Insurance

A PROJECT REPORT ON

INSURANCE
A Dissertation submitted in the partial fulfillment of the degree

BACHELORS IN MANAGEMENT STUDIES UNIVERSITY OF MUMBAI

SUBMITTED BY

JOSNA LALWANI
UNDER THE GUIDANCE OF PROF. MRS. KANTHI.V

V.E.S COLLEGE OF ARTS, SCIENCE AND COMMERCE

Chembur, Mumbai- 400071 2012-2013
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V.E.S COLLEGE OF ARTS, SCIENCE AND COMMERCE CHEMBUR

CERTIFICATE
Certified that this project entitled submitted by Shri/ Kum Ms. Josna Lalwani Roll no. 23 A student of Third Year of the course BMS as partial fulfillment of bachelors degree in management studies as prescribed by Mumbai University for the academic year 2012-2013. And that I have instructed/guided him/her for the said work from time to time and I found him/ her to be satisfactorily progressive. And that, the said work was accessed by me and I am satisfied that the same is upto the standard envisaged for the level of the course. And that, the said work may be presented to the External Examiner.

Date: (Signature of Guide) (Mrs.Kanthi.V)

Head of Department

Principal External Examiner

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Dr. (Mrs.) J.K. Phadnis
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SUBMISSION
I Ms. Josna Lalwani Roll no 23 a student of Third Year of the course BMS I have completed from time to time project work as described in this report by my own skills. And that I have not copied the report or its any appreciable part from any other literature in contravention of the academic ethics.

Date:
(Signature of Student)

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CONTENTS CONTENTS

Sr.No Topic Sr.No Topic Page. No

Page. No
5 8 10 22 27 35 40 47 51 55 67 76 78 80 82 84 86

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

Executive Summary 1. Executive Summary Acknowledgement 02 2. Acknowledgement Introduction 04 Brief History of Insurance 3. Introduction Liberalization of Insurance 08 Industry 4. Importance of Banks Marketing strategies adopted 12 by Insurance industries 5. History of Banks Types of Insurance policies 15 Keys to investing decision 6. Growth of Banks Major policy changes that has 20 affected Insurance companies 7. Banks Leading Innovation Filing an Insurance claim 44 Challenges in Life Insurance 8. Bancassurance Industry 50 SWOT Analysis 9. New Initiatives taken by PSBs Religious concern 54 Insurance 10. 7 PsFrauds of Bank Conclusion 57 Recommendation 11. SWOT Analysis Bibliography 63 12. Conclusion 68 13. Bibliography 70

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EXECUTIVE SUMMARY

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EXECUTIVE SUMMARY
Practical studies form an integral part of our tybms section. Only classroom training without any practice is of no use. As it is said, Theory without practice has no fruit. Practice without theory has no root. The proverb is enough to understand the interdependence of theory and practical on each other. Teaching gives an insight into the theoretical aspects of management. But implementation of theory gives practical knowledge of the management field. In our daily lives we encounter lot of risks which results in fiscal losses. One of the excellent ways to safeguard these losses is through insurance. The insurance firms in India take entire charge of any such losses against the payment forfeited every month in the form of premium. Insurance is a commercial means for relocating risks and covering fiscal losses. This Project provides an insight on the various policies offered by the insurer to cover particular losses, the premium charged by the insurer and how much money an insurer forfeits the policyholder in case of losses. This Report offers experts, consultancies, government divisions, authoritative units and analysts with self-sufficient predictions and domestically viable intelligence on the insurance industry. This project deals with the 5-7 year insurance industry predictions, target business prospects, probable risks, SWOT analysis and explore the current competitive sectoral acumen. The reports offer key insight into the industry and impact on conglomerates in the market. Industry indicators in the report comprise of number of life and non-life insurance firms; total and per capita Casualty premiums and assertions;
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aggregate premium revenues, total expenditures, operating expenditures, total assets, sectoral density, Market penetration, etc The users of the information are usually the prospective investors, policyholders, top management for decision makers and stake holders. Project Report on Insurance - Objectives A project report on Insurance is carried out on the basis of few objectives. Some of them are:

To encourage the expansion of capital markets; To accelerate the intermediation competence in the insurance sector, and to release latest out new schemes and services; To contribute to all-inclusive sectoral reforms To facilitate and improve the corporate administration and introduce sound commercial structure To sustain health modifications and private health insurance. To enable the investors to take a close view of the fund performance over the years To motivate the selling of insurance schemes To monitor the insurance schemes transactions To trigger long term strategic planning

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ACKNOWLEDGEMENT

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ACKNOWLEDGEMENT
Ideas, they say often remain ideas. Very few of them, if find support are turned into actual working models. And the rest of them are just forgotten and remain what they started off as ideas. This idea as well would have remained, but for one person,

MRS. KANTHI. V
The real debt of gratitude that I owe to her, without whom this project would not have seen light of day. I am very delighted to take the opportunity to acknowledge wholeheartedly the innumerable guidance and support extended to me by my guide. Inspite of being the Principal Dr. (Mrs.) J.K. Phadnis having an immensely busy work schedule, I never found any of my requests of help and guidance to her being turned down. Nor did she show even the slightest bit of impatience about me pestering her so much and so often. A project of this type requires lots of endeavor from people and I have been fortunate enough to have all the sustain I needed. I express out gratitude to the Library staff of our college for staying back late and keeping the library operational for me while I kept searching for books. I thank all those people who helped me in any way what so ever at some point of time Last but the most important I express thanks to my Parents for their harmonious support for ensuring the smooth passage of this ambitious project.

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INTRODUCTION

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INTRODUCTION
None of us know what is going to happen to us in the future but what we do know is that accidents happen. This is the simple idea that the insurance industry is founded on. You never know when you might crash your car or come home to find someone has broken into your home. But what you can do is protect yourself financially against something going wrong at some point in the future. This protection is what we call insurance. The business of insurance is related to the protection of the economic values of assets. The asset would have been created through the efforts of the owner. The asset is valuable to the owner, because he expects to get some benefits from it because it meets some of his needs. This benefit may be an income or in some other form. In the case of a factory or a cow, the product generated by it is sold and income is generated. In the case of a motor car, it provides comfort and convenience in transportation, there is no direct income. Both are assets and provide benefits. Every asset is expected to last for a certain period of time during which it will provide the benefits, after that, the benefit may not be available. There is a life-time for a machine in a factory or a cow or a motor car. None of them will last forever. The owner is aware of this and he can so manage his affairs that by the end of that period or life-time, a substitute is made available. Thus, he makes sure that the benefit is not lost. However, the asset may get lost earlier. An accident or some other unfortunate event may destroy it or make it incapable of giving the benefits. An epidemic may kill the cow suddenly. In that case, the owner and those enjoying the benefits there from, would be deprived of the benefits. The planned substitute would not have been ready. There is an adverse or unpleasant situation. Insurance helps to reduce the impact of such adverse situation.

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Insurance can seem complicated but the basic principles are really quite straightforward. An insurance company works out how likely it is that an accident or event will happen and what it would cost to put it right. Based on this, the insurance company sets what is known as a premium. This is the amount it asks you to pay in order to protect yourself against the accident or event. The cost of the premium is often spread so you pay it on a monthly basis. If whatever it is you have insured yourself against happens, you then make a claim to your insurance company and it pays out the agreed amount. Taking out insurance There are hundreds of insurance policies on offer and you can buy them from many different places. You can go direct to an insurance company, usually via a call centre or the companys Internet site these days. You can buy many policies from places such as banks or supermarkets. You can buy some insurance policies alongside the products and services they cover. Travel agents, for example, usually sell travel insurance and many shops offer breakdown cover for the products they sell. You can use an insurance broker to help you find the right policies. It is up to you where you get your insurance. If you are applying for a mortgage or booking a holiday, for example, you dont have to buy the insurance policy that the bank or travel agent may offer. Signing on the dotted line It is important to read an insurance policy carefully before signing it to make sure it provides the cover you are expecting and that you are aware of
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anything it might exclude. With some policies you get what is known as a cooling-off period, which gives you the chance to read through the policy thoroughly and change your mind within a set amount of time if you feel you need to. Different types of insurance There are many different types of insurance. In fact, as long as youve got enough cash to pay the premium, its possible to insure yourself against most things. Youve probably heard stories of film stars insuring their bodies or musicians their voices but, for most of us, there are just a few insurance policies that we might need to consider. These can be grouped under two main headings: General insurance: this covers things that could happen to your home (buildings insurance) and your possessions (contents insurance), your car (car insurance), and you or your belongings while you are on holiday (travel insurance). Life, income and health insurance: these insurance policies give you or your dependants financial protection if you are unable to work or if you die. They can also help you pay for the cost of private medical or long-term care. Insurance policies to cover these eventualities include; life insurance, medical insurance, income protection, critical illness and long term care insurances. Insurance is a mechanism that helps to reduce the effects of adverse situations in the economical way. It promises to pay to the owner or beneficiary of the asset, a certain sum if the loss occurs. Purpose & Need Of Insurance Insurance is necessary after all, life is fraught with tensions and apprehensions regarding the future and what it holds for the individual. Despite all the planning and preparation one might make, no one can
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accurately guarantee or predict how or when death might result and the circumstances that might ensue in its aftermath. We are not saying that life and existence are constantly fraught with danger and uncertainty. But then it is essential that you plan for the future. The chances for a fatality or an injury to occur to the average individual may not be particularly high but then no one can really afford to completely disregard his or her future and what it holds. People generally regard insurance as a scheme when and where you have to lose a lot to gain a little. Nevertheless, insurance is still the most reliable tool an individual can use to plan for his future. The risk only means that there is a possibility of loss or damage. The damage may or may not happen. Insurance is done against the possibility that the damage may happen. There has to be an uncertainty about the risk. The earthquake may occur, but the building may not have been affected at all. The word 'possibility' implies uncertainty. Insurance is relevant only if there are uncertainties. In case of a human being, death is certain, but it's time is uncertain. The person is insured, because of the uncertainty about the time of his death. In the case of a person who is ill, the time of death is not uncertain, though not exactly known. It would be 'soon'. He can't be insured. Function of Insurance The functions of Insurance can be bifurcated into three parts: 1. Primary Functions 2. Secondary Functions 3. Other Functions The primary functions of insurance include the following: Provide Protection
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The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Collective bearing of risk Insurance is a mean by which few losses are shared among large number of people. All the insured contribute the premiums towards a fund out of which the persons exposed to a particular risk is paid. Assessment of risk Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate Provide Certainty Insurance is a device which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain. Research and publicity Insurers also spend money in research and publicity in creating risk consciousness amongst which has a far reaching effect on reduction in national waste. The secondary functions of insurance include the following: Prevention of Losses Prevention of losses causes lesser payment to the assured by the insurerand this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and better protection to the insured. Small capital to cover larger risks

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Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contributes towards the development of larger industries Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery. It improves efficiency The insurance eliminates worries and miseries of loans at death and destruction of property. The carefree person can devote his body and soul together for better achievement. It improves not only his efficiency, but the efficiencies of the masses are also advanced. It helps economic progress The insurance by protecting the society from huge losses of damage, destruction and death provides an initiative to work hard for the betterment of the masses. The next factor of economic progress. The capital is also immensely provided by the masses. The property, the valuable assets, the man, the machine and the society cannot lose much at the disaster. The other functions of insurance include the following: Means of savings and investment Insurance serves as savings and investment. Insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's Forthe purpose of availing income-tax exemptions also, people invest in insurance. Source of earning foreign exchange

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Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways. Risk Free trade Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover. Nature of Insurance Sharing of risk Insurance is a device to share the financial losses which might be fall on an individual or his family on the happening of specified event. The event maybe death, in case of life insurance, marine perils, marine insurance, fire in fire insurance and other certain events in general insurance. Co-operative Device The most important feature of every insurance plan is the co-operation of large number of persons who, agree to share the financial loss arising due to a particular risk which is insured. All co-operative devices, there is no compulsion here on anybody to purchase the insurance policy Value of risk The risk is evaluated before inuring to charge the amount of share of an insured, here is called, consideration or premium. If there is expectation of mo r e loss , high er pr emiu m may b e ch arg ed . So ,th e prob abil it y of loss i s calculated at the time of insurance. Payment at Contingency The payment is made at a certain contingency insured. If the contingency occurs, payment is made. Since the life insurance is a contract of
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certainty, because the contingency, the death or the expiry of term, will certainly occur, the payment is certain. Amount of payment The amount of payment depends upon the value of loss occurred due to the particular insured risk provided insurance is there up to that amount. In case of life insurance, the insurer promises to pay a fixed sum on the happening of an event. (either death or the expiry of the term.) Large number of insured persons The co-operation of a small number of persons may also be insurance but in that case, the cost of insurance to each number may be higher. In case of large number of persons opposite condition is applicable. Insurance is not gambling The insurance is just opposite of gambling. In gambling by bidding the p ersons expos es hi ms el f to r isk of lo sing . I n th e insu ran ce th e insu red i s always opposed to risk and will suffer loss if he is not insured. Insurance is not charity Charity is given without consideration but security and safety provided by insurance is not possible without consideration or premium. It provides security and safety to an individual and to the society although it is a kind of business because inconsideration of premium it guarantees the payment of loss Principle of Insurance Principles of Co-operation. Insurance is co-operative device. If one person is providing for his own losses, it cannot be strictly insurance because in insurance, the loss is shared
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by a group of persons who are willing to co-operate. It is the duty and responsibility of the insurer to obtain adequate funds from the members of the society to pay them at the happening of the insured risk. Thus, the shares of loss took the form of premium. Today, all the insured give a premium to join the scheme of insurance. Thus, the insured are co-operating to share the loss of an individual be payment of a premium in advance. Principles of Probability. The loss in the shape of premium can be distributed only on the basis of theory of probability. The chances of loss are estimated in advance to affix the amount of premium. Since the degree of loss depends upon various factors, the affecting factors are analyzed before determining the amount of loss. With the help of this principle, the uncertainty of loss is converted into certainty. The insurer will have not to suffer loss as well have to gain windfall. Therefore, the insurer has to charge only so much of amount which is adequate to meet the loss. The probability tells what the chances of loss are and what will be the amount of losses. The insurance, on the basis of past experience, present conditions and future prospects, fixes the amount of premium. Without premium, no operation is possible and the premium cannot be calculated without the help of theory of probability, and consequently no insurance is possible. So, these two principles are the two main legs of insurance Working of Insurance The mechanism of insurance is very simple. People who are exposed to the same risks come together and agree that, if any one of them suffers a loss, the others will share the loss and make good to the person who lost. The manner in which the loss is to be shared can be determined beforehand. It can be equal among all. It can also be proportional to the risk that each person is exposed to.

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INSURANCE RULES AND REGULATIONS

Insurance laws and regulations in India takes care of all matters related to various insurance companies in the country. Much of the development and growth of the insurance sector in India is due to the government's decision to nationalize the insurance business and to allow private and foreign insurance companies to establish their businesses here. In India, there is one regulatory authority i.e. IRDA which oversees different functioning of the life insurance companies in India and provide them with guidelines. Insurance Regulatory and Development Authority (IRDA) Insurance Regulatory and Development Authority (IRDA) is the controlling body, overseeing important aspects and functioning of various insurance companies in India. Established by the government, it safeguards the interest of the insurance policy holders of the country. Some of IRDA's functions include: To regulate, ensure and promote the orderly growth of the insurance business To prescribe regulations on the investment of funds by insurance companies To regulate the maintenance of the margin of solvency To adjudicate the disputes between insurers and intermediaries To supervise the functioning of the Tariff Advisory Committee Other supporting organizations which facilitate in the working of the industry are: 1. Tariff Advisory Committee The main task of Tariff Advisory Committee is to regulate and control the rates, benefits, terms and conditions offered by life insurance companies in India.
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2. Insurance Association of India All insurance companies in India are members of the Insurance Association of India. It has two councils under its patronage, mainly a. Life Insurance Council b. General Insurance Council 3. Ombudsmen Ombudsmen play important role in regulating and ensuring smooth functions of the insurance companies. They are appointed to address all complaints relating to settlements of claims. Anyone having a grievance against an insurance company can approach Ombudsmen for redressal.

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BRIEF HISTORY OF INSURANCE

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BRIEF HISTORY OF INSURANCE

The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era past few centuries yet its beginnings date back almost 6000 years Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later
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Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage. The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost.

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Some of the important milestones in the life insurance business in India are: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
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1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

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LIBERALISATION OF INSURANCE INDUSTRY

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LIBERALISATION OF INSURANCE INDUSTRY

The journey of insurance liberalization process in India is now over seven years old. The first major milestone in this journey has been the passing of Insurance Regulatory and Development Authority Act, 1999. This along with amendments to the Insurance Act 1983, LIC and GIC Acts paves the way for the entry of private players and possibly the privatization of the hitherto public monopolies LIC and GIC. Opening up of insurance to private sector including foreign participation has resulted into various opportunities and challenges. The comprehensive regulation of insurance business in India was brought into effect with the enactment of the Insurance Act, 1983. It tried to create a strong and powerful supervision and regulatory authority in the Controller of Insurance with powers to direct, advise, investigate, register and liquidate insurance companies etc. However, consequent upon the nationalization of insurance business, most of the regulatory functions were taken away from the Controller of Insurance and vested in the insurers themselves. The Government of India in 1993 had set up a high powered committee by R.N.Malhotra, former Governor, Reserve Bank of India, to examine the structure of the insurance industry and recommend changes to make it more efficient and competitive keeping in view the structural changes in other parts of the financial system on the country. Dynamics of Insurance Industry:
Pre Purchase Process

Pre liberalisation Post liberalisation Motivating factor for considering Insurance Security 43 Security Savings % Savings Tac Rebate 14 Tax Rebate % Childrens education, 43 Daughters marriage,
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% Retirement plan %

Sources of information on Insurance and product awareness Friends, collegues, relatives and Additionally from direct agent mailers, consumer meets, internet and media Low awareness of self insurance products due to poor Rising level of awareness of communication inspite of new products of both LIC availability and private companies Choice of first policy 60% Money back 40% Endowment 00% Whole Life

Money back Endowment Whole Life

42 % 48 % 10 %

Purchase Process

Pre liberalisation Post liberalisation Discount Offering Practises No. of customers getting discount:50% Customers getting discount: 33% Rate of discount: 25% -50% of first Rate of discount: More or less same year premium Policy Delivery Mode Mode Registered post for LIC Registered post for Hand delivered by agent in LIC 23% cases Courier for private companies Time Taken Upto 1 week Time taken Private LIC 00% Upto 1 week 85% 05% 1 month Upto 1 month 15% 17% 65% More than 1 00% 18% More than 1 month 35% month
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Choice of first policy 60% Money back 40% Endowment 00% Whole Life

Money back Endowment Whole Life

42% 48% 10%

Post purchase process

Pre Liberalisation Post Liberalisation Correspondence (other than premium notice) from Company /Agent Generally no correspondence Mailers from both private from either company or agent companies and LIC on except for late premium products & services, greetings payment premium reminder cards on birthdays, anniversary from company and new year Agent maintained informal Phone calls from private contact from close customers company call centres Agent in regular contact for offering new products Delay in payment premium Incidence of delay high 30% Incidence of delay low 15% (Due to irregular receipt of premium (More regular receipt of premium notice from company / reminder notice from company / reminder from from agent) agent) Changing customer expectations: Role of IRDAEducate public on regulatory safeguards, investment guidelines and plough back of profits (several people had expressed concern about security of their money, credibility of private insurance companys investment of funds in foreign markets and repatriation of profits to foreign countries)
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Inform public on social and rural obligations of private players (several people believed that only LIC was responsible for insuring the poor) Changing trends in saving pattern Pre liberalisation Saving Instruments Insurance Bank Deposit PPF NSC Shares Post Office Bonds Gold Total % 23 28 19 12 07 07 00 04 Post liberalisation Saving Instruments Insurance Bank Deposit PPF NSC Shares Post Office Bonds Gold % 33 44 08 12 03 03 09 00 100

100 Total

Overview of Insurance Sector in India The Indian Insurance Industry has undergone several changes in trends and policies in the year 2010. The US$ 41 billion industry is considered the fifth largest life insurance market, and is growing at a rapid pace of 32-34% annually, according to the Life Insurance Council. State-owned Life Insurance Corporation (LIC) of India has recorded about 37% growth in its new business premium to US$ 15.1 billion during April to January FY 2010, the data from IRDA stated. Overall, 23 life insurers in the country collectively mopped US$ 21.35 million as new first year premium during the period, a 26% increase from US$ 17 billion during April-January 2009-2010. Out of this, the 22 private life insurers together accounted for US$ 6.26 billion worth of new business in April-January 2010-11, compared to US$ 5.91 billion in the year ago period, a growth of about 6%. Among the private
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life insurance players, SBI Life saw its premium collections from new business grew by 9% to US$ 1.1 billion during the period, while ICICI Life's premium collections from new businesses grew to US$ 1.15 billion AprilJanuary 2010-11, from US$ 964 million during the same period last year. Health Insurance The health insurance business in India has witnessed increased focus and attention from all stakeholders; not only from insurers and IRDA, but also from healthcare providers and other entities associated with the ecosystem. This increasing attention and awareness was due to rising healthcare costs. Recent de-tariffing of the general insurance business forced the insurance companies to focus on health insurance and other personal lines of business. Rationalization of premium rates in respect of individual medi-claim policies in 2007 which were unrevised for many years and upward revision of rates in all group health policies have also contributed to growth in premiums. Availability of products for senior citizens and children helped in popularizing health insurance. The Indian Health insurance market has emerged as a new and lucrative growth avenue for both the existing firms and new entrants. Health Insurance premium collections were US$ 1750 million in 2009-10 as compared to US$ 893.76 million in 2008-09, IRDA said in its annual report 2009-10. It should, however, be noted that figures for 2009-10 include policies served by third party administrators (TPAs) as well as those directly served by insurers whereas figures of 2008-09 include policies by TPAs only. Bancassurance Bancassurance, is the simplest way of distribution of insurance products through a bank distribution channel by selling insurance products and services by leveraging the vast customer base of a bank and fulfill the insurance needs. It takes the various forms depending upon the demography, economic and legislative climate of the country. For insurance company it
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acts as a tool for increasing their market penetration and premium turnover and for customer it acts as a bonanza in terms of reduced price, high quality products and delivery to doorsteps. According to Towers Watson India, Bancassurance Benchmarking Survey 2009-10, released in May 2010, bancassurance will play a crucial role in the overall development of the Indian insurance sector with the channel expected to generate 40% of private insurers' premium income by 2012, compared to 25-28%. In general insurance, presently 17% of premium income comes from bancassurance. Reinsurance Insurance companies retain only a part of the risk (less than 10 per cent) assumed by them, which can be safely borne from their own funds. The balance risk is re-insured with other insurers. In effect, therefore, re-insurance is insurer's insurance. It forms the backbone of the insurance business. It helps to provide a better spread of risk in the international market, allows primary insurers to accept risks beyond their capacity, settle accumulated losses arising from catastrophic events and still maintain their financial stability. While GIC's subsidiaries look after general insurance, GIC itself has been the major reinsurer. Currently, all insurance companies have to give 20 per cent of their reinsurance business to GIC. The aim is to ensure that GIC's role as the national reinsurer remains unhindered. However, GIC reinsures the amount further with international companies such as Swissre (Switzerland), Munichre (Germany), and Royale (UK). Reinsurance premiums have seen an exorbitant increase in recent years, following the rise in threat perceptions globally. Opportunities in Insurance sector in India Insurance sector in India holds vast untapped potentials inTYBMS
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Life insurance products Life covers Household insurance policies Overseas mediclaim Travel insurance policies Huge pull of skilled professionals to venture of new product through R&D Large branch net work facility by Life Insurance Corporation of India (LIC) & General insurance Corporation of India (GIC) Foreign Direct Policy in Insurance Sector: FDI up to 26% in the Insurance sector is allowed under the automatic route. This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority (IRDA) for undertaking insurance activities.

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MARKETING STRATEGIES ADOPTED BY INSURANCE COMPANIES

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MARKETING STRATEGIES ADOPTED BY

INSURANCE COMPANIES
Traditional Marketing Methods dont work as effectively anymore because of the following reasons: Buyers have changed. Their buying behavior has changed. Product Complexity and choice has also increased greatly and customers are no longer reliant on what a sales rep tells them. Hence Insurance companies need to meet buyers needs by providing them with enough product information & expertise for them to do their due diligence. The Sales Reps or Agents are pushed back in the Sales Cycle and Marketing needs to play a more significant role in providing this information. Marketers that do not provide this information are out of the game and Buyers will go elsewhere. The state of the economy has a huge impact on their buying decisions. The insecurity that the state of the economy has created in the last 18 months has resulted in buyers taking more time and caution in their buying decisions. They conduct more research on every purchase then they used to. This lengthens the selling cycle. Things are changing quickly. New products are being launched more frequently than ever before. With the increasing competition Insurance companies are barely able to keep up with product innovation and differentiation and are left with hardly any time to market their products right .Technology has a large role to play in this as well. Today Technology and the Web have a significant role to play in the buying process. The Web has made it easier not only for companies to launch new products, put out content and information a lot quicker but also for buyers to gain access to this information and valuable insight. This has a large impact on their Buying Process.

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While a website is extremely important it is just a start. Here are some eMarketing Strategies that Insurance Companies must adopt to ensure that they can market effectively to potential customers Providing Content in various formats Today customers are used to viewing content in various formats whether it is linkedin, twitter, facebook, blogs etc, Marketers need to ensure that they have content pushed out on all of these networks. Social Media whether Marketers use Social Media or not to promote their products it is very important to track what people are saying about your products and Brand. The kind of feedback you can get is invaluable and must not be ignored. Methods of Product Distribution Insurance companies generally employ four methods for distributing and servicing their products. These include using captive or independent agents (sometimes both), an insurance broker, or selling directly to you though their own employees. It is important that you understand and are comfortable with the sales and service approaches of a company prior to purchasing insurance. While all agents and brokers (collectively known as "producers") hold the same type of license, they may act in different capacities which affect how you purchase your insurance. The following are descriptions of the four basic distribution methods:Captive Agent A broker-agent acting as a captive agent represents a single insurer, or single fleet of insurers, and is obligated to submit business only to that company or, at the very minimum, give that company first refusal rights on a sale. Insurance Broker A broker-agent acting in the capacity of an insurance broker is an independent insurance sales person who searches the marketplace in the
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interests of clients, not insurance companies, and may place coverage with any admitted insurance company. Since brokers are not appointed to represent specific insurance companies, they must post a $10,000 bond before acting as a broker. Independent Agent A broker-agent acting as an independent agent is a contractor who represents different insurance companies and who searches the market for the best coverage based on a client's insurance needs. Independent agents must be appointed by each insurance company they represent before placing coverage with that company. Direct Writer Direct writing is a method of selling insurance directly to customers through a company's own employees, usually via mail or telephone solicitations, or at airport booths. Agents and brokers are not used in this method of product distribution. Buying insurance with an agent or without Consideration Insurance companies with top ratings advertise the grade repetitively. In a competitive market several top quality insurance companies are readily available to consumer access and will provide requested information. Purchasing insurance without an agent is fairly easy with most major companies, and you can request information via the Internet, telephone or postal mail. Premium costs may be somewhat lower buying direct as the company does not have to pay commission to their agents. Convenience Some buyers find it more convenient to shop from home. With Internet access, you can compare companies and policies, complete an application and pay premiums, all from the comfort of an easy chair. Using this method

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to purchase insurance will require you to conduct your own research and evaluate your personal insurance needs. Personal Service Buying insurance with an agent provides you with direct personal service. Many local agents live and work in the community they service. Buying through a licensed agent gives you an opportunity to explain your individual needs and purchase policies tailored to your specific circumstances. For example, a motorist who needs auto insurance will have a professional to explain what state laws require and what is recommended to protect assets. The coverage can be individualized to fit your routine. Selection Buying insurance without an agent will require you to choose among a considerable number of companies to find products that suit your individual needs. Contrastingly, using the services of an agent to purchase insurance can limit the products available. For example, often an insurance agent will represent a sole company or a small family of companies. An independent agent often represents a larger group of companies and products, but this varies from agency to agency. Discounts Agents can provide discounts upfront for buying multiple policies. For example, packaging homeowner's insurance, auto insurance and life insurance through the same company qualifies most policyholders for a discount on premiums. In addition, some agents provide a further discount on costs by willingly relinquishing a portion of their commission in order to sell an additional policy. Buying direct from the company without the assistance of an agent may also produce discounts if you choose a provider that offers a range of products.

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TYPES OF INSURANCE POLICIES

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TYPES OF INSURANCE POLICIES

Life insurance Definition: A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured Meaning: The goal of life insurance is to provide a measure of financial security for your family after you die. So, before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors. For example, who will be responsible for your funeral costs and final medical bills? Would your family have to relocate? Will there be adequate funds for future or ongoing expenses such as daycare, mortgage payments and college? It is prudent to re-evaluate your life insurance policies annually or when you experience a major life event like marriage, divorce, the birth or adoption of a child, or purchase of a major item such as a house or business. Life insurance policies: A life insurance policy provides financial protection to your family in the unfortunate event of your death. At a basic level, it involves paying small sums each month (called premiums) to cover the risk of your untimely demise during the tenure of the policy. In such an event, your family (or the beneficiaries you have named in the policy) will receive a lump sum amount. In case you live till the maturity of the policy, depending on the type of life insurance policy you have opted for, you will receive returns the policy may have earned over the years. Today, there are many variations to this basic theme, and insurance policies cater to a wide variety of needs.
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Types of Life Insurance policies: Given below are the basic types of life insurance policies. All other life insurance policies are built around these basic insurance policies by combination of various other features. Term Insurance Policy: A term insurance policy is a pure risk cover policy that protects the person insured for a specific period of time. In such type of a life insurance policy, a fixed sum of money called the sum assured is paid to the beneficiaries (family) if the policyholder expires within the policy term. For instance, if a person buys a Rs 2 lakh policy for 15 years, his family is entitled to the sum of Rs 2 lakh if he dies within that 15-year period. If the policy holder survives the 15-year period, the premiums paid are not returned back. The advantage, apart from the financial security for an individuals family is that the premiums paid are exempt from tax. These insurance policies are designed to provide 100 per cent risk cover and hence they do not have any additional charges other than the basic ones. This makes premiums paid under such life insurance policies the lowest in the life insurance category. Whole Life Policy: A whole life policy covers a policyholder against death, throughout his life term. The advantage that an individual gets when he / she opts for a whole life policy is that the validity of this life insurance policy is not defined and hence the individual enjoys the life cover throughout his or her life. Under this life insurance policy, the policyholder pays regular premiums until his death, upon which the corpus is paid to the family. The policy does not expire till the time any unfortunate event occurs with the individual. Increasingly, whole life policies are being combined with other insurance products to address a variety of needs such as retirement planning, etc.
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Premiums paid under the whole life policies are tax exempt. Endowment Policy: Combining risk cover with financial savings, endowment policies are among the popular life insurance policies. Policy holders benefit in two ways from a pure endowment insurance policy. In case of death during the tenure, the beneficiary gets the sum assured. If the individual survives the policy tenure, he gets back the premiums paid with other investment returns and benefits like bonuses. In addition to the basic policy, insurers offer various benefits such as double endowment and marriage/ education endowment plans. The concept of providing the customers with better returns has been gaining importance in recent times. Hence, insurance companies have been coming out with new and better ULIP versions of endowment policies. Under such life insurance policies the customers are also provided with an option of investing their premiums into the markets, depending on their risk appetite, using various fund options provided by the insurer, these life insurance policies help the customer profit from rising markets. The premiums paid and the returns accumulated through pure endowment policies and their ULIP variants are tax exempt. Money Back Policy: This life insurance policy is favoured by many people because it gives periodic payments during the term of policy. In other words, a portion of the sum assured is paid out at regular intervals. If the policy holder survives the term, he gets the balance sum assured. In case of death during the policy term, the beneficiary gets the full sum assured.

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New ULIP versions of money back policies are also being offered by various life insurers. The premiums paid and the returns accumulated though a money back policy or its ULIP variants are tax exempt. ULIPs: ULIPs are market-linked life insurance products that provide a combination of life cover and wealth creation options. A part of the amount that people invest in a ULIP goes toward providing life cover, while the rest is invested in the equity and debt instruments for maximising returns. . ULIPs provide the flexibility of choosing from a variety of fund options depending on the customers risk appetite. One can opt from aggressive funds (invested largely in the equity market with the objective of high capital appreciation) to conservative funds (invested in debt markets, cash, bank deposits and other instruments, with the aim of preserving capital while providing steady returns). ULIPs can be useful for achieving various long-term financial goals such as planning for retirement, childs education, marriage etc. Annuities and Pension: In these types of life insurance policies, the insurer agrees to pay the insured a stipulated sum of money periodically. The purpose of an annuity is to protect against financial risks as well as provide money in the form of pension at regular intervals. Non life Insurance Definition: Non-life insurance, also called property and casualty insurance, is a type of coverage that is very common and covers businesses and individuals. It
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protects them, monetarily, from disaster by providing money in the event of a financial loss. Before you purchase this type of insurance or if you already own any kind of non-life insurance, you should understand what it is. Non life insurance policies: Also known as non-life insurance, general insurance is normally meant for a short-term period of twelve months or less. Recently, longer-term insurance agreements have made an entry into the business of general insurance but their term does not exceed five years. General insurance can be classified as follows: Fire Insurance: Fire insurance provides protection against damage to property caused by accidents due to fire, lightening or explosion, whereby the explosion is caused by boilers not being used for industrial purposes. Fire insurance also includes damage caused due to other perils like strom tempest or flood; burst pipes; earthquake; aircraft; riot, civil commotion; malicious damage; explosion; impact Marine Insurance: Marine insurance basically covers three risk areas, namely, hull, cargo and freight. The risks which these areas are exposed to are collectively known as "Perils of the Sea". These perils include theft, fire, collision etc. Marine Cargo: Marine cargo policy provides protection to the goods loaded on a ship against all perils between the departure and arrival warehouse. Therefore, marine cargo covers carriage of goods by sea as well as transportation of goods by land. Marine Hull: Marine hull policy provides protection against damage to ship caused due to the perils of the sea. Marine hull policy covers three-fourth of the liability of the hull owner (shipowner) against loss due to collisions at

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sea. The remaining 1/4th of the liability is looked after by associations formed by shipowners for the purpose (P and I clubs). Miscellaneous: As per the Insurance Act, all types of general insurance other than fire and marine insurance are covered under miscellaneous insurance. Some of the examples of general insurance are motor insurance, theft insurance, health insurance, personal accident insurance, money insurance, etc

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KEYS TO INVESTING DECISION

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KEYS TO INVESTING DECISION

Interest and inflation are key to investing decisions, since they have a direct impact on the investment yield. When prices rise, the same unit of a currency is able to buy less. A sustained deterioration in the purchasing power of money is called inflation. Investors aim to preserve the value of their money by opting for investments that generate yields higher than the rate of inflation. In most developed economies, banks try to keep the interest rates on savings accounts equal to the inflation rate. However, when the inflation rate rises, companies or governments issuing debt instruments would need to lure investors with a higher interest rate. The Relationship between Interest and Inflation: Inflation is an autonomous occurrence that is impacted by money supply in an economy. Central governments use the interest rate to control money supply and, consequently, the inflation rate. When interest rates are high, it becomes more expensive to borrow money and savings become attractive. When interest rates are low, banks are able to lend more, resulting in an increased supply of money. Alteration in the rate of interest can be used to control inflation by controlling the supply of money in the following ways:

A high interest rate influences spending patterns and shifts consumers and business from borrowing to saving mode. This influences money supply. A rise in interest rates boosts the return on savings in building societies and banks. Low interest rates encourage investment in shares. Thus, the rate of interest can impact the holding of particular assets. A rise in the interest rate in a particular country fuels the inflow of funds. Investors with funds in other countries now see investment in this country as a more profitable option than before.

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Inflation and Interest Rates: Effect on the Time Value of Money Inflation has a significant impact on the time value of money (TVM).Changes in the inflation rate ( whether anticipated or actual) result in changes in the rates of interest. Banks and companies anticipate the erosion of the value of money due to inflation over the term of the debt instruments they offer. To compensate for this loss, they increase the interest rates. The central bank of a country alters interest rates with the broader purpose of stabilizing the national economy. Investors need to keep a close watch on interest and inflation to ensure that the value of their money increases over time. Top 5 players in the Indian Insurance companies: 1. 2. 3. 4. 5. Life Insurance Corporation Of India ICICI Prudential Life Insurance Co Ltd Bajaj Alliance Life Insurance Co Ltd SBI Life Insurance Co Ltd Reliance Life Insurance Co Ltd

Present scenario of INSURANCE industry The insurance industry in India has changed rapidly in the challenging economic environment throughout the world. In the current scenario, Indian insurance companies have become competitive in nature and are providing appropriate distribution channels to get the maximum benefit and serve customers in manifold ways. Indian Insurance industry has big opportunity to expand, given the large population and untapped potential.The insurance market in India has witnessed dynamic changes including entry of a number of global insurers. After opening up of insurance in private sector, various leading private companies including joint ventures have entered the fields of insurance both life and non-life business. Tata - AIG, Birla Sun life, HDFC standard life Insurance, Reliance General Insurance, Royal Sundaram Alliance Insurance, Bajaj Auto Alliance, IFFCO Tokio General Insurance, INA Vysya Life
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Insurance, SBI Life Insurance, Dabur CJU Life Insurance and Max New York Life. SBI Life insurance has launched three products Sanjeevan, Sukhjeevan and Young Sanjeevan so far and it has already sold 320 policies under its plan. Most of the private insurance companies are joint ventures with recognized foreign institutions across the globe. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The Insurance Regulatory and Development Authority (IRDA) regulate and develop the insurance sector in India through calibrated policy initiatives.

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MAJOR POLICY CHANGES THAT HAS AFFECTED THE INDUSTRY IN THE RECENT PAST

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MAJOR POLICY CHANGES THAT HAS AFFECTED

THE INDUSTRY (BOTH POSITIVELY AND NEGATIVELY) IN THE RECENT PAST
Regulatory tightening for the insurance industry in 2009: 2009 was a year in which regulators ushered in quite a few changes and proposed as many, for the insurance industry. The most notable changes were the ones that had policyholder interests in mind- a cap on the expenses of the popular unit- linked insurance plans and allowing life insurers to sell products online Apart from regulations which have already been passed into law, there are others in the proposal stage- such as Swarup Committee recommendations and the Direct Taxes Code which may have far reaching implications for players. Heres a look at the changes suggested, implemented and their impact on the industry 1. Cap on ULIP Expenses Unit Linked Insurance plans(ULIPs) have been long criticized for their high front-end charges, compared to alternative investments such as mutual funds, which depressed the yield to the investor. It was to address this issue that the Insurance Regulatory Development Authority introduced an upper ceiling on ULIP charges. This cap is expressed in terms of difference between the gross and net yield to customers. For ULIPs up to 10 years, the yield difference is capped at 300 basis points, and for those running over 10 years, it should not exceed 225 basis points. Apart from this, the regulator has also imposed a cap on fund management charges at 1.35 percent annually, within the overall cap, for all products.
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Insurance companies voiced their reservation on including the mortality and morbidity charges in the overall cap and upon the representation, IRDA removed these charges from the purview of the cap on expenses. The new regulations came into effect from Oct 1 for new products and existing ULIPs are required t meet these criteria by Dec 31. Responding to this charge, a few insurers have already withdrawn some existing products and relaunched them in line with the new regulation 2. Online purchase IRDA has permitted insurers to sell life insurance products online, which allow customers to purchase a life insurance policy without an intermediary. This is expected to drive down the cost of buying policies with one insurer recently offering a discount of 40 percent on premium for investors who opted for its online term insurance plan. 3. Promoters lock-in IRDA is also ready with the final guidelines on corporate governance pertaining to the insurance industry. According to the guidelines, the promoters of insurance companies would have a lock-in period of five years before they are allowed to transfer the shares of the company to a third party. In India, AMP Sanmar was the only insurance company to exit the business since the sector was opened up to private players. However this regulation is designed to ensure that policyholders enjoy continuity as only players with a long term view will enter this sector. 4. Swarup Committee recommendations The Swarup Committee has submitted its proposals for doing away with the agent commission that is embedded in the premium paid by the policyholders, akin to mutual fund entry loads. It has also suggested rationalizing the current commission structures of the
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agent. While the agent force has predictably objected to these recommendations, the insurance regulator, insurers and the life insurance council have also opposed these proposals. 5. Direct Taxes Code The draft of the proposed Direct Taxes Code recommended that insurance investments, for long driven by their tax benefits, should be brought under Exempt- Exempt- Tax Regime, which would make the final proceeds of insurance policies taxable on withdrawal. Further, it has stated that to get tax exemption, the premium payable during the term of the policy does not exceed 5 percent of the capital sum assured. If the committees proposals are accepted, insurance companies may find it hard to sell traditional endowment products that are driven largely by tax benefits. 6. Multiple products IRDA is considering allowing banks to tie-up with multiple insurance companies, for vending their products. That will give bank customers wider menu of options to choose from, and they can buy insurance products based on their needs. 7. IPOs from insurers Initial public offerings (IPOs) from insurance players have been on the anvil for some time now. However, according to IRDA regulations, only those with a 10- year track record are allowed to float public offers. Reliance has approached IRDA to seek its permission to float a public issue, despite a shorter history and the regulator has asked the company to approach the government. Currently, the government is considering the request.

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FILING AN INSURANCE CLAIM

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FILING AN INSURANCE CLAIM

Life insurance claim: Claim settlement is one of the most important services that an insurance company can provide to its customers. Insurance companies have an obligation to settle claims promptly. You will need to fill a claim form and contact the financial advisor from whom you bought your policy. Submit all relevant documents such as original death certificate and policy bond to your insurer to support your claim. Most claims are settled by issuing a cheque within 7 days from the time they receive the documents. However, if your insurer is unable to deal with all or any part of your claim, you will be notified in writing. Types of claims:Maturity Claim - On the date of maturity life insured is required to send maturity claim / discharge form and original policy bond well before maturity date to enable timely settlement. Most companies offer/ issue post dated cheques and/ or make payment through ECS credit on the maturity date. Death Claim (including rider claim) - In case of death claim or rider claim the following procedure should be followed. Follow these four simple steps to file a claim: 1. Claim intimation/notification The claimant must submit the written intimation as soon as possible to enable the insurance company to initiate the claim processing. The claim intimation should consist of basic
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information such as policy number, name of the insured, date of death, cause of death, place of death, name of the claimant. The claimant can also get a claim intimation/notification form from the nearest local branch office of the insurance company or their insurance advisor/agent. Alternatively, some insurance companies also provide the facility of downloading the form from their website. 2. Documents required for claim processing The claimant will be required to provide a claimant's statement, original policy document, death certificate, police FIR and post mortem exam report (for accidental death), certificate and records from the treating doctor/hospital (for death due to illness) and advance discharge form for claim processing. Based on the sum at risk, cause of death and policy duration, insurance companies may also request some additional documents. 3. Submission of required documents for claim processing For faster claim processing, it is essential that the claimant submits complete documentation as early as possible. A life insurer will not be able to take a decision until all the requirements are complete. Once all relevant documents, records and forms have been submitted, the life insurer can take a decision about the claim. 4. Settlement of claim As per the regulation 8 of the IRDA (Policy holder's Interest) Regulations, 2002, the insurer is required to settle a claim within 30 days of receipt of all documents including clarification sought by the insurer. However, the insurance
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company can set a practice of settling the claim even earlier. If the claim requires further investigation, the insurer has to complete its procedures within six months from receiving the written intimation of claim. Claim intimation: In case a claim arises you should: Contact the respective life insurance branch office. Contact your insurance advisor Call the respective Customer Helpline Claim requirements For Death Claim: Death Certificate Original Policy Bond Claim Forms issued by the insurer along with supporting documents For Accidental Disability / Critical Illness Claim: Copies of Medical Records, Test Reports, Discharge Summary, Admission Records of hospitals and Laboratories. Original Policy Bond Claim Forms along with supporting documents
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For Maturity Claims: Original Policy Bond Maturity Claim Form General Insurance Claim: All insurance contracts are based on the information provided by the insured in the proposal form. The correctness of the information furnished in the proposal form is verified at the time of a claim, when physical inspection of the property is done. In case of any misrepresentation, it would be the prerogative of the Insurance Company to avoid a claim, or avoid the policy itself, or pay a claim for a reduced amount. It should therefore be understood that the completed proposal form plays an important role as it affects the claims under the policy. Claim settlement procedure for the public sector general insurance companies(New India Assurance, Oriental Insurance, United India Insurance and National Insurance) Here are some important points, which would help you in the claims procedure.

The loss or damage should be reported to the insurer immediately. On receipt of claim intimation, the insurer will forward a claim form. Submit the completed claim form along with an estimate of the loss to the insurer. It is preferable to submit an itemized estimate with separate values. The insurer will arrange for inspection of the damaged items to assess the loss. In case of major losses, a specialist-licensed surveyor is deputed. The insured has to provide the required documents to substantiate
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the extent of loss. In case the cause of loss is not established, it is for the insured to prove that the loss or damage has occurred due to an insured peril. On agreement of claim amount between the insured and the insurer, the claim is settled.

In view of varied nature of policies, certain points distinct to individual policies, in addition to the above, are listed below : Fire claim:

Firstly the insured should take all possible steps to minimize the loss. The fire brigade may be intimated immediately. Lodge a police complaint in case of a fire arising out of - rioting mob, striking workers, malicious damage by third parties or terrorist damage. Obtain a meteorological report in case of loss due to cyclone, flood & inundation and if the loss is localized like in the case of flood & inundation from a local water source, MRO report may be obtained. If the policy is on 'reinstatement basis', the claim is settled only after completion of repairs/replacement of the damaged items and submission of bills for claim payment.

Burglary claims:

Immediately report to the police and obtain a non-traceable certificate that the items are not found. The insurers will insist upon a letter of undertaking on a stamp paper of appropriate value, for refunding the claim amount when the stolen property is recovered.

'All risks' policy for Jewelry and valuables:

Report to the police and obtain a non-traceable certificate.

Breakdown of domestic Appliances:

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Notice of claim and estimated cost of repairs should be filed with the insurers to arrange for inspection. In case of partial losses, no depreciation is charged but when the items are not insured for its present day replacement value, the items are treated as under-insured and the claim amount is proportionately reduced. Depreciation is only applied for Total Loss claims.

If an appliance is partially damaged, it should be repaired (on approval from insurance company) before it is put to use, as otherwise further loss is not covered.

T.V.Sets: Notice of claim and estimated cost of repairs should be filed with the insurers to arrange for inspection. It is at the option of the insurers to repair/replace a damaged item and the insured has no option to insist upon Total Loss and abandon the set. In extraordinary circumstances, the insurers will arrive at the liability and pay it in cash leaving the option to the insured. Motor vehicle (Private & two wheelers) claims:Claims under Act policies: Notice of an accident (not necessarily a claim) involving third parties should be reported to the insurers. The insured may be interested to pay compensation without going into whether he is liable to pay or not. It is therefore an express condition of the policy that no claim should be admitted or a compromise arrived at, without the approval of the insurers. In case of major claims, the insurers may be willing to defend criminal case against the driver also on the basis of which compensation claims
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may be decided in the civil courts. Every accident involving third parties is required to be reported to police. M.V.Act provides that a third party victim can proceed against the insurers directly. If the alleged accident is not reported to the insurers, the insurers can consider this as violation of policy condition. In such circumstances, even if insurers are required to pay compensation by a court of law, they have an option of recovering such claim amounts from the insured for violation of specific policy condition. The insured can proceed with repairs provided the insurers are submitted an estimate of repairs and the estimated cost of repairs does not exceed Rs.500 in case of Private cars and Rs.150 in case of two wheelers. Claims under Comprehensive policies:Steps to be taken in case of an accident : Notice of accident should be filed with the insurers. If damage is a major one, the accident may be reported before the vehicle is removed from the spot so that the insurers can arrange for spot inspection of damage. The vehicle may then be moved to a workshop, preferably to authorized workshop, for estimation of repair charges. On receipt of completed claim form and estimate of repairs the insurers will arrange detailed inspection of damage and cost of repairs will be ascertained. The insurers will ensure that a person duly licensed drove the vehicle at the time of accident and that the vehicle is the one insured in their books. To that end, they will verify the Registration Certificate and the Driving license of the driver who drove at the time of the accident. Upon completion of the above procedure, the repairers will be authorized
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to carry out repairs. The insurer may undertake to settle the repair bills directly with the garage or reimburse the insured. Insurers would like to collect the damaged parts for which replacements have been allowed, as salvage. To ensure that replacements with new parts, have in fact, been effected. In case of theft of the car or its accessories, it has to be reported to the police and final report should be submitted. Household goods in transit: In case any damage is suspected in transit, open delivery should be insisted upon the carrier and their certificate should be obtained. In case of loss/damage in transit, a monetary claim should be lodged with the carrier within the time limit to protect recovery rights, without which, the claim may not be admitted. Mediclaim policy: Notice of claim should be lodged within 24 hours. The insured should submit 'discharge summary' of the hospital/nursing home along with original hospital/medical bills, reports of the labs and investigation reports. In other words every item in the claim bill should be supported. Overseas Mediclaim: The claim procedure varies from country to country and therefore the insured should get in touch with the overseas claim settling agents of the insurers immediately. The Insured should carry the policy document with him, which may be produced as evidence if necessary. The policy document also contains the full information as to how to get in touch with the claim settling agents
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for assistance. Personal Accident Claims: In case of accidental death, the capital sum is paid to the legal nominee of the insured. If the insured fails to provide the name of the nominee, succession certificate from a court of law is necessary. In case of other claims, the insurers may get the insured examined by a specialist or refer the matter to medical board as is necessary, the cost of which will be borne by the insurers. Companies offering General Insurance General insurance companies are also known as Non-Life Insurance companies. There are a total of 23 non-life insurers operational in India. There is a mix of public sector and private sector companies with the last decade seeing a lot of new private sector companies entering the sector. Most of the private sector players have entered the market in partnership with international companies - there are exceptions to this though. Apart from the retail policies like health insurance, car insurance, home insurance, shop insurance and travel insurance there are a lot of corporate insurance solutions which general insurance companies provide. Corporate insurance solutions include fire insurance, plant and machinery insurance, marine insurance, burglary insurance to name a few. List of General Insurance Companies:

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Insurance

Corporation li General Insurance

Insurance

T General Insurance

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CHALLENGES IN LIFE INSURANCE INDUSTRY

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CHALLENGES IN LIFE INSURANCE INDUSTRY

The beginning of this new era in the development of insurance industry saw proliferation of new products and distribution channels which promoted rapid growth of the industry. The year 2011 brought in the beginning of a new decade for Indian Life Insurance industry. The preceding years were significant for the life insurance industry in India after the opening of the sector by the government. During the period 2000-2008, combined with Indias rapid rate of economic growth the Indian Life Insurance Industry gained its foothold in the country. Private sector insurers ventured into the country and the industry got a taste of market-driven competition, compared to the time when insurance business was dominated by only public sector insurers. The beginning of this new era in the development of insurance industry saw proliferation of new products and distribution channels which promoted rapid growth of the industry. The phase also witnessed continued regulatory action which is shaping the insurance industry currently. The regulatory changes introduced in September 2010 signaled the intent to shift the orientation of the industry for unbridled growth towards longer-term savings and protection and deliver more efficient propositions to consumers. There is also no doubt that the regulatory shifts had material impact on all life insurers in India. Given the above scenario, the current challenges in the life insurance industry have various factors guiding the market. Environmental factors Domestic economic conditions No matter how well-managed or financially sound a given insurer might be, none are immune to the effects of a contracting or slow growing economy. The double-digit inflation rate is an uncomfortable factor for the Indian economy. And the central bank of India, RBI, has the huge task of balancing the two controlling inflation without
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dampening growth too much. The interest rate and inflation trade off is the central banks core business and the last one year has been a very difficult for the central bank. While the Reserve Bank of India (RBI) has been raising repo and reverse-repo rates consecutively every quarter in an attempt to manage inflation, it has not succeeded in moderating inflation. This probably implies that inflation is more of a real sector supply side issue than a monetary implication. Implications of this relatively high interest rate and high inflation regime are unlikely to be positive for the Insurance industry in general. On one hand it would be difficult for the life insurance industry to manage return expectations as they are likely to be high. In the high interest scenario, higher assured returns are required for increasing penetration while competing with fixed income products. While there may be some reduction in actual growth rates but India's long term fundamentals remain intact and Life Insurance being an industry with very long term horizon, it would be able to tide over the economic cycle. On the other hand inflation means lower disposal income in the hands of consumer leading to lower household savings which currently stands at a healthy 34.7%, though significantly lower than Chinas 50%. Global Economic conditions The other concerning factor is the rising crude oil prices and rupee depreciation. Domestic oil companies have upwardly revised prices very often. Secondly, the Euro crisis and the instability of the US economic conditions too will bring in a ripple effect on India, mainly on financial markets and import oriented industries. Connecting the two syndromes the exchange rate (rupee devaluation) impacts India through oil imports and increased prices of fuel and transport (which gets factored in inflation). It is almost a double whammy kind of situation inflation, whichever way it happens reduces disposable income and discretionary spend does get affected.

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On the other hand, exchange rate devaluation has some positive effects also such as higher exports (goods and services) and increased employment which would hold good for the insurance industry in the long run. Consumer related challenges Low financial literacy and poor access to financial services in India pose a problem in penetration of the right kinds of life insurance products - more in terms of the right mix of savings and protection. This is combined with the fact that consumers and distributors both lack understanding of the true purpose of life insurance. Consumers are not clued in about their life stage needs, and the product solutions suitable for such needs. The distributor, armed with an array of products is also unable to give proper insurance guidance to the consumer due to limited knowledge of the true purpose of each financial instrument. This leads to mis-selling, which is a huge negative factor for the life insurance industry. The MNYL-NCAER India Financial Protection Survey done in collaboration with Max New York Life Insurance had yielded some worrisome results. The research had revealed the problem of uninsured and underinsured Indian households. At an all-India level, for all insured households, while the average sum-assured of a life insurance policy is Rs 1,14,450, the average premium paid is Rs 5,007 only. The awareness level about life insurance is higher for people in the older age group. It is important for consumers across demography to understand the true value of life insurance. In India, there is hardly any state supported social security system. The number of Indians over the age of 60 will grow to more than 21.8 crore in 2030. Today, at the age of 60, an Indian has an expected life up to 75 years by 2020 an individual of 60 will have an expected life up to 80 years of age. According to studies, only about 11% of Indias working population has any form of social security at all.

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The reason for citing the above data is to talk about the next challenge longevity. As the average longevity of people has increased, the number of years people spend working are less than their non-working years. This requires people to plan their future in such a way so that their savings help in the autumn years. Unfortunately, consumers are not savvy enough to understand or plan their needs for this time. Life Insurance is best suited to help consumers overcome this problem. While the industry will have to develop suitable products, it also has to overcome the challenge of lack of awareness of this issue. The key is to start as early as possible and sticking to the plan. Distribution Challenge India is a diverse country with various languages, food, culture, spending and saving patterns. Historically, the majority of life insurance players have followed a national strategy, with largely similar distribution and operating models across geographies. Going forward, with increasing economic pressures, players will need to make very conscious choices about where and how to compete. While advice based sales through agency distribution remains the most suitable distribution channel, to expand the reach there is a need to utilize the existing retail distribution networks available in the country. This may require simplified product designs to promote OTC life insurance solutions. For bancassurance, even though an open architecture will provide better choice for the consumer, in the Indian context it also needs to be viewed from societal perspective. Access to customers and quality of customer relationship should be the primary focus of the channels. It needs to develop in terms of grievance redressal and knowledge pool. The banks are not yet equipped to handle complex customer requirements with increasingly sophisticated products being launched by the life insurance companies.
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Notably, increasing the number of partners may not lead to increase in insurance penetration and/or financial inclusion. The number of bank branches across the country will anyway remain the same even with two insurers. Impact of regulatory changes and the new challenges it poses The regulatory changes that have been implemented in the past two years included ULIPs regulation that brought in a price control taking flexibility away from life insurers. This influenced distributors commission. In fact, India has now the lowest commission rates for agent advisors. It is imperative for agents to be motivated as they are the faces of life insurance companies. In order to build a career-agency model, adequate compensation is critical. The regulator IRDA has also tightened the performance criteria for agents in its effort to improve the persistency ratio in the industry. The agents have to ensure that the average annual persistency ratio should be 50 per cent. Though good for the industry in the long run, this poses a challenge for many agents in the interim. Another big challenge is attracting committed and quality talent to the industry. It is important to have good quality sales managers and agent advisors to ensure need-based selling and right-selling. This will require behavioural change in agent advisors so that products are not mis-sold. Life Insurers need to impart training to advisors to address this challenge. Max New York Life Insurance invests significantly into the training of agent advisors through pre-licensing training for around 100 hours instead of the stipulated 50 hours by IRDA and a continued course curriculum of 250 hours in the first 2 years. The latest draft of the DTC has suggested removing or reducing certain tax incentives from Indian life insurance products. It is these tax breaks alone
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that explain why the life penetration rate of 4.4% in India is higher than in China (2.5%) and even the US (3.5%). Implementation of DTC in its current form, especially with the no-grandfathering provision, does not bode too well for the industrys long-term growth outlook. While it is important that the life insurance industry is well regulated in terms of providing value for money or benefit to the insured/consumer, the regulator also needs to ensure that the business of insurance is profitable and earns adequate return on investment. It is extremely important, as it plays an important role in deepening the financial sector of the country. Life insurance industry also provides long-term infrastructure funds by routing small savings to long-term investments. In addition, the government also needs to make suitable interventions and facilitate business models for increasing financial inclusion through micro finance, micro insurance and social security /safety net mechanisms. Perceptions of influencers Another major challenge is posed by the media and influencers. Often, the life insurance industry is portrayed in a negative manner and hence the consumers become skeptical of the life insurance industry. The result is that, they may not purchase life insurance, even though a legitimate need exists. The fact the life insurance promotes a regular routine of small savings for long term savings and protection is not propagated. It is important for media and third-party influencers to look at the bigger picture on life insurance. They must understand that life insurance products should not be compared to any other financial products on calculated returns alone. They should also take into consideration, the discipline life insurance instill in the financial planning.

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The Way forward As mentioned earlier, Life Insurance is critical for the development of Indian economy. Apart from a brief dip in FY 2009 due to downturn, the industry has grown around 20 per cent per annum. In the first decade of privatisation the insurance penetration has doubled, which has all going for it to only rise significantly in a country of 1.2 billion people. Post the global financial crisis financial capital infusion by foreign partners has considerably slowed down; from Rs 8,170 core in 2008-9 to less than Rs 2,300 crore in 2010-11. For a capital intensive business like life insurance, the trickling down of capital severely impacts growth and also changes the strategy that the company adopts with its business. The fabled increase in the insurance FDI limit from 26% to 49% (consistent with banks sector) is on hold currently till the next parliamentary session. The much debated issue on allowing insurers to tap the capital markets has also not resulted into anything significant with regulatory roadblocks delaying clarity on companies floating an IPO. However, all is not lost. The Indian life insurance industrys biggest advantage is the countrys favorable demographics. Market penetration will be guided by the rise in income levels. From 80 per cent policy renewals in early 2000s, today only about 65 per cent policies come up for renewal after the first year. The working population (2560 years) is expected to increase from 675.8 million to 795.5 million by 2025 with the projected per capita GDP expected to increase to Rs 100,680 in 2025, which is indicative of rising disposable incomes. Indians are inclined towards savings and research has shown that life insurance is the first financial product majority turn to. And it is high time that the regulator, consumer bodies and the insurance companies collaborate together to yield effective and measurable results. With increasing levels of income, higher cost of living and longer life
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expectancy, the Indian consumer will require innovative products that will cater to wealth management, protection and retirement solutions. For insurance companies, profit from innovation will be integral to driving success, and technology will help insurers to develop and customize products to befit individual needs. Consumers are increasingly becoming multichannel in terms if their interaction with financial institutions. To buy insurance products, insurers will have to gear up with robust IT solutions to cater to that need. There will be need of proper financial planning for the Indian consumer. And hence, need for quality of advice in managing their financial need will be critical. Insurance agent advisors need to be trained and be their primary source of financial advisor. The customer-agent relation needs to be deepened by suggesting life-stage related selling. It is time for various stakeholders life insurers, regulators, distributors and consumer groups to come together to build a robust life insurance sector in India which will help create a secured society.

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SWOT ANALYSIS

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SWOT ANALYSIS
Strength Risk Protection is provided by this sector only Insurance having currently good market Tax exemption The variety of products is increasing Insurance to build close relationship with customers Weakness
Unable to convince people about the product Insurance companies instability Limited working capital Products or services similar to competitors Opportunities Technology is improving paperless transaction are available Busy life, customer need flexible and customizable policies Like mobile banking mobile insurance could be a hit New innovations in technology- measuring weather variables Threats Weather cycles New substitute product emerging Increasing expenses and lower profit margins with hard on the smaller agencies and insurance companies Government regulations on issues like health care terrorism can quickly change the direction on insurance

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RELIGIOUS CONCERNS

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RELIGIOUS CONCERNS
Muslim scholars have varying opinions about insurance. Insurance policies that earn interest are generally considered to be a form of riba (usury) and some consider even policies that do not earn interest to be a form of gharar (speculation). Some argue that gharar is not present due to the actuarial science behind the underwriting. Jewish rabbinical scholars also have expressed reservations regarding insurance as an avoidance of God's will but most find it acceptable in moderation. Some Christians believe insurance represents a lack of faith and there is a long history of resistance to commercial insurance in Anabaptist communities (Mennonites, Amish, Hutterites, Brethren in Christ) but many participate in community-based self-insurance programs that spread risk within their communities

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INSURANCE FRAUDS

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INSURANCE FRAUDS
Fraud hasnt received as much attention recently as the other causes of spiraling premiums. Big claims losses, rising costs and poor investment returns by insurers are among the most cited reasons why homeowners auto and health insurance premiums are rising. Fraud is a rapidly growing menace in the insurance industry. Thus is undoubtedly not a new issue, but has existed since the industrys beginnings in the seventeenth century; however, it received little attention until the 1980s We are living in a world where frauds, scams and cheating schemes have become the order of the day. Though fraudsters and cheats constitute a small fraction of the society, their avaricious activities create great financial hazards to the society. Sometimes, their misdeeds may cause a loss which has a systemic effect on the entire economy and it takes some years before normalcy is restored. Recently, a newspaper revealed the ways in which companies take insurers for a ride and the amount of loss the insurers are exposed to runs into thousand of crores. The effect of such adverse selections results in a burden to the insurers, thereby shooting up the premium for genuine policyholders. Insurance frauds involves trillions of dollars all over the world. Time and again, genuine policyholders have been mute spectators of the unfortunate happenings and silently suffer the effect of the frauds by paying higher premiums. Indian insurance companies have borne a loss of over Rs 30,000 Crore in 2011 due to different kinds of frauds, a study has claimed. It cited collusion between the employees of insurers and private persons, document falsification and manipulation in citing cause of death to claim insurance benefits, as some of the reasons behind these frauds.

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CONCLUSION

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CONCLUSION
India is among the important emerging insurance markets in the world. Life insurance will grow very rapidly over the next decades in India. The major drivers include sound economic fundamentals, a rising middle-income class, an improving regulatory framework and rising risk awareness. The fundamental regulatory changes in the insurance sector in 1999 will be critical for future growth. Despite the restriction of 26% on foreign ownership, large foreign insurers have entered the Indian market. State-owned insurance companies still have dominant market positions. But, this would probably change over the next decade. In the life sector, new private insurers are bringing in new products to the market. They also have used innovative distribution channels to reach a broader range of the population. There is huge in the largely undeveloped private pension market. The same is true for the health insurance business. The Indian general insurance segment is still heavily regulated. Three quarters of premiums are generated under the tariff system. Reinsurance in India is mainly provided by the General Insurance Corporation of India, which receives 20% compulsory cessions from other general insurers. Finally, the rural sector has potential for both life and general insurance. To realize this potential, designing suitable products is important. Insurers will need to pay special attention to the characteristics of the rural labor force, like the prevalence of irregular income streams and preference for simple products

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RECOMMENDATIONS

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RECOMMENDATIONS
Some of the specific services and solutions for the Life Insurance sector include the following: Improving time-to-market Claims transformation Policy administration transformation Enabling efficiency in new business acquisition Multi-channel distribution management solution Package evaluation of insurance products Insurance business intelligence solutions Insurance CRM solutions Simplifying business process management Underwriting optimization Web and mobile solutions Fraud detection and analytics Predictive analytics

Some of the specific services and solutions for the Non Life Insurance sector include the following: Multi-Line Rate, Quote & Issue Web Interfaces for Agents/Policyholders Integrated Billing and Receivables Module Integrated Claims System with Coverage Verification Flexible design that can grow as your organization grows Fast implementation model High quality product with low acquisition cost Business-user interfaces to maintain coverages, rates, discounts and reference tables, which minimizes dependencies on programmers and vendor

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BIBLIOGRAPHY

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BIBLIOGRAPHY
www.investopedia.com http://www.business.mapsofindia.com http://www.irda.gov.in http://www.managementparadise.com http://tips.thinkrupee.com

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