Market Sige Growth Rate of Ins Sec

 Market Size and Growth Rate

With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market (2004-05) is estimated at Rs. 450 billion (US$10 billion). According to government sources, the insurance and banking services‟ contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part. The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense growth potential of the insurance sector. The year 1999 saw a revolution in the Indian insurance sector, as major structural changes took place with the ending of government monopoly and the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Though, the existing rule says that a foreign partner can hold 26% equity in an insurance company, a proposal to increase this limit to 49% is pending with the government. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 21 private companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. The life insurance industry in India grew by an impressive 36%, with premium income from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff competition from private insurers. This report, “Indian Insurance Industry: New Avenues for Growth 2012”, finds that the market share of the state behemoth, LIC, has clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. But this was still not enough to arrest the fall in its market share, as private players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04. Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared to the previous one, its market share came down from 87.04 to 78.07%. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private

insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. There are presently 12 general insurance companies with four public sector companies and eight private insurers. According to estimates, private insurance companies collectively have a 10% share of the non-life insurance market. Though the focus of this market research report is on the potential growth on the Indian Insurance Sector, it also talks about the market size, market segmentation, and key developments in the market after 1999. The report gives an instant overview of the Indian non-life insurance market, and covers fire, marine, and other non-life insurance. The data is supplied in both graphical and tabular format for ease of interpretation and analysis. This report also provides company profiles of the major private insurance companies. competitive rivelry Insurance Industry, Five Forces, Rivarly, Barriers to Entry The threat of entry (of new competitors) and Rivarly are two of the "Five Forces" in Michael Porter's framework for industry analysis. Concerning the former, the basic idea is that "Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level." Among the factors creating barriers to entry are the intellectual property rights, capital requirements, brand equity, cost advantages, expected retaliation by incumbents, and government policy. Several other factors are said by Porter to increase the intensity of rivalry in an industry--and thereby lower profitability. The list includes the number of competitors, the rate of industry growth (the slower the growth the higher the rivarly), intermittent industry overcapacity, exit barriers, diversity of competitors, informational complexity and asymmetry, and economies of scale. Much of the discussion of late about healthcarere reform in the US concerns the relationship between barriers to entry and rivalry in the insurance industry. Many critics of the administration's plan prefer solutions that would force insurance companies to compete more agressively with one another. A key consideration for them are barriers to entry at the state-level. For example, in an article entitled "Let Insurance Companies Compete Across the US", University of Chicago political scientist Charles Lipson, makes the case by first noting the presence of laws that prevent healthcare insurers from selling across state lines: Right now, the U.S. does not have a national market for health insurance. It has 50 separate state markets. Erecting walls around each state means less competition and higher prices for consumers. There's not even one market for the Chicago area. If you live in South Holland or Calumet City, your insurance options could be completely different from your Indiana neighbors in Hammond or Merrillville. What sense does that make?

To help us understand the benefical effect that could arise from removing these laws, Lipson points to a very closely related industry where competition on price, differentiation, and even innovation are the norm--the market for auto-insurance: The easiest way to see how insurance competition benefits consumers is to look at auto insurance. That's a huge, nationwide market and companies compete intensively for a share of it. Some stress their low prices, others customer service, whatever gives them an edge in the marketplace.Geico and Progressive have been especially aggressive in touting cost savings. State Farm and Allstate certainly compete on price, but they stress service after an accident. That's why Allstate says "you're in good hands," and State Farm says it will be there "like a good neighbor." Other companies, like SafeAuto, focus on drivers who want only minimum coverage to meet state license requirements. In short, auto insurance companies compete vigorously to provide what different consumers want, and they tell them so in national advertisements. Life insurance companies do the same thing. There are even companies that specialize in comparing policies for customers. Competition drives down excess profits and means better, cheaper options for consumers. Ever see an ad touting health insurance? They are rare because the markets are small and companies don't need to compete aggressively on price or service. This last line is important. According to Lispon, preventing health insurers from competing across state lines is needless barrier to entry, one that keeps the markets small and reduces the need or incentive for companies in the market to compete on either price or service. This comports with Porter's model where both the number and the diversity of competitors in an industry increase the intensity of rivalry and by extension, bring many benefits for consumers.

Read more: http://www.investopedia.com/features/industryhandbook/insurance.asp#ixzz2Cscuskex How to Start Your Own Insurance Company by Owen E. Richason IV, Demand Media For entrepreneurs that want to build a small business that provides an ongoing revenue stream for years to come, an insurance agency is an ideal opportunity, as clients repurchase products to ensure that coverage continues. Among the types of insurance products an insurance agency can sell are: life, annuity products, term and whole health, automobile, homeowners, property, causality, and disability. Opening an insurance company requires some preparatory steps. Sponsored Link ICICI™ Auto Insurance Save Rs.1200 on Auto Insurance. Free Quick Quote. Buy Online Now! ICICILombard.com/Auto_insurance

Step 1 Become a licensed insurance agent. Laws and identifiers differ by state, but in general you will need a Property and Casualty Insurance license and/or a Life, Health and Variable Annuity license. For instance, in the state of Florida, these are referred to as 440 and 220 licenses respectively. Each can be obtained online or through classroom instruction. Most community colleges also offer these courses. Step 2 Determine what products you will offer. Typically, insurance agencies do not limit themselves to specific products and carry a variety of insurance plans. However, you might consider specializing in one particular product while still offering other insurance plans. As an example, you might wish to focus on corporate health benefit plans and sell employee insurance benefits to companies while still offering life and variable annuity products. Step 3 Apply for a business loan and insurance. Compile a list of all start-up costs including but not limited to: office equipment, lease monies, employee expenses like wages and benefits, and insurance, such as liability and errors and omission insurance. Using these numbers have an accountant or business plan writer write a business plan to apply for a small business loan using the Small Business Administration's approved lender database. Step 4 Locate suitable office space. Office space should have a well maintained exterior and interior and provide enough space for a reception area, one or two offices and a conference room for initial client consultations and workshops for potential clients. Step 5 Buy a franchise or open your own agency. Choose between buying a franchise and opening your own independent insurance agency. The advantages of buying a franchise is operating under a well established name and having access to "in-house" financing provided by the parent company. The advantage of opening an independent agency is freedom to choose any product. SWOT ANALYSISSTRENGTHS: 1.No. 1 Private Player in the insurance industry in India.2.Life Insurance linked with Investments 3 . T a x b e n e f i t s 4 . S e c u r i t y a g a i n s t l o a n s 5.Helps in future planning and p r o v i d e s f i n a n c i a l c o n s u l t a n c y. 6 . C o v e r s r i s k . WEAKNESS: 1.Negativity relating insurance and „Agents‟. 2 . N o f i x e d S a l a r y . OPPORTUNITIES: 1 . H i g h N e t w o r k I n d i v i d u a l s ( H N I ) 2 . A c l e a r c a r e e r p a t h 3.All round support through exclusive advertising, own in house consultant, andworld-class training.4 . A c o m p r e h e n s i v e b e n e f i t p a c k a g e . THREATS: 1 . D y n a m i c e n v i r o n m e n t 2.Increasing Competition3 . N o n creativit y4.An Unfocused a p p r o a c h 5.Complacency and arrogance Daily Hospitalization Benefit (DHB): During hospitalization, wewill pay an allowance of Rs. 2,500 per day.

Premiums paid for Health Insurance Benefits are eligible fortax benefits under section 80D, while premiums for LifeInsurance Benefits are eligible for tax benefits under section80C of the Income Tax Act, 1961. A guaranteed annual coupon of 5% of the sum assuredevery year for the rest of the insured‟s term from the 10thpolicy anniversary. Flexibility to choose your premium payment term: 5years or for the entire duration of the policy. Provides security to your family in case of your unfortunatedeath. All premiums paid are returned (without interest) in theevent you outlive the policy‟s 20-year term. 10% of the sum assured is paid on survival on the 3rd /6th /9th /12th /15th and 18th policy anniversaries.

promotion stretegies

A very common way to promote a Life insurance company through Life Insurance Marketing is to make the name of the company familiar to others by means of television commercials, handling out pamphlets, hanging banners in populated areas and by providing exciting offers.



Telephone marketing is another way of Life Insurance Marketing. One can see the telephone companies send messages about various offers and they even make phone calls. Web Insurance Marketing is another good strategy to promote insurance policies. The pop ups that one sees while using Internet are actually a very effective way of sending messages across the potential insurance customers.



One should listen to the existing Life Insurance Policy Holders as well as the potential Life insurance policy holders and listen to what people who actually matters have to say. One common problem that the insured persons face is that the insurance companies do not inform its clients about the hike in the premium rates. These things should be kept in mind. Not only that, a client should be informed about everything related to his policy and the Life insurance company should keep the transparency as much as possible.



Community Life Insurance Marketing is another different way to get promotion and a high recognition for the Life insurance company. Eminent workers join local community institutions, such as Chamber of Commerce, and by signing up there one can help out various projects that take place. These kinds of activities and social works on behalf of the Life insurance company helps the company to get free publicity as their names are published in news paper and in media also. Doing

charity works also helps the Life insurance companies to come across various people who act as volunteers and can act as their potential Life insurance clients. People also like to deal with like minded people and companies and this is how many deals are made.



A Life Insurance Company should not charge different Life insurance client different charges for the same policy. This kind of policy gives the Life insurance policy holders the feeling that they are being treated unfairly and also that the Life insurance companies are only looking for profits and not the betterment of customer welfare.



When a Life insurance claim is filed, especially for a very big hefty amount, the Life insurance company should help out the policy holder in processing out the paperwork. One should not let bureaucracy enter and make it so difficult for the one making the claim so that he gives his claim .This has always been a common tactic on the insurance company's part to avoid paying claims claimed by the policy holder. This though makes a short term profit for the company but it hurts in the long run as the reputation of the company is hampered severely.

HISTORY
History of insurance refers to the development of a modern business in insurance against risks, especially regarding ships, cargo, and buildings ("property" and "fire"), death ("life" insurance), automobile accidents ("auto"), and the cost of medical treatment (health insurance). The industry has been profitable and has provided attractive employment opportunities for white collar workers. It helps eliminate risks (as when fire insurance companies demand safe practices and the availability of fire stations and hydrants), spreads risks from the individual or single company to the larger community, and provides an important source of long-term finance for both the public and private sectors.

Ancient world
The first methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as [1] long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen. Achaemenian monarchs were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Nowruz (beginning of the Persian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of [2] twice as much." A thousand years later, the inhabitants of Rhodes created the 'general average', which allowed groups of merchants to pay to insure their goods being shipped together. The collected premiums would be used to reimburse any merchant whose goods were jettisoned during transport, whether to storm or sinkage. The ancient Athenian "maritime loan" advanced money for voyages with repayment being cancelled if the ship was lost. In the 4th century BC, rates for the loans differed according to safe or dangerous times of [3] year, implying an intuitive pricing of risk with an effect similar to insurance. The Greeks and Romans introduced the origins of health and life insurance c. 600 BCE when they created guilds called "benevolent societies" which cared for the families of deceased members, as well as paying funeral expenses of members. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. [edit]Medieval

and Early modern

In 12th Century, after the establishment of Seljuk state in Anatolia, Seljuk Sultan Ghiyas ad-Din [4] Kaykhusraw I , introduced a form of state insurance which reimbursing the traders for their loss from the [5] [6] state treasury, if they would be robbed within the Seljuk territory. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347, and in the next century maritime [7] insurance developed widely and premiums were intuitively varied with risks. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. The first printed book on insurance was the legal treatise On Insurance and [8] Merchants' Bets by Pedro de Santarém (Santerna), written in 1488 and published in 1552. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. The will of Robert Hayman, written in 1628, refers to two policies he has taken out with a [9] wealthy Londoner: one of life insurance and one of marine insurance. Toward the end of the 17th century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes. In the late 19th century, "accident insurance" began to be available, which operated much like [10][11] modern disability insurance. This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability [12] insurance. The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina in 1732, but it provided only fire insurance. [edit]Modern [edit]German

Europe
and British government programs

Germany built on a tradition of welfare programs in Prussia and Saxony that began as early as in the 1840s. In the 1880s Chancellor Otto von Bismarck introduced old age pensions, accident insurance, medical care and unemployment insurance that formed the basis of the modern European welfare state. His paternalistic programs won the support of German industry because its goals were to win the support of the working classes for the Empire and reduce the outflow of immigrants to America, where wages [13][14] were higher but welfare did not exist. After 1905, led by the Liberal Party, the British introduced a system of social insurance as well. It was [15][13] greatly expanded after 1944. [edit]American [edit]Colonial Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly Property insurance to spread the risk of loss from fire, in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. The sale of life insurance in the U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia and New York founded the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests created a comparable relief fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. [edit]19th

history

century
[16]

Most insurance companies operated locally. The ambitious ones expanded geographically in the 1830s, such as the New York Life Insurance and Trust Company in upstate New York, and the Baltimore Life Insurance Company in the Mid-Atlantic and Upper South. They built a network of agents to develop markets in different cities. The goal was to only insure people "of sound health, and of sober habits, [17] without hereditary disease, and not belonging to families remarked for short lives." The company had to judge the reliability of agents, who sought out clients, canceled dubious policies, and judged the health of

potential customers. The agents were not medical men, but they were instructed to ask applicants some standard questions: "Is he now in good health, and does he usually enjoy good health, or how otherwise? . . . Has he at any time been afflicted with gout, asthma, consumption, scrofula, convulsions, palsy, or any other disease likely to impair his constitution? . . . Has he been vaccinated, or had the small pox? . . . Is he of a sedentary turn, or accustomed to much exercise? . . . Do you know of any circumstance which renders an insurance on his life more than usually hazardous?"
[18]

A better solution came late in the 19th century when the companies employed doctors who used standardized criteria. [edit]Moral hazards An important concern for insurance companies was the moral hazard--people might set fires to collect property insurance--or even commit suicide or murder when life insurance was involved. From the opposite angle, religious people refused to consider insurance against God's decisions. Fraud was also a problem, as people lied on applications, broke policy restrictions, or falsified their own [19] deaths so their family could collect. [edit]Slaves Prior to the Civil War (1861-65), some insurance companies in the South insured the lives of slaves for their owners. In response to bills passed in California in 2001 and in Illinois in 2003, the companies have been required to search their records for such policies. New York Life for example reported that Nautilus sold 485 slaveholder life insurance policies during a two-year period in the 1840s; they added that their trustees voted to end the sale of such policies 15 years before the Emancipation Proclamation of 1863. [edit]20th

century

[edit]Social Security Until the passage of the Social Security Act in 1935, the federal government had never mandated any form of insurance upon the nation as a whole, but this program expanded the concept and acceptance of insurance as a means to achieve individual financial security that might not otherwise be available. That expansion experienced its first boom market immediately after the Second World War with the original VA Home Loan programs that greatly expanded the idea that affordable housing for veterans was a benefit of having served. The mortgages that were underwritten by the federal government during this time included an insurance clause as a means of protecting the banks and lending institutions involved against avoidable losses. During the 1940s there was also the GI life insurance policy program that was designed to ease the burden of military losses on the civilian population and survivors. During the 1970s and 1980s there was a growth in support for the requirement for drivers to have insurance as a means of proving financial responsibility since it was recognized that the automobile, in the case of an accident, could cause significant collateral damage. It soon followed that car insurance became a mandatory requirement for all drivers.

[edit]Health

insurance in the United States

Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the US by 1866, but the industry consolidated rapidly soon thereafter. In 1887, the African American workers in Muchakinock, Iowa, a company town, organized a mutual protection society. Members paid fifty [20] cents a month or $1 per family for health insurance and burial expenses. In the 1890s, various [21] health plans became more common. Group disability policy was issued in 1911. Commercial insurance companies began offering accident and sickness insurance (disability [21][22] insurance) as early as the mid-19th century. The first group medical plan was purchased from The Equitable Life Assurance Society of the United States by the General Tire & Rubber Company in [21] 1934. Before the development of medical expense insurance, patients were expected to pay all other health care costs out of their own pockets, under what is known as the fee-for-service business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and also most prescription drugs, but this was not always the case. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis. The first group pre-payment plan was created at the Baylor University Hospital in Dallas, [21][23][24] Texas. This concept became popular among hospitals during the Depression, when they were facing declining revenues. The Baylor plan was a forerunner of later Blue Cross plans. Physician associations began offering pre-paid surgical/medical benefits in the late 1930s Blue Shield plans. Blue Cross and Blue Shield plans were non-profit organizations sponsored by local hospitals (Blue Cross) or physician groups (Blue Shield). As originally structured, Blue Cross and Blue Shield plans provided benefits in the form of services rendered by participating hospitals and physicians ("service [21][25] benefits") rather than reimbursements or payments to the policyholder. Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, [21] eventually leading to the development of Blue Cross organizations. The Ross-Loos Clinic, founded in Los Angeles in 1929, is generally considered to have been the first health maintenance [23] organization (HMO). Henry J. Kaiser organized hospitals and clinics to provide pre-paid health benefits to his shipyard workers during World War II. This became the basis for Kaiser Permanente HMO. Most early HMOs were non-profit organizations. The development of HMOs was encouraged by the passage of the Health Maintenance Organization Act of 1973. The first employer[26] sponsored hospitalization plan was created by teachers in Dallas, Texas in 1929. Because the plan only covered members' expenses at a single hospital, it is also the forerunner of today's health [23][26][27] maintenance organizations (HMOs). Employer-sponsored health insurance plans dramatically expanded as a result of wage controls [26] during World War II. The labor market was tight because of the increased demand for goods and decreased supply of workers during the war. Federally imposed wage and price controls prohibited manufacturers and other employers raising wages high enough to attract sufficient workers. When the War Labor Board declared that fringe benefits, such as sick leave and health insurance, did not

count as wages for the purpose of wage controls, employers responded with significantly increased [26] benefits. Employer-sponsored health insurance was considered taxable income until 1954.
[26]

In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system for insurance similar to that which oversees state banks and national banks.

SECOND HISTORY

History of insurance
Main article: History of insurance In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: natural or non-monetary economies (using barter and trade with no centralized nor standardized set of financial instruments) and more modern monetary economies (with markets, currency, financial instruments and so on). The former is more primitive and the insurance in such economies entails agreements of mutual aid. If one family's house is destroyed the neighbours are committed to help rebuild. Granaries housed another primitive form of insurance to indemnify against famines. Often informal or formally intrinsic to local religious customs, this type of insurance has survived to the present day in some countries where a modern money economy with its [citation needed] financial instruments is not widespread. Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practiced [13] by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea. Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.

The subscription room at Lloyd's of London in the early 19th century.

The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of [14] twice as much." A thousand years later, the inhabitants of Rhodes invented the concept of the general average. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were deliberately jettisoned in order to lighten the ship and save it from total loss. The ancient Athenian "maritime loan" advanced money for voyages with repayment being cancelled if the ship was lost. In the 4th century BC, rates for the loans differed according to safe or dangerous times of year, implying an intuitive pricing of risk with an effect similar to [15] insurance. The Greeks andRomans introduced the origins of health and life insurance c. 600 BCE when they created guilds called "benevolent societies" which cared for thefamilies of deceased members, as well as paying funeral expenses of members. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in postRenaissance Europe, and specialized varieties developed.

Lloyd's of London, pictured in 1991, is one of the world's leading and most famous insurance markets

Some forms of insurance had developed in London by the early decades of the 17th century. For example, the will of the English colonist Robert Hayman mentions two "policies of insurance" taken out with the diocesan Chancellor of London, Arthur Duck. Of the value of £100 each, one relates to the safe arrival of Hayman's ship in Guyana and the other is in regard to "one hundred pounds assured by the said Doctor Arthur Ducke on my life". Hayman's will was signed and sealed on 17 November 1628 but not [16] proved until 1633. Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is an insurance market rather than a company) for marine and other specialist types of insurance, but it operates rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a [17] site for 'the Insurance Office' in his new plan for London in 1667." A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England's first fire insurance company, the 'Insurance Office for Houses', at the back of the Royal Exchange. [18] Initially, 5,000 homes were insured by Barbon's Insurance Office.

The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by [19] Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry primary resides with individual state insurance departments. The current state insurance regulatory framework has its roots in the 19th century, [19] when New Hampshire appointed the first insurance commissioner in 1851. Congress adopted the McCarran-Ferguson Act in 1945, which declared that states should regulate the business of insurance and to affirm that the continued regulation of the insurance industry by the states is in the public's best [19] interest. The Financial Modernization Act of 1999, commonly referred to as "Gramm-Leach-Bliley", established a comprehensive framework to authorize affiliations between banks, securities firms, and [19] insurers, and once again acknowledged that states should regulate insurance. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through the National Association of Insurance Commissioners. In recent years, some have called for a dual state and federal regulatory system (commonly referred to as the Optional federal charter (OFC)) for insurance similar to the banking industry. In 2010, the federal Dodd-Frank Wall Street Reform and Consumer Protection Act established the [20] Federal Insurance Office ("FIO"). FIO is part of the U.S. Department of the Treasury and it monitors all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that [20] may contribute to a systemic crisis in the insurance industry or in the U.S. financial system. FIO coordinates and develops federal policy on prudential aspects of international insurance matters, [20] including representing the U.S. in the International Association of Insurance Supervisors. FIO also assists the U.S. Secretary of Treasury with negotiating (with the U.S. Trade Representative) certain [20] international agreements. Moreover, FIO monitors access to affordable insurance by traditionally underserved communities and [20] consumers, minorities, and low- and moderate-income persons. The Office also assists the U.S. [20] Secretary of the Treasury with administering the Terrorism Risk Insurance Program. However, FIO is [20] [20] not a regulator or supervisor. The regulation of insurance continues to reside with the states. [edit]Types

of insurance

Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as perils. An insurance policy will set out in detail which perils are covered by the policy and which are not. Below are non-exhaustive lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set out below. For example, vehicle insurance would typically cover both the property risk (theft or damage to the vehicle) and the liability risk (legal claims arising from an accident). A home insurance policy in the US typically includes coverage for damage to the home and the owner's belongings, certain legal claims against the owner, and even a small amount of coverage for medical expenses of guests who are injured on the owner's property.

Business insurance can take a number of different forms, such as the various kinds of professional liability insurance, also called professional indemnity (PI), which are discussed below under that name; and the business owner's policy (BOP), which packages into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners' insurance packages the [21] coverages that a homeowner needs. [edit]Auto

insurance

Main article: Vehicle insurance

A wrecked vehicle in Copenhagen

Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision. Coverage typically includes: 1. Property coverage, for damage to or theft of the car; 2. Liability coverage, for the legal responsibility to others for bodily injury or property damage; 3. Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses. Most countries, such as the United Kingdom, require drivers to buy some, but not all, of these coverages. When a car is used as collateral for a loan the lender usually requires specific coverage. [edit]Gap insurance Main article: Gap insurance Gap insurance covers the excess amount on your auto loan in an instance where your insurance company does not cover the entire loan. Depending on the companies specific policies it might or might not cover the deductible as well. This coverage is marketed for those who put low down payments, have high interest rates on their loans, and those with 60 month or longer terms. Gap insurance is typically offered by your finance company when you first purchase your vehicle. Most auto insurance companies offer this coverage to consumers as well. If you are unsure if GAP coverage had been purchased, you should check your vehicle lease or purchase documentation. [edit]Health

insurance

Main articles: Health insurance and Dental insurance

Great Western Hospital, Swindon

Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance protects policyholders for dental costs. In the US and Canada, dental insurance is often part of an employer's benefits package, along with health insurance. [edit]Accident,

sickness and unemployment insurance

Workers' compensation, or employers' liability insurance, is compulsory in some countries

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Disability insurance policies provide financial support in the event of the policyholder becoming unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgage loans and credit cards. Short-term and long-term disability policies are available to individuals, but considering the expense, long-term policies are generally obtained only by those with at least six-figure incomes, such as doctors, lawyers, etc. Short-term disability insurance covers a person for a period typically up to six months, paying a stipend each month to cover medical bills and other necessities. Long-term disability insurance covers an individual's expenses for the long term, up until such time as they are considered permanently disabled and thereafter. Insurance companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled. Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work. Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.

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Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expenses incurred because of a job-related injury.

[edit]Casualty Main article: Casualty insurance Casualty insurance insures against accidents, not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified, such as auto, workers compensation, and some liability insurances.  Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement. Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss.

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[edit]Life Main article: Life insurance Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that aretiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance. Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities andendowment policies, are financial instruments to accumulate or liquidate wealth when it is needed. In many countries, such as the US and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. In the US, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. [edit]Burial insurance Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses, such as the cost of a funeral. The Greeks and Romans introduced burial insurance circa 600 CE when

they organized guilds called "benevolent societies" which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose, as did friendly societies during Victorian times.