`

INSURANCE
(Governed by Insurance Act -1938,Now By –
IRDA act-1999)

• History:-Methods of transferring or distributing risk were

practiced by Chinese and Babylonian traders as long ago
as the 3rd and 2nd millennia BC.
• The Greeks and Romans introduced the origins of health
and life insurance c. 600 AD.
• India:- First Indian insurance company was Calcutta
Insurance Company which setup in 1798 exclusively for
Europeans. The Bombay Life Assurance Society formed in
1870 Insured Indians first time.
• Indian life assurance companies act ,1912
.
was first statutory act to regulate life
business.
• In 1928 the indian insurance companies
act enacted.
• In 1938 insurance act amended to
consolidate legislation and effective
control over the activities of insurer.
• 19th Jan.1956 LIC is formed by absorbing
154 Indian,16 non-indian insurer and 75
provident societies.
• GIC was Incorporated
. as a company
in Year 1971 . In 1972 General
Insurance Business(Nationalization)
Act passed with effect from 1st Jan
1973 GIC is formed by amalgamation
of 107 insurer and 4 company formed
named as…
• National Insurance Co. Ltd.
• The New India Assurance Co. Ltd.
• The Oriental Insurance Co. Ltd.
• The United India insurance co. Ltd.
 Cont…
• In Dec. 2000 subsidiaries of GIC were
restructured as independent company.
And in July 2002 parliament passed a bill
of De-linking of four subsidiaries of GIC.
• Today there are 14 General insurance
companies including ECGC & Agricultural
insurance corporation of India and 14 life
Insurance company operating in India.
 Definition:-

• Insurance is pooling of risks. In

contract of insurance ,the insurer
(insurance company)
agree/undertakes, in consideration of
a sum of money (premium) , to make
good the loss suffered by the insured
against a specified risk such as fire ,
accident etc or any contingency.
 Indian Insurance
company
• a company defined and registered
under the companies act in which
aggregate holding of equity shares by
a foreign company either by itself or
by nominees/subsidiaries ,does not
exceed 26% paid up equity capital
and whose sole purpose is to carry on
life/general/reinsurance business
 Insurer
• (a) any individual or unincorporated body of
individuals or body corporate incorporated
under the law of any country carrying on
insurance business which–
• (i) carries on that business in or
• (ii) has his or its principal place of business
or is domiciled in
• (iii) with the object of obtaining insurance
business, employs a representative, or
maintains a place of business, in India
 CONTINUED….
• (b) Any body corporate carrying on
the business of insurance, which is a
body corporate incorporated under
any law for the time being in force in
or stands to any such body corporate
in the relation of a subsidiary
company within the meaning of the
Indian Companies Act, 1913
 Insurance agent
• Means an insurance agent licensed
under section 42 who receives or
agrees to receive payment by way of
commission or other remuneration in
consideration of his soliciting or
procuring.
 Life insurance business
• 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.
• Parties :- There are two parties to
an Insurance contracts as:-
• Insurer/assurer/underwriter,
• Insured/assured/beneficiary
• Policy :- The document laying down
the term of contract is called
(insurance) policy.
 Principal Agent
• A person who is in consideration of any
commission,--
• (i) performs any administrative and
organising functions for the insurer, and
• (ii) procures general insurance business
whether wholly or in part by employing or
causing to be employed insurance agents
on behalf of the insurer.
 Special agent
• A person who is consideration of any
commission, procures life insurance
business for the insurer whether
wholly or in part by employing or
causing to be employed .
Restriction on name of insurer

• An insurer shall not be registered by

a name identical with that by which
an insurer in existence is already
registered, or so nearly resembling
that name .
 Fundamental principals

• Principle of Insurable interest.

• Principle of Utmost good.
• Principle of Indemnity .
• Principle of Subrogation.
• Principle of Contribution.
 Type of Insurance
• Life insurance
• Grant of disability and double/triple
indemnity accident benefits,
• Grant of annuities upon human life and
• Grant of superannuation allowance/
annuities payable out of any fund
applicable solely to the relief and
maintenance of person engaged.
 Type of Life Insurance
Polices
• Endowment Policy
• Whole Life Policy
• Limited Payment Life Policy
• Joint Life Policy
• Convertible Whole Life Policy
• Annuities
 Contin…
• Sinking Fund Policy
• Double Accident Indemnity
Policy
• Janata Policy
 General insurance
• It means fire, marine / miscellaneous
insurance business whether carried
on singly or in combination with
one/more of them
 Types of General
Insurance
• Fire insurance Policies
• (a) Specific Policy
• (b) Comprehensive Policy
• (c) Valued Policy
• (d) Floating Policy
• e) Replacement or Reinstatement
Policy:
 Marine Insurance
Policies
• (a) Voyage Policy
• (b) Time Policy
• (c) Mixed Policy
• (d) Valued Policy:
• (e) Open and Unvalued Policy
• (f) Floating Policy
 Other Type of insurance
• Property insurance
• Automobile insurance
• Aviation insurance
• Boiler insurance
• Builder's risk insurance
• Crop insurance
• Earthquake insurance
 Cont…
• A fidelity bond
• Flood insurance
• Home insurance
• Landlord insurance
• Marine insurance
• Surety bond insurance
• Terrorism insurance etc.
 Health/ medical insurance:

• This cover only two type of

benefits

 Re-imbursement of medical
expenses related to specific diseases
and
 Hospitalization
 Some of policies are as

• Individual/Group Mediclaim policy

• Bhavishya Arogya policy
• Jan Arogya Bima
• Overseas medical cover
 Liability insurance/indemnity
policies—
• Employee liabilities
• Employee state insurance liabilities
• Non-industrial risk
• Professional liabilities
• Product liabilities
 IRDA
• In 1993 Government setup a committee under
chairmanship of RN Malhotra ,former Governor of RBI
for reforms in Insurance sector.
• Recommendations are :-
• IRDA was constituted as an autonomous body to
regulate and develop the insurance industry.
• Foreign companies are allowed up to 26% of paid up
capital and can operate with an Indian company.
 Composition of Authority under
IRDA Act, 1999

• The Authority is a ten member team

consisting of

    (a)    a Chairman;

    (b)    five whole-time members;
    (c)    four part-time members
 Duties, Powers and Functions of
IRDA

 To regulate, promote and ensure orderly growth of the

insurance business and re-insurance business.
 Issue to the applicant a certificate of registration,
renew, modify, withdraw, suspend or cancel such
registration .
 Protection of the interests of the policy holders in
matters concerning assigning of policy, nomination by
policy holders, insurable interest, settlement of
insurance claim, surrender value of policy and other
terms and conditions of contracts of insurance;
 Cont….
• Specifying requisite qualifications,
code of conduct and practical training
for intermediary or insurance
intermediaries and agents.
• Specifying the code of conduct for
surveyors and loss assessors.
• Promoting efficiency in the conduct of
insurance business.
 Cont..
• Levying fees and other charges for
carrying out the purposes of this Act
• Calling for information from, undertaking
inspection of, conducting enquiries and
investigations including audit of the
insurers, intermediaries.
• Control and regulation of the rates,
advantages, terms and conditions that
may be offered by insurers in respect of
general insurance business .
 Cont…
• Specifying the form and manner in which books of
account shall be maintained and statement of
accounts shall be rendered by insurers and other
insurance intermediaries.
• Regulating investment of funds by insurance
companies.
• Regulating maintenance of margin of solvency
• Adjudication of disputes between insurers and
intermediaries or insurance intermediaries.
 Registration under IRDA
• The application accompanied by:-
• A certified copy of memorandum and article
of association.
• Name, address and occupation of Directors.
• A statement of the classes of insurance
business done/to be done along with a
statement of deposits with the Reserve Bank
of India.
 Cont…
• For life business , a sum equivalent to 1% of
total gross premium not exceeding 10 crore
written in India in any Financial year.
• For General business 3% of total gross
premium not exceeding 10 crore.
• Reinsurance business Rs.20 crore;
Rs.100,000.
• For cooperative life insurance business /
assurance companies should be Rs.2 lakh.
 Cont…
• A declaration verified by an affidavit by the principal officer of the
insurer that the requirement of paid up capital (Rs. 100 crore and
Rs.200 crore for life/general and reinsurance business,
respectively) Rs. 250 crore for reinsurance business or working
capital.
• A certified copy of the Published prospectus if any and,
• Standard policy forms of the insurer and statements of the
insurer and statements of the assured rates, advantages, terms
and conditions to be offered in connection with insurance
policies, together with a certificate in connection with life
business by an actuary.
 Cont…
• The receipt showing payment of fee
(as determined by IRDA regulation)
not exceeding Rs.50,000 for each
class of business.
• Such other document as may be
specified by IRDA.
 Cancellation of
Registration
• He fails to comply with the requirement of
deposit with the RBI.
• He fails to comply with the requirement
relating to sufficiency of assets(assets-
liabilities)
• The whole of his deposit has been
refunded to him on court order when he
cease to carry on business and all liabilities
has been satisfied/provided for.
 Cont…
• He defaults in complying with or
contravenes any requirement of
insurance act/any rule/order made or
direction issued there under,
• The IRDA has reason to believe that
any claim are unpaid for 3 month after
final court order in India.
• He carries on any other business,
 Cont…
• His business has been transferred to any
other person/amalgamated with any other
insurer.
• He defaults in complying with any
directions issued/order maid by IRDA .
• He default in complying with or
contravenes any requirement of
Companies Act/LIC Act/GIC Act/FEMA etc
 INVESTMENT…..
Assets of insurer should be invested as …
• 25% in Government securities(including deposit in
RBI),
• At least 25% in Government/other approved securities;
• Up to 15% of the controlled fund of the insurers can be
invested in other insurance;
• Up to 25% of the assets of GIC can be invested in
other investment;
• No fund of policy holder can be invested outside India.
  INSURANCE BUSINESS IN
RURAL/SOCIAL SECTOR
For all new life insurer:-( percentage of
total insurance)
• First year-7%
• Second year-9%
• Third year-12%
• Fourth year-14%
• Fifth year-16%
• Sixth year-18%
 For general insurer….
• First year- 2%
• Second year- 3%
• Third year- 5%
• Fourth year- 5% so on…
All insurers are obliged to issue
5,7,10,15,20,and 25 thousand lives
in first six years respectively.
LICENCING OF INSURANCE AGENTS

An insurance agent is a licensed

agent with IRDA. For getting license
an agent has to pay Rs 250
• Eligibility:- The agent should not
• Minor
• Unsound mind
• Guilty of criminal misappropriation
/breach of trust/forgery
 Cont…
• Have not been found in the course of
– Any judicial proceeding relating to any
insurance policy/winding up of an
insurance company
-Guilty of knowingly participated in
committing
fraud/dishonesty/misrepresentation
against an insurer/insured
 An agent should be…
• Possess requisite qualification and practical
training not exceeding 12 months
• Passed examination by IRDA
• Not violated code of conduct as specified
by IRDA.
• If any individual who act as an agent sans a
license and the insurer who appoints so
would be punishable with a fine of up to
Rs.500and Rs.1000 respectively
 PENALTIES:-
• Default in compliance with/Act in
Contravention
• Furnish all report to IRDA
• Comply with its direction
• Maintain solvency margin
• Comply with the directions on
insurance

Penalty up to Rs.5lakh for each failure

 Cont….
Carrying on business in contravention of
requirement of registration and deposits if
not then fine up to Rs. 5lakh.
• False statement in document
• Investment of assets
• Prohibiting investment of fund outside
of India
• Manner and condition of investment
Fine up to Rs. 5lakh for each failure.
 Cont…
• Wrongfully obtaining/withhold property
fine up to Rs. 2lakh
• Offence by companies
• Failure to comply with provision of
insurance act in the social/rural sector
invite a penalty of up to Rs.25 lakh for
each failure and imprisonment up to 3
years or both.
 CURRENT NEWS:-
• India’s insurance sector is expected to grow
17% in 2008-09 fiscal year if the economy
expands at 7.6%, Insurance Regulatory and
Development Authority (IRDA) chairman J.
Hari Narayan said on Wednesday.
• In October, the federal cabinet approved
changes to insurance laws and proposed
raising the foreign investment limit to 49%
from the present 26%.
 Cont…
• Life insurers grew their business by 23.3% to
Rs930 billion in 2007-08 fiscal year, while
general insurers posted growth of about 14% in
premium income to Rs298 billion, according to
IRDA data.
• If an agent left his job then it is the
responsibility of insurance company to help
customer and manage all future assistance.
 Cont..
• According to K N Bhandari, the
Secretary General of General
Insurance Council, India's general
insurance sector growth @ 18% rate
in 2008. In 2007 it was 13%.
• Present market value of the GIS is Rs
30,000-crore& Penetration level of
the Indian insurance sector is 0.65
%. 
 List of Life Insurers..
• Bajaj Allianz Life Insurance Company Limited
• Birla Sun Life Insurance Co. Ltd
• HDFC Standard life Insurance Co. Ltd
• ICICI Prudential Life Insurance Co. Ltd.
• ING Vysya Life Insurance Company Ltd.
• Life Insurance Corporation of India
• Max New York Life Insurance Co. Ltd
• Met Life India Insurance Company Ltd.
 Cont…
• Kotak Mahindra Old Mutual Life Insurance
Limited
• SBI Life Insurance Co. Ltd
• Tata AIG Life Insurance Company Limited
• Reliance Life Insurance Company Limited.
• Aviva Life Insurance Co. India Pvt. Ltd.
• Shriram Life Insurance Co, Ltd.
• Sahara India Life Insurance
• Bharti AXA Life Insurance
• Future Generali Life Insurance
• IDBI Fortis Life Insurance
 Cont…
• Canara HSBC Oriental Bank of Commerce
Life Insurance
• Religare Life Insurance
• DLF Pramerica Life Insurance
• Star Union Dai-ichi Life Insurance
• Agriculture Insurance Company of India
• Apollo DKV Insurance
• Cholamandalam MS General Insurance
• HDFC Ergo General Insurance Company
• ICICI Lombard General Insurance
• IFFCO Tokio General Insurance
 Cont…
• National Insurance Company Ltd
• New India Assurance
• Oriental Insurance Company
• Reliance General Insurance
• Royal Sundaram Alliance Insurance
• Shriram General Insurance Company Limited
• Tata AIG General Insurance
• United India Insurance
• Universal Sompo General Insurance Co. Ltd
THANK YOU