1.

INTRODUCTION

Insurance is a federal subject in India and has a history dating back to 1818. Life and General
Insurance in India is still a nascent sector with huge potential for various global players with
the life insurance premiums accounting to 2.5% of the country’s GDP while General
Insurance premiums to 0.65% of India’s GDP.

The Insurance sector in India has gone through a number of phases and changes,
particularly in the recent years when he Govt. of India in 1999 opened up the insurance
sector by allowing private companies to solicit insurance and also allowing Foreign Direct
Investment.

India’s life insurance is the biggest in the world with about 360 million existing policies
which are expected to increase between 12-15% over the next five years. The country’s
insurance market is expected to quadruple in size over the next 10 years from its current
size of approx. Rs. 450 billion. During this period, the life insurance market is slated to cross
Rs. 1120 billion.

Yet, nearly 80 % of Indian population is without life insurance cover while health insurance
and non-life insurance continues to be below international standards

Insurance, in Law and Economics, is a form of risk management primarily used to evade
against the risk of a contingent loss. Insurance is defined as the equitable transfer of risk of
a loss, from one entity to another, in exchange for a premium. It can be thought of a
guaranteed small loss to prevent possibly devastating large loss.
2. OBJECTIVE OF THE PROJECT

 What kind and amount of insurance an individual should opt for and the value of the
premium measured against other wants and needs.

 TO STUDY THE VARIOUS LIFE INSURANCE AND GENERAL INSURANCE POLICIES OF

DIFFERENT COMPANIES

 TO DO A COMPRATIVE STUDY OF DIFFERENT KINDS OF POLICIES

 TO KNOW ABOUT INSURANCE SECTOR AS A WHOLE

 TO STUDY VARIOUS FINANCIAL ACEPT OF THE INSURANCE SECTOR

 TO UNDERSTAND THE DIFFERENT INSURANCE POLICIES AND RISKS INVOLVED WITH

THEM

 TO STUDY AND ANALYSE THE INSURANCE POLICIES

STATEMENT OF PROBLEM

 For the Comparison purpose, I have considered Life Insurance Company

of India (LIC) from the Public Sector and Bajaj Alliance Life Insurance
Company Limited (Bajaj Allianz) from the Private sector.

 FOR BRTTER COMPRASION I HAVE COSNSIDERED POLICES FOR THE

SAME TIME PERIOD

 THE PARAMETERS WHICH THE POLICIES ARE COMPARED

1 DURATION OF POLICIE
2 RATE OF INTREST
3 RISK ASSOCIAITED
3. METHOTDS OF DATA COLLECTION

THE DATA COLLECTED IS OF TWO TYPES NAMELY

1 PRIMARY DATA

 BY VISTING THE NEAREST BRARNCHES OF INSURANCE COMPANIES

 DOING REASERCH ON DIFFERENT INSURANCE POLICIES AVALIABLE

 THROUGH DIFFERENT AGIENCIES AVAILIABLE

2 SECONDARY DATA

 DATA AVALIABLE ON DIFFERENT WEBSITES

 DATA COLLECTED FROM VARIOUS ADVERTISEMENT

 DATA COLLECTED FROM RESEARCH DONE PREVISOULY


4. WORKING DEFINATION

 In very simple terms, insurance is a pooling arrangement whereby contributions are

collected from the members who joint the pool. The amount so collected is utilized to
compensate members who suffer loss. The arrangement works because generally not all
members who joint the pool suffer loss. In order to ensure fairness, a pool would consist
of people who are exposed to similar risks or losses.

 Insurance, in Law and Economics, is a form of risk management primarily

used to evade against the risk of a contingent loss. Insurance is defined as
the equitable transfer of risk of a loss, from one entity to another, in
exchange for a premium. It can be thought of a guaranteed small loss to
prevent possibly devastating large loss.

 In order to provide a smooth and flawless operation of Insurance in India, a

national agency named The Insurance Regulatory and Development
Authority (IRDA) was established by the Government of India. IRDA is based
in Hyderabad

 Life Insurance provides an insurance benefit to the beneficiaries of a

person when the person who is insured dies. This insurance is concerned
with two hazards that stand across the life path of every person viz. that
are dying prematurely leaving a dependent family and secondly that of
living the life but without any adequate support.

 General Insurance- General Insurance evolves with the evolution of business and
lifestyle of human beings. With its seeds in the seafaring manners and ships today
general insurance covers everything from space expeditions to the voice of famous
singers. More than life insurance, general insurance forms the life line of several
commerce and trade activities.
TIME OF STUDY

 I have used the Secondary data of last five financial years. I have collected data from
the various Balance sheets of public and other private insurance companies, websites
and in some cases I have personally met some employees of some insurance companies.
I have tried to find out most of the information required to compare the public and
private insurance companies

PREFACE 1. OBJECTIVES: ¾ To find out general insurance and which are the companies involved in it. ¾
To know what are the trends in General Insurance. ¾ To find out the developments in the General
Insurance. ¾ To find out the Procedure of Claims. 2. METHODOLOGY: ¾ The study was carried out in
Mumbai. ¾ Extensive Library Research was carried out. ¾ Various Websites were referred. ¾ Primary
data was collected through interviews. ¾ Various books, magazines and newspapers have been referred.
EXECUTIVE SUMMARY Insurance is not the sale of products, but servicing customers. It is a system, by
which the losses suffered by a few are spread over many, Exposed to similar risks. Insurance is a
protection against financial loss arising: on the happening of an unexpected event. Insurance companies
collect premiums to provide for this protection. A loss is paid out of the premiums collected from the
insuring public and the Insurance Companies act as trustees to the amount collected. The very
fundamental principle of spreading of the risk is actually practiced by the insurance companies by
reinsuring the risks that they have insured. The opening up of the Insurance Sector to Private
Companies, has made available more products and world class service to Indian Customer. This project
has been made with an objective to give an insight into various facts of General Insurance sector in
India. An attempt has been made to explain the apex body of General Insurance. i.e. General Insurance
Corporation of India, its structure, products and subsidiaries. Also the review of latest entrants into
insurance sector viz private players like TATA AIG General Insurance Company, Reliance General
Insurance Company limited, Bajaj Allianz General Insurance Company, IFFCO Tokio General Insurance
Company, Royal Sundaram General Insurance Company limited and ICICI Lombard General Insurance
Company have been described in brief, Due to the growth in the technological sector of the country, the
insurance companies have started utilizing these technologies to it’s optimum level. A case study based
on the devastating Mumbai floods on 26th July 2005 is been prepared and facts of the case are being
listed along with the effect of the particular situation on the General Insurance Companies is been
justified. INDEX Serial no. Topic Page no. 1 Origin of Insurance 1 2 A brief history of the Insurance sector
2 3 Insurance Sector Reforms 5 4 Insurance Regulatory Authority 7 5 Insurance Industry Classification 8 6
4 I’s of Insurance 10 7 General Insurance 12 8 Product levels 15 9 Frequent Terms Used 20 10 Public
Sector Subsidiaries 21 11 Private Players 30 12 Market Share 40 13 Insurance Regulatory & Development
Authoritarian 42 14 Products 45 15 Changing Scenario of General Insurance Market 51 16 Trends 56 17
Claims 59 18 Case Study 62 Origin of Insurance Whenever there is uncertainty there is risk. We do not
have any control over uncertainties which involves financial losses. The risk may be certain events like
death, pension, retirement or uncertain events like theft, fire, accident, etc. Insurance is a financial
service for collecting the savings of the public and providing them with risk coverage. It comes under
service sector and while marketing this service due care is taken in quality product and customer
satisfaction. The main function of the Insurance is to provide protection against the possible chances of
generating losses. The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again. Tracing the developments in the Indian
insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries. 1 Brief
History of the Insurance Sector The business of life insurance in India in its existing form started in India
in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the
important milestones in the life insurance business in India are: 1912: The Indian Life Assurance
Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian
Insurance Companies Act enacted to enable the government to collect statistical information about both
life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and
foreign insurers and provident societies taken over by the central government and nationalized. LIC
formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the
Government of India. The General insurance business in India, on the other hand, can trace its roots to
the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British. Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general
insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India,
frames a code of conduct for ensuring fair conduct and sound business practices. 2 1968: The Insurance
Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory
Committee set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and
grouped into four companies’ viz. the National Insurance Company Ltd., the New India Assurance
Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC
incorporated as a company. INSURANCE SECTOR The opening up of Insurance sector was a part of the
on going liberalization in the financial sector of India. The changing face of the financial sector and the
entry of several companies in the field of life and non life Insurance segment are one of the key results
of these liberalization efforts. Insurance business by way of generating premium income adds
significantly to be the GDP. Over the past three years, more than thirty companies have expressed
interest in doing business in India. The IRDA (Insurance Regulatory Development Authority) is the
regulatory authority, which looks over all related aspects of the insurance business. The provisions of
the IRDA bill acknowledge many issues related to insurance sector. The IRDA bill provides guidance for
three levels of players - Insurance Company, Insurance brokers and Insurance agent. Life Insurance
sector is one of the key areas where enormous business potential exists. In India currently the life
insurance premium as a percentage of GDP is 1.3 % against, 5.2 per cent in the US. General Insurance is
another segment, which has been growing at a faster pace. But as per the current comparative statistics,
the general insurance premium has been lower than life insurance. General Insurance premium as a
percentage of GDP was a mere 0.5 'per cent in 1996. In the General Insurance Business, General
Insurance Corporation (GIC) and its four subsidiaries viz. New India Insurance, Oriental Insurance,
National Insurance and United India Insurance, are doing major business. The General Insurance
Industry has been growing at a rate of 19 percent per year. 3 The entry of several private insurance
companies, particularly international insurance companies, through joint ventures, will speed up the
process of insurance mobilization. The competition will unleash new schemes and benefits, which will
give consumers a better Chance to save as well as insure. The regulatory system in India is relatively new
and takes some more time to make the Insurance sector a perfectly competitive one. Insurance
Regulatory Authority of India issued regulations on 15 subjects which included appointed. Actuary,
actuarial report, Insurance agents, Solvency margins, reinsurance, registration of Insurers, and obligation
of insurers to rural and social sector, investment and accounting procedure. The reform in Insurance in
India is guided by factors like availability of a variety of products at a competitive price, improvement in
the quality of customer services etc. Also the employment opportunities in the Insurance sector wil1
increase as major players set their business plans in India. The policy of the government to open up the
financial sector and the Insurance sector is expected to bring greater FDI inflow into the country. The
increase in the investment limit in this vital sector has generated considerable business interests among
the foreign Insurance companies" Their entry wil1 certainly change the Insurance sector considerably. 4
Insurance Sector Reforms: In 1993, Malhotra Committee, headed by former Finance Secretary and RBI
Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its
future, direction. The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector. In 1994, the committee submitted the report and some of the key
recommendations included: Structure: 1. Government stake in the insurance Companies to be brought
down to 50%. 2. Government should take over the holdings of GlC and its subsidiaries so that these
subsidiaries can act as independent corporations. 3. All the insurance companies should be given greater
freedom to operate. Competition: I. Private Companies with a minimum paid up capital of Rs. 1 bn
should be allowed to enter the industry. 2. No Company should deal in both Life and General Insurance
through a single entity. 3. Foreign companies may be allowed to enter the industry in collaboration with
the domestic companies. 4. Postal Life Insurance should be allowed to operate in the rural market. 5.
Only one State Level Life Insurance Company should be allowed to operate in each state. 5 Regulatory
Body: 1. The Insurance Act should be changed. 2. An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be made independent.
Investment: 1. Mandatory Investments of LIC Life Fund in government securities to be reduced from
75% to 50%. 2. GIC and its subsidiaries are not to hold more than 5% in any company (There current
holdings to be brought down to this level over a period of time.) Customer Service: 1. LIC should pay
interest on delays in payments beyond 30 days. 2. Insurance companies must be encouraged to set up
unit linked pension plans. 3. Computerization of operations and updating of technology to be carried out
in the insurance industry. The committee emphasized that in order to improve the customer Services
and increase the coverage of the insurance industry should open up to competition. But at the same
time, the committee felt the need to exercise caution as any failure on the part of new players could ruin
the public confidence in the industry. Hence, it was decided to allow competition in a limited way by
stipulating the minimum capital requirement of Rs. 100 crores. The committee felt the need to provide
greater autonomy to insurance companies in order to improve. 6 Insurance Regulatory Authority On the
recommendations of the Malhotra Committee, government has set up an interim Insurance Regulatory
Authority (IRA), with a view to activate an insurance regulatory apparatus essential for proper
monitoring and control of the insurance industry. The IRA is headed by a chairman who is also Controller
o0f insurance and chairman of TBC. The other members of the IRA, not exceeding seven in number of
whom not more than three shall serve full time, shall be nominated by the central government.
INSURERS: Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers: Life
Insures: • Life Insurance Corporation of India (LIC) General Insurers • General Insurance Corporation of
India (GIC) (with effect from Dec ‘2000, a national reinsurer) 7 INSURANCE INDUSTRY: CLASSIFICATION
INSURANCE LIFE INSURANCE GENERAL INSURANCE Fire Insurance Marine Insurance Mediclaim Motor
Vehicle 8 SOME PLAYERS IN THE INDUSTRY: Life Insurance General Insurance Life Insurance Corporation
of India. General Insurance Corporation of India. 1. Oriental Insurance Company Ltd. 2. New India
Assurance Company Ltd. 3. National Insurance Company Ltd. 4. United India Insurance Company Ltd.
New Entrants ICICI Prudential Life Insurance Ltd. Bajaj Alliaz General Insurance Company Ltd. Tata AIG
Life Insurance Corporation Ltd. Reliance General Insurance Company Ltd. ING Vysya Life Insurance
Corporation Ltd. Tata AIG General Insurance Company Ltd. Om Kotak Mahindra Life Insurance
Corporation Ltd. Royal Sundaram Alliance Insurance Company Ltd. 9 4 I’s of Insurance Service The 4 I’s
refers to the different dimensions/ characteristics of any service. Unlike pure product, services have its
own characteristics and its related problems. So the service provider needs to deal with these problems
accordingly. The service provider has to design different strategies according the varying feature of the
service. These 4 I’s not only represent the characteristics of different services but also the problems and
advantages attached to it. These 4 I’s can be broadly classified as: • Intangibility • Inconsistency •
Inseparability • Inventory • Intangibility: Insurance is a guarantee against risk and neither the risk nor
the guarantee is tangible. Hence, insurance rightly come under services, which are intangible. Efforts
have been made by the insurance companies to make insurance tangible to some extent by including
letters and forms 10 • Inconsistency Service quality is often inconsistent. This is because service
personnel have different capabilities, which vary in performance from day to day. This problem of
inconsistency in service quality can be reduced through standardization, training and mechanization. •
Inseparability Services are produced and consumed simultaneously. Consumers cannot and do not
separate the deliverer of the service from the service itself. Interaction between consumer and the
service provider varies based on whether consumer must be physically present to receive the service. •
Inventory No inventory can be maintained for services. Inventory carrying costs are more subjective and
lead to idle production capacity. When the service is available but there is no demand, cost rises as, cost
of paying the people and overhead remains constant even though the people are not required to
provide services due to lack of demand. In the insurance sector however, commission is paid to the
agents on each policy that they sell. Hence, not much inventory cost is wasted on idle inventory. As the
cost of agents is directly proportionate to the policy sold. 11 GENERAL INSURANCE With the opening up
of the insurance industry to the private sector, the need for a strong, independent and autonomous
Insurance Regulatory Authority was felt. As the enacting of legislation would have taken time, the then
Government constituted through a Government resolution an Interim Insurance Regulatory Authority
pending the enactment of a comprehensive legislation. The Insurance Regulatory and Development
Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of
holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry
and for matters connected therewith or incidental thereto and further to amend the Insurance Act,
1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act,
1972 to end the monopoly of the Life Insurance Corporation of India (for life insurance business) and
General Insurance Corporation and its subsidiaries (for general insurance business). Definition and
meaning: 1. INSURANCE: Insurance is the means of managing risk and protection against financial loss
arising as a result of contingencies, which may or may not occur. In other words, insurance is the act of
providing assurance, against a possible loss, by entering into a contract, with one who is willing to give
assurance. Through this contract the person willing to give assurance binds himself to make good such
loss, if it occurs. 12 2. GENERAL INSURANCE: General insurance means managing risk against financial
loss arising due to fire, marine or miscellaneous events as a result of contingencies, which may or may
not occur. General Insurance means to “Cover the risk of the financial loss from any natural calamities
viz. Flood, Fire, Earthquake, Burglary, etc.. i.e. the events which are beyond the control of the owner of
the goods for the things having insurable interest with the utmost good faith by declaring the facts
about the circumstances and the products by paying the stipulated sum , a premium and not having a
motive of making profit from the insurance contract.” Some of the General Rules: 1. Mis-description :
The insurance policy shall be void and all the premiums paid by insured may be forfeited by the
insurance company in the event of mis-presentation or misdeclaration and/or non-disclosure of any
material facts. 2. Reasonable care : The insured shall take all reasonable steps to safeguard the property
insured against any loss or damage. Insured shall exercise reasonable care that only competent
employees are employed and shall take all reasonable precautions to prevent all accidents and shall
comply with all statuary or other regulations 13 3. Fraud : If any claim under the policy may be in any
respect fraudulent or if any fraudulent means or device are used by the insured or any one acting on the
insured’s behalf to obtain any benefit under the insurance policy, all the benefits under the insurance
policy may be forfeited. 4. Few basic principles of general insurance are : 1. Insurable interest 2. Utmost
good faith 3. Subrogation 4. Contribution 5. Indemnity 5 Risks of loss not covered under general
insurance are: The loss or damage or liability or expenses whether direct or indirect occasion by
happening through or arising from any consequences of war, invasion, act of foreign enemy, hostilities
(whether war be declared or not), civil war, rebellion revolution, civil commotion or loot or pillage in
connection therewith and loss or damage caused by depreciation or wear and tear. However the risk of
loss or damage by war can be insured by payment of additional premium in some cases only. 14 Product
levels: In this figure there is a nucleus or core in the center, which is supported by series of tangible and
intangible features and benefits and these form a cluster around the core product. AUGMENTED CORE
POTENTIAL E X P E C T E D 15 Level Type of service Contents Insurance sector 1 Core service Basic service
product •Life •Non-life insurance policy 2 Expected service Basic product and minimum purchase
conditions that must be met. •After sales service •Low claim settling period. 3 Augmented service
Something different, which enables one product to be differentiated from other •Technology •Online
premium payment • Payment through credit cards • Standing instruction to bank 4 Potential service
Features that attract the customers and are useful to them. •Maturity claims settled on or before the
maturity date. •Loans The core product of insurance company is insuring life and non life products.
People opt for this service as they want to secure their life, people dependent on them and other
valuable things in life. The time factor plays an important role while providing service to the customer.
The customer expects that the procedures for settling the claim should be short and not much time
consuming. They should get the benefits of the service as soon as possible. 16 Today the technology is
boosting in each and every field. Insurance is not an exception. Companies have started providing
customers facility of online payment of premium through their websites. They also provide online
assistant to the customer the policy status and how to calculate the premium. To calculate the premium
they just need the present age, the type of police, sum assured, and accident covered if any. By filling in
this information you can calculate the amount of premium you have to pay. The customer can pay their
premiums by means of credit cards or can also give standing instruction to the bank in order to pay their
monthly premiums. The insurance companies also provide loan facilities against their policies. At
present loans are granted on unencumbered polices as follows: • Up to 90% of the Surrender Value for
policies, where the premium due is fully paidup, and • Up to 85% of the Surrender Value for policies
where the premium due is partly paidup. The minimum amount for which a loan can be granted under a
policy is Rs150. The rate of interest charged is 10.5% p.a., payable half-yearly. Loans are not granted for
a period shorter than six months, or on the security of lost policies (the assured must have the duplicate
policies) or on policies issued under certain plans. Certain types of policies are, however, without loan
facility. 17 FREQUENT TERMS USED Agent: An insurance company representative licensed by the state,
who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder far the
insurer. Actual Total Loss: It is a loss where the goods are completely lost and become irrecoverable
Additional cover: An insurance policy extended to cover additional risk perils such as strikes. Riots and
Civil commotion etc on payment of extra premium. Agreed value policy: Policy which undertakes to pay
a specified amount in case of total loss. Under this case the policy does not take into account the current
market value. Assessor: Person who estimates the value of goods for the purpose of apportioning the
sum payable by the underwriters to settle the claims. Also called as Surveyor. Assured: Party
indemnified against 19ss by means of insurance. Burglary: It is a theft committed by breaking into or out
of the premises. Evidence of breaking In, Is necessary. 18 Coverage: The scope of protection provided
under a contract of insurance; any of several risks covered by a policy. Cargo insurance: A generic term
used in both inland marine and ocean marine insurance to designate the type’s of insurance available to
provide coverage for cargo that is being transported by truck, rail, air, ship, or boat. Certificate of
Insurance: A statement of coverage issued to an individual insured, specifying the insurance benefits
and principal provisions applicable to the member. Claim: The formal request by a policyholder or a
claimant for payment of loss under an insurance policy. Co-insurance: A provision under which an
insured who carries less than the stipulated percentage of insurance to value, will receive a loss
payment that is limited to the same ration which the amount of insurance bears to the amount
required; Cover Note: Is the document that is issued provisionary pending issuance of insurance Policy.
Indemnity: Legal principle that specifies an insured should not collect more than the actual cash value of
a loss but should be restored to approximately the same financial position as existed before the loss. 19
Insurable Interest: A condition in which the person applying for insurance and the person who is to
receive the policy benefit will suffer all emotional or financial loss, if any untouched event occurs.
Without insurable interest, an insurance contract is invalid, Insurance: Social device for minimizing risk
of uncertainty regarding loss by spreading the risk over a large enough number of similar exposures to
predict the individual chance of loss. Net Premium: The portion of premium rate which is designed to
cover benefits of the policy, excluding expenses, contingencies and profit. Policy: Is the legal document
that has the conditions of the insurance contract. Premium: It is the amount paid to secure an insurance
policy. Salvage: Recovery made by an insurance company by the sale of property which has been taken
over from that insured as a part of loss settlement. The remains of damaged vehicle or any other
property. Third party: Any person other than the two parties signing an insurance, contract.
Underwriting: Underwriting of a risk involves consideration of material, facts on the basis of which a
decision will be taken whether to accept the risk and if so at what rate of premium. 20 Public Sector
Subsidiaries I. Oriental Insurance Company. The Oriental Insurance Company Ltd. (OICL) is one of the
leading General Insurance companies in India and is a subsidiary of the General Insurance Corporation
(GIC) of India. It is one of the oldest Insurance. If companies and was established in the year 1947. The
Company transacts all kinds of non-life insurance business ranging from insurance covers for very big
projects to small rural insurance covers. OICL, is the – • First to have underwritten the biggest Grass
Root Refinery Project, Reliance Jamnagar Refinery. • First to have issued a Package Policy under mega
risk to PSU Oil giants. . • First to have issued Advance Loss of Profits policy in India. • First to have issued
directors & Officers liability policy in India. • First to introduce Kidnap & Ransom cover in India. • First to
have issued Stock Brokers and Stock Exchange custodial services policy in India. • First to have issued
tailor-made cover for Cellular Communication systems. • First to have front office computerization drive
in India. • First to have a system of in-house loss assessment upto statutory limits. • First to have started
motor third party conciliatory proceedings. 21 THE PROFILE The Oriental Insurance Company' Ltd. (OICL)
is one of the leading General Insurance companies in India and is a subsidiary of the General Insurance
Corporation (GIC) of India. It is one of the oldest Insurance companies and was established in the year
1947. The Company transacts all kinds of non-life insurance business ranging from insurance covers for
very big projects to small rural insurance covers. OICL has its Head office in New Delhi, the capital of
India. The Company has 21 Regional Offices, 311 Divisional Offices and 635 Branch offices in various
cities of the country. Reinsurance connections are spread all over the world. The Company has a very
high reputation in the Reinsurance market. OICL specializes in devising special covers for large projects
like Power Plants, Petro-chemical, Steel Plants and chemical plants. It has a highly technically qualified
and competent team of professionals, to render the best customer service. The Company has a
dedicated project cell at the Head Office as well as major cities of India. A special R & D team has been
dedicated to bring out special innovative covers like StockBrokers' Policies, Special Package Policies etc.
MISSION o To develop general insurance business in the best interest of the community. o To provide
financial security to individuals, trade and commerce by offering insurance products and service of high
quality at affordable cost. 22 VALUES o Highest priority to customer needs. o High standards of public
conduct. o Transparency in operations. COMMITMENTS TO THE CITIZENS o In areas coming within
competence of GIC respond to all commercially viable general insurance requirements of the citizens,
not hitherto available within three months from the date on which such a demand is received. o In areas
covered by tariff, appropriate proposals will be submitted to the Tariff Advisory Committee with
appropriate comments within two months. o Continue to provide customized insurance products for
weaker sections of the society at affordable price within six months of receipt of a request for a specific
type of cover. o Prepare booklets on standard policy covers setting out essential information and make
such booklets readily available for purchase at suitable places. o Promote customer education in general
insurance service by holding workshops in important regional centers. o Make available to a customer,
on request to the policy issuing office, the status of his claim and/or claim settlement details within 7
working days. o Endeavor to set up a system of Ombudsman at four metropolitan cities to conciliate
disputes on personal line insurance claims 23 CORPORATE OBJECTIVES: o To serve better the insurance
needs of the entire community, keeping CUSTOMER as the focus. o To serve better the insurance needs
of the entire community, keeping CUSTOMER as the focus. o To manage Business profitably, Manage
funds judiciously and deploy investible funds for optimum Yield. o To manage Business profitably,
Manage funds judiciously and deploy investible funds for optimum Yield. o To work towards
minimization of losses and develop Risk Management Technologies. o To function as a strong and
dynamic non-life insurer. 24 PRODUCTS: The various products can be grouped under the following
categories: o Individuals/Family o Marine o Professionals o Business/Office/Traders o
Engineering/Industry o Agriculture/Sericulture/Poultry o Animals/Birds o Aviation o Motor Vehicle –
Private/Commercial o Health-Mediclaim/Overseas Mediclaim/Personal Accident 25 Documents
requirement for various types of Claims Different documents are required for settling different types of
claims. The most commonly required ones are mentioned under each claims type listed below. Your full
cooperation to surveyor/Investigator appointed by the Company would enable prompt settlement of
claims. o Claim due to Fire and/or Explosion. o Claim due to Flood, Storm, Cyclone, Earthquake, and
Subsidence/Landslide. o Claim due to Riot, Strike, Malicious Damage and Terrorism (RSMDT). o Marine
Inland Transit Loss of cargo/machinery. o Marine Loss of cargo/machinery for export' o Marine Loss of
cargo/machinery during Import o Claim due to Electrical/Mechanical/Electronic
Breakdown/mishandling/ o Impact damage to machine. o Claim due to Burglary/Theft of Vehicle o
Accidental Death Claim o Permanent Disability/Injury claim due to accident o Temporary Total Disability
(TTD) (Weekly compensation) claim due to accident o Mediclaim claim due to hospitalization
(disease/accident) o Claim due to Death of Cattle (Non-IRDP)/Permanent Total Disablement. Damage
claim to private Vehicle (Car/2Wheeler) due. to accident o Claim of Damage to Commercial Vehicle
(Taxi/Bus/Lorry) due to accident. Third Party (T.P.) Claim due to accident 26 II. The New India Assurance
Company. Established by Sir Dorab tata in 1919, New India’ was the first fully Indian owned insurance
company in India. There were nearly 150 insurance firms in India - including ones from France, the UK
and America. These were operated through managing agencies in India largely held by Indian business
houses.New India is a leading global insurance group, with offices and branches throughout India and
various countries abroad. The company services the Indian subcontinent with a network of 1,130 offices,
comprising 26 Regional offices, 366 Divisional offices and 738 Branches. With approximately 25,000
employees, New India has the largest number of specialist and technically qualified personnel at all
levels of management, who are empowered to underwrite and settle claims of high magnitude New
India has historically been a frontrunner in several diverse fields of business and industrial activity. New
India are lead underwriters of India's Space programn1e having insured several INSAT and other,
satellites. New India are pioneers in Engineering insurance, Financial risks insurance and are now
offering customized Risk Management solutions to our: corporate clients in the Private and public
Sectors in Power, Telecom, Petrochemicals, Steel and Automobile industries New India's foreign
operations started with the establishment of an office in London in 1920. An international presence was
built up by New India as a direct writing Company in 23 countries spanning 5 continents. It increased its
reach and capacity, for reinsurance facilities for all classes of business. Starting way back in the 1920s,
New India's UK operations have now taken deep root. New India is party to one of the oldest
reinsurance treaties in the UK market. Through participation in Aviation and Marine Hull underwriting,
New India has, over a period of time, strengthened its market presence. In 1980's with the
establishment of a full-fledged branch to underwrite UK Business, it has extended its UK operations,
authorized by the Department of Trade and industry The New India commenced its Japan operations in
1950, and now: operates through 8 branches. The Japanese operation covers 35% of the Company’s
overseas premium income. 27 II. The National Insurance Company Since incorporation in the year 1906,
National Insurance~ Company has been carrying out general insurance business under private
management until 1972, the year of its nationalization. In the same year 22 foreign and 11 Indian
Insurance Companies were amalgamated with National Insurance Company Limited, as a subsidiary
company of General Insurance Corporation of India Headquartered in Calcutta it has an organizational
network of over 964 offices with around 20,077 trained workforces. The company also has operations in
Hong Kong and Nepal and ranks among the top global business insurers. Later on in 2002, with the
passage of Insurance amendment Bill (2002), National Insurance Company has been delinked from GlC
and. has been functioning as an independent company Its product range includes motor vehicle
insurance; fire insurance on buildings and other assets; various crime covers like burglary and theft of
cash; machinery breakdown cover for industrial equipment; transit damage cover for imported or
exported goods; as well as legal liability cover. Professional indemnity and directors and officer’s liability
covers are some of the new covers. NICO General Insurance seeks to attract clients and intermediaries
and flexibility in claims settlements, and at the same time ensuring that we do not erode shareholder
value. The objective is to add value to the shareholders' funds whilst ensuring customer satisfaction?
The strength of NGI is in its balance sheet. NICO General Insurance views the future and its prospects as
extremely bright, exciting and rewarding for staff, clientele and shareholders alike. 28 IV. United India
Insurance Company United India Insurance is one of the four subsidiaries of the General Insurance
Company carrying on general insurance business with its head office at Chennai. Later on in 2002, with
the passage of Insurance amendment Bill (2002), United India Insurance has been Del inked from GIC
and has been functioning as an independent company. UI spans the country with a network of 1123
offices and manpower of Over 21,000 employees. The organizational structure comprises 22 regional
offices, 327 divisional offices.., and 777 branch offices, supported by 21,505 employees. ICRA has
maintained the iAAA rating, indicating the claims paying ability of United India Insurance (UII) to be of
the highest order. The rating takes into consideration the favorable prospects for the domestic general
insurance industry following the deregulation of the sector. UII continues to be a dominant player in the
Indian insurance industry, with an overall market share of 25% and a leadership position in the southern
markets. UII is a Pioneer of Personal Insurance Products in India who specializes in non-life insurance
products including Medical and Accident Insurance. It enjoys a market share of over 25 percent of the
non-life insurance sector in India. 29 PRIVATE COMPANIES 1. Bajaj Allianz General Insurance Company:
Allianz AG: Allianz group was founded in 1890 and is one of the world's leading insurance companies
with over 100 year's experience in insurance and related services. It is also the largest insurer in Europe.
Allianz group has multi-local structure and presence in over 70 countries. The key business areas of
Allianz group include General Insurance (property, engineering, marine, motor, casualty and
miscellaneous), Reinsurance, Risk Management, Life & health insurance, Asset Management and
Pension Funds Management. Bajaj Auto Ltd. Bajaj Auto Ltd the flagship company of Bajaj Group was
incorporated in 1945 as Bachraj Trading Corporation. Initially it started by assembling two and three
wheelers in collaboration with Piaggio of Italy. After the expiry of the Agreement in 1971 the two and
three wheelers acquired the brand name of Bajaj. The strength of the company lies in its strong brand
image and ability to offer value for money products leveraging on its large-scale operations. The Joint
Venture Bajaj Allianz General Insurance a joint venture non-life company promoted jointly by Bajaj Auto
and German insurer- Allianz. Indian auto major holds 74% while Allianz holds 26% in the Joint Venture,
and has an authorized and paid up capital of Rs. ll0 crores. Mr. Graham Norris is the CEO of the
company. Bajaj Allianz General Insurance will leverage the customer base and expertise of Bajaj Auto Ltd
and Allianz. 30 2. Royal Sundaram General Insurance Company Limited: Sundaram Finance Sundaram
Finance Limited (SF) was established In 1954 with a paid-up capital of Rs. 0.02 million, primarily to assist
the development of Road Transport Industry. SF has been providing financial assistance to road
transport operators for acquiring commercial vehicles under hire purchase system. Emerging as the
leader in the industry, SF has been staying at that position for over four decades. SF diversified into
equipment leasing in 1981. Royal & Sun Alliance Royal & Sun Alliance is one of the world's leading
international Insurance companies. The Sun was established in 1710 and is the oldest. Insurance
company in existence still trading under its original name. The Alliance was founded in 1824 and the
Royal in 1845. The Group's international presence began to emerge in the 18th century with business
ventures in mainland Europe. Forays into the US and Canadian markets followed in the 19th century,
and in 1998, Royal & Sun Alliance became the first UK insurance company to be granted a license to
operate in China. The Joint Venture The joint venture bringing together Royal & Sun Alliance Insurance
and Sundaram Finance Limited started its operations from March 2001. The company is Head Quartered
at Chennai, and has two Regional Offices, one at Mumbai and another one at Delhi. The venture is
aiming at Rs. 120 Crores in revenue during first year of its operations and is confident of breaking even
by fifth year. 32 3. ICICI Lombard General Insurance Company: ICICI ICICI Ltd. was established in 1955 by
the World Bank, the Government of India and the Indian Industry, to promote industrial development of
India by .Providing project and corporate finance to Indian industry. Since inception, ICICI has grown
from a development bank to a financial conglomerate and has become one of the largest public financial
institutions in India. ICICI has thus far financed all the major sectors of the economy, covering 6,848
companies and 16,851 projects. Lombard Lombard Canada Ltd., is a leading insurance management
company responsible for providing insurance management services for all of the Lombard group's
commercial, personal, and specialized insurance companies. Canadian owned and operated, Lombard
Canada Ltd. has its head office in Toronto and has annual sales in excess of$500 million and is a wholly
owned subsidiary of Fairfax Financial Holdings Limited (FFH on the TSF Lombard Canada Ltd. has
achieved a reputation for providing solid underwriting performance, diversified books of business and
strong capital positions. The Joint Venture ICICI Lombard General Insurance Co will be headed by Mr.
Sanjiv Kerkar. ICICI would hold about 74 percent stake, while Canadian insurer Lombard would hold the
maximum permissible 26 percent and commence business with a start-up capital ofRs.100 crore. ICICl
Lombard has plans to sell covers to the corporate clients of ICICl. St the same time it will sell property
insurance for ICICI home loan seekers and auto insurance for those availing of car finance. 33 4. Tata AIG
General Insurance Company Limited: TATA Group Tata Enterprises with 82 companies, spread over
seven sectors and with an annual turnover exceeding US $ 8.8 billion, employs more than 262,000
people. Tata Group has shown over years that it is a value driven company and has" pioneering
contributions in various fields including insurance, activation, iron and steel. Tata companies have
forged a number of global alliances with eminent international partners in several fields. In terms of
capital market performance as many as 40 listed Tata companies account for nearly 5% 6fthe total
market capitalization of all listed companies. TATA Group in Insurance The Late Sir Dorab Tata was the
founder Chairman of New India Assurance Co. Ltd., a group company incorporated way back in 1919.
Government of India took over the management of this company as a part of Nationalization of general
insurance companies in 1972. Not deterred by the move, Tata group have ventured into" risk
management services having tied up with AIG group, back in 1977, with the incorporation of Tata AIG
Risk Management Services Pvt. Ltd. 34 AIG “American Insurance Group is the leading U.S. based
international insurance and financial services organization and the largest underwriter of commercial
and industrial insurance in the United States. Its member companies write a wide range of commercial
and personal insurance products through a variety of distribution channels in over 130 countries and
jurisdictions throughout the world. AIG's global businesses also include financial services and asset
management, including aircraft leasing, financial products, trading and market making, consumer
finance, institutional, retail and direct investment fund asset management, real estate investment
management, and retirement savings products. The Joint Venture Tata AIG General Insurance Co. Ltd.
has a start-up capital of Rs. 125 crores of which 74 per cent has been brought in by Tata Sons and
American partner brings in the balance 26 per cent. Tata -AIG plans to be the first Indian insurance
company to offer a comprehensive policy to cover various risks in the IT sector, risk arising out of virus,
cyber crime, negligent acts, errors and omissions and third party liability from a security failure. Other
products on offer are property, casualty, marine, directors and officer’s liability, accident and health,
homeowners and automobile insurance. 35 Bajaj Allianz General Insurance Products o Personal Accident
o Hospital Cash Daily Allowance Policy o Health Guard o Critical Illness o Burglary Insurance o
Householders Insurance o Travel Companion o Fidelity Guarantee Policy o Office package o Money
Insurance o Public Liability o Plate Glass Insurance o Consequential Loss (Fire) Insurance Policy 31 Tata
AIG General Insurance Company Products o Executive Guard o Family Guard o Travel Guard o Home
Secure o Business Guard Sanjeevani o Business Guard Jyothi 36 5. Reliance General Insurance Company
Limited: Reliance Group' Reliance 'Group is India's largest business house has annual sales turnover of
Rs. 41,280 crore (US$ 9,003 million) and has posted a net profit of Rs. 2,940 crore (US $ 641 million) for
the 12-month period ending June 30, 2000. The Group has total assets of Rs. 52,100 crore and net worth
of Rs. 22,415 crore. It has a large investor base of over 5 million, as well as a large customer base in
retail (textiles, LPG, Cellular phones, etc.) and commercial segments. Reliance Industries Limited, India's
largest private sector enterprise, is a, major player in the Indian petrochemicals sector. Relianc6~s
operations capture value addition at every stage from producing crude oil and gas to polyester and
polymer products and are vertically integrated to the production of textiles. Reliance has one of the
largest marketing networks in the Indian Industry. All its brands are market leaders. Reliance General
Insurance Company Limited Reliance group has announced its plans to enter the Indian insurance
sector- both in the life and general insurance businesses'. Reliance Industries plans to bring in around Rs.
300 Crores into its insurance venture through its financial arm Reliance Capital Ltd. Reliance group will
be the lead investor for this initiative. The two companies will have an initial authorized capital of Rs.200
crores (US $ 43.62 million) each. This is the first application from an Indian company without a foreign
insurance tie-up. However, Reliance will associate with international insurance consultants to bring the
best practices in the business to India. 37 Iffco Tokio General Insurance Company ltd Iffco Indian
farmer’s fertilizers cooperative limited was created on Nov 3, 1967 as a multi unit cooperative society
engaged in production and distribution of fertilizers the byelaws of the society provide a broad
framework for the activities of IIFCO as a cooperative society the main emphasis is on production and
distribution of fertilizers The Tokio marine and fire insurance The Tokio marine and fire insurance (Tokio
marine) company holds a leading position in Japan’s property and casualty insurance industry. It is the
second largest in P & C insurance market in the world. With superior capitalization, stable profitability
and conservative management tem the company provides a large rage of property and casualty
insurance products n services including, automobile fire and personal accident to retail corporate clients
38 The Joint Venture IFFCO TOKIO General Insurance Company is a joint venture promoted by India
Farmers Fertilizers Co-Operative, Tokio Marine and fire Insurance Company, Japan, the fifth largest
insurance company in the world, Krishak bharathi Cooperative ltd. (KRIBHCO), and Indian potash. Their
contribution to the Rs.100 crore equity capitals is 49 percent, 20 percent and 5 percent respectively. The
head Office is in Delhi and operating Office are in about 20 cities. IFFCO Tokio Insurance Products •
Home & Family Protector • Standard Fire & Special Perils • Burglary and House Breaking • Personal
accident • Trade Protector • Travel Protector 39 Market Share As by this time we are well versed with all
the General Insurance companies both Public and private we know how each company contributes
serving the customers and also generating revenue through it. We also know that General Insurance
contributes towards the Gross Domestic Profit, but now let us see how these companies individually
contribute towards the Gross Domestic Profit through the way of Market Share of each company both
Private & Public. As we can see in the Pie Charts a comparison of 3 consecutive years have been taken
which are 2003-04, 2004-05 & 2005-06. Public Companies have been dominating the General Insurance
Market since a long time, the market share of Private companies have been improving in the last few
years by approximately 6 % each year, but then too Public sector companies capturing the major
market. But also in Public sector companies New India Assurance is been leading the way which is been
closely followed by the remaining. Among the private players we can note that ICICI Lombard is leading
the way. By considering 2005-06 as the base year, we can note that the market share of Public
companies have been deteriorating having 73.43% of the market share from 85.54% in the year 2003-
04. 40 4 Companywise Market Share of Gross Premium Underwritten (In India) Industry Total - 2003-04
Oriental; 18.13% New India; 25.90% National; 21.87% Private Co's; 14.46% United India; 19.63% Private
Co's Total - 2003-04 ICICI Lombard; 22.43% IFFCO Tokio; 13.08% Bajaj Allianz; 21.08% Cholamandalam;
4.28% HDFC Chubb; 4.94% TATA-AIG; 15.64% Royal Sundaram; 11.42% Reliance; 7.13% Industry Total -
2004-05 United India; 16.80% Private Co's; 20.29% National; 21.68% New India; 24.02% Oriental; 17.21%
Private Co's Total - 2004-05 ICICI Lombard; 24.88% IFFCO Tokio; 14.09% Bajaj Allianz; 24.06%
Cholamandalam; 4.78% HDFC Chubb; 5.17% TATA-AIG; 13.18% Royal Sundaram; 9.30% Reliance; 4.54%
Industry Total - 2005-06 United India; 15.45% Private Co's; 26.57% National; 17.26% New India; 23.46%
Oriental; 17.26% Private Co's Total - 2005-06 Reliance; 2.99% Royal Sundaram; 8.36% TATA-AIG; 11.28%
HDFC Chubb; 3.73% Cholamandalam; 4.06% Bajaj Allianz; 23.73% IFFCO Tokio; 16.51% ICICI Lombard;
29.34% INSURANCE REGULATORY AND DEVELOPMENT AUTHORITARIAN Insurance Regulatory and
Development Authority Act, 1999, came into being from 19/04/2000. Objects are stated in Act are as
follows: "An Act to provide for establishment of Authority to protect interests of holders of insurance
policies to regulate, promote and ensure orderly growth of insurance industry and for matters
connected there with and further to amend Insurance Act, 1938, Life Insurance Corporation Act, 1956
and General Insurance Business (Nationalization) Act, 1972". Composition: IRDA will consist of a
chairperson and not more than Five whole time members and not more than four part time members.
Whole time members shall hold office for 5 years or until age of 62 (65 in case of chair person)
whichever is earlier. Part time members shall hold office for not more than 5 years. 42 Powers and
Function of Authority 1. To regulate, promote and ensure orderly growth of insurance and re- insurance
business 2. To issue a certificate of registration, renew, modify, withdraw, suspend or cancel such
registration of applicant, i.e. insurance company 3. To prepare a code of conduct for agents, surveyors
and loss accesses and other intermediaries who take part in insurance business 4. To exercise all powers
and perform all functions of controller of Insurance under Insurance Act, 1938 5. To protect interest of
policy holders in matters concerning assignment of policy, settlement of claims, terms and conditions of
contract etc. 6. To promote efficiency in conduct of insurance business 7. To promote and regulate
professional organizations connected with insurance business 8. To regulate investment of funds of
insurance companies 9. To regulate maintenance of margin of solvency 10. To adjudicate disputes
between insurers and intermediaries 11. To call for information from" undertake inspection and conduct
enquiries and investigations including audit of insurers, intermediaries etc. 12. To control and regulate
rates', advantages, terms and conditions offered by Insurers in respect of general insurance business riot
so controlled by Tariff Advisory committee 13. To prescribe manner and forms in which books of
accounts is to be maintained 14. To exercise other powers as such may be prescribed by central
government. 43 Insurance Advisory Committee: Authority has power to appoint a committee to provide
guidance to Authority and committee is called Insurance Advisory Committee. This committee contains
not more than 25 members excluding ex-officio member representing interest of commerce, trade
industry, agriculture, surveyors, agents, intermediaries etc. Chairperson and members ~f Authority are
ex-officio members of Insurance Advisory Committee. 15) Code of conduct for insurance agent: Every
insurer agent shall, • Identify himself and insurance company of whom he is an agent • Disclose his
license to prospect on demand • Give requisite information in respect of insurance product offered for
sale by his insurer and into account needs of prospect while recommending a specific 'plan. • Disclose
scales of commission payable to him if asked by prospect • Indicate premium to be charged by insurer
on insurance product • Explain to prospect nature of information required in proposal from and also
importance of disclosure of material information • Bring to notice of insurer any adverse habits or
income inconsistency of Prospect • Inform promptly about acceptance of rejection of proposal by
insurer. • Render necessary assistance to policyholder or claimant in complying with, requirements of
settlement of claims 44 Products The different types of General insurance products are listed below.
While most policies are optional that is at the behest of the insured, some are mandatory. The
mandatory ones are: • Motor Insurance • Public liability (for corporate class) Other policies include: Fire
insurance o Building or flat o Furniture fixtures & other content’s o Loss of profit that is consequential
loss Miscellaneous insurance o Personal insurance o Burglary ,theft o Workmen’s compensation o
Fidelity guarantee o Cancer o Mediclaim o Comprehensive Package Policy for jewelry, T.V, V.C.R,
Furniture etc… 45 Marine Cargo Insurance o Cargo In Transit o Cargo Declaration Policy Marine Hull
Insurance Inland vessels ocean going vessels, fishing & sailing vessels, freight at risk, construction of
ships, voyage insurance of various vessels, ship breaking , insurance Awaiting break up, insurance Oil &
energy in respect of onshore & offshore risks including construction risk. Non – Traditional / Rural o
Cattle / Hens o Crop o Water Pump for agriculture o Hut o Other Livestock o Motor Insurance Motor
insurance is mandatory for all types of vehicles in India. There are two types of motor insurance viz o
Third party, which only insures the party / parties other than the owner in an accident o Comprehensive,
which insures the owner as well as the third party involved. 46 The premium for motor vehicles is
decided on the following factors: o Value of the vehicle o Location where it is to registered .places
having higher claim rates (like Mumbai) are likely to have higher premium The premium for heavy
commercial o Value of the vehicle o Gross laden weight, that is, the carrying capacity of the vehicle. For
HCV’s the driver is also insured along with the vehicle. A charge of rs.15/- is made as premium for the
driver. For all sorts of vehicles insured, the policy would not cover the use on hire , reward or organized
racing ,speed reliability trails and speed testing. There is (NCB) No Claim Bonus applicable for each year
an insured person does not claim .It is accrued as a 5% deduction from the premium amount for the
next year, subject to maximum 50%. Property Insurance Property insurance covers land, buildings and
the contents of building. There are several types of Property insurance packages, but the most common
are the Fire Insurance and burglary Insurance 47 Fire Insurance Fire insurance is a comprehensive policy,
which goes beyond only fire accidents. The policy, besides covering loss on account of fire, also covers
loss on account of the following o Earthquake o Riots o Strikes o Malicious Intent o Floods Fire insurance
only can be taken by the owner of the premises to be insured. A tenant cannot insure rented premises
since he does not have insurable interest. But the tenant has the option of insuring the contents of the
premises. The premium is based on “Good faith” and depends on the value of property being insured. It
should be noted that thought fire insurance is not compulsory, in case of corporate availing of loans, the
lending institution may insist on equipment or relevant property to be insured against fire. This trend is
now also being followed by housing finance companies, some of which are insisting that the premises be
insured against fire 48 Burglary Burglary insurance covers all losses arisen out of burglary committed in
one’s premises. The only condition for lodging a claim on the insurance party is that there should be a
“forced entry” in to the premises. A forced entry may in the form of physical damage to the entry area,
or to a person or entry gained through coercion. In this case too, the policy has no limitations and it is
the right of the insured to decide upon the value of the insurance cover Overseas Mediclaim Policy –
Travel Insurance Policies issued in India under Overseas Mediclaim Scheme, as approved by Reserve
Bank Of Indian residents traveling abroad for any approved visits viz. Business, Study Tour, Specialized
training conferences, Employment or higher studies. Premium on such policies may be collected in
rupees but for employment in foreign currency. This policy was originally introduced in 1984, to provide
for payment of medical expenses in respect of illness suffered or accident sustained by Indian residents
during their overseas trips for official or holiday purposes. In. 1998, a new policy known as VIDESH
YATRA MITRA, was made available for Business and Holiday Travelers. Cover for corporate frequent
travelers were also introduced. 49 The policy provides for following Sections:- 1) Medical Cover 2)
Repatriation Of Remains 3) Checked Baggage Loss / Baggage Delay 4) Passport Loss 5) Personal Accident
– Overseas 6) Personal Liability 7) Hijack Relief Benefit The plan available now with various companies
are however not the same as each company has introduced. Some variation in the cover to suit the
varying requirements. Types of overseas Mediclaim insurance policy 1) Individual Overseas Mediclaim
insurance policy 2) Student Overseas Mediclaim insurance policy 3) Senior Citizen Mediclaim insurance
policy. 50 CHANGING SCENARIO OF GENERAL INSURANCE MARKET 'Looks to the future with confidence
and optimism' Brief the history of general Insurance. In India General Insurance business started, Marine
Insurance started on later part of the 17th century. Before nationalization in 1947 we have 147
insurance companies, foreign and Indian both. But during there nationalization, in 1973 we have 107
companies that merge into four companies, i.e. taken over by Government. General Insurance
Corporation of India (GIC) was set up in 1973 as a holding company, with four subsidiary operating
companies - National Insurance co Ltd., New India Assurance Co. Ltd., Oriental Insurance co Ltd., and
United India Insurance Co Ltd., with a clear cut mission as set out in the Act. The overall scenario in the
insurance market in India after nationalization. GIC and its subsidiaries function through a vast country -
wide network of around 4100 offices spread across the length and breadth of the country, GIC has taken
the benefit of insurance to almost every district, across hilly terrain and often inaccessible areas of the
country. The customer interface is made easy through a network of agents, development officers and
employees at Branch, Divisional and Regional offices as well as at the corporate level. 51 The GIC and its
subsidiaries have a workforce of approximately 86,000 In 1973 tainted at various levels through in house
training institutions. Now the total number of employees went up. The industry has also promoted the
National Insurance Academy (NIA), which is the premier training institute in insurance, catering not only
to Indian Nationals but also to select foreign nationals. The industry issues around 23 million documents
and settles 2 million claims every year. Country wide computerization in the recently past has made the
task of policy- holder's servicing easier and rapid. At the same time, profitable lines and premium
components increases and we became a investment company. Where does Indian Insurance sector
stand compared to International Insurance Sector? Technologically, Indian insurance sector is quiet
comparable with the international sector. Our vast resources of skilled and technical manpower, huge
market potentiality and technical know-how - all are comparable with the international market. But
lacking in the process of computerization and in pricing (premium rate) is also seen. In product, we have
demand in less because lack of awareness for adequate insurance cover in India with insuring public.
Our marketing strategy is not very modern. But we are trying to rectify both these (Technology and
Marketing) areas. The problems faced by Indian Insurance Sector Today: The main problems are: [Lack
of awareness for insurance needs. [Lack of penetration due to inadequate marketing/delivery system.
[Total computerization still in the process of implementation. [Sophisticated covers do not have
adequate demands because of General attitude to insurance in India. 52 The Schemes Recognizing its
organizational strengths, the Govt. of India has also entrusted the corporation with the administration of
various schemes for social melioration and public welfare. Social security schemes benefiting millions of
Citizens below the poverty line. Personal Accident Insurance and Hut Insurance are operated all over the
country for which the premiums are paid by the Government. The GIC administers on behalf of
Government, the crop Insurance scheme for areas and crops notified under the crop Insurance Scheme.
Various low cost mass insurance policies have been evolved over a period of time, e.g. 'Jan Arogya Bima
Policy'. Role General Insurance Industry is playing in the growth of economy of the country: The General
Insurance Industry has an enviable track record among public sector units. It has a consistent profit and
dividend paying record accompanied by a steady growth in its financial resources. Through investments
in the- Government sector and: socially - oriented Sectors the Industry has contributed immensely to
the nation's development. The industry is recognized as one of the largest financial' Institutions in the
Country. The ventures initiated by the industry in the areas of Mutual Fund, Housing Finance have done
exceedingly well in recent years. To protect the country's foreign exchange reserves, the reinsurance
arrangement are so organized that maximum retention is made possible within the country while at the
same time protecting interests of the policy holders. The GIC'S inwards reinsurance wing, called the
SWIFT, maximizes the foreign exchange balance by acting as an international insurer-accepting risk from
all over the globe. 53 GIC'S International operation: GIC'S international operations span over 31
countries around the globe. The reinsurance expertise built over a long period has made the Indian
Insurance Industry a globally acknowledged reinsurer of repute GIC'S risk management skill has been
backed by specialists with a vast insurance experience. Thus, the technical and underwriting skills have
been acknowledged in the international market. The corporation operates in 17 countries through
branches and agencies, whereas in another 14 countries, it has subsidiaries and associate companies.
The GIC has a subsidiary company known as 'India International Pvt, Ltd.,' operating in Singapore and a
joint-venture company, Kenindia Insurance co. Ltd. The impact of liberalization of economy in the
activities of GlC. With the liberalization of economy, General Insurance in India is poised for a quantum
jump, both in quality and quantity. Vision for the future: It is estimated that the industry will outstrip the
present rate of growth and reach a premium value of over Rs. l,20,000 millions by taking advantage of
the extra-large megarisk and social awareness of insurance in general, even as . a developing country
turns into a developed country. The task before the industry to service the growing number of policy-
holders would equally see a quantum jump in issuance of documents and settlement of claims.
Matching reserves and consequent investment will be a natural corollary. 54 It is expected that the
investment portfolio will touch around Rs. 2,50,000 millions by the end of the next decade, with the
strength built up over the years since nationalization, GIC new looks to the future with confidence and
optimism, takes on global chal1enge with its high standard of service, innovative initiative and a
compelling social perspective. GIC's plan - in new business areas: The two new areas that GIC is getting
into are the areas of health care and crop insurance. For the health care business, the corporation has
received permission to set up a separate management services company. GIC has plans to increase the
scope of cover in health care, personal accident and crop insurance and will require expertise in pricing
the products. The Research & Development activities: They have just entered these areas and for the
coming five years we are investing approximately 500 crores. GIC'S R & D cell is created backed up
market research data. The subsidiaries of GIC are becoming an autonomous body. Privatization in the
insurance sector of India - Is it in the right direction It's purely a government decision and the
nationalized sector is ready to face the challenge. And have taken the challenge to stand in the stiff
competition. And now, many private companies have entered the market. These companies are a result
of merger of Indian companies with foreign companies. 55 TRENDS Trends in any sector basically refers
to the up gradations or acquiring new technologies which has replaced the conventional methods in any
organizations In Today’s automated and modernized era any organization cannot take a chance by not
maintaining pace with the competition. With the passage of time and taking into consideration today’s
needs and changing scenario insurance companies should also adopt new technology i.e. it should be
trendy enough to meet customer needs and expectations. Trends or use of technology should be such
that it is eco friendly enough to be used by customers. Today, right from a grocery shop to I.T sector
technologies is explored to the fullest E-Business or E-commerce has sown its seeds in every sector of
business which is one of the strongest sign of improvement and technology. As we are dealing here with
insurance industry let us see the technology involved in the Insurance sector. Technological: •
Computerization: Initially, in the late 1950’s the insurance companies used Unit Record Machines
(Electro Magnetic Machines) to process data punched into cards. Computers were introduces in the mid
1960’s and by the 1980’s the Unit Phased Machines were phased out and the entire process was
computerized. This brought about greater efficiency and quick service delivery. 56 • Internet: Internet
usage has drastically improved in the last decade. There was a tremendous increase in the use of
technology by GIC during the late 1990’s. The companies Launched its website in the mid 1990’s to offer
basic services such as modifying policies (change of address, change of nominee, etc) and querying the
status of the policy. But today, the internet has completely changed the service delivery process.
Internet is today used to even sell insurance policies. Internet is, in fact, proving to be one of the widely
used distribution networks for selling insurance policies. Also internet is used for sending premium
notices to policy holders through e-mails. Also GIC has a special feature on its website. It has a premium
calculator which accurately displays the amount of premium month wise and the remaining balance.
One just has to enter the age, name of the insurance policy, the sum assured and whether there is an
accident cover or not. By keying in this information, the entire premium amounts are shown within no
time. This has helped the customer in a way so that he/she doesn’t have to travel all the way to the
branch to ascertain the amount of premium to be paid. • Metropolitan Area Network (MAN) and Wide
Area Network (WAN): GIC has commissioned a MAN connecting more than 75 branches in Mumbai. This
enabled the policy holders to pay their premiums and get their status report, surrender value quotations
and loan quotation, from any branch in the city. Following the MAN in Mumbai, seven MAN centres
(Chennai, Bangalore, Delhi, Calcutta, Pune, Hyderabad, and Ahmedabad) became operational. These
MAN centres were connected to each other by a WAN network. This WAN was designed for distributed
processing without a central database – each division maintained a database of the policyholders. The
central office in Mumbai maintained an index of policy numbers and the corresponding IP addresses of
the servers where the details of the policy were maintained. 57 • Electronic Clearance Service (ECS):
Almost all the big organizations today provide the ECS facility to its customers. A policy holder having an
account in any bank which is a member of the local clearing house can opt for ECS debit to pay
premiums. The advantage here is that once the option is exercised, the policy holder need not visit a
branch for paying the premium or collecting the receipts. On the day indicated by the policy holder, the
premium amount will be directly debited to the bank account of the policyholder and the receipt will be
issued by the designated branch office. • Bank ATM’s: Many insurance companies have a tie-up with
commercial banks so as to enable policyholders to use the facility of paying premiums through the bank
ATM’s. ICICI Lombard has a tie up with ICICI bank; Bajaj Allianz has a tie-up with Corporation bank and
UTI Bank. • Call Centres and SMS services: Almost all the insurance companies have their own call
centres which cater to the phone based queries of the policyholders. This service is 24x7 and they have
the Interactive Voice Response (IVR) systems at all the branches. Also, LIC and other companies now
provide SMS services going with the new trends like SMS banking in the banking sector. 58 Claims The
Settlement of claims constitutes one of the important functions in an insurance organisation. The proper
settlement of claims requires a sound knowledge of thee law, principles and practices governing
insurance contracts and in particular a thorough knowledge of the terms and conditions of the standard
policies and various extensions and modifications there under. The procedure in respect of claim a
under various classes of insurance follows a common pattern and may be considered under 3 broad
headings Preliminary procedure It is essential that early notification of the loss is received by insurance
undue delay in notification would adversely affect the position of the insurer. However if there is any
delay in notification or not or weather is material will be ultimately decided by the courts based on the
facts of the individual cases The notice of loss condition in liability policies provides for two aspects a.)
Notification of the happening of the accident immediately followed by b.) Notification of the receipt of
claim or suit filed against the insured. Under certain types of policies (e.g. Burglary) notice is also to be
given to police authorities. Loss Minimization At common law, there is a duty on the part of the insured
to observe good faith .This duty of good faith means that at all times the insured has to act as if he is
uninsured. For E.g., the private car package policy provides , among other things , that the insured shall
take all reasonable steps to safeguard the motor car from loss or damage and to maintain it in efficient
condition. In the event of any accident or breakdown the motor car shall not be left unattended without
proper precautions being taken to prevent further damage or loss. 59 Procedural On receipt of
intimation of loss or damage insurers check that: a.) the policy is in force on the date of occurrence of
the loss or damage b.) The loss or damage is by a peril insured by the policy. c.) Notice of loss received
without undue delay. After this check up the loss is allotted a number and entered in the claims register.
Claim Forms The contents of the claim form vary with each class of insurance .In general the claim in
general the claim form is designed to elicit full information regarding the circumstances of the loss such
as date of loss, time, cause of loss, extent of loss etc claim forms are invariably sued in fire and
miscellaneous insurance. Investigation and Assessment On receipt of the claim form duly completed
from the insured the insurers decide about the investigation and assessment of loss if the loss is small
the investigation to determine the cause and extent of loss is done by an officer of the insurers. Some
times even this may be waived and the loss settled he basis of the claim form only. The investigation of
larger or complicated claims is entrusted to independent professional surveyors who are specialist in
their line the appointment of a surveyor is intimated to the claimant the surveyor is furnished with all
relevant claim papers such as claim form policy copy etc…However, many a times surveyor is appointed
and survey is carried immediately on receipt on notice of loss, that is even before claim form could be
issued. Claims documents In addition to the claim form independent survey report certain documents
are required to be submitted by the insurers to substantiate the claim for example for fire claims for fire
claims a report for the fire brigade for motor claims driving license registration copy police report etc 60
Arbitration It is distinct from litigation and is a method of settling disputes under contract in accordance
and conciliation act 1996. Settlement The claim is processed on the basis of Claim form Independent
report from Surveyors, legal opinion, medical opinion etc as the case may be. Various documents
furnished by the insured. Any other evidence secured by the insurers If the claim is in order settlement is
effected by cheque the payment is entered in claims register as well as in the relevant process record.
Appropriate recoveries are made from the insurers if any. 61 Case Study 26/7/2005 – Mumbai under
water Mumbai will never be the same again. And so will the insurance sector in Mumbai after the 26/7
floods. Torrential rains which killed thousands and rendered many homeless, also led to loss of business
and vehicles. • The facts: As fallout of the torrential rains, the non-life insurance sector was flooded with
more than 10000 claims totalling over Rs. 2000 crores. However, these did not include the 50000 cars
that have been damaged in Maharashtra. While the top four private sector general insurance
companies, ICICI Lombard General Insurance, Bajaj Allianz General Insurance, Iffco Tokio General
Insurance and Tata AIG have together received claims worth over Rs 1,000 crore; the four state-owned
general insurance companies New India Insurance, Oriental Insurance, United Insurance and National
Insurance received claims close to Rs 1,500 crore. Private insurer, Bajaj Allianz General Insurance
Company Ltd (BAGICL) alone had received claims for at least 10,000 motor vehicles after the recent
floods in Mumbai. As several companies temporarily closed down their operations and godown stocks
went missing, corporate claims were the highest, in terms of value. Next came claims for cars and
household goods and from shopkeepers and traders for their warehouses. A majority of individuals and
small and medium entrepreneurs also submitted claims. ONGC's insurance claim is considered to be the
largest given its loss of $ 500 million after fire gutted the Bombay High rig. 62 Insurance firms set up
special cells to visit victims and settle claims. In many firms, the special teams worked round-the-clock to
take stock of the loss and speed up the settlement process. Bajaj Allianz settled claims worth about Rs
200 crore without any documentation, to the victims of the recent floods in Mumbai. After the natural
calamity, the Finance Minister sought speedy redressal of claims. He directed the Chairmen and
Managing Directors of the four public sector general insurance companies that claims below Rs 50,000,
arising out of the recent floods in Maharashtra and Gujarat, should be settled by August 31. Public
sector player, National Insurance Company received 3,000 claims for Rs 350 crore from its customers in
Mumbai for damage to property caused by the recent rains. While some insurers had taken a re-
insurance cover, some have not. Mumbai floods brought to fore the ill-preparedness both among the
mega polis administrative officials and the insurance sector. While the latter seems to have realized the
damages, the former is still grappling with the situation. As death toll continues to rise, insurance firms
have realized the need to better manage natural calamities. The premium for flood covers may rise in
coming years. 63 • The effect: Here’s a warning to the lakhs of Mumbaikars who are planning to insure
their houses in the wake of the recent deluge. One will have to read the fine print carefully. Public sector
insurance firms are quietly planning to drop the word ‘flood’ from the policy. As of now, a household
insurance policy is basically a fire insurance policy, which also incorporates a flood insurance policy.
However, with 10,000 policy-holders filing claims totalling Rs 1,500 crores, insurance firms are looking at
new ways to keep their heads above water. After the last calamity—the Latur quake of 1993— insurance
firms had dropped earthquakes from the household insurance policy. Those wanting to insure their
homes against flooding may now have to pay a separate premium. The insurance sector has suffered
losses of about Rs 1,500 crore. These companies may not get re-insurance for these policies as they had
not taken re-insurance for these small individual polices. 64 5 Classwise Break-up of Gross Premium
Underwritten (In India) 2003-04 Liability; 2.30% P. A.; 2.30% Others; 10.05% Motor TP; 13.32% Health;
8.64% Aviation; 3.01% MRN Hull; 2.94% MRN Cargo; 4.48% Fire; 20.36% Motor OD; 28.04% Engg.; 4.55%
2004-05 Motor TP; 13.30% Health; 9.53% Aviation; 1.88% MRN Hull; 2.97% MRN Cargo; 4.22% Motor
OD; Fire; 18.84% 29.51% Engg.; 4.91% Others; 9.99% P. A.; 2.80% Liability; 2.05% 2005-06 Liability;
2.01% P. A.; 2.89% Others; 9.99% Motor TP; 12.43% Health; 11.06% Aviation; 1.96% MRN Hull; 2.50%
MRN Cargo; 3.87% Fire; 18.36% Motor OD; 30.15% Engg.; 4.80% 6 34,170 37,999 35,241 40,457 42,108
47,906 28,321 30,178 35,251 30,669 29,445 31,545 4,763 8,561 12,877 967 1,701 2,204 1,117 1,838
2,024 5,067 8,852 15,920 2,956 5,013 8,961 1,611 1,617 1,623 2,580 3,307 4,536 3,533 4,689 6,124 0
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 INR Millions National New India
Oriental United India Bajaj Allianz Cholamandalam HDFC Chubb ICICI Lombard IFFCO Tokio Reliance
Royal Sundaram TATA-AIG Company-wise Break-up of Gross Premium Underwritten (Industry Total)
2003-04 2004-05 2005-06 7 31,804 33,028 37,530 6,982 7,384 7,865 4,613 5,174 5,095 7,082 8,634
9,806 43,767 51,701 61,576 20,798 23,344 25,446 13,542 16,697 22,575 4,702 3,319 4,001 3,620 3,595
4,096 3,602 4,935 5,854 15,700 17,495 20,368 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 INR
Millions Fire MRN Cargo MRN Hull Engg. Motor OD Motor TP Health Aviation Liability P. A. Others Class-
wise Break-up of Gross Premium Underwritten (Industry Total) 2003-04 2004-05 2005-06 Questionnaire
Q1.) What according to you, Is the General Insurance market growing to its maximum level or some
more products/dimensions are yet to be discovered? Q2.) According to what are the trends in General
Insurance? Q3.) On an average how much time does it take to settle a claim (period)? Q4.) How
important is re-insurance according to you? Q5.) In General Insurance Corporation, public Sector
companies are dominating past many years? Why? Q6.) What are Challenges faced by General Insurance
companies? Q7.) What are the future prospects of General Insurance?