INSURANCE MANAGEMENT

Unit 2 Organization of Insurance

Organization of Insurance Insurance Organization in India Role of Insurance Risk Management and Insurance

Insurance Market comprises three parties i.e., (i) seller; insurance companies and insurers, (ii) intermidiaries; insurance agents or brokers, ect., (iii)Buyers; insureds or perspective buyers. 1.Buyers (i). Individual insured (ii). Commodity owner (iii). Undertakings and organisations (iv). Government undertakings and departments (v). Importers and exporters (vi). Insurance companies (vii). Corporate insures

2. Sellers 3. Intermediaries Indian Insurance Market (A). Public Sector Insurance Organizations (B). Private Sector Insurance Organizations

Insurance Companies Operating in India as on 31st March, 2007

Life Insurers
Public Sector 1. LIC

Private players
1. BSLI Co. Ltd. and so on

Non Life Insurers

Public Sector Private Players

RE-INSURER:
1. GIC

Insurance Organization in India--In Public Sector Life

Insurance Corporation

Organization
1. Corporate Body Management: LIC of India is a corporate body having permanent status and it has got powers to acquire, to hold and to dispose of property. It consist of 16 members who constitute the board of Corporation. Corporations head office (central office) is at Mumbai. 2. Investment Committee 3. Zonal Offices 4. Branch Network

Organizational Chart of L.I.C. Central Office

The Board
Executive Committee Investment Committee Building Advisory Committee

Zonal Office Hyderabad

Zonal Office New Delhi(North Zone)

Zonal Office Kanpur (Central Zone)

Zonal Office Kolkata (East Zone)

Zonal Office Chennai (South Zone)

Zonal Office Mumbai (West Zone)

Zonal Office Bhopal

Divisional Offices

Divisional Offices

Divisional Offices

Divisional Offices

Divisional Offices

Divisional Offices

Divisional Offices

Branch Offices

Branch Offices

Branch Offices

Branch Offices

Branch Offices

Branch Offices

Branch Offices

There are three types of branches of LIC 1. Ordinary Branches 2. Direct Agent Branches 3. Career Development Branches

GENERAL INSURANCE CORPORATION OF INDIA Formed and registered on 1st Jan 1973 under the Insurance Act, 1938

Other General Insurance Players in India Public Sector: 1. NIC Co. Ltd 2. New India Assurance Co. Ltd 3. Oriental Insurance Co. Ltd 4. United India Insurance Co. Ltd Private Sector: 1. Bajaj Allianz General Insurance Co. Ltd. 2. HDFC Chubb General Insurance Co. Ltd. 3. ICICI Lombord General Insurance Co. Ltd. 4. IFFCO TOKIO General Insurance Co. Ltd. 5. Reliance General Insurance Co. Ltd. 6. Royal Sundaram General Insurance Co. Ltd. 7. Tata-AIG General Insurance Co. Ltd.

Specialized Institutions: 1. Export Credit Guarantee Corporation 2. Star Health & 3. Allied Insurance.
Re-insurer: 1. General Insurance Corporation Of India (GIC) Despite the welcome reforms between 2000 and 2006 the Indian non life market remains heavily regulated. Nonetheless 2007 has so far been one of the most exciting years for non life insurance market with several reforms taking place.

Some key characteristics are:

Tariffs: Up to until the end of 2006, tariffication remained in place across 70% of the market. Rates for property and motor were detariffied at the beginning of 2007 Public Sector Undertakings.

Agents: Around 80% of products are still distributed through traditional medium of direct sales (or marketing) agent and brokers have failed to gain a significant market share largely due to regulations that have put them in disadvantaged position.

Compulsory Cessions: There is only one reinsures the 100% government owned GIC. In April 2007 the proportion of compulsory cessions was decreased from 20% to 15%.

ORGANIZATIONAL STRUCTURE OF GENERAL INSURANCE CORPORATION OF INDIA.

The organization of these companies is as given ahead.

Organization Chart of GIC. Head Office

Regional Offices
Divisional Offices Branch Offices

MISSION
The mission of GIC is: To provide need-based and low cost general insurance covers to the rural population keeping in mind their low premium paying capacity. To administer a crop insurance scheme for the benefit of farmers. To develop and introduce covers with social security benefits.

To develop a marketing network throughout the country including areas with low premium potential; promote balanced regional development irrespective of cost considerations and make the benefits of insurance available to the masses.

ROLE OF INSURANCE
(A). For Individual 1.It provides peace of mind. 2.A tool for Security and Safety. 3.It eliminates dependency. 4.Gives protection to mortgaged property. 5.Develops the habit of Saving. 6.Other uses to an Individual.

(B). For Business 1. Reduction in Uncertainty of Business losses. 2. Improvement in Efficiency. 3. Provides financial help. 4. Indemnification. 5. Continuity in business. 6. Grant of Credit Facilities. 7. Employees Security.

(C). For Commerce And Industry. 1. Earning of Foreign Exchange. 2. Source of Income. 3. Capital Formation. 4. Economic Development.
(D). For Society. 1. Economic Growth of the Country. 2. Protects Societys Wealth. 3. Social Security benefits. 4. Standard of Living. 5. Reduction in Inflation.

Objectives of Life Insurance Corporation.

The then Finance Minister, Shri C.D. Deshmukh, While piloting the bill, outlined the objectives of LIC:

1. To conduct the business with the outmost economy, in a spirit of trusteeship to change premium no higher than warranted by strict actuarial considerations.
2. To invest the funds for obtaining maximum yield for the policy holders consistent with safety of the capital. 3. To render prompt and efficient service to policy holders, thereby making insurance widely popular.

Achievements of LIC Some of the important milestones in the life insurance business in India are: 1. 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 2. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 3. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 4. 1928: The Indian Insurance companies Act enacted to enable the government to collect statistical information about both life and non life insurance business. And so on

Risks and Underwriting of Risks

Meaning and Definition
There is no definite or commonly accepted definition of term risk. The meaning of this term is used differently at different situations. However, for the purpose of insurance, this term refers to future risk of loss.

Hazards and Perils of Insurance

According to Mehar and Cammack, Hazard is a condition, that may create or increase the chance of loss arising from general Peril.

Classification of Hazards
Hazard can be classified into the following five groups: 1.Physical Hazards 2.Occupational Hazards 3.Moral Hazards 4.Internal Hazards 5.Legal Hazards

RISK MANAGEMENT AND INSURANCE MEANING OF RISK. The term risk is a psychological and relative term. It means uncertainty of losses. In other words, one does not know and predict as to when and how much loss be caused by some adverse future event.
DEFINITIONS OF RISK. There is no single universally accepted definition of the word Risk and this is used to describe the different situations.

CAUSES OF RISK. Theory of cause and effects applies to risks. Generally, risk are caused by certain factors and concentration of pressure of such forces causes risk. DIFFERENCE BETWEEN RISK AND UNCERTAINTY. The term risk is variously defined as (1)the chance of loss, (2)the possibility of loss (3)uncertainty (4)the dispersion of actual form expected results or (5)the probability of any outcome different from the one expected.

The term uncertainty is often used connection with the term risk (sometimes even interchangeably), it seems appropriate to explain the relationship between the two terms.

CHARACTERISTICS OF INSURABLE RISKS. The risk can be thought of as the degree of variation in the possible out-comes from an uncertain event, or as the variation in actual from expected outcomes. 1.Insurable Interest. No risk can be insured unless it has insurable interest in its object or a persons life. 2.Pure and Major Risk. Risk is said to be pure when it is casual, uncertain and non-speculative.

3. Calculable Risks. Estimation of possibility of risk is the basis for the success of insurance. Some risks are capable of being measured quantitatively but others are not quantitable. 4. Monetary Risks. Only monetary risks are capable of being insured as real monetary value of utility of an object or interest is compensated under insurance whenever there is occurrence of monetary loss.

5. Risk must be common at large. 6.Risk must be casual. 7. Object of risk not to be Illegal. 8. Catastrophic 9. Real Risks 10. Risk of reasonable insurance cost