Insurance sector

ACKNOWLEDGEMENT
I would like to express my gratitude to all those who gave me
helpinghand incompleting this term paper. I want to thank my
teacher LECT.MANPREET KAUR KALER for helping me whenever I
needed it themost. My friends have also supported me in my
work. I want to thankthem all for their help, support, interest and
valuable hints

INDEX
S R N O
1.

C O N T E N T S

P A G E

N O

Concept of insurance
4
2.
Basic insurance terminologies
4
3.
Origin of insurance
5
4.
General insurance
6
5.
Insurance sector
6
6.
Development of general insurance
10
7.
De tariffing of general insurance
11
8.
Insurance products
12
9.
General insurance council
13
10.
Investment polcies of GIC
13

11.
Current trend in insurance sector
14

THE CONCEPT OFINSURANCE
Insurance is a contract betweent w o p a r t i e s
where by one partyc a l l e d i n s u r e r u n d e r t a k
e s i n e x c h a n g e f o r a fi x e d s u m c a l l e d p re m i u m s , to
pay
t h e o t h e r p a r t y c a l l e d i n s u r e d a fi x e d a m o u n t o f m o
n e y o n t h e h a p p e n i n g o f a certain
event.I n s u r a n c e i s a p ro t e c t i o n a g a i n s t fi n a n c i a l l o
s s a r i s i n g o n t h e happening of an unexpected
event.I n s u r a n c e c o m p a n i e s c o l l e c t p r e m i u m
s t o p r o v i d e f o r t h i s protection. A loss is paid out
of
thep r e m i u m s c o l l e c t e d f r o m t h e i n s u r i n g p u b l i

c a n d t h e I n s u r a n c e C o m p a n i e s a c t a s tr u s t e e s t o t h e
amount collected. For Example, in a Life Policy, by paying a
premiumt o t h e I n s u r e r , t h e f a m i l y o f t h e i n s u r e d
p e r s o n r e c e i v e s a fi x e d compensation on the death of
the i n s u r e d . S i m i l a r l y , i n a
c a r i n s u r a n c e, i n t h e e v e n t o f t h e
c a r m e e t i n g w i t h a n a c c i d e n t , t h e insured
receives the compensation to the extent of damage. It is a
s y s t e m b y w h i c h t h e l o s s e s suffered by a
few are spread
over m a n y , e x p o s e d t o s i m i l a r r i s k s . I n s u r a n c e i
s a m e c h a n i s m f o r transferring risk and reducing
riskb y h a v i n g a l a r g e n u m b e r o f i n d i v i d
u a l s w h o s h a r e i n t h e fi nancial losses of the
group.
Riski n h i b i t s a c t i o n a n d i s h i g h l y s u b j e c t i v e
o n a n i n d i v i d u a l b a s i s . I n s u r a n c e o b j e c t i fi e s r i s k . Pe o p l
e trade the possibility of financial
lossf o r t h e r e l a t i v e c e r t a i n t y o f t h e premium paid a
nd reimbursementfor loss. Insurance frees people
tot a k e a c t i o n e v e n i n t h e f a c e o f p o s s i b l e fi n a
n c i a l l o s s . T h u s , insurance provides utility even if no loss
ever occurs. Some people believe insurance is
s i m i l a r t o g a m b l i n g o r o p e n i n g a savings account.

B A S I C
I N S U R A N C E
LOGIESInsured
The person known as the policy
h o l d e r , a p e r s o n w i t h i n s u r a n c e coverage.

TERMINO

Insurer
A company licensed to transact the
b u s i n e s s o f i n s u r a n c e a n d i s s u e insurance policies.
Policy
It's the written contract between an insurance company and its
insured. It defines what the company agrees to cover for what
period of time and d e s c r i b e s t h e o b l i g a t i o n s a n d
responsibilities of the insured.
Premium
I t ' s t h e a m o u n t o f m o n e y a policyhold
e r p a y s f o r i n s u r a n c e protection.
Claim
I t ' s t h e n o t i c e t o t h e i n s u r a n c e company that
under the terms of a policy, a loss may be covered.
Indemnity
L e g a l p r i n c i p l e t h a t s p e c i fi e s a n i n s u r e d s h o u l d n o t
c o l l e c t m o r e than the actual cash value of a
lossb u t
s h o u l d
b e
r e s t o r e d
t o a p p rox
i m a t e l y t h e s a m e fi n a n c i a l position as existed before
the loss.
Agent
A licensed person or organization who sells insurance and
represents the insurance company to the policy holder.
ORIGIN OF INSURANCE
W h e n e v e r t h e r e i s u n c e r t a i n t y t h e re i s r i s k . We
do not have any c o n t ro l o v e r u n c e r t a i n t i e s w h i c h
involves fi nancial losses. The risk m a y b e c e r ta i n e v en t s
l i ke d e a t h , p e n s i o n , r e t i r e m e n t o r u n c e r t a i n events
like theft, fire, accident, etc. Insurance is a fi nancial service
for collecting the savings of the public
a n d p r o v i d i n g t h e m w i t h r i s k coverage.
It comes under service

s e c t o r a n d w h i l e m a r k e t i n g t h i s service due care is
taken in quality product and customer satisfaction . The main
function of the Insurance is to provide protection against
thep o s s i b l e c h a n c e s o f g e n e r a t i n g l o s s e s . T h e i n s u r
a n c e s e c t o r i n I n d i a h a s c o m e a f u l l c i r c l e f r o m bein
g an open competitive
markett o n a t i o n a l i z a t i o n a n d b a c k t o a l i b e r a l i z e d m a
r ke t a g a i n . Tr a c i n g t h e d e v e l o p m e n t s i n t h e I n d i a n i
nsurance sector reveals the
360- d e g r e e t u r n w i t n e s s e d o v e r a period of
almost two centuries.
GENERAL INSURANCE
G e n e r a l ( n o n l i f e ) i n s u r a n c e provide a sho
r t t e r m c o v e r a g e , u s u s a l l f o r a p er i o d o f o n e y ea r.
g e n e r a l i n s u r a n c e t r a n s a c t fi r e insurance, motor
insurance,
marinei n s u r a n c e , a n d m i s c e l l a n e o u s insurance busin
ess. Among thesec a t e g o r i e s fi r e a n d m o t
o r i n s u r a n c e
b u s i n e s s
a r e p r e d
o m i n a n t m o t o r v e h i c l e i n s u r a n c e i s co m p u l s
o r y i n i n d i a a n d t h e m o t o r i n s u r a n c e p o r t f o l i o co n s t i t u t e
s a ro u n d 4 0 p e rc e n t o f the total
gross premium collectedb y
t h e
g e n e r a l i n s
u r a n c e i n d u s t r y . M o r e o v e r , m o t o r i
nsurance due to third party liability claims has substantially
contributed to underwriting
losses.T h e g o v e rn m e n t n a t i o n a l i z e d th e g e n e r a l i n s u r a n c
e b u s i n e s s o n 1 j a n 1 9 7 3 , b y p a s s i n g th e g e n e r a l
insurance business act, 1972.prior to nationalization,
insurance b u s i n e s s w a s c o n c e n t r a t e d i n urban
area.
INSURANCE SECTOR
The opening up of Insurance sector w a s
p a r t o f t h e o n
g o i n g

a
liberalization in

the fi nancial sector of India. The changing face of
thefi n a n c i a l s e c t o r a n d t h e e n t r y o f s e v er a l co m p a n i
e s i n t h e fi e l d o f life and non life Insurance segmentare one
of the key results of
thesel i b e r a l i z a t i o n e ff o r t s . I n s u r a n c e b u s i n e s s b y
w a y o f g e n e r a t i n g premium income adds significantlyto be
the GDP. Over the past threeyears, more than thirty
companieshave expressed interest in
doingb u s i n e s s i n I n d i a . T h e I R D A ( I n s u r
a n c e
R e g u l a t o r y Development Auth
o r i t y ) i s t h e re g u l a t o r y a u t h o r i t y , w h i c h l o o k s o v e r
a l l r e l a t e d a s p e c t s o f t h e insurance business. The
provisionsof the IRDA bill acknowledge manyissues related to
insurance sector.The IRDA bill provides guidance for three
levels of players InsuranceCompany, Insurance brokers andI n s u r a n c e a g e n
t. Life Insurances e c t o r i s o n e o f t h e k e y a r e a s
where enormous business
potentiale x i s t s . I n I n d i a c u r r e n t l y t h e l i f e i n s u r
a n c e
p r e m i u m
a s
a p e r c e n t a g e o
f G D P i s 1 . 3 % against, 5.2 per centin the
US.G e n e r a l I n s u r a n c e i s a n o t h e r segment, which
has been growinga t a f a s t e r p a c e . B u t a s p e r
t h e current comparative statistics, theg e n e r a l i n s u r a n c e
p r e m i u m h a s b e e n l o w e r t h a n l i f e i n s u r a n c e . Gen
e r a l I n s u r a n c e p re m i u m a s a percentage of GDP was a mere
0.5' p e r c e n t i n 1 9 9 6 . I n th e
G e n e r a l I n s u r a n c e B u s i n e s s , G e n e r a l Insurance Co
rporation (GIC) andits four subsidiaries viz. New
IndiaI n s u r a n c e , O r i e n t a l I n s u r a n c e , N a t i o n a l I n s u
r a n c e a n d U n i t e d India Insurance, aredoing major business.
The GeneralI n s u r a n c e I n d u s t r y h a s b e e n growing
at a rate of 19 percentper year.
T h e e n t r y o f s e v e r a l p r i v a t e insurance comp
anies, particularlyinternational insurance
companies,t h r o u g h j o i n t v e n t u r e s, w i l l s p e e d u p t h e p

r o c e s s o f i n s u r a n c e mobilization. The competiti
o n w i l l u n l e a s h n e w s c h e m e s a n d benefits,
which will give consumers a better Chance to save as well
asi n s u re . T h e re g u l a t o r y s y s t e m i n I n d i a i s r e l a t i v e l y
n ew an d takess o m e m o r e t i m e t o m a k e t h e
Insurance sector a perfectlycompetitive
o n e . I n s u r a n c e Regulatory Authority of India
issuedregulations
on 15 subjects whichi n c l u d e d a p p o i n t e d . A c t u a r
y , actuarial report, Insurance
agents,s o l v e n c y m a r g i n s , r e i n s u r a n c e r e g i s t r a t i
o n o f I n s u r e r s , a n d o b l i g a t i o n o f i n s u re r s t o r u r a l
a n d s o c i a l s e c t o r , i n v e s t m e n t a n d accounting
procedure. The reformi n I n s u r a n c e i n I n d i a i s g u i d e d
b y factors like availability of a varietyof products at a
competitive
price,i m p r o v e m e n t i n t h e q u a l i t y o f c u s t o m e r s
e r v i c e s e t c . A l s o t h e e m p l o y m e n t o p p o r t u n i t i e s i n th e
I n s u r a n c e s e c t o r w i l 1 i n c re a s e a s m a j o r p l a y e r s s e t t h
e i r b u s i n e s s p l a n s i n I n d i a . T h e p o l i c y o f t h e governm
ent to openup the financialsector and the Insurance sector
ise x p e c t e d t o b r i n g g r e a t e r F D I i n fl o w i n t o
t h e c o u n t r y . T h e increase in the investment limit
int h i s v i t a l s e c t o r h a s g e n e r a t e d
considerable business interestsa m o n g t h e f o r e i
gn Insurancecompanies" Their entry wil
1 c e r t a i n l y c h a n g e t h e I n s u r a n c e sector
considerablyS e c t o r a n d c o m p a n i e s i n g e n e r a l insurance:T h
ere are four nationalized andn i n e p r i v a t e g e n e r a l
i n s u r a n c e companies:T h e g o v e r n m e n t n o t i fi e d t
h e g e n e r a l i n s u r a n c e c o r p o r a t i o n o f india (GIC) as an
Indian reinsurer i n N o v e m b e r 2 0 0 0 . Wi t h t h i s t h e four
public sector companies
whichw e r e s u b s i d i a r i e s o f G I C h a v e been delinked

from it and are noe
b r o a d l y r u n a s b o a r d m a n a g e d companies. the four
public sector companies are:

T h e o r i e n t a l i n s u r a n c e company limited.

T h e n e w i n d i a a s s u r a n c e company limited.

T h e n a t i o n a l i n s u r a n c e company limited.

T h e u n i t e d i n d i a i n s u r a n c e company limited.
T h e p r i v a t e s e c t o r g e n e r a l insurance
companies are:

The general Royal sundramalliance insurance
companylimited.

Reliance general insurancecompany limited.

I F F C O To k i o g e n e r a l i n s u r a n c e
c
o m p a n y limited.

T A T A A I G g e n e r a l insurance company limited.

B a j a j A l l i a n z g e n e r a l insurance company limited.

I C I C I L o m b a r d g e n e r a l insurance company limited.

C h o l a m a n d a l a m g e n e r a l insurance company limited.

H D F C - C h u b b g e n e r a l insurance company limited.

S t a r h e a l t h a n d a l l i e d insurance company
limited.Two new public sector entrants ingeneral
insurance business are:


E x p o r t c r e d i t g u a r a n t e e corporation limited. 
A g r i c u l t u r e

i n s u r a n c e company of india Ltd.

The minimum paid up capital of thegeneral insurance
companies wasr a i s e d t o R s 1 0 0 c ro re u n d e r
t h e m o d i fi e d i n s u r a n c e A c t . t h e f o u r n a t i o n a l i s e d g
e n e r a l i n s u r a n c e companies enhanced their paid
upc a p i t a l f r o m 4 0 c r o r e t o R s 1 0 0 crore.

T h e g e n e r a l i n s u r a n c e m a r ke t i s not big as the life
insurance market.While life insurance accounts for 81per cent of
the insurance market
ini n d i a , g e n e r a l a c c o u n t s f o r t h e remaining 19 per
cent.
General insurance products
Fire insurance
This cover the following:

Bulding or flat.

Furniture fi xtures and other contents.

L o s s o f p r o fi t , t h a t i s , consequently loss.
Fi re i n s u r a n c e i s c o m p re h e n s i v e p o l i c y w h i c h c o v
e r s l o s s o n account of fire, earthquakes, flodd,s t r i k e . I t
can be taken only
b y p r e m i s e s t o b e i n s u r e d . fi r e i n s u r a n c e
s e g m e n t i s t h e m o s t l u c r a t i v e a s fi re r a t e a s g o v e rn
b y tariff.the compitation is maximum inthe segment .bulk of the

premiumcomes from corporate clients
withl a r g e i n d u s t r i a l a s s e t s . fi r e insurance
today accounts for a fiftho f b u s i n e s s f o r n o n l i f e i n s u r a n c e c o m p a n i e s a n d b r i n g s i n m o s t o f their
profits.
Motor insurance
The coverage is for the following:

V a r i o u s t y p e s o f c a r s , trucks, twow h e e l e r s , a n d three –wheelers.

There are two types of motor insurance namely:

Third party insurance
whicho n l y i n s u re t h e p a r t y o t h e r t h a n
t h e
o w n
e r i n
a n accident.

C o m p re h e n s i v e i n s u r a n c e w h i c h i n s u r e t h e o w n e r a s
w e l l a s t h e t h i r d p a r t y involved.
In motor insurance, the rates wererevised upwards twice,once
in1982a n d t h e n i n 1 9 9 0 a s th e h i g h co s t
of repairs coupled with third partyclaims had adversely
aff ected theincurred loss ratio.motor
insurancei s m a n d a t o r y l e a d i n g t o g o o d amount
of premium collection but
iti s n o t fi n a n c e d u p o n a s i t c o u l d l e a d t o l i t i g a t i o n
p r o b l e m . m o t o r insurance is the single largest
andt h e f a s t e s t g ro w i n g b u s i n e s s l i n e for insurance
companies.
.Marine cargo insuranceThis covers:

Cargo in transit.

Cargo declaration policy.


Marine hull insurance.

I n l a n d v e s s e l s , o c e a n g o i n g vessels,fishing
and scaling
vessels,f r e i g h t a t r i s k , c o n s t r u c t i o n o f ships,ship
breaking insurance.them a r i n e h u l l p o r t f o l i o i s a R s 4 0
0 crores business and detarifi ng
thec o m p e t i t i o n a m o n g g e n e r a l i n s u r a n c e t o
o ff e r c h e a p e r p r i c e s wil increase,as a result the
shipingindustry will be the beneficiary.
Some of the General Rules:
1.Mis-description :
The insurance policy shall be
void
a n d a l l t h e p r e m i u m s p a i d b y insured may b
e f o r f e i t e d b y t h e i n surance company in the event
of mis-presentation or mis-declarationa n d / o r n o n d i s c l o s u r e o f a n y material facts.
2.Reasonable care :
T h e i n s u r e d s h a l l t a k e a l l reasonable
steps to safeguard theproperty insuredagainst any loss
or d a m a g e . I n s u r e d s h a l l e x e r c i s e r e a s o n a b
l e
c a r e
t h a t onlycompetent employ
e e s a r e e m p l o y e d a n d s h a l l t a k e a l l reasona
ble precautions topreventall accidents and shall comply withall
statuary or other regulations
3.Fraud :
I f a n y c l a i m u n d e r t h e p o l i c y m a y b e i n a n y re s p e c t
f r a u d u l e n t o r i f any fraudulentmeans or device
areu s e d b y t h e i n s u r e d o r a n y o n e a c t i n g o n t h e i
n s u r e d ’ s b e h a l f t o o b t a i n a n y b e n e fi t u n d e r t
h e i n s u r a n c e p o l i c y , a l l t h e b e n e fi t s under theinsurance
policy may beforfeited.

4.Few basic principles of generalinsurance are :
1.insurable interest
2.utmost good faith
3.subrogation
4.contribution
5.indemnity
5 .Risks of loss not covered under general insurance are:

T h e l o s s o r d a m a g e o r liability or expenses
whether
directo r i n d i re c t o c c a s i o n b y h a p p e n i n g t h r o u g h o r
a r i s i n g f r o m a n y consequences of war, invasion, act
of foreign enemy, hostilities(whether w a r b e d e c l a re d o r n o t ) ,
c i v i l w a r , rebellion revolution,
civilcommotiono r l o o t o r p i l l a g e i n c o n n e c t i o n t h e r
e w i t h a n d l o s s o r d a m a g e caused by depreciation or
wear and tear.
However the risk of loss or damageby war can be insured by
payment of addition alpremium in some cases only Development
of general insurance :
British and other foreign insurance
c o m p a n i e s t r a n s a c t e d g e n e r a l insurance business in
india throught h e i r a g e n t s . S u b s e q u e n t l y , t h e y
established their companiesinindia. The
t r i t o n i n s u r a n c e c o m p a n y l i m i t e d w a s t h e fi
rstg e n e r a l i n s u r a n c e c o m p a n y e s t a b l i s
h e d i n C a l c u t t a i n 18 50 .Forei gn compa ni es
had am o n o p o l y i n t h e i n s u r a n c e b u s i
n e s s u p t o t h e c l o s e o f nineteenth century.
the fi rst Indianc o m p a n y t o t r a n s a c t g e n e r a l i n s
urance business was Indianmercantile insuranc
e companyl i m i t e d i n B o m b a y i n 1 9 0 7 . i n 1 9

5 7 , t h e g e n e r a l i n s u r a n c e council .Framed a
code of
conductf o r i n s u r i n g f a i r t r a n s a c t i o n o f g e n e r a
l insurance business. Ac o n t r o l l e r o f i n s u r a
n c e w a s appointed to implement this code
of conduct.I n 1 9 6 5 , i n s u r a n c e fl o a t e d a r e i n s u r
a n c e c o m p a n y , I n d i a n reinsurance corporation limited,
for retention of the general insuranceb u s i n e s s i n i n d i a .
In 1961,theI n d i a n g u a r a n t e e a n d g e n e r a l i n s u
r a n c e c o m p a n y l i m i t e d , a g o v e rn m e n t c o m p a n y a
l o n g w i t h I n d i a n r e i n s u r a n c e c o r p o r a t i o n were
notified as Indian
reinsurance .T h e i n s u r a n c e c o m p a n i e s voluntary
ceded to each of them
10p e r c e n t o f t h e i r g r o s s d i r e c t premium. In
1960,the govt of made i t m a n d a t o r y f o r e v e r y i n s u r e r t o
ceded 20 percent in fire and marinecargo,10 percent in marine
hull
andm i s c e l l a n e o u s i n s u r a n c e a n d 5 p e r c e n t i n c r e d i
t and solvencyb u s i n e s s
t o
t h e s e
t w o reinsurancers.I n 1 9 6 6 , I n d i a n r e i n s u r a n
c e c o m p a n i e s a r e f o r m e d t h e re i n s u r a n c
e p o o l s i n fi re a n d h u l l department for retention of
higher p r e m i u m s i n t h e c o u n t r y . T h e m e m b e r s
c o m p a n i e s c e d e d a specified percentage of premium to
the respective pools which werem a n a g e d b y
t w o s t a t u t o r y reinsurance.T h e g o v e rn m e n t n a t i o
nalized theg e n e r a l i n s u r a n c e b u s i n e s s A c t 1 9 7 2 . O n
e h u n d e r e d a n d s e v e n i n s u re r i n c l u d i n g t h e b r a n c h e s
o f f o r e i g n c o m p a n i e s o p e r a t i n g i n india were
amalgamated and
groupi n t o f o u r c o m p a n i e s , n a m e l y th e national insurance
company limited,the new india assurance
companyl i m i t e d , t h e o r i e n t a l i n s u r a n c e co m p a n y
limited,the united indiaa s s u r a n c e l i m i t e d . . t h e g e n
e r a l insurance corporation as a holdingcompany of these four
companiesin November 1972.The general insurance company

iss m a l l e r t h a n t h e l i f e i n s u r a n c e company. The total
market size
ina n n u a l p r e m i u m i s a b o u t h a l f o f t h a t l i f e i n s u r a n
c e . T h e g e n e r a l i n s u r a n c e i n n i d i a h a s c u r r e n t l y abo
ut Rs20,000 crores of
premiumi n c o m e
w i t h
a
fi v e
y e a r
compounded annual growth rate inthe 16 percent range. The
demandf o r g e n e r a l i n s u r a n c e i s s t i l l g e n e r a
ted by some of
m a n d a t o r y or regularitybrequirements. Motor v e h i c l e i n s u
rance is compulsorya n d h e n c e m o t o r i n s u r
a n c e p r e m i u m d o m i n a t e s t h e t o t a l premium
portfolio.the growth of g e n e r a l i n s u r a n c e b u s i n e
s s i s h a m p e r e d b y l a c k o f p r o d u c t innovation,l
ack of quality data onrisks and associated parameters
handicaps product innovation.D e- t a r i ffi n g o f n o n l i f e i n s u r a n c e products:M o s t o f t h e n o n - l i f e
i n s u r a n c e b u s i n e s s tr a n s a c t e d i n i n d i a w a s g o v e r n e d
b y t a r i ff s . Ta r i ff s a r e documents that prescribe the
ratesa s w e l l a s p o l i c y c o v e r a g e a n d c o n d i t i o n p e r t a
i n i n g t o a c l a s s o f i n s u r a n c e . T h i s h a d re s u l t e d i n
a v e r y l i t t l e ro o m f o r co m p e t i t i o n i n t h e s e a r e a s . T h i s
also
l e f t v e r y less incentives for a rating better m a n a g e d r
isks, thus resulting ina v o i d a b l e c l a i m c o s t s f
o r t h e i n s u r e r s . T o a d d f u e l t o fi r e ,feature
s like adverse selection andmoral hazard ensured that
bottoml i n e s o f i n s u r a n c e a l w a y s u n d e r p re s s u re re g a
rd l e s s o f v o l u m e o f b u s i n e s s . T h e y e a r 2 0 0 7 w
i l l witness a switch over to atarifffreep r i c i n g r e g i m e f o r n o n l i f e insurance.
This is excepted to bringabout hectic competition in
pricingo f
n o n
l i f e
i n s u r a n c e
products.hoeever,with a view to

e n s u r i n g a g r a d u a l t r a n s i t i o n to
a f re e m a r ke t re g i m e , th e re g u l a t o r h a s p u t o n h o l
d the freedomtomodify coverage or pol
i c y conditions.D e = t a r i ffi n g o f m o t o r i n s u r a n c e f r o m 1
january, 2007,will be theb i g g e s t d e r e g u l a t i
o n i n t h e i n s u r a n c e
i n d u s t r y
s i n c
e n a t i o n a l i z a t i o n . M o t o r i n s u r a n c e today accounts for
over 35 percento f t h e p re m i u m i n c o m e o f n o n
lifei n s u r a n c e c o m p a n i e s . I R D A adopted a pha
s e d a p p ro a c h t o detariffing in motor insurance.

With a view to pre-empting
ar a t e
w a r
i n
m o t o r
insurance,t
he regulator hasa s k e d c o m p a n i e s n o t t o o ff e r
v e h i c l e c o v e r a t r a t e s lower then 10 percent of thetariff.

I f t h e c o m p a n i e s w a n t t o o ff e r h i g h e r d i s c o u n t a f
t e r jan 2007,they would have
toe x p l a i n t h e i r p r i c i n g rationale.

I n s u r a n c e a r e a l l o w e d t o marginally increase the
ratesfor third party insurance.

T h e t h i r d p a r t y p r e m i u m would go into a special
poolw h i c h w i l l b e m a n a g e d b y g e n e r a l i n s u r a n c e c o
u n c i l and claims will be paid out of this pool.

If the premium in the pool
isi n a d e q u a t e t o m e e t a l l claims,the claim
shortfall
bes h a r e d b y t h e i n s u r e r i n p r o p o r t i o n o f t h e i r o
v e r a l l business size.

Insurance companies willre c e i v e 1 0 p e rc e n t o f t
h e premium as management e x p e n s e s , w h i l e g e n e
r a l insurance council will
get2.5p e r c e n t f o r m a n a g i n g t h e pool.


In the first phase,companieswill issue polcies and
settlec l a i m s
t h r o u g h
t h e i r
branches.the
claims shortfall

Wo u l d b e s h a r e d b y t h e industry at the end
o f t h e year.
G E N E R A L I N S U R A N C E COUNCIL:
T h e f u n c t i o n o f t h e g e n e r a l insurance co
uncil include aiding
a n d a d v i s i n g t h e i n s u re r c a rr y i n g o n g e n e r a l i n s u r a n c e
b u s i n e s s i n the matters of setting up standardsof conduct and
sound practice andin the matter of rendering
effi cients e r v i c e s t o h o l d e r s o f p o l i c i e s o f general
insurance. The council hasdeliberated on issues relating to
det a r i ffi n g o f t h e m o t o r i n s u r a n c e b u s i n e s s , r e
view of the motor vehicles Act and struc
t u r e o f compensation/remunerationpayable to agents.
INVESTMENT POLICY OF GIC
Central Govt. securities being
notl
e
s
s
t
h
a
n
2
0
%
S t a t e G o v t . s e c u r i t i e s a n d o t h e r government
guaranteed
securities,i n c l u d i n g ( 1 ) a b o v e , b e i n g n o t less
than30%L o a n s t o H U D C O / D D A / G I C - H F and to state
govts. For housing andfirefighting equipment, notless
than15%Market sector not more than 55
C U R R E N T
T R E N D S
I N INSURANC
E SECTOR
India's insurance sector is
zoomingt o s h o w a n u n p r e c e d e n t e d p r o g r
e s s i v e g r o w t h o f m o r e t h a n 2 0 0 % b y t h e p er i o d
of 200910. The Associated Chambers of C o m m e r c e a n d
I n d u s t r y o f I n d i a h a s c l o c ke d o u t t h e f a c t
t h a t during this period, private players
int h e i n d u s t r y w i l l s e e a g r o w t h o f a b o u t 1 4 0 p e r
cent, owing to
thea d o p t i o n o f t h e a g g r e s s i v e m a r k e t

i n g
t e c h n i q u e s
i n comparison of the growth
rate of 35p er c e n t - 4 0 p er c e n t a c h i e v e d
byt h e s t a t e o w n e d i n s u r a n c e c o m p a n i
e s . T h e c h a m b e r i s expected to poise the business
of i n s u r a n c e
t o
r e a c h
a t R s.
2 0 0 0 b i l l i o n i n c o m i n g 2 y e a r s f ro m t h e p re s e n t l ev e l o f
R s . 5 0 0 billion. With the result of adoptionof the intense
marketing
strategiesb y t h e p r i v a t e p l a y e r s , t h e de
clination has been witnessed inr e s p e c t o f t h e s h a r e o f
t h e s t a t e o w n e d i n s u r a n c e c o m p a n i e s captured
in the market. The marketsh a re f a l l o u t h a s b e e n n o t i c e d
i n c o n t e x t o f s u c h c o m p a n i e s l i k e GIC, LIC, which have
comedown ton e a r l y 7 0 p er c e n t i n t h e p a s t 4 5 y e a r s f r o m t h e 9 7 p e r c e n t . T h e experts have
forecasted the moresevere competition in the insurance
a n d a d v i s i n g t h e i n s u re r c a rr y i n g o n g e n e r a l i n s u r a n c e
b u s i n e s s i n the matters of setting up standardsof conduct and
sound practice andin the matter of rendering
effi cients e r v i c e s t o h o l d e r s o f p o l i c i e s o f general
insurance. The council hasdeliberated on issues relating to
det a r i ffi n g o f t h e m o t o r i n s u r a n c e b u s i n e s s , r e
view of the motor vehicles Act and struc
t u r e o f compensation/remunerationpayable to agents.
INVESTMENT POLICY OF GIC
Central Govt. securities being
notl
e
s
s
t
h
a
n
2
0
%
S t a t e G o v t . s e c u r i t i e s a n d o t h e r government
guaranteed
securities,i n c l u d i n g ( 1 ) a b o v e , b e i n g n o t less
than30%L o a n s t o H U D C O / D D A / G I C - H F and to state
govts. For housing andfirefighting equipment, notless
than15%Market sector not more than 55
C U R R E N T
T R E N D S
I N INSURANC
E SECTOR
India's insurance sector is
zoomingt o s h o w a n u n p r e c e d e n t e d p r o g r
e s s i v e g r o w t h o f m o r e t h a n 2 0 0 % b y t h e p er i o d
of 2009-

10. The Associated Chambers of C o m m e r c e a n d
I n d u s t r y o f I n d i a h a s c l o c ke d o u t t h e f a c t
t h a t during this period, private players
int h e i n d u s t r y w i l l s e e a g r o w t h o f a b o u t 1 4 0 p e r
cent, owing to
thea d o p t i o n o f t h e a g g r e s s i v e m a r k e t
i n g
t e c h n i q u e s
i n comparison of the growth
rate of 35p er c e n t - 4 0 p er c e n t a c h i e v e d
byt h e s t a t e o w n e d i n s u r a n c e c o m p a n i
e s . T h e c h a m b e r i s expected to poise the business
of i n s u r a n c e
t o
r e a c h
a t R s.
2 0 0 0 b i l l i o n i n c o m i n g 2 y e a r s f ro m t h e p re s e n t l ev e l o f
R s . 5 0 0 billion. With the result of adoptionof the intense
marketing
strategiesb y t h e p r i v a t e p l a y e r s , t h e de
clination has been witnessed inr e s p e c t o f t h e s h a r e o f
t h e s t a t e o w n e d i n s u r a n c e c o m p a n i e s captured
in the market. The marketsh a re f a l l o u t h a s b e e n n o t i c e d
i n c o n t e x t o f s u c h c o m p a n i e s l i k e GIC, LIC, which have
comedown ton e a r l y 7 0 p er c e n t i n t h e p a s t 4 5 y e a r s f r o m t h e 9 7 p e r c e n t . T h e experts have
forecasted the moresevere competition in the insurance
s e c t o r l i ke l y t o b e o c cu rre d i n th e near future. Till recently,
insurances e c t o r w a s m a j o r i ty d r i v e n b y th e government
sector players but
nowm a n y p r i v a t e s e c t o r m u l t i n a ti o n a l players have come
into the picture.Like HDFC, ICICI, Kotak, Mahindraand Birla
Sunlife. Insurance
sector h a s b e e n c h a r a c t e r i z e d a s t h e booming sector
of the Indian arena,which has shown the growth rate
of m o r e t h a n 1 5 p e r c e n t t o 2 0 p e rc e n t .
Insurance in India is
putu n d e r t h e f e d e r a l s u b j e c t a n d i s g o v e r n e d b
y t h e I n s u r a n c e Act,1938, the Life Insur
a n c e Corporation Act, 1956 and
GeneralInsuranceBusiness(Nationalization).

Act,1 9 7 2 , I n s u r a n c e R e g u l a t o r y a n d Development Auth
ority(IRDA) Act,1999 and by various other acts.T h e ro o t s o f
the insurance sector c a n b e t r a c ke d d o w n i n t h e
y e a r 1 8 1 8 i n t h e f o r m a t i o n o f t h e l i f e insurance
Corporation in Calcutta.The idea was to provide means
tot h e E n g l i s h w i d o w s . D u r i n g t h a t t i m e d i ff e r e n
t p r e m i u m s w e r e charged for the Indian and
Englishpeople lives. In1870, the
BombayM u t u a l L i f e I n s u r a n c e S o c i e t y started its
insurance business andit chargedthe same premium
froma l l p e o p l e i rre s p e c t i v e o f w h e t h e r they were Indian
or English. In they e a r 1 9 1 2 , i n s u r a n c e r e g u l a t i o n w a s
s t a r t e d d u e t o t h e p a s s i n g o f the Life Insurance
Companies Actand the Provident Fund Act. By they e a r o f
1 9 3 8 , i n I n d i a t h e re w e re total 176 insurance. companies.
Inthe year of 1938, with the passingo f I n su r a n c e Ac t ,
1 9 3 8 t h e re
w a s t h e i n t r o d u c t i o n o f t h e fi r s t compreh
ensive legislation. It wasp a s s e d w i t h t h e a i m
o f p ro v i d i n g t h e s t r i c t s t a t e c o n t r o l o v e r t h e i n s u
r a n c e b u s i n e s s . A f t e r t h e independence, insurance
sector inIndia grew at a much higher
pace.I n
t h e
y e a r
1 9 5 6 ,
I n d i a n gover
nment combined together 245Indian and foreign insurers and
theprovident societies under the
nameo
f
n
a
t
i
o
n
a
l
i
z
e
d
m o n o p o l y c o r p o r a t i o n . I t w a s th e s a m e p e r i o
d w h e n t h e l i f e i n s u r a n c e co r p o r a t i o n ( L I C ) c a
m e into theexistence by the passing of
the Act of Parliament and
throught h e c o n t r i b u t i o n o f c a p i t a l a ro u n d Rs. 5 crore. Till
1972, private sector has enjoyed somehow monopoly inthe
general insurance sector.
Therew e r e
a r o u n d
1 0 7
p r i v a t e comp

a n i e s i n t h e fi e l d . W i t h t h e e ff e c t o f t h e G e n e r a l I n
suranceBusiness (Nationalization) Act,1 9 7 2 , t h e
g e n e r a l i n s u r a n c e business got the India. Due to thea m
algamation of 107 privateinsurance comp
a n i e s , 4 n e w companies, as the subsidiaries
of t h e G e n e r a l I n s u r a n c e C o m p a n y , c a m e i n t o e f
f e c t - N a t i o n a l Insurance Company, New India
A s s u r a n c e C o m p a n y , O r i e n t a l Insurance Company
a n d U n i t e d India Insurance Company.