39

CHAPTER II

CONCEPTS AND REVIEW OF LITERATURE

The Life Insurance Corporation of India is a monopolistic and

monolithic organization, which undertakes Life Insurances for the whole

of India. Present chapter makes an attempt to explain in detail the origin,

growth and structure of Life Insurance of India and its operations.

EVOLUTION OF LIFE INSURANCE

It is very difficult to give an account of the earliest form of

Insurance. In early Greece, the temple societies collected monthly

subscriptions from the devotees, in return for which each member was

assured of a decent burial. The Romans took over from Greece this burial

insurance. During middle ages, the Anglo-Saxon Guilds continued the

insuring of lives in manner similar to that the Roman burial societies. In

this context, there is interesting documentary evidence in England. On

18th June 1536, Richard Martin a marine underwriter issued the first

policy on William Gybbson’s life for one year. Gybbson’s had the

misfortune to die on the 29th day of the following May. The underwriter

refused to pay the claim on the ground that the contract had run for a

period of 12 lunar months of 28 days each and that the policy had expired
 40

on May 20th.But the court was not impressed by the above argument and

ordered to pay the claim. This was the earliest record of Life Insurance

contract.

Later on two life officers started insurance company, namely, the

Hand in Hand Society (1696) and the Marcers’ company (1698). The

society of Assurance for widows and orphans was founded in 1699 and is

considered to have been the first true Life Insurance Association. During

this period the following companies cam up-The Royal Exchange

Assurance, London Assurance, British Insurance Company and Symons’

Assurance of Life etc. The Insurance Society an Amicable Society for a

perpetual assurance office received a charter from Queen Anne in 1706.

Since then Life Insurance came to be transacted by many composite

companies, spreading their areas of operation in the eastern countries

which were in the domains of England. Thus, the oldest Life Insurance

Company still in business is the society for the Equitable Assurance of

Lives and Survivorships, which is commonly known as “old Equitable”. It

was founded in 1756.

In France, “Compagnite Royld” Assurance surla via 1787 was the

first to be organized in that country. In Germany the first company came

 41

up in 1806. In UNITED STATE OF AMERICA Insurance started

insuring policies to colonists. The first commercial company to write Life

Insurance exclusively was the Pennsylvania Company for insurance on

lives and granting annuities, which wrote its first policy in 1812. Another

early company was the Massachusetts Hospital Life Insurance Company,

which began business in 1815. The mutual life of New Yorks (1842) is in

operation till today.

EVOLUTION OF LIFE INSURANCE IN INDIA – PERIOD

BETWEEN 1818-1870

The early history of modern insurance in India is somewhat

obscure. The earliest available reference to some from of insurance is

found in the codes of “Hammurabi” and “Manudharma Sastra”. The term

“Yokakshema” is used in the “Rigveda” suggesting that some form of

community insurance was practiced by “Aryans” in India over 3000 years

ago.

Though in India there are many who are well – informed on

matters concerning insurance, the early history of insurance in this

country, including the operation of foreign companies in India, is not very

widely known.
 42

As far back 1818 an insurance company named the Oriental Life

Assurance Company was started in Calcutta by Europeans, Eventually

this company failed in 1834 and was transformed into “New Oriental”

The oldest policy was issued (1848) on the life of cursetjee Furdonnju by

Royal Insurance started in 1845.

During the years 1818 to 1870 Eight Indian Companies were

established of which only three survived. During the same period 12

foreign companies started operation in India but only two survived at the

end of 1870.

PERIOD “BETWEEN” 1870 – 1912.

In December 3, 1870 seven carnets men in Bombay with only

seven rupees initial expenses started Bombay Mutual Life Assurance

Society. On the basis of this society’s commencement year, the LIC

celebrated Centenary year of India Life Assurance in 1970. The period

from 1896 to 1912 was vital in the history of Life Insurance in India. The

Insurance companies were governed by the 1866 Indian Companies Act

governed the Insurance company In 1905 the Swadeshi Movement was

also gaining ground and it encouraged the promotion of all sorts of

indigenous enterprises.
 43

The Swadeshi Movement of 1905 saw the birth of the United

India Life Assurance Company, The National Indian Life Assurance

Company, The National Insurance Company, The Hindustan Co-operative

Insurance Society, The India Equitable Insurance Company and the

Bombay Life. In 1912 the Indian Government proclaimed the Indian Life

Assurance Companies Act. Thus taking the Indian and Foreign

Companies together, this period saw the birth of 88 companies of which

only 39 continued their operation in India in the subsequent period.

PERIOD “BETWEEN” 1913 TO 1939

Authoritative data on Indian Insurance began to be recorded for

the first time in 1914 when the Government of India started publishing the

returns of Life Insurance in India.

The early returns were incomplete and did not cover a number of

Companies, which had started operation in India long before 1914. At the

end of the First World War in 1918, the Indian Insurance Business was

affected due to Epidemic. The Swadeshi Movement, The Non – Co-

operation Movement of 1919 and the Civil Disobedience Movement of

1929 were milestones in the history Indian Insurance as these movements

were primarily responsible for eliminating a substantial amount of foreign

 44

competition. The Non – Co-operation movement saw the birth of New

India, Valcan, Jupiter and Universal Fire and General Insurance

Companies. The Disobedience Movement saw the birth of Indian Globe,

Bengal Co-Operative. Bombay Co-operative, Metropolitan and other

Insurance Companies. “Between” 1913 to 1939, 226 companies were

founded of which 148 remained working at the end period.

The Indian Insurance Companies Act 1928 was passed in this

period. It amended the existing Act of 1912. In 1938 a truly

comprehensive law on the Insurance was passed. The Act was further

amended in the year 1939.

PERIOD “BETWEEN” 1940 TO 1956

A Serious of amendments were made in the years from 1940 to

1945 its 1938 Act. The reason for Amendments were:

1.The creation of superintendence of Insurance with powers of

supervision and control,

2.Prohibition of rebating, restricting commission and licensing of

agents

3.Submission of returns to Insurance department etc.

 45

During this period a number of companies ceased operation due to

enactments of legislation for controlling the Insurance Business. There

were a lot of changes in and around the Insurance Industry in this period.

Some of the changes were (a) World War II, (b) A serious Amendments

to 1938 Act, (c) Partition in India, (d) Devaluation of rupee (e) The low

interest yield rate (3 percent) prevailed, (f) Out-throat competition and

rate war among Insurance companies and the Insurance Amendment Act

of 1950.

REASONS FOR NATIONALISATION

Before Nationalization, many Insurance companies in India

indulged in extravagant expenses, charged high price for the risk and

employed too many middlemen of high commission and salaries. At that

time the lapse ratio Life Insurance policy was very high, which

determined the efficiency of the business. The cutthroat competition and

rate war between the insurance companies was the worst and the service

performances were very commendable. The above factors had led to

ultimate liquidation and amalgamation of insurance companies.

Above all, the policyholder’s savings were vitally needed for the

Second Five Year plan implementation and further Economic

 46

Development of the country. The Indian National Congress, the ruling

party, is wedded to a socialistic policy and the state of affairs of the

Insurance companies over the decade 1945 to 1955 provided the

provocation that made to resort to the nationalization of Live Sector.

THE NATIONALISATION OF LIC

The Government of India therefore promulgated an ordinance on

19th January 1956 for taking over of all assets and liabilities of erst-while

insurance companies and custodians were placed in charge from 8p.m. on

19.01.1956 to 31.08.1956. The Life Insurance Corporation actually took

over from the custodians on 1st September 1956 and Life Insurance

Business came to be managed by Life Insurance of India, a public Sector

Undertaking.

At the time of nationalization there were 224 Indian Insurers and

24 Non-Indian Insurers and 16 Non-Indian Insurers and 76 provident

Societies. The Corporation absorbed 154 Indian Insurers and 16 Non-

Indian Insurers and 75 provident Societies. Since the day of

nationalization the LIC has grown into a mighty institution with a

nationwide network. It has been conducting Life Insurance business with

the following objectives.

 47

1.To spread Life Insurance much more widely and in particular to

the rural and to the socially and economically backward with a view of

reaching all insurable persons in the country and providing them adequate

financial cover against death at a reasonable cost.

2.To maximize mobilization of people’s savings by making

insurance linked savings adequately attractive.

3.To ensure that Insurance Business is being transacted Keeping

in view the national priorities and obligation of attractive return.

3.To conduct business with utmost economy and with the full

realization that the money belong to the policyholders. To act as trustees

of the insured public in their individual and collective capacities.

4.To meet the various life insurance needs of the community that

would arise in the changing social and economic environment.

4.To involve all people working in the corporation to the best of

their capability in furthering the interest of the insured public by

providing efficient service with courtesy and

5.To promote amongst all agents and employees of corporation a

sense of participation, pride and job satisfaction through discharge of their

duties with dedication towards achievement of corporate objectives.

 48

PRESENT POSITION OF LIC

Life Insurance of India has been in the service of the nation since

1956. As a flag bearer of family security it has been engaged in providing

protection of insurance to people in every part of the country, mobilizing

savings for the development of the country and responding to customer

sensitivity. Today, it is not only insurance organization but also

movement in itself.

The LIC went about restricting its organizational set up in the

Eighties by decentralizing many functions, making the branch office a

single point contact for the customer. To expand its reach across the

country the LIC has been continuously strengthening its network of

branches and market operators. In 1956 it was operating from 97 centres

with 212 branches.

At Present “All the 2048 Branches are computerized out of

which 1734 are already networked connectivity has resulted into several

advantages to the policyholders. Huge Investments are being made

towards enhancing infrastructure, keeping in mind customer centric

initiatives. These steps and actions can only be taken up by a financially

sound and progressive organization like ours and not be an organisation,

 49

which is in trouble. It hardly needs to be emphasized that the corporate

policy keeps the customer at centre stage and is well known for taking

steps in that direction. “Let us LIC of India is ever dedicated to the

principle of “Yogskshema and is the pride of India.”

CENTRAL OFFICE

The Central Office the corporation at Bombay, has mainly a

policy making and coordinating role. In general at the Central Office the

Chairman or the appropriate committee of the Corporation it takes broad

policy decisions on the recommendations of the departmental heads. The

various departments at the Central Office issued detailed instructions;

prepare manuals of procedure etc. for the implementation of these broad

policy decisions. The Central Office control over the operations of the

Branch, Divisional and zonal Offices. Personal conferences of all Zonal

Managers and an annual conference Divisional Managers are held at the

Central Office to discuss various issues that need attention.

In addition to the Chairman, there are usually two Managing

Directors at the Central Office. They mainly co-ordinate the work of the

various Departments at the central office allotted to them. They are

sometimes in direct charge of some departments. Generally, each

 50

department at the central office is headed by an officer of the rank of the

Zonal Manager designated either as Executive Director of Chief. The

various departments at the Central office are Actuarial, Buildings,

Corporate Planning, Development including publicity and public

relations, Finance and Accounts and vigilance.

ZONAL OFFICE

The corporation has seven zonal offices located at Mumbai,

Calcutta, Delhi, Bopal, Kanpur, Chennai and Hydrabad. The Zonal

Manager is the head of the Zonal office and is assisted by Regional

Managers and Secretaries who are put in charge of individual portfolios.

The Zonal office also functions as an appellate office to which appeals are

made over the decisions of the Divisional Managers by the aggrieved

persons. It contains various departments including a zonal Training.

DIVISIONAL OFFICE

The corporation has nearly hundred divisional offices located

at various cities in India. Each divisional office has a specified number of

branches under its control, each functioning in its own limited area of

operation. The function of a divisional office is to see that the branch

functions effectively and successfully. Its business is to provide guidance

 51

and necessary resources to the branch office and to have effective control

and supervision, which would help them to deliver the goods.

The repaplic-organisation scheme, which was implemented

recently, has changed the role of a divisional office from an operation one

to a supervising one. The heads of the different departments visit the

branches periodically personel manning the branch. In this way, more of

controlling is done in the divisional office than operational jobs. The

scope of the latter is confined to the references that are made by the

branches to the divisional office because of limitation of financial powers

or on matters requiring evaluation. It is also divided into several

departments.

BRANCH OFFICES

The branch office of the corporation is the main operating

office in the sense that this is the only office where sales are made and

services given. Each branch is given a specific area of operation and is

expected to strictly adhere to the territorial limits for business procreation.

At present there were 1906 branches in India. There are branches at

London, Fiji and Mauritius outside India. For the branches new business

is brought in by licensed agents. Until recently, the branches confined

 52

their activities to procreation of business and doing some initial

policyholders service. But now under the Repaplic-organisation scheme,

the branch had developed into an independent accounting unit. The

Branch Manager presides over the destines of the branch and is personally

responsible for drawing up its three year plan and annual performance

budgets. The profile of the branch reveals the economic indicators of the

area like industries and agricultural development, income distribution

among the population and potential to be tapped. The functions of each

branch are sales, new business, policyholders department, accounts, office

and management and data processing department.

DEFINITION:

In order to avoid ambiguity a few operational definitions have been

developed in the course of designing and execution of the study. These

definitions are given below:

I. INSURANCE AGENT:

An Insurance Agent is any one who is authorized by an

Insurance company to solicit, create, modify or terminate contracts of

Insurance between the company and the public.

 53

II. SATISFACTION:

Satisfaction is the extent, which the policyholders have been

satisfied about the various services of LIC, as expressed by the

respondents themselves.

III. LIFE FUNDS:

The difference between total receipts and total expenditure is net

profit but is a reserve with which the net liability will be compared when

ascertained. This reserve is called assurance fund.

IV. PREMIUM:

The amount payable at regular intervals, or in some instances as a

single amount, in return for the particular cover provide by a policy of

Insurance.

V. BONUS:

It is the share of profit, which a policyholder gets from the

life Insurance company.

VI. REVERSIONARY BONUS:

It is payable only on the maturity of the policy.

VII. INSURER:

The LIC otherwise called as Insurer.

 54

VIII. INSURED:

One who takes up policy from LIC?

XI. FIRST YEAR PREMIUM:

The policyholder paid it first year of the life policy.

X. RENEVAL PREMIUM:

Premium paid in later years of the policy are known as

premium.

XI. ANNUITY:

It refers to fixed annual payment made by the Insurance

Company to the Insured on his attaining specified age.

XII. COMMISSION:

It is the compensation and remuneration for the discharge of

duties by the agent.

Contract of Insurance

It is a contract between two parties whereby a person

undertakes in consideration of fixed sum to pay to the other fixed amount

of money on the happening of a certain event or to pay the amount of

actual loss when it takes place through a risk insured.

 55

Policy

The instrument containing the contract of insurance is called

a policy.

Premium

The consideration in return for which insurer agrees to make

good the loss is known as premium.

Subject matter of Insurance

The thing or property which forms the basis of insurance is

called the subject matter of insurance.

Insurable interest

The interest of the insurer in the subject matter is called the

insurable interest.

A contract of insurance is not a wagering contract as it is the

opposite of gambling. There is no possibility of any gain because the

underlying principle of an insurance contract is to indemnity the

individual from loss whether by fire, accident or death.

 56

Fundamental Elements of Insurance:1

i. Essential elements of a valid contract;

ii. Utmost good faith;

iii. Insurable Interest

iv. Indemnity

v. Causa Proxima

vi. Risk must attach

vii. Mitigation of loss

viii. Subrogation; and

ix. Contribution

Premiums

It is the price paid adequate to the risk. It is the consideration

receivable by the insurers from the insured in exchange for their promise

to pay the sum insured in case the event insured against happens. The

contract of insurance must define the rate of premium. The rate of

premium is calculated upon the average of losses as compared with

profits. After the policy has become binding the insured cannot ordinarily

recover the premiums paid to the insurer.

1
R.C.Chawla and K.C.Garg, Mercantile Law, Kalyani Publishers, New Delhi, 2000,p.508
 57

Re-Insurance

It is an insurance of insurance. The insurer in as much as he

is liable on a policy of insurance may insure against the risk which he has

taken upon himself. The second contract of insurance is called re-

insurance.

Double Insurance

When an insured insures the some property with more than

one insurer and the total sum insured exceeds the value of the subject

matter, the insured is said to make double insurance. But in the case of

loss the insured cannot recover more than actual amount of loss. This is

because a contract of insurance is a contract of indemnity.

Life Insurance

It is a contract whereby the insurer in consideration of a

premium paid either in lump sum or in periodical instalments undertakes

to pay an annuity or a certain sum of money, either on the death of the

insured or on the expiry of a certain number of years whichever is earlier.

LIC of India

The Government of India nationalised the Life Insurance business

in India in 1956. Not only Indian Insurance business but also the foreign
 58

insurance business was brought under the control of the Government to

achieve the objectives. The Government of India has set up the Life

Insurance Corporation under the Life Insurance Corporation Act, 1956.

The corporation came into existence on September 1, 1956, with the

nationalisation of life insurance business in India the corporation has the

monopoly of carrying on life insurance business in India.2

REVIEW OF LITERATURE

Many researchers have done their studies on various

insurance schemes such as cattle insurance, fire insurance, personal

accident insurance, agricultural insurance etc. The study objectives,

methodology, analytical tools and suggestions of a few researchers are

summarised in the following pages:

S.M.Chockalingam has studied the problems and prospects in cattle

insurance in Annamalai University, 1989 where the researcher aims to

identify the significance of cattle insurance among rural insurance

schemes. He has studied about the selling practices, performance of cattle

insurance and operational problems of cattle insurance covering a period

of thirteen years beginning from 1975 till 1988.

2
Ibid., p.510
 59

The study was based on both primary data and secondary

data. Primary data were collected from cattle owners and from the

insurance companies and the banks connected with cattle insurance. On

the basis of the experience gained from the pilot survey made covering 20

cattle owners of Chidambaram area in South Arcot district to test the

validity of the schedule.3

Attitude of cattle owners towards cattle insurance, reason for

non-adoptions, reasons for voluntary adoptions, problems of voluntary

adopters, problems of forced adopted, payment of premium and problems

of claims were intensively analysed. Causes of mortality time taken by the

beneficiaries of contact veterinarians, causes of death and evaluation of

benefit of cattle insurance were also analysed. Total gain made by the

insurance company for cattle insurance was also arrived. Various

operational problems of cattle insurance such as frauds, unjust claims, etc.

were also analysed.

In order to study the prospects of cattle insurance human

population trend and cattle population trend were analysed through

population projection analysis. A statistical technique called Orthogonal

3
S.M.Chockalingam, Problems and Prospect in Cattle Insurance, Annamalai University, 1989
 60

Polynomials was applied. The projected cattle under orthogonal

polynomial model upto the year 2001 on the basis of estimated census

1976. The percentage of disparity under the estimated cattle population

and actual for the year 1977 is very insignificant infact, less than 0.01

percentage.

The suggestion given on the basis of the research study was

that a separate rural insurance corporation must be established in order to

deal with all rural insurance schemes. This suggestion has been

strengthened by the report of the parliamentary committee on public

undertakings. If such a corporation is created cattle insurance would get

the desired boost and the economy would benefit from such a scheme.

A study was made by S.Sundarasubramaniam on Medi-

Claim Insurance Policy with particular reference to National Insurance

Company Limited, Tiruchirapalli, in Bharathidasan University 1997.4

The objectives of the study were to describe the features of

General Insurance and Mediclaim policies. It also studies the profile and

working of National Insurance Company, Trichy.

4
S.Sundarasubramaniam on Mediclaim policy with particular reference to National Insurance Company
Limited, Tiruchirapalli, Bharathidasan University, Tiruchirapalli, 1997
 61

The study was a survey method of research. Data were

collected using primary and secondary sources of information. Interview

and questionnaire were techniques of data collection. For collection of

primary data, a structured questionnaire was designed to gather first hand

information from the sample mediclaim policy holders. It consisted of two

parts. First part elicited information on the socio-economic background of

the respondents. The second part extracted responses from the

policyholders on the working of mediclaim policies. Scaling technique

was used in rating the responses that included from least to most

important.

The suggestions given on the basis of the study were that

there is a need to create more awareness about this policy. The

policyholders should be motivated to take mediclaim policy. The

formalities at the time of taking insurance and at the time of preferring

claims should be simplified. MAY I HELP YOU COUNTER may be

opened in every operating office manned by a courteous employee.

Seminars, meetings are to be conducted with the help of the non profit

service organisations to educate the general public about this scheme.

 62

A study on Fire Insurance Business an appraisal with

reference to Trichy town, 1989 was done by Mr.A.Kandappan, Annamalai

University. The study deals with various aspects of fire insurance and the

classification of the insurance on the basis of period of insurance. It can

be classified as short period insurance for a period of less than 12 months

and more than 12 months. If the sum insured is increased during the

currency of the policy short period scale of rate shall apply to the

increased amounts. A new policy for the full increased sum insured may

be issued cancelling the old insurance and allowing a pro-data refund.5

To meet the demands of varying needs of the insured, special types

of policies have been designed with certain modifications on the basis of

indemnity provided under a fire policy. The statistical tools used in this

thesis are regression analysis and Chi-square tests are applied.

Based on the study certain suggestions were given for the

avoidance of fire. The precautionary measures should be adopted by the

general public. The storage parking of vehicles, construction of buildings

with effective electrical fittings should properly deal with by the public.

Even if it happened to meet fire accidents, measures should be taken to

5
A.Kandappan, A Study on Fire Insuranced Business with reference to Trichy Town, Annamalai
University 1989
 63

save the remaining goods from destruction by fire. Awareness should be

created among the public about the destructive nature of fire.

The statistical tools used in this study are Least Square Techniques,

ANOVA techniques, Ordinary Regression Techniques and Chi-square

technique.

The suggestions given on the basis of the study are that the traffic

regulations should be made aware to the public so as to avoid road

accidents. The speed of vehicles can be regulated within the city limits.

The procedure for issuing license should be made rigorous by the

government.

J.Premanadhan, in his research work entitled, A study on the public

acceptability of Life Insurance Policy with special reference to AVIVA

Life Insurance in Trichy, presented the performance of the insurance

companies are very much familiar after the privatisation and helps the

public in many ways.6

A.Raja in his research workof A Study on health plans with special

reference to ICICI Prudential Life Insurance in Chennai City, explained

6
J.Ptemanadhan, A study on the Public Acceptability of life Insurance Policy with special reference to
AVIVA Life Insurance company in Trichy, submitted to Bharathidasan University, Trichy for MBA
Degree, 2006, p.62
 64

the impact of health plans and the survival of the company in the

marketing of health plans in an improved manner. He also determined the

working of the company in a systematic manner.7

K.Ramesh Babu in his research analysis has stated that the

satisfaction level and consumer behaviour of the policy holders are to be

given significance. This work contains the different factors involved in

awareness and satisfaction on personal accident insurance and

recommendations to improve them based on the perception of policy

holders. The company should consider the essential factors in this report

and try to implement the recommendations to increase the sale of more

personal accident policies.8

Insurance sector in India has come full circle, starting from privatisation

to nationalisation and back to liberalisation. Like most other liberalised

sector driven market forces and the industry has two challenges.

 To reduce considerably the high cost of management and

distribution with the sole aim of reducing the prices and to facilitate

the growth of industry in the exponential sense.

7
A.Raja, A Study on health plans with special reference to ICICI Prudential Life Insurance in Chennai
City, submitted to Bharathidasan University Trichy for MBA degree, 2006, p.71
8
K.Ramesh Babu, A Study on Awareness and Satisfaction on personal accident policy of United India
Insurance Company Limited in Salem Town, MBA Degree, Vinayaka Mission,Salem, 2002
 65

 To make the industry world class in terms of professionalism, and

expertise.

 The reforms in the realm of insurance industry over aimed at

clearing a more efficient and competitive financial system suitable

for the requirements of the economy. Keeping in mind the

structural changes currently underway and recognizing that

insurance is an important part of the overall financial spheres.

Insurance is a contingent service, whose purchase is not an end in

itself but rather complementary to the production of goods and

other services. In recent years it is more realised than even before

that insurance of primary importance both in regard to national

economy and international trade.

The Indian insurance industry in the light of nationalization,

privatisation and globalization has become the core subject matter of

many researchers. There has been sustained engagement of research on

the various of the topic. The research papers along this line is steadily

growing.
 66

Anabil Bhattacharya9 (2001) in his article discusses in detail

the survival strategies for the existing insurers. This article recommends

that the strategic planning is vital for all branches for management. By

strategic planning this article specifies a systems approval whereby

specific marketing objectives are perused in accordance with a specific

plan. This article highlights the personal selling market strategy. It

emphasises that personal selling stands out singularly as it is not only cost

effective but is perhaps the most effective one, since relationship is the

hall mark of insurance business. The article speculates further that as the

process of economic reforms getting momentum its speed should be in

consistence with the growth both in business volume and profit

maximization.

Vinay Verma10 (2001) in his article discusses the new dimensions

of financial reporting and accounting disclosures in general insurance.

The article furnishes in detail the accounting standards and directives

which would trends a standing authoritative guidance on the

measurement, recognition and disclosure of insurance transactions and

9
Anabil Bhattacharya, Survival Strategies for the existing insurers, The insurance Times, pp.15-17,
Jan.2001.
10
Vinay Verma, New Dimension of Financial Reporting and accounting disclosures in General
Insurance, The Insurance Times, pp.12-14, Feb. 2001.
 67

events. It suggests that improvement in reporting by revised norms may

improve in the perceptions of users and may create the general sense of

confidence on comprehensive structural framework of financial

statements.

Rengachary11 (2002) in his article comprises opinions about the

role of regulatory authority in the modern era of insurance. This article

necessitates the importance of overhauling the framework of financial

regulation. The author discusses in detail the complexities of regulation

or any form of official intervention where market imperfection is

prevalent. This article prescribed a stable financial system which alone

can provide a favourable environment for efficient resource allocation and

further economic growth.

Kumar12 (2002) in his article has discussed the survival issues of

public sector General Insurance Companies. He has elaborated the vital

components such as claim Ratio, claim settlement, and excessive

manpower. The paper offers valid suggestions to downsize the manpower

in order to reduce the excessive management expenses with regard to

11
N. Rengachary, Strategic Positioning in a Liberalising Market, Asia insurance review, May 2002.
12
C. Kumar, Will the Public Sector General Insurance Companies Survive anymore. The insurance
Times, pp.17-21, October 2002.
 68

product development; the author reported that the public sector companies

have neglected the customer needs and expectations. The article highly

exposes the shortcoming of the public sector companies that they have not

developed their own data bank on its various operations such as claim

statistics in minute details the risk issued and the premium rates.

Mishra13 (2002) in his disseminal article narrates in detail the

changes and consequent results and the future needs of the insurance

industry in the light of liberalisation, privatisation and globalisation of

economics. The article exposes after through examination of the generic

forces that have prompted the emergence. They are customer power,

information power, Global investor’s power, power of market place,

power of simplicity, power of the organisation and the power of

reciprocity or interdependence. The author prescribes the change in the

form of the organisation from rigid hierarchical structure to flexible term

based structure. He recommends the change of strategy from a

technology focus to integrated business focus, management style from a

functional control bias to leadership based on teamwork and performance

assessment from weak internal job orientation to result oriented business.

13
K.C. Mishra, Economy Begs for ashake of Indian Insurance Industry, Insurance Chronicle pp.15-21,
December 2002.
 69

Rao14 (2002) in his article covers the recent, major blows that

the global insurance industry has and its impact on insurance business. It

deals elaborately the global spread of insurance. This article explains the

consequence of much frequency of losses arising out of a peril but the

sheer impredictability of the severity of losses. This article discusses in

detail the Indian Insurance trends its market shaping, weak regulation,

poor public insurance awareness, ignorance of global trends and future

trends. The author recommends the dismantling of the present tariff

structure, professionalizing the distribution channels which allow only

qualified and experienced intermediaries more self regulation by insurers

and less regulation from the IDRA.

Tamela D. Ferguson and Nilliam L Ferguson15 (2002) in their

article have furnished a lucid picture of the insurance industry scenario in

Asia. This article the world now shares a single platform with no

geographical barriers. It discusses in detail the tie-ups in the insurance

industry and its consequences at the global level. This article examines

the growth process of insurance business among the Asian countries. The

14
G.V. Rao, Prospects for Global Insurance Industry and State of Indian Insurance Market, Insurance
Chronicle, pp.22.24, December 2002.
15
Tamela d. Ferguson and William L. Ferguson, Reform and Opportunity in Asian / Pacific Ram
insurance market, Insurance Chronicle pp.28-32, December 2002.
 70

author unfolds that the underpinning secret in the realm of insurance

market reform in India. Seems to revolve around a few understandable

key issues such as industry protection, fear of substantial outflow of

capital and potential domestic job loss. This article prescribes the

following components viz., efficient customers education, building, public

trust maintaining investor confidence, attracting and retaining well

analysed produces, products that best meet unique customer needs,

increasing information credibility applying new technologies, controlling

costs, penetrating rural areas and innovative market. It further

recommends Re-regulation as the same may create new opportunities for

both domestic and foreign insurers.

Jean Kwon16 (2002) in his article captures the overall scenario,

investment opportunities in India and the government role in improving

the industry. This article reiterates the need of a quantitative restriction

approach with regard to the number of insurance firms. This article

necessitates a strategy that insurers shall be permitted to invest their assets

in a wide array of investment areas that commensurate with their liability

exposures is equally important. The author highlights the fact that

16
N. Jean Kwon, Pre requisites for a sound Insurance Market in India, Insurance Chronicle, pp.33-35,
Dec.2002.
 71

insurance industry is a vital source of capital for economic development,

and it makes indirect but significant contribution to the economy.

Hydery A. Rehmanjee (2002) in is article deals with the

challenges before insurers today. This article examines the parameters

such as rapidity in the industry and technological up gradation. It

identifies that the aforementioned parameters resulted in pressures on a

few economic parameters viz., pressure on capital, pressure on volumes,

pressure on margins pressure on service, pressure on reinsurance, pressure

on organisations, pressure on intermediaries and pressure from regulatory

authorities.

Sesha Ayyar17 (2002) in his article provides an introspection of life

insurance industry since 1956. This article captures several changes,

challenges and pitfalls of life insurance industry. The author emphasise

on the scientific investigation that, proper standards of medical

examinations, quality moral hayard report of development staff and

judicial underwriting of risks are needed to ensure that the actual

mortality experience is well within the mortality rates underlying the

premiums. This article dwells upon an importance component viz., use of

17
V. Sesha Ayyar, Life Insurance in India – Opportunities, Challenges and Pitfalls, Insurance Chronicle
pp.61-65, December 2002.
 72

resources. It suggests that all items of expenditure should be periodically

reutilized to optimise the use of resources; the failure of this kind of

scrutiny would result in cost increase to policyholders.

Anand18 (2002) in his article provides insight into the future of

insurance industry and prescribes a few avenues for building insurance

companies in the Indian Markets. This article recterates the need of

customer education and customer centred service. On acturial basis this

article in forms that competition will result in the market to grow beyond

current rates and offer new products, services and price options. This

article also places on record a forecost that the present classification of

life and non-life insurance may change.

Herb Denenberg19 (2002) in his article focuses on the job of

regulators in Insurance business, as the same is mandatory for the

successful growth of the industry. This article narrates the significance of

an insurance regulator and the perils of regulator malfunctioning or

negligence. This article identifies a host of reason for continuing

regulatory failures. This article alarms the situation that when regulators

18
M. Anand, Indian Insurance Industry : Channelizing growth, Insuarnce Chronicle,
pp.66-67, December 2002.
19
Herb Denenberg, Insurance in the 21st Century : A wake up call for regulators, Insurance Chronicle,
pp. 68-70, December 2002.
 73

are not on the beat everyone in the market – consumer and business alike

– suffers.

Arunajatesan20 (2002) in his paper has captured the future

prospects of insurance in India. This article examines the definent

penetration of the market when compared with other countries. The

article suggests drawing a strategic plan to create and tap the market.

Through reorientation of policies, change of focus is other issues of

contemplation of this article. The author highlights the need of designing

of products with more benefits at less cost. This article throws light on

the fact that the household savings in India is about 25% of G.D.P. but

mostly invested in physical properties and suggests that insurance

companies must exploit this opportunity.

Sampada kapse and Kodwani21 (2003) in their article

analysed the share of financial savings. This paper on the basis of

sufficient statistical data brought out an inference that due to the changing

trends of a shift in investment pattern of household saving in favour of

pension funds and insurance. The authors suggest that to improve upon

20
Arunajatesan, Insurance in India and its future prospects Management Matters,
pp.53-55, September 2002.
21
Sampada Kapse and D.G. Kodwani, Insurance as an investment option, The insurance Times, pp.15-
21, May 2003.
 74

features of insurance products to make them more liquid or short term

schemes need to be increased. On the basis of survey findings the authors

indicate that it may not be very difficult to win over the confidence of

small investors towards insurance policies.

Jimmy John22 (2003) in his article elaborated on the business

environment in the Indian Insurance Sector. He has analysed the growth

prospectus of the Insurance Industry. He has exposed that tough time

which the new companies are having and are deficient in setting up their

distribution networks. This article identifies the hardships faced by

private sectors. The author has concluded that in spite of all the action

taken in the market, the opening of the insurance industry has created

numerous opportunities and success will come only to those who are able

to size them.

Jawaharlal23 (2003) in his research paper deals with the

domain of customer service and with the domain of customer service and

analyses the challenges ahead. According to him customer service always

remains at the top of an organisation agenda. He reveals that in reality not

many organisation are able to deliver real customer service. The article
22
Jimmy John private players Gain in Non-life segment Asia Insurance Review, pp.28-29, June 2003.
23
V.Jawarharlal Customes Sevice- Challenges Ahead, Insurance Chronicle pp.20-21, September 2003
 75

emphasised the need for explicit policy conditions. The author disclosed

the fact that a satisfied customer is the greatest brand ambassador. The

article also identified the priorities of agents, and the growing need of the

levels of awareness of insurance. This article also exposes to inference

that awareness with regard to insurance is not taking place, though a

beginning has been made.

Sengupta24 (2003) in his article on current trend and future

prospectus of insurance industry captured the wholesome picture of the

insurance industry. This article emphasised the strategy that the Indian

insurance industry today needs to take a hard look at itself and do a reality

check. The author has rightly pointed out that the insurance phenomenon

is also translating, into a newfound vigour in erstwhile sluggish and

traditionally inward looking areas like claims and investments. This

article offers a note that effective planning in the light of creative strategy

and market research.

24
N.N. Sengupta, Insurance Industry current Trend and future prospectus, Indian Scenario, The
Insurance Times, pp.24-26, September 2003.
 76

Pandey25 (2004) in his paper analysed the insurance sector

with regard to time. This article has addressed the issues on finance,

marketing and the impact of globalisation. This paper exposed and

examined the new channel of marketing such as direct marketing through

dedicated sales force, Bancasurance, corporate agents or brokers,

independent financial advisors, and Telemarketing. The author has

suggested that to stay in business the players need to constantly reinvest

themselves with the changing dynamics of the market. He emphasized

that the competition can only make life easier for the consumers in the

coming years.

Sudarsana Reddy and Raghintha Reddy26 (2004) in their

article examines the liberalisation of insurance sector, with focused

reflections on LIC According to the authors India is poised to experience

major changes in its insurance markets. Insurers will operate in an

increasingly deregulated and liberalised environment. According to the

authors prediction LIC will continue to maintain their dominant position

25
K.C. Pandey, Insurance Sector: Changing with time, The Management Accountant, pp.102-104,
December 2004.
26
G. Sudarsana Reddy and S. Raghunatha Reddy, Liberalisation of insurance sector : Reflections on
LIC, Southern Economists, pp.13-17, May 2004.
 77

in the market, at least in the foreseeable future. The concluding remarks

of this article are the following.

 Despite India’s vast population, rural poverty and lack of awareness

about insurance products have constrained the growth of insurance

business in the past.

 India’s high saving rate, customary lack of social security nets and

a tradition of frugality are expected to be key growth drivers.

 The rising middle class that will encourage increase insurance

spending and their growing risk awareness.

Urvashi makkar and Satish Kumar27 (2004) in their article

examine in detail the changing scenario of insurance sector in the wake of

privatization and its impact on Indian economy. The article explores in

detail the impact of privatisation over insurance industries. The article

also speculates the benefits that would with the success of insurance viz.,

infrastructure, housing, safe-drinking water, electricity and primary

education. The article also investigates the helm of affairs of insurance

industry in the post-liberalisation scenario.

27
Urvashi makkar and Satish Kumar, Changing Scenario of insurance sector in the wake of
privatisation and its impact of Indian Economy, Southern Economist, pp.19-22, 2004.
 78

Antony Jacob28 (2004) in his article has projected the issue

pertaining to distribution network of General insurance. This article

captures the fact that the driving force behind the record growth of the

General Insurance industry is the increasing demand for specialised

covers by customers. The author emphasised the need of new distribution

channels and payment mechanism and customer awareness.

Abhijit Roy29 (2004) in his paper discussed the trends in the sale of

Life Insurance companies, in a surcharged atmosphere where new entrant

have increased their share. This article identified an important fact that

only well capitalised insurers which are innovative and offer the right

product can hope to survive. This article has dealt in detail the notori

such as alternative distribution channels lower investment returns and

equity requirements. The author disclosed an alarming note about LIC on

the extent of its issued guaranteed return policies. This article suggests

that detailed actuarial calculations are necessary to determine its future

liabilities and take appropriate measures if required.

28
Antony jcob, General Insurance, focus on distribution, The Hindu Survey of Indian Industry, pp.63-
63, 2004.
29
Abhiji, Roy, Smooth opening up phase, The Hindu Survey of Indian Industry, pp.67-70, 2004.
 79

Shikha Sharma30 (2004) in his findings placed the benefits of

competition. The article disclosed that with the advent of invited private

players to participate in the arena, each company has obtained fortuning

and on the job of making strides on raising awareness levels, introducing

innovative products and increasing the penetration of life insurance. This

article discussed in detail the components such as changed perception,

flexibility of unit linked products and rising service levels. The author

highlighted the fact that a job as “insurance advisor” has become a

practical career option for thousands of people. This article sustained on

the fact that LIC as the only the credible players with a long term vision

and a robust business strategy that will survive.

Vivek Gupta31 (2004) in his article details the major factors

that have influenced the Indian insurance industry in the new millennium

including the emergence of new distribution channels to market insurance

products. This paper also deals with an indepth analysis of the changes in

the Indian Insurance industry after deregulation. The author has observed

30
Shikha Sharma, Life Insurance Benefits of competition, The Hindu Survey of Indian Industry, pp.59-
60, 2004.
31
Vivek Gupta, Insurance Industry, An Indian Perspective Insurance Chronicle, pp.36-41, August 2004.
 80

that the insurance industry was also expected to work on much product

innovation in the coming years.

Ron Clark32 (2004) in his research paper examined the

challenges faced by the life insurance and financial services industry. He

has analysed the components of rating agencies, consolidation, product

complexity, and public perception. The author has concluded with a note

that the industry has a bright future.

Dinesh K. Vaishnav33 (2005) in his article captures the

nuances of agriculture insurance. The author by agriculture insurance

looks beyond simply crop insurance. According to the author agriculture

insurance represents an effective risk management tool to provide security

to the farming sector against such uncertainties. This article examines in

detail on the issues of limitation of subsidy, lack of education, lack of

effective channels of distribution, public sector monopoly and low

incentives. This article offers strategies to move agriculture insurance

beyond crop segment. In the concluding remark, the author discloses that

32
Ron Clark, Golden years ahead for industry, Insurance Chronicle, pp.42-44, August 2004.
33
Dinesh K. Vaishnav, Agriculture insurance – beyond simply Crop insurance, The Insurance Times,
pp.24-31, May 2005.
 81

the agriculture rural market is still virgin territories to a great extent and

offer exciting opportunities for insurance companies.

Prathiba J. Sharma34 (2004) in her article contemplates on the

increased competition which has given rise to a need for persons well

trained skilled and experienced amenable to various facts of insurance.

The sale object of this article is to regurgitate the persons facilitating the

growth of the insurance industry. Greater emphasis is laid on full fledged

training. The author suggests measures for evaluating the training process.

Nalini Prava Tripathy35 (2006) in her paper identifies the five

major factors that influence the consumers more. It also offers purchase

divisions and suggests some measures to managers to design future

products. The author has effectively employed factor analysis with the

objective of examining the customers preferences and priorities to the

types of insurance products. She also examines the key features of

insurance products and service attributes that are essential in purchase

decision of the customers.

34
Prathiba J. Sharma, Need of Training in Insurance in the present Liberalised Insurance Market, The
Insurance Times, pp.33-38, Sep.2005.
35
Nalini Prava Tripathy, An application of Factor analysis approach towards designing insurance
products in India, Insurance Chronicle, pp.84-90, Feb.2006.
 82

Anil Chandhok36 (2006) in his article discussed on the

applications of customers relationship management in the insurance

sector. This article focuses its attention to customer relationship

management with the greater emphasis on an individual and personalised

basis. This article highlights the fact that a loyal customer advocates the

company’s products much better than the organisation itself. The author

recommends that to survive and to have an upperhard over the

competitors, insurance companies bound to implement customer

relationship management not as the demand of all the time but as the

demand of our culture.

Michelle Hannen37 (2006) in his research study examines the

relationship between brokers and insurers and the issues they face. With

the sufficient background of statistical data this article deals in detail the

helm of affairs of the insurance industry. The challenge both insurers and

brokers face, internet access, business process and broken repositioning.

36
Anil Chandhok, Applications of CRM in the Insurance Sector, Insurance Chronicle, pp.17-19, May
2006.
37
Michelle Hannen, The State of the Industry, Insurance Chronicle, pp.61-66, May 2006.