Professional Documents
Culture Documents
Presented by ANKUR VASHISTHA DEEPAK KASHYAP KAUSHAL CHAWDA (Section I Group XI)
Contents
Introduction to General Insurance Features of General Insurance Types of General Insurance products List of General Insurers History of General Insurance in India Post independence developments IRDA Business structure, Policy developments & Current state of General Insurance companies Micro Insurance Tariffing & Detariffing Investment Pattern Risk in Insurance Future prospects in General Insurance
What is Insurance?
A promise of compensation for specific potential future pure losses in exchange for a periodic payment(premium). Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss.
Insurance is classified into Life and General(non life) insurance
Pooling of losses
Pays for losses that are unforeseen, unexpected and occur as a result of chance Risk transfer Indemnification
Fire and motor insurance are predominant and constitute 60% of total gross premium collected by general insurance companies
Fire Insurance
Fire insurance is a comprehensive policy which covers loss on account of fire, earthquake, riots, flood, strikes and malicious intent Scope
building plant and machinery stocks furniture, fixtures and contents loss of profit or consequential loss
Fire Insurance
Most lucrative as fire rates are governed by tariffs Bulk of the premium comes from corporate clients Accounts for 20% of the business for general insurance companies
Motor Insurance
It is insurance purchased for cars, trucks, two wheelers and other type of vehicles Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident Motor insurance is of two types
Third party insurance which only insures the party/parties other than the owner in an accident Comprehensive insurance which insures the owner as well as the third party involved
Motor Insurance
Motor insurance is mandatory leading to a good amount of premium collection Largest and fastest growing business line for insurance companies Accounts for 40% of the business of non life insurers
Health Insurance
A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured Health insurance policies
Can be broadly classified into
Indemnity based : provide for reimbursement of expenses incurred necessarily as a result of hospitalisation necessitated by a covered disease, illness or injury. Benefit type : provide for lump sum payment on happening of an event insured against by the policy
Health Insurance
Standard health insurance policy Indemnifies the insured against hospitalisation expenses incurred by him at a hospital or nursing home upon the advice of a duly qualified medical practitioner as a result of an illness, disease or an injury contracted during the policy period Reimbursement and cashless policy The insured initially bears all the expenses which is later on reimbursed by the insurance company provided the claim is admissible as per the policy Cashless policy allows a policy holder to avail medical treatment at a network hospital of the insurer without paying cash
Health Insurance
Floater policy Provides for a sum insured for the entire family against medical expenses Group mediclaim policy Provides cover to the members of any group/institution/association/corporate body Other health insurance covers Cancer medical expenses insurance policy Hospital cash policies Critical illness covers Jan arogya bima policy Community based universal health insurance schemes Nagrik suraksha policy Personal accident policy Overseas medical insurance
Marine Insurance
Marine cargo insurance covers Cargo in transit Cargo declaration policy Marine hull insurance covers Physical damage to ship or vessel Collision liability Owners legal liability
Bajaj Allianz ICICI Lombard Iffco-Tokio Reliance Royal Sundaram Alliance TATA-AIG Cholamandalam MS HDFC ERGO Star Health & Allied Apollo Munich Future Generali Universal Sompo Shriram Bharti AXA Raheja QBE Max Bupa L&T Religare Health Magma HDI Liberty Videocon
National Insurance Co. Ltd. The New India Assurance Co. Ltd. The Oriental Insurance Co. Ltd. United India Insurance Co. Ltd. Export Credit Guarantee Corporation of India Ltd. Agriculture Insurance Co. of India Ltd. SBI General Insurance Co. Ltd.
In early 90s, Government identified the increasing market scope in general insurance business. Thus, in 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein its prime recommendation was that the private sector be permitted to enter the insurance industry. It also stated that foreign companies be allowed to enter Indian insurance sector, preferably a joint venture with Indian partners.
Apart from the conventional general insurance types, GIC has introduced new policies like; 1. Personal accident policies for visitors in bank premises 2. Rejection insurance on marine products. 3. Personal accident insurance etc. Also, other activities of GIC include; 1. GIC Mutual fund 2. GIC Grih Vitta Ltd 3. Loss prevention association of India Ltd. 4. National Insurance Ltd
Policy developments
De - tariffing* of general insurance industry Obligations towards rural and social sectors. Restriction on FDI up-to 26% earlier. Every insurer shall maintain a required solvency margin as per Section 64VA of Insurance act 1938 Further to above , currently foll. are new developments wrt insurance sectors; A meeting of senior cabinet ministers chaired by Prime Minister has decided to hike foreign direct investment (FDI) limit in the insurance sector to 49 per cent from the existing 26 per cent. The move is expected to ripe benefits soon, in terms of more foreign investments into the country.
Source - http://www.ibef.org/industry/insurance-sector-india.aspx
To enhance financial inclusion and boost bank assurance as a business, banks to sell insurance policies, subject to prior approval from the Reserve Bank of India (RBI) before applying for a license to act as an insurance broker. Banks to apply under the direct broker category. The license, once granted, will be valid for three years. Banks can now offer their customers policies from various life and non-life insurance companies. Until now, brokers included only exclusive intermediaries for insurance distribution. The new regulation now allows this business to be carried departmentally within a bank.
http://www.ibef.org/industry/insurance-sector-india.aspx
Micro Insurance
protection of low-income people (those living on between approximately $1 and $4 per day) against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved. Target population : persons ignored by mainstream commercial and social insurance schemes, persons who have not previously had access to appropriate insurance products. Critical Features : a) transactions are low-cost (and reflect members willingness to pay); b) clients are essentially low-net-worth (but not necessarily uniformly poor); c) the essential role of the network of micro insurance units is to enhance risk management of the members of the entire pool of micro insurance units over and above what each can do when operating as a stand-alone entity.
Functions of TAC
Collection of data on premium and claims, analysis of data and dissemination of information to insurer; Report to IRDA on underwriting health of market and any aberrations in market behaviour; Constitution of expert group at the request of General Insurance Council, to look into underwriting issues and recommend necessary action; Organise training of underwriters at the market level; and Attend public grievances on non-availability of insurance.
Percent
20
30
Profitability of Sector
Risk Management
Risk: situation which bears a probability of some financial loss In Insurance world : risk referred to a property or an individual insured also called Exposure Unit. Risk Management : process of planning, organising, directing and controlling resources to minimise the adverse effects of potential losses at the least possible cost.
Types of Risks
Portfolio Risk : means the mix of business done by an insurer includes fire, health, motor, etc. Solvency Risk : Depends on backup in terms of capital represented by assets of the insurer. Marketing Risk : Due to change in demographic structure including consumer preferences. Market Risk : To maintain profitability, insurers have to be aggressive in investing funds in high risk, high return securities which give rise to market risk, volatility of financial markets Operational Risk : Due to more dependence on IT tools like centralised servers and WAN (wider area networks).
References
Financial Institutions and markets Bhole & Mahakud (5 th edition) The Indian Financial System: Markets, Institutions and Services Pathak (3rd edition)