensed in
the period in which they are incurred. Acquisition costs are those
costs that vary with and are primarily related to the acquisition of new
and renewal insurance contracts.

4. Claims Cost: The ultimate cost of claims shall comprise the policy
benefit amount and specific claims settlement costs, wherever
applicable.

5. Actuarial Valuation - Liability for Life Policies: The estimation

of liability against life policies shall be determined by the appointed
actuary of the insurer pursuant to his annual investigation of the life
insurance business. Actuarial assumptions are to be disclosed by way
of notes to the account. The liability shall be so calculated that
together with future premium payments and investment income, the
insurer can meet all future claims (including bonus entitlements to
policyholders) and expenses

93
Procedure to determine value of investments: An insurer shall
determine the values of investments in the following manner:

(a) Real Estate Investment Property: The value of investment

property shall be determined at historical cost, subject to revaluation
at least once in every three years. The change in the carrying amount
of the investment property shall be taken to Revaluation Reserve. The
insurer shall assess at each balance sheet date whether any
impairment of the investment property has occurred. Gains/losses
arising due to changes in the carrying amount of real estate shall be
taken to equity under 'Revaluation Reserve'. The bases for revaluation
shall be disclosed in the notes to accounts. The Authority may issue
directions specifying the amount to be released from the revaluation
reserve for declaring bonus to the policyholders. For the removal of
doubt, it is clarified that except for the amount that is released to
policyholders as per the Authority's direction, no other amount shall
be distributed to shareholders out of Revaluation Reserve Account.
An impairment loss shall be recognised as an expense in the Revenue/
Profit and Loss Account immediately, unless the asset is carried at re-
valued amount. Any impairment loss of a re-valued asset shall be
treated as a revaluation decrease of that asset and if the impairment
loss exceeds the corresponding revaluation reserve, such excess shall
be recognised as an expense in the Revenue/Profit and Loss Account.

94
(b) Debt Securities: Debt securities, including government securities
and redeemable preference shares, shall be considered as "held to
maturity" securities and shall be measured at historical cost subject to
amortisation.

(c) Equity Securities and Derivative Instruments that are traded

in active markets: Listed equity securities and derivative instruments
that are traded in active markets shall be measured at fair value on the
balance sheet date. For the purpose of calculation of fair value, the
lowest of the last quoted closing price at the stock exchanges where
the securities are listed shall be taken. The insurer shall assess on each
balance sheet date whether any impairment of listed equity
security/derivative instrument has occurred. Unrealised gains/ losses
arising due to changes in the fair value of listed equity shares and
derivative instruments shall be taken to equity under the head 'Fair
Value Change Account". The Authority may issue directions
specifying the amount to be released from the Fair Value Change
Account for declaring bonus to the policyholders. For the removal of
doubt, it is clarified that except for the amount that is released to
policyholders as per the Authority's prescription, no other amount
shall be distributed to shareholders out of Fair Value Change
Account. Also, any debit balance in Fair Value Change Account shall
be reduced from profit/free reserves while declaring dividends.

95
The insurer shall assess, on each balance sheet date, whether any
impairment has occurred. An impairment loss shall be recognised as
an expense in Revenue/Profit and Loss Account to the extent of the
difference between the re-measured fair value of the
security/investment and its acquisition cost as reduced by any
previous impairment loss recognised as expense in Revenue/Profit
and Loss Account. Any reversal of impairment loss, earlier
recognised in Revenue/Profit and Loss Account, shall be recognised
in Revenue/Profit and Loss Account.

(d) Unlisted and other than actively traded Equity Securities and
Derivative Instruments: Unlisted equity securities and derivative
instruments and listed equity securities and derivative instruments that
are not regularly traded in active markets shall be measured at
historical cost. Provision shall be made for diminution in value of
such investments. The provision so made shall be reversed in
subsequent periods if estimates based on external evidence show an
increase in the value of the investment over its carrying amount. The
increased carrying am of the investment due to the reversal of the
provision shall not exceed the historical cost. For the purposes of this
regulation, a security shall be considered as being not actively traded,
if as per guidelines governing mutual funds laid down from time to
time by SEBI, such a security is classified as "thinly traded'.

96
7. Loans: Loans shall be measured at historical cost subject to
impairment provisions. The insurer shall assess the quality of its loan
assets and shall provide for impairment. The impairment provision
shall not be lower than the amounts derived on the basis of guidelines
prescribed from time to time by the Reserve Bank of India that apply
to companies and financial institutions.

8. Linked Business: The accounting principles used for valuation of

investments are to be consistent with principles enumerated above. A
separate set of financial statements, for each segregated fund of the
linked businesses, shall be annexed. Segregated funds represent funds
maintained in accounts to meet specific investment objectives of
policyholders who bear the investment risk. Investment income/ gains
and losses generally accrue directly to the policyholders. The assets of
each account are segregated and are not subject to claims that arise
out of any other business of the insurer.

9. Funds for Future Appropriation: The funds for future

appropriation shall be presented separately. The funds for future
appropriation represent all funds, the allocation of which, either to the
policyholders or to the shareholders, has not been determined by the
end of the financial year.

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PART II -DISCLOSURES FORMING PART OF
FINANCIAL STATEMENTS

A. The following shall be disclosed by way of notes to the

Balance Sheet:
1. Contingent Liabilities:

(a) Partly-paid up investments

(b) Underwriting commitments outstanding
(c) Claims, other than those under policies, not acknowledged as
debts
(d) Guarantees given by or on behalf of the company
(e) Statutory demands/liabilities in dispute, not provided for
(f) Reinsurance Obligations to the extent no provided for in account
(g) Others (to be specified).

2. Actuarial assumptions for valuation of liabilities for life policies in

force.

3. Encumbrances to assets of the company in and outside India.

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4. Commitments made and outstanding for Loans, Investments and
Fixed Assets.

5. Basis of amortisation of debt securities. 6. Claims settled and

remaining unpaid for a period of more than six months as on the
balance sheet date.

7. Value of contracts in relation to investments, for:

(a) Purchases where deliveries are pending;

(b) Sales where payments are overdue.

8. Operating expenses relating to insurance business: basis of

allocation of expenditure to various segments of business.

9. Computation of managerial remuneration.

10. Historical costs of those investments valued on fair value basis.

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11. Basis of revaluation of investment property.

B. The following accounting policies shall form an integral

part of the financial statements:

1. All significant accounting policies in terms of the accounting

standards issued by the ICAI, and significant principles and policies
given in Part I of Accounting Principles. Any other accounting
policies, followed by the insurer, shall be stated in the manner
required under Accounting Standard AS 1 issued by the ICAI.

2. Any departure from the accounting policies shall be separately

disclosed with reasons for such departure.

3. Insurance contracts present a similar situation to that of the

company providing landscaping services. The normal convention is
for customers to pay their premium at the beginning of the insurance
term (or periodically during that term for policies with more than one
premium expected). However, at this point in time, the insurer has not
yet provided any insurance coverage since the term is just
commencing. It would therefore give a misleading picture of an
insurer’s earnings if premiums were recognised as revenue at the time
the customers pay their premiums. Instead, premiums are “earned”
over the term of the policy or period for which premiums have been
paid. See the detailed discussion on accounting for premiums later.

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C. The following information shall also be disclosed:

1. Investments made in accordance with any statutory requirement

should be disclosed separately together with its amount, nature,
security and any special rights in and outside India;

2. Segregation into performing/ non performing investments for

purpose of per the directions, if any, issued by the Authority; income
recognition as

3. Assets to the extent required to be deposited under local laws or

otherwise encumbered in or outside India;

4. Percentage of business sector-wise;

5. A summary of financial statements for the last five years, in the

manner as may be prescribed by the Authority; 6. Bases of allocation
of investments and income thereon between Policyholders' Account
and Shareholders' Account;

7. Accounting Ratios as may be prescribed by the Authority.

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PART III - GENERAL INSTRUCTIONS FOR
PREPARATION OF FINANCIAL STATEMENTS

1. The corresponding amounts for the immediately preceding

financial year for all items shown in the Balance Sheet, Revenue
Account, Profit and Loss Account and Receipts and Payments
Account shall be given.

2. The figures in the financial statements may be rounded off to the

nearest thousands. 3. Interest, dividends and rentals receivable in
connection with an investment should be stated at gross amount, the
amount of income tax deducted at source should be included under
'advance taxes paid' and taxes deducted at source.

4. (1) for the purposes of financial statements, unless the context

otherwise requires –

(a) the expression provision' shall, subject to (II) below mean any
amount written off or retained by way of providing for depreciation,
renewals or diminution in value of assets, or retained by way of
providing for any known liability or loss of which the amount cannot
be determined with substantial accuracy;

102
(b) the expression 'reserve' shall not, subject to as aforesaid, include
any amount written off or retained by way of providing for
depreciation, renewals or diminution in value of assets or retained by
way of providing for any known liability or loss;

(c) the expression capital reserve' shall not include any amount
regarded as free for distribution through the profit and loss account;
and the expression 'revenue reserve' shall mean any reserve other than
a capital reserve;

(d) The expression "liability" shall include all liabilities in respect of

expenditure contracted for and all disputed or contingent liabilities.

103
(II) WHERE:

(a) any amount written off or retained by way of providing for

depreciation, renewals or diminution in value of assets, or

(b) Any amount retained by way of providing for any known liability
or loss, is in excess of the amount which in the opinion of the
directors is reasonably necessary for the purpose, the excess shall be
treated as a reserve and not provision.

5. The company shall make provisions for damages under lawsuits

where the management is of the opinion that the award may go
against the insurer.

6. Extent of risk retained and re-insured shall be separately disclosed.

7. Any debit balance of the Profit and Loss Account shall be shown as
deduction from uncommitted reserves and the balance, if any, shall be
shown separately. Tutorial Note: PART IV-Contents of Management
Report is omitted here.]

104
PART V-PREPARATION OF FINANCIAL
STATEMENTS

(1) An insurer shall prepare the Revenue Account [Policyholders'

Account], Profit and Loss Account [Shareholders' Account] and the
Balance Sheet in Form A-RA, Form A-PL and Form A-BS,

As prescribed in this Part, or as near thereto as the circumstances

permit. An insurer shall prepare Revenue Account and Balance Sheet
for the under mentioned businesses separately and to that extent the
application of AS 17 shall stand modified:
(a)Participating policies and Non-participating policies;
(b) (i) Linked business [life insurance contracts or health insurance
contracts under which benefits are wholly or partly to be
determined by reference to the value of underlying assets or any
approved index]
(ii) Non-Linked business separately for Ordinary Life, General
Annuity, Pensions and Health Insurance;
(c) Business within India and business outside India.

(2) An insurer shall prepare separate Receipts and Payments Account

in accordance with the Direct Method prescribed in AS 3 - "Cash
Flow Statement" issued by the ICAI.

105
 Chapter No. 3
REVIEW OF LITERATURE

106
 REVIEW OF INSURANCE

This chapter presents the review of literature to identify and

understand the implications of different issues related to consumer
perception and satisfaction towards public and private life insurances
companies in India. The literature on life insurance industry in India
includes books, compendia, theses, dissertations, study reports and
articles published by academicians and researchers in different
periodicals. The review of this literature gives an idea to concentrate
on the unexplored area and to make the present study more distinct
from other studies. The literature available is presented below:

Gautama V and Kumar M T

The present research is an effort, to allegorise the attitudes of Indian
consumers towards the insurance services. The study has been made
by accumulating the antiphon of consumers through structured
questionnaire on five point Liker scale. The decree of the present
study may act as an important aspect for the insurance companies in
Indian market to flounce marketing strategies established on socio
demographic and economic factors.

107
Ansari Z. A
In the present study examines the attitude of individuals towards
different kinds of risks and scope they prefer in Saudi Arabia. The
study by further examine how the use of insurance particularly the
binding insurance has altered the perception towards risks and their
future behaviour towards buying other insurance policies and also
what features the users of insurance suggest in their insurance policy
contract. The study is based on primary data collected aimlessly from
current users of binding insurance policies that is motor insurance and
health insurance and life insurance.

Das S. K.
A study on insurance has been as essential part of financial services
system and acknowledged as a vital element of a country’s financial
health and mark of progress. Insurance suppliers for the financial
security of citizens and proposes valuable investment advices and
serves as a persuasive step towards both individual and national
financial stability. It is found that high operating cost, exertion break
even, confluence of accounting standard etc. are the main issues of
life insurance companies in India.

108
Ali L. and Chatley P
Ban assurance as an aqueduct of selling insurance has fast
ameliorated impulse in the Indian insurance scene. Hence conveying
that future of ban assurance can be bright in India too if the
aggravating ascend companies can channelize their achievements
cogently is for corporate image taking the place by size of operations
and customer satisfaction and adeptness in sales process.

Ahmed A. and Kwatra N

This papers aims at judging the quality of insurance services in India
through customer’s determination and how this can be used to
increase the demand for insurance which is at present low in India.
The study by revealed among other things that the total number of
death claim settled by an insurance company is the most important
factor considered by the customers of insurance companies in India in
their judgement and calculation of quality of the policies they are
holding. The study therefore advises that the culture of deferment in
premium payment or non-payment should be gridlocked and
organisations should look in going to see the acumen why the
payment of premium is a difficulty.

109
 Chapter No. 4
DATA ANALYSIS

110
 4.1 SURVEY QUESTION

1. Name:-

2. Gender

 Male
 Female

3. Age

 Below-20 Yrs
 21- 30 Yrs
 31- 40 Yrs
 41 Yrs- above

4. Educational Level

 Under Graduate
 Graduate
 Post Graduate
 Other

111
5. Occupation

 Students
 Service
 Business
 House Wife
 Retired

6. Annual Income

 Below-50,000
 51,000-1,00,000
 1,00,000-5,00,000
 5,00,000-Above

7. Do you have an insurance policy?

 Yes
 No

8. What type of insurance do you have?

 Private
 Public

112
9. Who influenced you to get an insurance policy?

 The Media
 Insurance Agents
 Federal Government
 Friends
 Family
 Colleagues
 Other

10. How many insurance policies do you currently have?

 1
 2
 3
 4
 More than 5

113
11. What kind of insurance policies do you have? Check as many as
you’d like.

 Savings Policy
 Whole Life Policy
 Endowment Policy
 Money Back Policy
 Automobile Insurance
 Pension Plan Policy
 Property Insurance
 Any Other

12. What is the average term of the policies you have?

 Up To 5 Yrs
 Above 20 Yrs

13. Have you ever received any benefits from any of the policies you
currently have?

 Yes
 No

114
14. If yes, how many times have you received it?

 1
 2
 3
 More Than Three

15. How regularly do you pay your premiums?

 Monthly
 Quarterly
 Half Year
 Yearly

16. Have any of your policies ever lapsed due to non-payment of

premiums?

 Yes
 No

115
17. Have you received any incentives from your insurance company
on the insurance premiums?

 Yes
 No

18. Are you aware of any insurance bonuses of your policies?

 Yes
 No

19. Have you ever surrendered any insurance policy?

 Yes
 No

116
 4.2 SURVEY REPONSES AND CHART

2. Gender

 Male
 Female

Gender

41% Male

59% Female

As we can see in a pie diagram survey on Insurance policy 59% of

Male & 41% of Female
As per survey conduction

117
3. Age

 Below-20 Yrs
 21- 30 Yrs
 31- 40 Yrs
 41 Yrs- above

Age

10%
30% Below-20 Yrs
16% 21-30 Yrs
31-40Yrs
41 Yrs-Above
44%

As we can see in “AGE” Criteria

30% are below – 20 yrs of age, 44% are 21-30 yrs of age, 16% are 31-
40 yrs of age, and 10% are 41 yrs- above age.
As per survey conduction.

118
4. Educational Level

 Under Graduate
 Graduate
 Post Graduate
 Other

Educational Level

8%

59% Under Graduate

10% Graduate
Post Graduate
Other

23%

As we can see in “Educational Level” Criteria

59% people are under Graduate, 23% people are Graduate, 10%
people are Post Graduate, and 8% people have done other education.
As per survey conduction.

119
5. Occupation

 Students
 Service
 Business
 House Wife
 Retired

Occupation

6%
8%
Students
59%
Service
10%
Business
House Wife
Retired
23%

As we can see in “Occupation” Criteria

59% people are students, 23% people are service, 10% people are
business, and 8% people are house wife, 6% people are retired
As per survey conduction

120
6. Annual Income

 Below-50,000
 51,000-1,00,000
 1,00,000-5,00,000
 5,00,000-Above

Annual Income

10%
Below-50,000
15% 36%
51,000-1,00,000
1,00,000-5,00,000
5,00,000-Above
39%

As we can see in “Annual Income” Criteria 36% are below –50,000

annual incomes, 39% are51, 000-1, 00,000 annual incomes, 15% are
1, 00,000-5, 00,000 annual incomes, 10% 5, 00,000-above annual
Incomes
As per survey conduction.

121
7. Do you have an insurance policy?

 Yes
 No

35%

65% YES NO

As we can see there is a 65% person have insurance policy and were
35% people don’t have insurance policy.
As per survey conduction.

122
8. What type of insurance do you have?

 Private
 Public

35%
PRIVATE

65% PUBLIC

As we can see there is a 65% person have private company insurance

and were other 35% people have public insurance policy.
As per survey conduction

123
9. Who influenced you to get an insurance policy?

 The Media Friends

 Insurance Agents Family
 Federal Government Colleagues
 Other

4%
The Media
12% 19%
Insurance Agents
Federal Government
13% Friends
23% Family
Colleagues
19%
10% Other

As we can see in people are influenced you to get an insurance policy

4% people know through the media, 23% people know through
insurance agents,10% people know through federal government, 19%
people know through friends, 13% people know through family , 12%
people know through colleagues, 4% people know through other
source.
As per survey conduction

124
10. How many insurance policies do you currently have?

 1
 2
 3
 4
 More than 5

8%
6%
1

11% 2

60% 3
4
15%
More than 5

As we can see in the number of policies own by people as per survey

conduction.
60% people have 1 policy, 15% people have 2 policies, 11% people
have 3 policies, 6% people have 4 policies, 8 % people have more
than 5 policies.
As per survey conduction

125
11. What kind of insurance policies do you have? Check as many as
you’d like.

 Savings Policy Whole Life Policy

 Endowment Policy Money Back Policy
 Automobile Insurance Pension Plan Policy
 Property Insurance Any Other

8%
Savings Policy
6%
Whole Life Policy
9% 31%
Endowment Policy
Money Back Policy
11% Automobile Insurance
Pension Plan Policy
10% 13% Property Insurance
12% Any Other

As we can see in a pie diagram survey on insurance policy

31% people have saving policy, 13% people have whole life policy,
12% people have endowment policy, 10% people have money back
policy, 11% people have automobile Insurance,9% people have
pension plan policy,6% people have property Insurance, 8% people
have any other policy
As per survey conduction

126
12. What is the average term of the policies you have?

 Up To 5 Yrs
 Above 20 Yrs

30%
Up To 5 Yrs
70%
Above 20 Yrs

As we can see in a pie diagram survey on average term of the policies

people have
70% people have up to 5yrs and 30% people have above 20 yrs
As per survey conduction.

127
13. Have you ever received any benefits from any of the policies you
currently have?

 Yes
 No

35% YES
65%
No

As we can see there is a 65% person have received benefits from

insurance policy and were 35% people do not received any benefits
from insurance policy
As per survey conduction.

128
14. If yes, how many times have you received it?

 1
 2
 3
 More Than Three

5% 1
8%

10% 2

77%
3

More Than Three

There are some who have received benefits from there insurance
policy as follows
77% people have received 1 time benefit, 10% people have received 2
time benefits, 8% people have received 3 time benefits, and 5%
people have received more than three time benefits
As per survey conduction.

129
15. How regularly do you pay your premiums?

 Monthly
 Quarterly
 Half Year
 Yearly

8%

10%
Monthly

59% Quarterly
23%
Half Year

Yearly

As we can see in people pay their insurance policy premiums as

follows
59% people pay their premiums monthly, 23% people pay their
premiums quarterly, 10% people pay their premiums half year, and
8% people pay their premiums yearly
As per survey conduction.

130
16. Have any of your policies ever lapsed due to non-payment of
premiums?

 Yes
 No

25%

YES NO

75%

As we can see in above pic diagram that people policies have lapsed
due to non-payment of premiums
Only 25% people have lapsed there due to non-payment of premiums
and 75% people have not lapsed there policies due to non-payment of
premiums
As per survey conduction.

131
17. Have you received any incentives from your insurance company
on the insurance premiums?

 Yes
 No

39%
YES NO
61%

As we can see there is a 61% person have received incentives on there

insurance policy and were other 39% people have not received any
incentives on there insurance policy. As per survey conduction.

132
18. Are you aware of any insurance bonuses of your policies?

 Yes
 No

37%
YES NO
63%

As we can see there is a 63% person have received bonuses on there

insurance policy and were other 37% people have not received any
bonuses on there insurance policy. As per survey conduction.

133
19. Have you ever surrendered any insurance policy?

 Yes
 No

42% 58%

YES NO

As we can see there is a 58% person have surrendered there insurance

policy and were other 42% people have not surrendered any insurance
policy. As per survey conduction.

134
 4.3 CASE STUDY

ORIGIN OF LIC

The Life Insurance Corporation of India was established on

September 1, 1956, by the Ministry of Finance of the Government of
India, with the goal of making life insurance more widely available,
particularly in rural areas, with the goal of reaching all insurable
persons in the country and providing adequate financial cover at a
reasonable cost.

135
 LIC's OBJECTIVES

The primary goal of LIC is to promote life insurance across the

country, particularly in rural regions and among the socially and
economically disadvantaged, to reach all insurable individuals and
provide them with appropriate financial protection against death at a
fair cost.

Maximise people's savings mobilisation by making insurance-linked

savings sufficiently appealing. Another goal is to function as trustees
for the insured public in their individual and collective capacities.
Meeting the community's diverse life insurance demands as the social
and economic environment changes.

LIC intends to involve all employees to the best of their abilities to

advance the insured public's interests by delivering prompt and
courteous service.

136
 GROWTH OF LIC’s

In 1956, LIC had 5 zone offices, 33 divisional offices, and 212 branch
offices in addition to its corporate office. Because life insurance
contracts are long-term contracts that require a range of services
during the policy's life. LIC felt the necessity to extend operations and
open a branch office at each district headquarters in subsequent years.

The LIC was reorganised, and it created a considerable number of

new branch offices. It shifted servicing tasks to branches due to the
reorganisation, and departments were declared accounting units. It
had a significant impact on the company's success.

You can observe that from about INR 200 crores in new business in
1957, the company only exceeded INR 1000 crores in 1969-70, and it
took another ten years for LIC to reach the INR 2000 crore barriers.
However, after reorganisation in the early 1980s. LIC had already
surpassed INR 7000 crores in Sum Assured on new policies by 1985
86.

137
 LIC's AT PRESENT

LIC has practically monopolised the solicitation and sale of life

insurance plans in India, having existed as a massive insurance
business for almost 60 years LIC has expanded its operations outside
of India to 14 countries to meet the insurance needs of Non-Resident
Indians

With an asset value of INR 2,529,390 crores, LIC is now India's

largest life insurance business, controlled by the government LIC's
headquarters are in Mumbai

It currently operates eight zone offices and 113 divisional offices

around the nation. It has 2,048 branches across India in various towns
and cities

In addition, LIC maintains a network of over 15 million agents that

sell life insurance to the general population. The LIC had a total life
fund of $28.3 trillion as of 2019. In the 2018-19 fiscal years, the total
value of sold insurance was $21.4 million in 2018-19, LIC resolved26
million claims. With 290 million policyholders, it is the largest
insurance company in the world

138
The Life Insurance Corporation of India (LIC of India) is one of
India's largest financial organisations, providing comprehensive
financial solutions for all aspects of life. It has a customer base of
around 23 crores, making it the largest insurance company globally
After Indian Railways; it is the second-largest real estate owner in the
country. The LIC advertises through newspapers radio, television.
Billboards and other media

139
 LIC's PRODUCTS AND SERVICES

The Life Insurance Corporation of India (LIC) offers a variety of life

insurance plans. As a government-owned Life Insurance Firm, LIC's
policies are in high demand and appeal to a broad spectrum of
consumers.

LIC For endowment, LIC offers the Jeevan Pragati, LIC Jeevan Labh,
LIC Single Premium Endowment Plan, LIC's New Endowment Plan,
New Jeevan Anand, LIC's Jeevan Rakshak, LICs Limited Premium
Endowment Plan Jeevan LIC’s Lakshya, LIC's Aadhaar Shila, and
LIC's Aadhar Stambh

LIC Jeevan Umang specialises in life insurance.

LIC's Bima Shree, LIC's Jeevan Shiromani, LIC's New Money Back
Plan- 20 years, LIC's New Money Back Plan-25 years, LIC New
Bima Bachat, LIC's Jeevan Tarun is some of the money-back plans
available. Money-back plans include LICS Anmol Jeevan II and LIC's
e-term Plan.

Their pension schemes include the Pradhan Mantri Vaya Vandana

Yojana, LIC New Jeevan Nidhi, and LIC's Jeevan Akshay.

140
 LIC’s SERVICES FOR ITS EMPLOYEES

Agents are being offered home loans.

The LIC of India's Agents Housing Scheme provides house loans to

the company's agents. It has a separate subsidiary, LIC-HFL, from
which many housing plans are moved for fairer distribution.

Employees are given meal coupons.

In September 2010, the Life Insurance Corporation of India (LIC of

India) introduced a one-of-a-kind benefit for all workers. The number
of meal vouchers is determined by each team member's position in the
hierarchy.

141
Team member participation in sports is encouraged.

Employees of the LIC of India are encouraged to participate in

various sporting activities to improve their physical fitness and overall
personality. Employees have also spoken on behalf of the company at
different national and international levels. It has recruited numerous
workers from its Sports Recruitment Quota to maintain competitive
excellence in sports and to compete on an equal footing with other
businesses.

Training its employees

LIC has begun to provide training to its staff at all levels of the
organisation. It has established a distinct Human Resources
Development / Organizational Development (HRD/OD) Department
to develop and enhance capabilities, commitment and foster a
learning and performance-focused culture.

142
 LIC's MARKETING STRATEGY

LIC Life Insurance's marketing approach is pretty basic. Its primary

goal is to educate consumers about the company's different policies
and brands. Personal selling, exhibits, demonstrations at events,
advertising, and innovative schemes have all been used by LIC to
achieve this goal.

As presents and incentives, policyholders are given bags, diaries, and

calendars. As promotional activities, advertisements are displayed on
TVs, newspapers, and billboards.

A mobile advertising van circulates across rural regions, raising

awareness of the firm. LIC-Life Insurance has a website and a
webpage where it provides thorough information on each potential
inquiry to satisfy customers.

LIC is continually working to strengthen "Brand LIC" and strengthen

the brand's link with growing market segments. It has done so by
maintaining a regular media presence in national and regional outlets.

It has also sponsored several national and international programmes

and a variety of activities such as newspaper campaigns and
continuous coverage of goods in several publications.

143
 FREQUENTLY ASKED QUESTION

1. Who is the founder of LIC?

LIC has been founded by Government of India in 1956.

2. What are the Subsidiary companies of LIC?

LIC subsidiary companies are

 LIC Pension Fund Limited

 LIC Cards Service Limited.
 IDBI Bank Limited

3. What is the number of employees in LIC?

There are 1, 14, 000 employees (2020) working for LIC, and over 10
Lakh LIC agents.

144
Chapter No. 5

145
 5.1 CONCLUSION

Insurance is a large investment and you will most likely

purchase multiple policies throughout your lifetime. It is
essential that you know what each type of insurance covers
and how it works so you can make the best decision about
what to buy. Do not base your decision on just what is
cheapest, but look at what it provides.

Take the time to shop around and find the right insurance for
your situation. People often say they cannot afford insurance,
but the reality is that they cannot afford not to have it. It can
save them from thousands or more dollars in unplanned
expenses when unexpected situations arise. You do not want to
waste your money on policies that do not meet your needs, but
the right insurance policy can protect you and your family
from unforeseen disasters

This manuscript reviews and analyses the activities, reporting, and

valuation of insurance companies. The primary objectives are to
describe the insurance business, discuss and evaluate insurers’
financial information and the accounting methods used in preparing
financial statements.

146
 5.2 SUGGESTIONS

Due to the intense competition in the insurance market, the insurance

companies have to adopt better strategies to attract more customers
keeping the cost quality and return on investment in tact is necessary
in order to tackle the competition

Return on investment, company reputation and premium outflow by

the respondent. Hence greater fows should be given to their attributes.
Companies should adopt effective promotional strategies to income
the awareness level among the consumers

147
 5.3 REFERENCE

Library Books

01. Advanced Financial Accounting

02. Financial Services Banking and Insurance

03. Insurance: Concepts and Coverage

04. Insurance in India: Opportunities, Challenges and Strategic

Perspective

05. Valuation of Indian Insurance Companies

06. Insurance Law in India

148
 5.4 BIBLIOGRAPHY

01. Tryst with Trust (1991) LIC of India, Bombay, India

02. Bhave S.R. (1970) “Saga of Security: Story of Indian Life

insurance (1870-1970”, LIC of India, Bombay

03. Haridas R. (2011) “Life Insurance in India” New Century

publications, New Delhi, India.

04. Agarwal, Abhisek, “Distribution of life Insurance products in

India”. Insurance Chronicle, 2002

05. Gupta, P.K. (1997) “Distribution strategies of insurance players in

India”, Insurance and Risk Management

06. Shanker (2004), “Marketing of Insurance Services”, Service

Marketing, the Indian Perspective

07. Adil Zia Khalid & Prof Mohammad Azam (2013) “Insurance
Services”. In the journal of Pacific Business

08. Shahid Akhtar and Iftekhar Iqbal (2012)- Insurance and Risk
Management in India-Challenges

149
 WEBSITE

https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx
?page=PageNo107&flag=1

https://www.yourarticlelibrary.com/accounting/problems-
accounting/accounting-problems-on-insurance-claims/80497

https://legislative.gov.in/sites/default/files/A1938-04.pdf

https://www.indiacode.nic.in/handle/123456789/2304?locale=en

www.insuranceinstituteofindia.in

www.insuringindia.com

http://www.internationalinsurance.org

www.policybazaar.co

www.licindia.in

150