ROAD MAP

History Introduction of IRDA Registration under IRDA Cancellation of registration Expectations from IRDA Duties, Powers and Functions of IRDA Definition Of Insurance Indian Insurance Company Various challenges faced in Insurance Markets Parties Restriction On name of Insurer Principles of Insurance Types of Insurance

History (Governed by Insurance Act -1938, Now By IRDA Act-1999)

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: - The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered more riskier for coverage. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and nonIndian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalised monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalisation

was justified on the grounds that it would create much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State lead planning and development. GIC was Incorporated as a company in Year 1971 . In 1972 General st Insurance Business(Nationalization) Act passed with effect from 1 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.

IRDA
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. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included: i) Structure Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. ii) Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state. iii) Regulatory Body The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance- a part of the Finance Ministry- should be made independent iv) Investments Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. 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) v) Customer Service LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry. The committee emphasised that in order to improve the customer services and increase the coverage of insurance policies, industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the 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 their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body- The Insurance Regulatory and Development Authority. Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

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. 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.

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, 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

Expectations from IRDA

To protect the interest of and secure fair treatment to policyholders. To bring about speedy and orderly growth of the insurance industry for the benefit of the common man, and to provide long term funds for accelerating growth of the economy. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates.. To ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players.

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;

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. 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
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 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.

Insurance
Definition of Insurance
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. 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.

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

Various challenges faced in Insurance Markets

1. Industry Challenges
Shifting consumer requirements( everyone wants products tailored to them, customization) Heightened competition. Global economic meltdown.

2. Business Challenges
Distribution Channel pressures and emerging consumer demands for mass customization and hydrid products are moving rapid product development from being a competitive advantage to a necessity.

3. Process Challenges
Lack of stream lined processes, change processes management, automated

Parties
There are two parties to an Insurance contracts as: Insurer/assurer/underwriter, Insured/assured/beneficiary

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, representative, or maintains a place of business, in India employs a

(b) Anybody 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. The document laying down the term of contract is called (insurance) policy.

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 .

Other Type of insurance

Property insurance Automobile insurance Aviation insurance Boiler insurance

 Builder's risk insurance Crop insurance Earthquake insurance Flood insurance Home insurance Landlord insurance Marine insurance Terrorism insurance etc.

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.

Type of Life Insurance Polices

Endowment Policy Term insurance Policy Whole Life Policy Limited Payment Life Policy Joint Life Policy Convertible Whole Life Policy Annuities

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) Unvalued Policy (e) Floating Policy (f) Replacement or Reinstatement Policy (g)Blanket Policy

Marine Insurance Policies

(a) Voyage Policy (b) Time Policy (c) Mixed Policy (d) Valued Policy: (e) Open and Unvalued Policy (f) Floating Policy

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

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. 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 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 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 Future Generali Life Insurance IDBI Fortis Life Insurance HDFC Ergo General Insurance Company ICICI Lombard General Insurance IFFCO Tokio General Insurance Universal Sompo General Insurance Co. Ltd United India Insurance