PREFACE

1. OBJECTIVES:

To find out general insurance and which are the companies involved in

it.

To know what are the trends in General Insurance.

To find out the developments in the General Insurance.

To find out the Procedure of Claims.

2. METHODOLOGY:

The study was carried out in Mumbai.

Extensive Library Research was carried out.

Various Websites were referred.

Primary data was collected through interviews.

Various books, magazines and newspapers have been referred.

EXECUTIVE SUMMARY

Insurance is not the sale of products, but servicing customers.

It is a system, by which the losses suffered by a few are spread over many,

Exposed to similar risks. Insurance is a protection against financial loss arising:

on the happening of an unexpected event. Insurance companies collect premiums

to provide for this protection. A loss is paid out of the premiums collected from

the insuring public and the Insurance Companies act as trustees to the amount

collected. The very fundamental principle of spreading of the risk is actually

practiced by the insurance companies by reinsuring the risks that they have

insured. The opening up of the Insurance Sector to Private Companies, has made

available more products and world class service to Indian Customer.

This project has been made with an objective to give an insight into various facts

of General Insurance sector in India.

An attempt has been made to explain the apex body of General Insurance. i.e.

General Insurance Corporation of India, its structure, products and subsidiaries.

Also the review of latest entrants into insurance sector viz private players like

TATA AIG General Insurance Company, Reliance General Insurance Company

limited, Bajaj Allianz General Insurance Company, IFFCO Tokio General

Insurance Company, Royal Sundaram General Insurance Company limited and

ICICI Lombard General Insurance Company have been described in brief, Due to

the growth in the technological sector of the country, the insurance companies

have started utilizing these technologies to it’s optimum level. A case study based

on the devastating Mumbai floods on 26th July 2005 is been prepared and facts of

the case are being listed along with the effect of the particular situation on the

General Insurance Companies is been justified.

INDEX

Serial no. Topic Page no.1 Origin of Insurance 1 2 A brief history of the Insurance sector 2 3 Insurance Sector Reforms 5 4 Insurance Regulatory Authority 7 5 Insurance Industry Classification 8 6 4 I’s of Insurance 10 7 General Insurance 12 8 Product levels 15 9 Frequent Terms Used 20 10 Public Sector Subsidiaries 21 11 Private Players 30 12 Market Share 40 13 Insurance Regulatory & Development Authoritarian 42 14 Products 45 15 Changing Scenario of General Insurance Market 51 16 Trends 56 17 Claims 59 18 Case Study 62

Origin of Insurance

Whenever there is uncertainty there is risk. We do not have any control over uncertainties

which involves financial losses. The risk may be certain events like death, pension,

retirement or uncertain events like theft, fire, accident, etc.

Insurance is a financial service for collecting the savings of the public and providing

them with risk coverage. It comes under service sector and while marketing this service

due care is taken in quality product and customer satisfaction. The main function of the

Insurance is to provide protection against the possible chances of generating losses.

The insurance sector in India has come a full circle from being an open competitive

market to nationalization and back to a liberalized market again. Tracing the

developments in the Indian insurance sector reveals the 360-degree turn witnessed over a

period of almost two centuries.

1

Brief History of the Insurance Sector

The business of life insurance in India in its existing form started in India in the year

1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of

the important milestones in the life insurance business in India are:

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 taken over by the central

government and nationalized. 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.

2

1968: The Insurance Act amended to regulate investments and set minimum solvency

margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized 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.

INSURANCE SECTOR

The opening up of Insurance sector was a part of the on going liberalization in the

financial sector of India. The changing face of the financial sector and the entry of

several companies in the field of life and non life Insurance segment are one of the key

results of these liberalization efforts. Insurance business by way of generating premium

income adds significantly to be the GDP.

Over the past three years, more than thirty companies have expressed interest in doing

business in India. The IRDA (Insurance Regulatory Development Authority) is the

regulatory authority, which looks over all related aspects of the insurance business. The

provisions of the IRDA bill acknowledge many issues related to insurance sector.

The IRDA bill provides guidance for three levels of players - Insurance Company,

Insurance brokers and Insurance agent. Life Insurance sector is one of the key areas

where enormous business potential exists. In India currently the life insurance premium

as a percentage of GDP is 1.3 % against, 5.2 per cent in the US.

General Insurance is another segment, which has been growing at a faster pace. But as

per the current comparative statistics, the general insurance premium has been lower

than life insurance. General Insurance premium as a percentage of GDP was a mere 0.5

'per cent in 1996. In the General Insurance Business, General Insurance Corporation

(GIC) and its four subsidiaries viz. New India Insurance, Oriental Insurance, National

Insurance and United India Insurance, are doing major business. The General Insurance

Industry has been growing at a rate of 19 percent per year.

3

The entry of several private insurance companies, particularly international insurance

companies, through joint ventures, will speed up the process of insurance mobilization.

The competition will unleash new schemes and benefits, which will give consumers a

better Chance to save as well as insure. The regulatory system in India is relatively new

and takes some more time to make the Insurance sector a perfectly competitive one.

Insurance Regulatory Authority of India issued regulations on 15 subjects which

included appointed. Actuary, actuarial report, Insurance agents, Solvency margins, re-

insurance, registration of Insurers, and obligation of insurers to rural and social sector,

investment and accounting procedure. The reform in Insurance in India is guided by

factors like availability of a variety of products at a competitive price, improvement in

the quality of customer services etc. Also the employment opportunities in the Insurance

sector wil1 increase as major players set their business plans in India. The policy of the

government to open up the financial sector and the Insurance sector is expected to bring

greater FDI inflow into the country. The increase in the investment limit in this vital

sector has generated considerable business interests among the foreign Insurance

companies" Their entry wil1 certainly change the Insurance sector considerably.

4

Insurance Sector Reforms:

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor

R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its

future, direction. The Malhotra committee was set up with the objective of

complementing the reforms initiated in the financial sector.

In 1994, the committee submitted the report and some of the key recommendations

included:

Structure:

1. Government stake in the insurance Companies to be brought down to 50%. 2.

Government should take over the holdings of GlC and its subsidiaries so that these

subsidiaries can act as independent corporations.

3. All the insurance companies should be given greater freedom to operate.

Competition:

I. Private Companies with a minimum paid up capital of Rs. 1 bn should be allowed to

enter the industry.

2. No Company should deal in both Life and General Insurance through a single entity.

3. Foreign companies may be allowed to enter the industry in collaboration with the

domestic companies.

4. Postal Life Insurance should be allowed to operate in the rural market.

5. Only one State Level Life Insurance Company should be allowed to operate in each

state.

5

Regulatory Body:

1. The Insurance Act should be changed.

2. An Insurance Regulatory body should be set up.

Controller of Insurance (Currently a part from the Finance Ministry) should be made

independent.

Investment:

1. Mandatory Investments of LIC Life Fund in government securities to be reduced from

75% to 50%.

2. GIC and its subsidiaries are not to hold more than 5% in any company (There current

holdings to be brought down to this level over a period of time.)

Customer Service:

1. LIC should pay interest on delays in payments beyond 30 days.

2. Insurance companies must be encouraged to set up unit linked pension plans.

3. Computerization of operations and updating of technology to be carried out in the

insurance industry.

The committee emphasized that in order to improve the customer

Services and increase the coverage of the insurance industry should open up to

competition. But at the same time, the committee felt the need to exercise caution as any

failure on the part of new players could ruin the public confidence in the industry. Hence,

it was decided to allow competition in a limited way by stipulating the minimum capital

requirement of Rs. 100 crores. The committee felt the need to provide greater autonomy

to insurance companies in order to improve.

6

Insurance Regulatory Authority

On the recommendations of the Malhotra Committee, government has set up an interim

Insurance Regulatory Authority (IRA), with a view to activate an insurance regulatory

apparatus essential for proper monitoring and control of the insurance industry. The IRA

is headed by a chairman who is also Controller o0f insurance and chairman of TBC. The

other members of the IRA, not exceeding seven in number of whom not more than three

shall serve full time, shall be nominated by the central government.

INSURERS:

Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:

Life Insures:

• Life Insurance Corporation of India (LIC)

General Insurers

• General Insurance Corporation of India (GIC) (with effect from Dec ‘2000, a

national reinsurer)

7

INSURANCE INDUSTRY:

CLASSIFICATION

INSURANCE

LIFE INSURANCE GENERAL INSURANCE

Fire Insurance Marine Insurance Mediclaim Motor Vehicle

8

SOME PLAYERS IN THE INDUSTRY:

Life Insurance General Insurance

Life Insurance Corporation of India. General Insurance Corporation of India.

1. Oriental Insurance Company Ltd.

2. New India Assurance Company Ltd.

3. National Insurance Company Ltd.

4. United India Insurance Company Ltd.

New Entrants

ICICI Prudential Life Insurance Ltd. Bajaj Alliaz General Insurance Company Ltd.

Tata AIG Life Insurance Corporation Ltd. Reliance General Insurance Company Ltd.

ING Vysya Life Insurance Corporation Ltd. Tata AIG General Insurance Company Ltd.

Om Kotak Mahindra Life Insurance

Corporation Ltd.

Royal Sundaram Alliance Insurance Company

Ltd.

9

4 I’s of Insurance Service

The 4 I’s refers to the different dimensions/ characteristics of any service. Unlike

pure product, services have its own characteristics and its related problems. So the

service provider needs to deal with these problems accordingly. The service

provider has to design different strategies according the varying feature of the

service. These 4 I’s not only represent the characteristics of different services but

also the problems and advantages attached to it.

These 4 I’s can be broadly classified as:

• Intangibility

• Inconsistency

• Inseparability

• Inventory

• Intangibility:

Insurance is a guarantee against risk and neither the risk nor the guarantee is

tangible. Hence, insurance rightly come under services, which are intangible.

Efforts have been made by the insurance companies to make insurance tangible to

some extent by including letters and forms

10

• Inconsistency

Service quality is often inconsistent. This is because service personnel have

different capabilities, which vary in performance from day to day. This problem of

inconsistency in service quality can be reduced through standardization, training

and mechanization.

• Inseparability

Services are produced and consumed simultaneously. Consumers cannot and do

not separate the deliverer of the service from the service itself. Interaction between

consumer and the service provider varies based on whether consumer must be

physically present to receive the service.

• Inventory

No inventory can be maintained for services. Inventory carrying costs are more

subjective and lead to idle production capacity. When the service is available but

there is no demand, cost rises as, cost of paying the people and overhead remains

constant even though the people are not required to provide services due to lack of

demand.

In the insurance sector however, commission is paid to the agents on each policy

that they sell. Hence, not much inventory cost is wasted on idle inventory. As the

cost of agents is directly proportionate to the policy sold.

11

GENERAL INSURANCE

With the opening up of the insurance industry to the private sector, the need for a strong,

independent and autonomous Insurance Regulatory Authority was felt. As the enacting of

legislation would have taken time, the then Government constituted through a

Government resolution an Interim Insurance Regulatory Authority pending the enactment

of a comprehensive legislation.

The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for

the establishment of an Authority to protect the interests of holders of insurance policies,

to regulate, promote and ensure orderly growth of the insurance industry and for matters

connected therewith or incidental thereto and further to amend the Insurance Act, 1938,

the Life Insurance Corporation Act, 1956 and the General insurance Business

(Nationalization) Act, 1972 to end the monopoly of the Life Insurance Corporation of

India (for life insurance business) and General Insurance Corporation and its subsidiaries

(for general insurance business).

Definition and meaning:

1. INSURANCE:

Insurance is the means of managing risk and protection against financial loss

arising as a result of contingencies, which may or may not occur.

In other words, insurance is the act of providing assurance, against a possible loss,

by entering into a contract, with one who is willing to give assurance. Through this

contract the person willing to give assurance binds himself to make good such loss, if it

occurs.

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2. GENERAL INSURANCE:

General insurance means managing risk against financial loss arising due to fire,

marine or miscellaneous events as a result of contingencies, which may or may not occur.

General Insurance means to “Cover the risk of the financial loss from any natural

calamities viz. Flood, Fire, Earthquake, Burglary, etc.. i.e. the events which are beyond

the control of the owner of the goods for the things having insurable interest with the

utmost good faith by declaring the facts about the circumstances and the products by

paying the stipulated sum , a premium and not having a motive of making profit from the

insurance contract.”

Some of the General Rules:

1. Mis-description :

The insurance policy shall be void and all the premiums paid by insured may be

forfeited by the insurance company in the event of mis-presentation or mis-

declaration and/or non-disclosure of any material facts.

2. Reasonable care :

The insured shall take all reasonable steps to safeguard the property insured

against any loss or damage. Insured shall exercise reasonable care that only

competent employees are employed and shall take all reasonable precautions to

prevent all accidents and shall comply with all statuary or other regulations

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3. Fraud :

If any claim under the policy may be in any respect fraudulent or if any fraudulent

means or device are used by the insured or any one acting on the insured’s behalf

to obtain any benefit under the insurance policy, all the benefits under the

insurance policy may be forfeited.

4. Few basic principles of general insurance are :

1. Insurable interest

2. Utmost good faith

3. Subrogation

4. Contribution

5. Indemnity

5 Risks of loss not covered under general insurance are:

The loss or damage or liability or expenses whether direct or indirect occasion by

happening through or arising from any consequences of war, invasion, act of foreign

enemy, hostilities (whether war be declared or not), civil war, rebellion revolution, civil

commotion or loot or pillage in connection therewith and loss or damage caused by

depreciation or wear and tear. However the risk of loss or damage by war can be insured

by payment of additional premium in some cases only.

14

Product levels:

In this figure there is a nucleus or core in the center, which is supported by series of

tangible and intangible features and benefits and these form a cluster around the core

product.

AUGMENTED CORE POTENTIAL

EXPECTED

15

Level Type of

service

Contents Insurance sector

1 Core service Basic service product • Life

• Non-life insurance

policy

2 Expected

service

Basic product and minimum

purchase conditions that must be

met.

• After sales service

• Low claim settling

period.

3 Augmented

service

Something different, which

enables one product to be

differentiated from other

• Technology

• Online premium

payment

• Payment through credit

cards

• Standing instruction to

bank

4 Potential

service

Features that attract the customers

and are useful to them.

• Maturity claims settled

on or before the maturity

date.

• Loans

The core product of insurance company is insuring life and non life products. People opt

for this service as they want to secure their life, people dependent on them and other

valuable things in life.

The time factor plays an important role while providing service to the customer. The

customer expects that the procedures for settling the claim should be short and not much

time consuming. They should get the benefits of the service as soon as possible.

16

Today the technology is boosting in each and every field. Insurance is not an exception.

Companies have started providing customers facility of online payment of premium

through their websites. They also provide online assistant to the customer the policy

status and how to calculate the premium. To calculate the premium they just need the

present age, the type of police, sum assured, and accident covered if any. By filling in this

information you can calculate the amount of premium you have to pay. The customer can

pay their premiums by means of credit cards or can also give standing instruction to the

bank in order to pay their monthly premiums.

The insurance companies also provide loan facilities against their policies. At present

loans are granted on unencumbered polices as follows:

• Up to 90% of the Surrender Value for policies, where the premium due is fully paid-

up, and

• Up to 85% of the Surrender Value for policies where the premium due is partly paid-

up.

The minimum amount for which a loan can be granted under a policy is Rs150. The rate

of interest charged is 10.5% p.a., payable half-yearly. Loans are not granted for a period

shorter than six months, or on the security of lost policies (the assured must have the

duplicate policies) or on policies issued under certain plans. Certain types of policies are,

however, without loan facility.

17

FREQUENT TERMS USED

Agent:

An insurance company representative licensed by the state, who solicits,

negotiates or effects contracts of insurance, and provides service to the policyholder far

the insurer.

Actual Total Loss:

It is a loss where the goods are completely lost and become irrecoverable

Additional cover:

An insurance policy extended to cover additional risk perils such as strikes. Riots

and Civil commotion etc on payment of extra premium.

Agreed value policy:

Policy which undertakes to pay a specified amount in case of total loss.

Under this case the policy does not take into account the current market value.

Assessor:

Person who estimates the value of goods for the purpose of apportioning the sum

payable by the underwriters to settle the claims. Also called as Surveyor.

Assured:

Party indemnified against 19ss by means of insurance.

Burglary:

It is a theft committed by breaking into or out of the premises. Evidence of

breaking In, Is necessary.

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Coverage:

The scope of protection provided under a contract of insurance; any of several risks

covered by a policy.

Cargo insurance:

A generic term used in both inland marine and ocean marine insurance to

designate the type’s of insurance available to provide coverage for cargo that is being

transported by truck, rail, air, ship, or boat.

Certificate of Insurance:

A statement of coverage issued to an individual insured, specifying the insurance

benefits and principal provisions applicable to the member.

Claim:

The formal request by a policyholder or a claimant for payment of loss under an

insurance policy.

Co-insurance:

A provision under which an insured who carries less than the stipulated

percentage of insurance to value, will receive a loss payment that is limited to the same

ration which the amount of insurance bears to the amount required;

Cover Note:

Is the document that is issued provisionary pending issuance of insurance Policy.

Indemnity:

Legal principle that specifies an insured should not collect more than the actual

cash value of a loss but should be restored to approximately the same financial position

as existed before the loss.

19

Insurable Interest:

A condition in which the person applying for insurance and the person who is to

receive the policy benefit will suffer all emotional or financial loss, if any untouched

event occurs. Without insurable interest, an insurance contract is invalid,

Insurance:

Social device for minimizing risk of uncertainty regarding loss by spreading the

risk over a large enough number of similar exposures to predict the individual chance of

loss.

Net Premium:

The portion of premium rate which is designed to cover benefits of the policy,

excluding expenses, contingencies and profit.

Policy:

Is the legal document that has the conditions of the insurance contract.

Premium:

It is the amount paid to secure an insurance policy.

Salvage:

Recovery made by an insurance company by the sale of property which has been

taken over from that insured as a part of loss settlement. The remains of damaged vehicle

or any other property.

Third party:

Any person other than the two parties signing an insurance, contract.

Underwriting:

Underwriting of a risk involves consideration of material, facts on the basis of

which a decision will be taken whether to accept the risk and if so at what rate of

premium.

20

Public Sector Subsidiaries

I. Oriental Insurance Company.

The Oriental Insurance Company Ltd. (OICL) is one of the leading General Insurance

companies in India and is a subsidiary of the General Insurance Corporation (GIC) of

India. It is one of the oldest Insurance. If companies and was established in the year 1947.

The Company transacts all kinds of non-life insurance business ranging from insurance

covers for very big projects to small rural insurance covers. OICL, is the –

• First to have underwritten the biggest Grass Root Refinery Project, Reliance

Jamnagar Refinery.

• First to have issued a Package Policy under mega risk to PSU Oil giants. .

• First to have issued Advance Loss of Profits policy in India.

• First to have issued directors & Officers liability policy in India.

• First to introduce Kidnap & Ransom cover in India.

• First to have issued Stock Brokers and Stock Exchange custodial services policy

in India.

• First to have issued tailor-made cover for Cellular Communication systems.

• First to have front office computerization drive in India.

• First to have a system of in-house loss assessment upto statutory limits.

• First to have started motor third party conciliatory proceedings.

21

THE PROFILE The Oriental Insurance Company' Ltd. (OICL) is one of the leading General

Insurance companies in India and is a subsidiary of the General Insurance Corporation

(GIC) of India. It is one of the oldest Insurance companies and was established in the

year 1947. The Company transacts all kinds of non-life insurance business ranging from

insurance covers for very big projects to small rural insurance covers.

OICL has its Head office in New Delhi, the capital of India. The Company has 21

Regional Offices, 311 Divisional Offices and 635 Branch offices in various cities of the

country.

Reinsurance connections are spread all over the world. The Company has a very

high reputation in the Reinsurance market.

OICL specializes in devising special covers for large projects like Power Plants,

Petro-chemical, Steel Plants and chemical plants. It has a highly technically qualified

and competent team of professionals, to render the best customer service. The Company

has a dedicated project cell at the Head Office as well as major cities of India. A special

R & D team has been dedicated to bring out special innovative covers like Stock-

Brokers' Policies, Special Package Policies etc.

MISSION

o To develop general insurance business in the best interest of the community.

o To provide financial security to individuals, trade and commerce by offering

insurance products and service of high quality at affordable cost.

22

VALUES

o Highest priority to customer needs.

o High standards of public conduct.

o Transparency in operations.

COMMITMENTS TO THE CITIZENS

o In areas coming within competence of GIC respond to all commercially viable

general insurance requirements of the citizens, not hitherto available within three

months from the date on which such a demand is received.

o In areas covered by tariff, appropriate proposals will be submitted to the Tariff

Advisory Committee with appropriate comments within two months.

o Continue to provide customized insurance products for weaker sections of the

society at affordable price within six months of receipt of a request for a specific

type of cover.

o Prepare booklets on standard policy covers setting out essential information and

make such booklets readily available for purchase at suitable places.

o Promote customer education in general insurance service by holding workshops

in important regional centers.

o Make available to a customer, on request to the policy issuing office, the status of

his claim and/or claim settlement details within 7 working days.

o Endeavor to set up a system of Ombudsman at four metropolitan cities to

conciliate disputes on personal line insurance claims

23

CORPORATE OBJECTIVES:

o To serve better the insurance needs of the entire community, keeping

CUSTOMER as the focus.

o To serve better the insurance needs of the entire community, keeping

CUSTOMER as the focus.

o To manage Business profitably, Manage funds judiciously and deploy investible

funds for optimum Yield.

o To manage Business profitably, Manage funds judiciously and deploy investible

funds for optimum Yield.

o To work towards minimization of losses and develop Risk Management

Technologies.

o To function as a strong and dynamic non-life insurer.

24

PRODUCTS:

The various products can be grouped under the following categories:

o Individuals/Family

o Marine

o Professionals

o Business/Office/Traders

o Engineering/Industry

o Agriculture/Sericulture/Poultry

o Animals/Birds

o Aviation

o Motor Vehicle – Private/Commercial

o Health-Mediclaim/Overseas Mediclaim/Personal Accident

25

Documents requirement for various types of Claims

Different documents are required for settling different types of claims. The most

commonly required ones are mentioned under each claims type listed below. Your

full cooperation to surveyor/Investigator appointed by the Company would enable

prompt settlement of claims.

o Claim due to Fire and/or Explosion.

o Claim due to Flood, Storm, Cyclone, Earthquake, and Subsidence/Landslide.

o Claim due to Riot, Strike, Malicious Damage and Terrorism (RSMDT).

o Marine Inland Transit Loss of cargo/machinery.

o Marine Loss of cargo/machinery for export'

o Marine Loss of cargo/machinery during Import

o Claim due to Electrical/Mechanical/Electronic Breakdown/mishandling/

o Impact damage to machine.

o Claim due to Burglary/Theft of Vehicle

o Accidental Death Claim

o Permanent Disability/Injury claim due to accident

o Temporary Total Disability (TTD) (Weekly compensation) claim due to accident

o Mediclaim claim due to hospitalization (disease/accident)

o Claim due to Death of Cattle (Non-IRDP)/Permanent Total Disablement.

Damage claim to private Vehicle (Car/2Wheeler) due. to accident

o Claim of Damage to Commercial Vehicle (Taxi/Bus/Lorry) due to accident.

Third Party (T.P.) Claim due to accident

26

II. The New India Assurance Company.

Established by Sir Dorab tata in 1919, New India’ was the first fully Indian owned

insurance company in India. There were nearly 150 insurance firms in India - including

ones from France, the UK and America. These were operated through managing agencies

in India largely held by Indian business houses.New India is a leading global insurance

group, with offices and branches throughout India and various countries abroad. The

company services the Indian subcontinent with a network of 1,130 offices, comprising

26 Regional offices, 366 Divisional offices and 738 Branches. With approximately

25,000 employees, New India has the largest number of specialist and technically

qualified personnel at all levels of management, who are empowered to underwrite and

settle claims of high magnitude

New India has historically been a frontrunner in several diverse fields of business and

industrial activity. New India are lead underwriters of India's Space programn1e having

insured several INSAT and other, satellites. New India are pioneers in Engineering

insurance, Financial risks insurance and are now offering customized Risk Management

solutions to our: corporate clients in the Private and public Sectors in Power, Telecom,

Petrochemicals, Steel and Automobile industries

New India's foreign operations started with the establishment of an office in London in

1920. An international presence was built up by New India as a direct writing Company

in 23 countries spanning 5 continents. It increased its reach and capacity, for reinsurance

facilities for all classes of business.

Starting way back in the 1920s, New India's UK operations have now taken deep root.

New India is party to one of the oldest reinsurance treaties in the UK market. Through

participation in Aviation and Marine Hull underwriting, New India has, over a period of

time, strengthened its market presence. In 1980's with the establishment of a full-fledged

branch to underwrite UK Business, it has extended its UK operations, authorized by the

Department of Trade and industry

The New India commenced its Japan operations in 1950, and now: operates through 8

branches. The Japanese operation covers 35% of the Company’s overseas premium

income.

27

II. The National Insurance Company

Since incorporation in the year 1906, National Insurance~ Company has been

carrying out general insurance business under private management until 1972, the year

of its nationalization. In the same year 22 foreign and 11 Indian Insurance Companies

were amalgamated with National Insurance Company Limited, as a subsidiary company

of General Insurance Corporation of India

Headquartered in Calcutta it has an organizational network of over 964 offices

with around 20,077 trained workforces. The company also has operations in Hong Kong

and Nepal and ranks among the top global business insurers. Later on in 2002, with the

passage of Insurance amendment Bill (2002), National Insurance Company has been

delinked from GlC and. has been functioning as an independent company

Its product range includes motor vehicle insurance; fire insurance on buildings

and other assets; various crime covers like burglary and theft of cash; machinery

breakdown cover for industrial equipment; transit damage cover for imported or

exported goods; as well as legal liability cover.

Professional indemnity and directors and officer’s liability covers are some of the

new covers. NICO General Insurance seeks to attract clients and intermediaries and

flexibility in claims settlements, and at the same time ensuring that we do not erode

shareholder value. The objective is to add value to the shareholders' funds whilst

ensuring customer satisfaction? The strength of NGI is in its balance sheet.

NICO General Insurance views the future and its prospects as extremely bright,

exciting and rewarding for staff, clientele and shareholders alike.

28

IV. United India Insurance Company

United India Insurance is one of the four subsidiaries of the General Insurance

Company carrying on general insurance business with its head office at Chennai. Later

on in 2002, with the passage of Insurance amendment Bill (2002), United India

Insurance has been Del inked from GIC and has been functioning as an independent

company.

UI spans the country with a network of 1123 offices and manpower of Over

21,000 employees. The organizational structure comprises 22 regional offices, 327

divisional offices.., and 777 branch offices, supported by 21,505 employees. ICRA has

maintained the iAAA rating, indicating the claims paying ability of United India

Insurance (UII) to be of the highest order. The rating takes into consideration the

favorable prospects for the domestic general insurance industry following the

deregulation of the sector.

UII continues to be a dominant player in the Indian insurance industry, with an

overall market share of 25% and a leadership position in the southern markets. UII is a

Pioneer of Personal Insurance Products in India who specializes in non-life insurance

products including Medical and Accident Insurance. It enjoys a market share of over 25

percent of the non-life insurance sector in India.

29

PRIVATE COMPANIES

1. Bajaj Allianz General Insurance Company:

Allianz AG:

Allianz group was founded in 1890 and is one of the world's leading insurance

companies with over 100 year's experience in insurance and related services. It is also the

largest insurer in Europe. Allianz group has multi-local structure and presence in over 70

countries. The key business areas of Allianz group include General Insurance (property,

engineering, marine, motor, casualty and miscellaneous), Reinsurance, Risk

Management, Life & health insurance, Asset Management and Pension Funds

Management.

Bajaj Auto Ltd.

Bajaj Auto Ltd the flagship company of Bajaj Group was incorporated in 1945 as

Bachraj Trading Corporation. Initially it started by assembling two and three wheelers in

collaboration with Piaggio of Italy. After the expiry of the Agreement in 1971 the two

and three wheelers acquired the brand name of Bajaj. The strength of the company lies in

its strong brand image and ability to offer value for money products leveraging on its

large-scale operations.

The Joint Venture

Bajaj Allianz General Insurance a joint venture non-life company promoted

jointly by Bajaj Auto and German insurer- Allianz. Indian auto major holds 74% while

Allianz holds 26% in the Joint Venture, and has an authorized and paid up capital of Rs.

ll0 crores. Mr. Graham Norris is the CEO of the company. Bajaj Allianz General

Insurance will leverage the customer base and expertise of Bajaj Auto Ltd and Allianz.

30

2. Royal Sundaram General Insurance

Company Limited:

Sundaram Finance

Sundaram Finance Limited (SF) was established In 1954 with a paid-up capital of

Rs. 0.02 million, primarily to assist the development of Road Transport Industry.

SF has been providing financial assistance to road transport operators for

acquiring commercial vehicles under hire purchase system. Emerging as the leader in the

industry, SF has been staying at that position for over four decades. SF diversified into

equipment leasing in 1981.

Royal & Sun Alliance

Royal & Sun Alliance is one of the world's leading international Insurance companies.

The Sun was established in 1710 and is the oldest. Insurance company in existence still

trading under its original name. The

Alliance was founded in 1824 and the Royal in 1845.

The Group's international presence began to emerge in the 18th century with

business ventures in mainland Europe. Forays into the US and Canadian markets

followed in the 19th century, and in 1998, Royal & Sun Alliance became the first UK

insurance company to be granted a license to operate in China.

The Joint Venture

The joint venture bringing together Royal & Sun Alliance Insurance and

Sundaram Finance Limited started its operations from March 2001. The company is Head

Quartered at Chennai, and has two Regional Offices, one at Mumbai and another one at

Delhi. The venture is aiming at Rs. 120 Crores in revenue during first year of its

operations and is confident of breaking even by fifth year.

32

3. ICICI Lombard General Insurance

Company:

ICICI

ICICI Ltd. was established in 1955 by the World Bank, the Government of India and the

Indian Industry, to promote industrial development of India by .Providing project and

corporate finance to Indian industry.

Since inception, ICICI has grown from a development bank to a financial

conglomerate and has become one of the largest public financial institutions in India.

ICICI has thus far financed all the major sectors of the economy, covering 6,848

companies and 16,851 projects.

Lombard

Lombard Canada Ltd., is a leading insurance management company responsible

for providing insurance management services for all of the Lombard group's commercial,

personal, and specialized insurance companies. Canadian owned and operated, Lombard

Canada Ltd. has its head office in Toronto and has annual sales in excess of$500 million

and is a wholly owned subsidiary of Fairfax Financial Holdings Limited (FFH on the TSF

Lombard Canada Ltd. has achieved a reputation for providing solid underwriting

performance, diversified books of business and strong capital positions.

The Joint Venture

ICICI Lombard General Insurance Co will be headed by Mr. Sanjiv Kerkar. ICICI

would hold about 74 percent stake, while Canadian insurer Lombard would hold the

maximum permissible 26 percent and commence business with a start-up capital

ofRs.100 crore. ICICl Lombard has plans to sell covers to the corporate clients of ICICl.

St the same time it will sell property insurance for ICICI home loan seekers and auto

insurance for those availing of car finance.

33

4. Tata AIG General Insurance Company

Limited:

TATA Group

Tata Enterprises with 82 companies, spread over seven sectors and with an annual

turnover exceeding US $ 8.8 billion, employs more than 262,000 people. Tata Group has

shown over years that it is a value driven company and has" pioneering contributions in

various fields including insurance, activation, iron and steel. Tata companies have forged

a number of global alliances with eminent international partners in several fields. In terms

of capital market performance as many as 40 listed Tata companies account for nearly

5% 6fthe total market capitalization of all listed companies.

TATA Group in Insurance

The Late Sir Dorab Tata was the founder Chairman of New India Assurance Co.

Ltd., a group company incorporated way back in 1919.

Government of India took over the management of this company as a part of

Nationalization of general insurance companies in 1972. Not deterred by the move, Tata

group have ventured into" risk management services having tied up with AIG group, back

in 1977, with the incorporation of Tata AIG Risk Management Services Pvt. Ltd.

34

AIG

“American Insurance Group is the leading U.S. based international insurance and

financial services organization and the largest underwriter of commercial and industrial

insurance in the United States. Its member companies write a wide range of commercial

and personal insurance products through a variety of distribution channels in over 130

countries and jurisdictions throughout the world.

AIG's global businesses also include financial services and asset management,

including aircraft leasing, financial products, trading and market making, consumer

finance, institutional, retail and direct investment fund asset management, real estate

investment management, and retirement savings products.

The Joint Venture

Tata AIG General Insurance Co. Ltd. has a start-up capital of Rs. 125 crores of

which 74 per cent has been brought in by Tata Sons and American partner brings in the

balance 26 per cent.

Tata -AIG plans to be the first Indian insurance company to offer a comprehensive

policy to cover various risks in the IT sector, risk arising out of virus, cyber crime,

negligent acts, errors and omissions and third party liability from a security failure. Other

products on offer are property, casualty, marine, directors and officer’s liability, accident

and health, homeowners and automobile insurance.

35

Bajaj Allianz General Insurance Products

o Personal Accident

o Hospital Cash Daily Allowance Policy

o Health Guard

o Critical Illness

o Burglary Insurance

o Householders Insurance

o Travel Companion

o Fidelity Guarantee Policy

o Office package

o Money Insurance

o Public Liability

o Plate Glass Insurance

o Consequential Loss (Fire) Insurance Policy

31

Tata AIG General Insurance Company Products

o Executive Guard

o Family Guard

o Travel Guard

o Home Secure

o Business Guard Sanjeevani

o Business Guard Jyothi

36

5. Reliance General Insurance Company

Limited:

Reliance Group'

Reliance 'Group is India's largest business house has annual sales turnover of Rs. 41,280

crore (US$ 9,003 million) and has posted a net profit of Rs. 2,940 crore (US $ 641

million) for the 12-month period ending June 30, 2000. The Group has total assets of Rs.

52,100 crore and net worth of Rs. 22,415 crore. It has a large investor base of over 5

million, as well as a large customer base in retail (textiles, LPG, Cellular phones, etc.)

and commercial segments.

Reliance Industries Limited, India's largest private sector enterprise, is a, major player in

the Indian petrochemicals sector. Relianc6~s operations capture value addition at every

stage from producing crude oil and gas to polyester and polymer products and are

vertically integrated to the production of textiles. Reliance has one of the largest

marketing networks in the Indian Industry. All its brands are market leaders.

Reliance General Insurance Company Limited

Reliance group has announced its plans to enter the Indian insurance sector- both

in the life and general insurance businesses'. Reliance Industries plans to bring in around

Rs. 300 Crores into its insurance venture through its financial arm Reliance Capital Ltd.

Reliance group will be the lead investor for this initiative. The two companies will

have an initial authorized capital of Rs.200 crores (US $ 43.62 million) each. This is the

first application from an Indian company without a foreign insurance tie-up. However,

Reliance will associate with international insurance consultants to bring the best practices

in the business to India.

37

Iffco Tokio General Insurance Company ltd

Iffco

Indian farmer’s fertilizers cooperative limited was created on Nov 3, 1967 as a multi unit

cooperative society engaged in production and distribution of fertilizers the byelaws of

the society provide a broad framework for the activities of IIFCO as a cooperative society

the main emphasis is on production and distribution of fertilizers

The Tokio marine and fire insurance

The Tokio marine and fire insurance (Tokio marine) company holds a leading position in

Japan’s property and casualty insurance industry. It is the second largest in P & C

insurance market in the world.

With superior capitalization, stable profitability and conservative management tem the

company provides a large rage of property and casualty insurance products n services

including, automobile fire and personal accident to retail corporate clients

38

The Joint Venture

IFFCO TOKIO General Insurance Company is a joint venture promoted by India Farmers

Fertilizers Co-Operative, Tokio Marine and fire Insurance Company, Japan, the fifth

largest insurance company in the world, Krishak bharathi Cooperative ltd. (KRIBHCO),

and Indian potash. Their contribution to the Rs.100 crore equity capitals is 49 percent, 20

percent and 5 percent respectively. The head Office is in Delhi and operating Office are

in about 20 cities.

IFFCO Tokio Insurance Products

• Home & Family Protector

• Standard Fire & Special Perils

• Burglary and House Breaking

• Personal accident

• Trade Protector

• Travel Protector

39

Market Share

As by this time we are well versed with all the General Insurance companies both

Public and private we know how each company contributes serving the customers

and also generating revenue through it. We also know that General Insurance

contributes towards the Gross Domestic Profit, but now let us see how these

companies individually contribute towards the Gross Domestic Profit through the

way of Market Share of each company both Private & Public.

As we can see in the Pie Charts a comparison of 3 consecutive years have been

taken which are 2003-04, 2004-05 & 2005-06.

Public Companies have been dominating the General Insurance Market since a

long time, the market share of Private companies have been improving in the last

few years by approximately 6 % each year, but then too Public sector companies

capturing the major market.

But also in Public sector companies New India Assurance is been leading the way

which is been closely followed by the remaining. Among the private players we

can note that ICICI Lombard is leading the way.

By considering 2005-06 as the base year, we can note that the market share of

Public companies have been deteriorating having 73.43% of the market share from

85.54% in the year 2003-04.

40

4

Companywise Market Share of Gross Premium Underwritten (In India)

Industry Total - 2003-04

Oriental; 18.13%

New India; 25.90%

National; 21.87%

Private Co's; 14.46%

United India; 19.63%

Private Co's Total - 2003-04

ICICI Lombard; 22.43%

IFFCO Tokio; 13.08%

Bajaj Allianz; 21.08%

Chola-mandalam;

4.28%

HDFC Chubb; 4.94%

TATA-AIG; 15.64%

Royal Sundaram; 11.42%

Reliance; 7.13%

Industry Total - 2004-05

United India; 16.80%

Private Co's; 20.29%

National; 21.68%

New India; 24.02%

Oriental; 17.21%

Private Co's Total - 2004-05

ICICI Lombard; 24.88%

IFFCO Tokio; 14.09%

Bajaj Allianz; 24.06%

Chola-mandalam;

4.78%

HDFC Chubb; 5.17%

TATA-AIG; 13.18%

Royal Sundaram; 9.30%

Reliance; 4.54%

Industry Total - 2005-06

United India; 15.45%

Private Co's; 26.57%

National; 17.26%

New India; 23.46% Oriental;

17.26%

Private Co's Total - 2005-06

Reliance; 2.99%

Royal Sundaram; 8.36%

TATA-AIG; 11.28%

HDFC Chubb; 3.73%

Chola-mandalam;

4.06%Bajaj Allianz;

23.73%

IFFCO Tokio; 16.51%

ICICI Lombard; 29.34%

INSURANCE REGULATORY AND

DEVELOPMENT AUTHORITARIAN

Insurance Regulatory and Development Authority Act, 1999, came into being

from 19/04/2000.

Objects are stated in Act are as follows:

"An Act to provide for establishment of Authority to protect interests of holders

of insurance policies to regulate, promote and ensure orderly growth of insurance

industry and for matters connected there with and further to amend Insurance Act, 1938,

Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization)

Act, 1972".

Composition:

IRDA will consist of a chairperson and not more than Five whole time members

and not more than four part time members.

Whole time members shall hold office for 5 years or until age of 62 (65 in case of

chair person) whichever is earlier. Part time members shall hold office for not more than

5 years.

42

Powers and Function of Authority

1. To regulate, promote and ensure orderly growth of insurance and re- insurance

business

2. To issue a certificate of registration, renew, modify, withdraw, suspend or cancel such

registration of applicant, i.e. insurance company

3. To prepare a code of conduct for agents, surveyors and loss accesses and other

intermediaries who take part in insurance business

4. To exercise all powers and perform all functions of controller of Insurance under

Insurance Act, 1938

5. To protect interest of policy holders in matters concerning assignment of policy,

settlement of claims, terms and conditions of contract etc.

6. To promote efficiency in conduct of insurance business

7. To promote and regulate professional organizations connected with insurance business

8. To regulate investment of funds of insurance companies

9. To regulate maintenance of margin of solvency

10. To adjudicate disputes between insurers and intermediaries

11. To call for information from" undertake inspection and conduct enquiries and

investigations including audit of insurers, intermediaries etc.

12. To control and regulate rates', advantages, terms and conditions offered by Insurers

in respect of general insurance business riot so controlled by Tariff Advisory committee

13. To prescribe manner and forms in which books of accounts is to be maintained

14. To exercise other powers as such may be prescribed by central government.

43

Insurance Advisory Committee:

Authority has power to appoint a committee to provide guidance to

Authority and committee is called Insurance Advisory Committee.

This committee contains not more than 25 members excluding ex-officio member

representing interest of commerce, trade industry, agriculture, surveyors, agents,

intermediaries etc.

Chairperson and members ~f Authority are ex-officio members of Insurance

Advisory Committee.

15) Code of conduct for insurance agent:

Every insurer agent shall,

• Identify himself and insurance company of whom he is an agent

• Disclose his license to prospect on demand

• Give requisite information in respect of insurance product offered for sale by his

insurer and into account needs of prospect while recommending a specific 'plan.

• Disclose scales of commission payable to him if asked by prospect

• Indicate premium to be charged by insurer on insurance product

• Explain to prospect nature of information required in proposal from and also

importance of disclosure of material information

• Bring to notice of insurer any adverse habits or income inconsistency of Prospect

• Inform promptly about acceptance of rejection of proposal by insurer.

• Render necessary assistance to policyholder or claimant in complying with,

requirements of settlement of claims

44

Products

The different types of General insurance products are listed below. While most policies

are optional that is at the behest of the insured, some are mandatory. The mandatory ones

are:

• Motor Insurance

• Public liability (for corporate class)

Other policies include:

Fire insurance

o Building or flat

o Furniture fixtures & other content’s

o Loss of profit that is consequential loss

Miscellaneous insurance

o Personal insurance

o Burglary ,theft

o Workmen’s compensation

o Fidelity guarantee

o Cancer

o Mediclaim

o Comprehensive Package Policy for jewelry, T.V, V.C.R, Furniture etc…

45

Marine Cargo Insurance

o Cargo In Transit

o Cargo Declaration Policy

Marine Hull Insurance

Inland vessels ocean going vessels, fishing & sailing vessels, freight at risk, construction

of ships, voyage insurance of various vessels, ship breaking , insurance Awaiting break

up, insurance Oil & energy in respect of onshore & offshore risks including construction

risk.

Non – Traditional / Rural

o Cattle / Hens

o Crop

o Water Pump for agriculture

o Hut

o Other Livestock

o Motor Insurance

Motor insurance is mandatory for all types of vehicles in India. There are two types of

motor insurance viz

o Third party, which only insures the party / parties other than the owner in an

accident

o Comprehensive, which insures the owner as well as the third party involved.

46

The premium for motor vehicles is decided on the following factors:

o Value of the vehicle

o Location where it is to registered .places having higher claim rates (like Mumbai)

are likely to have higher premium

The premium for heavy commercial

o Value of the vehicle

o Gross laden weight, that is, the carrying capacity of the vehicle.

For HCV’s the driver is also insured along with the vehicle. A charge of rs.15/- is made

as premium for the driver. For all sorts of vehicles insured, the policy would not cover the

use on hire , reward or organized racing ,speed reliability trails and speed testing.

There is (NCB) No Claim Bonus applicable for each year an insured person does not

claim .It is accrued as a 5% deduction from the premium amount for the next year,

subject to maximum 50%.

Property Insurance

Property insurance covers land, buildings and the contents of building.

There are several types of Property insurance packages, but the most common are the

Fire Insurance and burglary Insurance

47

Fire Insurance

Fire insurance is a comprehensive policy, which goes beyond only fire accidents.

The policy, besides covering loss on account of fire, also covers loss on account of the

following

o Earthquake

o Riots

o Strikes

o Malicious Intent

o Floods

Fire insurance only can be taken by the owner of the premises to be insured. A tenant

cannot insure rented premises since he does not have insurable interest. But the tenant has

the option of insuring the contents of the premises. The premium is based on “Good

faith” and depends on the value of property being insured.

It should be noted that thought fire insurance is not compulsory, in case of corporate

availing of loans, the lending institution may insist on equipment or relevant property to

be insured against fire. This trend is now also being followed by housing finance

companies, some of which are insisting that the premises be insured against fire

48

Burglary

Burglary insurance covers all losses arisen out of burglary committed in one’s premises.

The only condition for lodging a claim on the insurance party is that there should be a

“forced entry” in to the premises. A forced entry may in the form of physical damage to

the entry area, or to a person or entry gained through coercion. In this case too, the policy

has no limitations and it is the right of the insured to decide upon the value of the

insurance cover

Overseas Mediclaim Policy – Travel Insurance

Policies issued in India under Overseas Mediclaim Scheme, as approved by

Reserve Bank Of Indian residents traveling abroad for any approved visits viz.

Business, Study Tour, Specialized training conferences, Employment or higher

studies. Premium on such policies may be collected in rupees but for employment in

foreign currency.

This policy was originally introduced in 1984, to provide for payment of medical

expenses in respect of illness suffered or accident sustained by Indian residents during

their overseas trips for official or holiday purposes.

In. 1998, a new policy known as VIDESH YATRA MITRA, was made available

for Business and Holiday Travelers. Cover for corporate frequent travelers were also

introduced.

49

The policy provides for following Sections:-

1) Medical Cover

2) Repatriation Of Remains

3) Checked Baggage Loss / Baggage Delay

4) Passport Loss

5) Personal Accident – Overseas

6) Personal Liability

7) Hijack Relief Benefit

The plan available now with various companies are however not the same as each

company has introduced. Some variation in the cover to suit the varying

requirements.

Types of overseas Mediclaim insurance policy

1) Individual Overseas Mediclaim insurance policy

2) Student Overseas Mediclaim insurance policy

3) Senior Citizen Mediclaim insurance policy.

50

CHANGING SCENARIO OF GENERAL

INSURANCE MARKET

'Looks to the future with confidence and optimism'

Brief the history of general Insurance.

In India General Insurance business started, Marine Insurance started on later part of the

17th century. Before nationalization in 1947 we have 147 insurance companies, foreign

and Indian both. But during there nationalization, in 1973 we have 107 companies that

merge into four companies, i.e. taken over by Government.

General Insurance Corporation of India (GIC) was set up in 1973 as a holding company,

with four subsidiary operating companies - National Insurance co Ltd., New India

Assurance Co. Ltd., Oriental Insurance co Ltd., and United India Insurance Co Ltd., with a

clear cut mission as set out in the Act.

The overall scenario in the insurance market in India after nationalization.

GIC and its subsidiaries function through a vast country - wide network of around 4100

offices spread across the length and breadth of the country, GIC has taken the benefit of

insurance to almost every district, across hilly terrain and often inaccessible areas of the

country. The customer interface is made easy through a network of agents, development

officers and employees at Branch, Divisional and Regional offices as well as at the

corporate level.

51

The GIC and its subsidiaries have a workforce of approximately 86,000

In 1973 tainted at various levels through in house training institutions. Now the total

number of employees went up.

The industry has also promoted the National Insurance Academy (NIA), which is the

premier training institute in insurance, catering not only to Indian Nationals but also to

select foreign nationals. The industry issues around 23 million documents and settles 2

million claims every year.

Country wide computerization in the recently past has made the task of policy- holder's

servicing easier and rapid. At the same time, profitable lines and premium components

increases and we became a investment company.

Where does Indian Insurance sector stand compared to International Insurance

Sector?

Technologically, Indian insurance sector is quiet comparable with the

international sector. Our vast resources of skilled and technical manpower, huge market

potentiality and technical know-how - all are comparable with the international market.

But lacking in the process of computerization and in pricing (premium rate) is also seen.

In product, we have demand in less because lack of awareness for adequate insurance

cover in India with insuring public. Our marketing strategy is not very modern. But we

are trying to rectify both these (Technology and Marketing) areas.

The problems faced by Indian Insurance Sector Today:

The main problems are:

[Lack of awareness for insurance needs.

[Lack of penetration due to inadequate marketing/delivery system.

[Total computerization still in the process of implementation.

[Sophisticated covers do not have adequate demands because of General attitude to

insurance in India.

52

The Schemes

Recognizing its organizational strengths, the Govt. of India has also entrusted the

corporation with the administration of various schemes for social melioration and public

welfare. Social security schemes benefiting millions of Citizens below the poverty line.

Personal Accident Insurance and Hut Insurance are operated all over the country for

which the premiums are paid by the Government. The GIC administers on behalf of

Government, the crop Insurance scheme for areas and crops notified under the crop

Insurance Scheme.

Various low cost mass insurance policies have been evolved over a period of time, e.g.

'Jan Arogya Bima Policy'.

Role General Insurance Industry is playing in the growth of economy of the country:

The General Insurance Industry has an enviable track record among public sector

units. It has a consistent profit and dividend paying record accompanied by a steady

growth in its financial resources.

Through investments in the- Government sector and: socially - oriented Sectors the

Industry has contributed immensely to the nation's development. The industry is

recognized as one of the largest financial' Institutions in the Country. The ventures

initiated by the industry in the areas of Mutual Fund, Housing Finance have done

exceedingly well in recent years.

To protect the country's foreign exchange reserves, the reinsurance arrangement are so

organized that maximum retention is made possible within the country while at the same

time protecting interests of the policy holders. The GIC'S inwards reinsurance wing,

called the SWIFT, maximizes the foreign exchange balance by acting as an international

insurer-accepting risk from all over the globe.

53

GIC'S International operation:

GIC'S international operations span over 31 countries around the globe. The reinsurance

expertise built over a long period has made the Indian Insurance Industry a globally

acknowledged reinsurer of repute GIC'S risk management skill has been backed by

specialists with a vast insurance experience.

Thus, the technical and underwriting skills have been acknowledged in the

international market. The corporation operates in 17 countries through branches and

agencies, whereas in another 14 countries, it has subsidiaries and associate

companies. The GIC has a subsidiary company known as 'India International Pvt,

Ltd.,' operating in Singapore and a joint-venture company, Kenindia Insurance co.

Ltd.

The impact of liberalization of economy in the activities of GlC.

With the liberalization of economy, General Insurance in India is poised for a quantum

jump, both in quality and quantity.

Vision for the future:

It is estimated that the industry will outstrip the present rate of growth and reach a

premium value of over Rs. l,20,000 millions by taking advantage of the extra-large mega-

risk and social awareness of insurance in general, even as . a developing country turns

into a developed country.

The task before the industry to service the growing number of policy-holders would

equally see a quantum jump in issuance of documents and settlement of claims. Matching

reserves and consequent investment will be a natural corollary.

54

It is expected that the investment portfolio will touch around Rs. 2,50,000 millions by

the end of the next decade, with the strength built up over the years since nationalization,

GIC new looks to the future with confidence and optimism, takes on global chal1enge

with its high standard of service, innovative initiative and a compelling social

perspective.

GIC's plan - in new business areas:

The two new areas that GIC is getting into are the areas of health care and crop

insurance. For the health care business, the corporation has received permission to set up

a separate management services company. GIC has plans to increase the scope of cover

in health care, personal accident and crop insurance and will require expertise in pricing

the products.

The Research & Development activities:

They have just entered these areas and for the coming five years we are investing

approximately 500 crores. GIC'S R & D cell is created backed up market research data.

The subsidiaries of GIC are becoming an autonomous body.

Privatization in the insurance sector of India - Is it in the right direction

It's purely a government decision and the nationalized sector is ready to face the

challenge. And have taken the challenge to stand in the stiff competition.

And now, many private companies have entered the market. These companies are a result

of merger of Indian companies with foreign companies.

55

TRENDS Trends in any sector basically refers to the up gradations or acquiring new technologies

which has replaced the conventional methods in any organizations

In Today’s automated and modernized era any organization cannot take a chance by not

maintaining pace with the competition.

With the passage of time and taking into consideration today’s needs and changing

scenario insurance companies should also adopt new technology i.e. it should be trendy

enough to meet customer needs and expectations.

Trends or use of technology should be such that it is eco friendly enough to be used by

customers. Today, right from a grocery shop to I.T sector technologies is explored to the

fullest

E-Business or E-commerce has sown its seeds in every sector of business which is one of

the strongest sign of improvement and technology.

As we are dealing here with insurance industry let us see the technology involved in the

Insurance sector.

Technological:

• Computerization:

Initially, in the late 1950’s the insurance companies used Unit Record Machines (Electro

Magnetic Machines) to process data punched into cards. Computers were introduces in

the mid 1960’s and by the 1980’s the Unit Phased Machines were phased out and the

entire process was computerized. This brought about greater efficiency and quick service

delivery.

56

• Internet:

Internet usage has drastically improved in the last decade. There was a tremendous

increase in the use of technology by GIC during the late 1990’s. The companies

Launched its website in the mid 1990’s to offer basic services such as modifying policies

(change of address, change of nominee, etc) and querying the status of the policy.

But today, the internet has completely changed the service delivery process. Internet is

today used to even sell insurance policies. Internet is, in fact, proving to be one of the

widely used distribution networks for selling insurance policies. Also internet is used for

sending premium notices to policy holders through e-mails.

Also GIC has a special feature on its website. It has a premium calculator which

accurately displays the amount of premium month wise and the remaining balance. One

just has to enter the age, name of the insurance policy, the sum assured and whether there

is an accident cover or not. By keying in this information, the entire premium amounts

are shown within no time. This has helped the customer in a way so that he/she doesn’t

have to travel all the way to the branch to ascertain the amount of premium to be paid.

• Metropolitan Area Network (MAN) and Wide Area Network (WAN):

GIC has commissioned a MAN connecting more than 75 branches in Mumbai. This

enabled the policy holders to pay their premiums and get their status report, surrender

value quotations and loan quotation, from any branch in the city. Following the MAN in

Mumbai, seven MAN centres (Chennai, Bangalore, Delhi, Calcutta, Pune, Hyderabad,

and Ahmedabad) became operational.

These MAN centres were connected to each other by a WAN network. This WAN was

designed for distributed processing without a central database – each division maintained

a database of the policyholders. The central office in Mumbai maintained an index of

policy numbers and the corresponding IP addresses of the servers where the details of the

policy were maintained.

57

• Electronic Clearance Service (ECS):

Almost all the big organizations today provide the ECS facility to its customers. A policy

holder having an account in any bank which is a member of the local clearing house can

opt for ECS debit to pay premiums. The advantage here is that once the option is

exercised, the policy holder need not visit a branch for paying the premium or collecting

the receipts. On the day indicated by the policy holder, the premium amount will be

directly debited to the bank account of the policyholder and the receipt will be issued by

the designated branch office.

• Bank ATM’s:

Many insurance companies have a tie-up with commercial banks so as to enable

policyholders to use the facility of paying premiums through the bank ATM’s. ICICI

Lombard has a tie up with ICICI bank; Bajaj Allianz has a tie-up with Corporation bank

and UTI Bank.

• Call Centres and SMS services:

Almost all the insurance companies have their own call centres which cater to the phone

based queries of the policyholders. This service is 24x7 and they have the Interactive

Voice Response (IVR) systems at all the branches.

Also, LIC and other companies now provide SMS services going with the new trends like

SMS banking in the banking sector.

58

Claims The Settlement of claims constitutes one of the important functions in an insurance organisation. The proper settlement of claims requires a sound knowledge of thee law, principles and practices governing insurance contracts and in particular a thorough knowledge of the terms and conditions of the standard policies and various extensions and modifications there under. The procedure in respect of claim a under various classes of insurance follows a common pattern and may be considered under 3 broad headings

Preliminary procedure It is essential that early notification of the loss is received by insurance undue delay in notification would adversely affect the position of the insurer. However if there is any delay in notification or not or weather is material will be ultimately decided by the courts based on the facts of the individual cases The notice of loss condition in liability policies provides for two aspects

a.) Notification of the happening of the accident immediately followed by b.) Notification of the receipt of claim or suit filed against the insured.

Under certain types of policies (e.g. Burglary) notice is also to be given to police authorities.

Loss Minimization At common law, there is a duty on the part of the insured to observe good faith .This duty of good faith means that at all times the insured has to act as if he is uninsured. For E.g., the private car package policy provides , among other things , that the insured shall take all reasonable steps to safeguard the motor car from loss or damage and to maintain it in efficient condition. In the event of any accident or breakdown the motor car shall not be left unattended without proper precautions being taken to prevent further damage or loss.

59

Procedural

On receipt of intimation of loss or damage insurers check that: a.) the policy is in force on the date of occurrence of the loss or damage b.) The loss or damage is by a peril insured by the policy. c.) Notice of loss received without undue delay. After this check up the loss is allotted a number and entered in the claims register.

Claim Forms

The contents of the claim form vary with each class of insurance .In general the claim in general the claim form is designed to elicit full information regarding the circumstances of the loss such as date of loss, time, cause of loss, extent of loss etc claim forms are invariably sued in fire and miscellaneous insurance.

Investigation and Assessment On receipt of the claim form duly completed from the insured the insurers decide about the investigation and assessment of loss if the loss is small the investigation to determine the cause and extent of loss is done by an officer of the insurers. Some times even this may be waived and the loss settled he basis of the claim form only. The investigation of larger or complicated claims is entrusted to independent professional surveyors who are specialist in their line the appointment of a surveyor is intimated to the claimant the surveyor is furnished with all relevant claim papers such as claim form policy copy etc…However, many a times surveyor is appointed and survey is carried immediately on receipt on notice of loss, that is even before claim form could be issued.

Claims documents

In addition to the claim form independent survey report certain documents are required to be submitted by the insurers to substantiate the claim for example for fire claims for fire claims a report for the fire brigade for motor claims driving license registration copy police report etc

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Arbitration It is distinct from litigation and is a method of settling disputes under contract in accordance and conciliation act 1996.

Settlement The claim is processed on the basis of Claim form Independent report from Surveyors, legal opinion, medical opinion etc as the case may be. Various documents furnished by the insured. Any other evidence secured by the insurers If the claim is in order settlement is effected by cheque the payment is entered in claims register as well as in the relevant process record. Appropriate recoveries are made from the insurers if any.

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Case Study

26/7/2005 – Mumbai under water

Mumbai will never be the same again. And so will the insurance sector in Mumbai after

the 26/7 floods. Torrential rains which killed thousands and rendered many homeless,

also led to loss of business and vehicles.

• The facts:

As fallout of the torrential rains, the non-life insurance sector was flooded with more than

10000 claims totalling over Rs. 2000 crores. However, these did not include the 50000

cars that have been damaged in Maharashtra.

While the top four private sector general insurance companies, ICICI Lombard General

Insurance, Bajaj Allianz General Insurance, Iffco Tokio General Insurance and Tata AIG

have together received claims worth over Rs 1,000 crore; the four state-owned general

insurance companies New India Insurance, Oriental Insurance, United Insurance and

National Insurance received claims close to Rs 1,500 crore.

Private insurer, Bajaj Allianz General Insurance Company Ltd (BAGICL) alone had

received claims for at least 10,000 motor vehicles after the recent floods in Mumbai.

As several companies temporarily closed down their operations and godown stocks went

missing, corporate claims were the highest, in terms of value. Next came claims for cars

and household goods and from shopkeepers and traders for their warehouses. A majority

of individuals and small and medium entrepreneurs also submitted claims.

ONGC's insurance claim is considered to be the largest given its loss of $ 500 million

after fire gutted the Bombay High rig.

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Insurance firms set up special cells to visit victims and settle claims. In many firms, the

special teams worked round-the-clock to take stock of the loss and speed up the

settlement process.

Bajaj Allianz settled claims worth about Rs 200 crore without any documentation, to the

victims of the recent floods in Mumbai.

After the natural calamity, the Finance Minister sought speedy redressal of claims. He

directed the Chairmen and Managing Directors of the four public sector general insurance

companies that claims below Rs 50,000, arising out of the recent floods in Maharashtra

and Gujarat, should be settled by August 31.

Public sector player, National Insurance Company received 3,000 claims for Rs 350 crore

from its customers in Mumbai for damage to property caused by the recent rains.

While some insurers had taken a re-insurance cover, some have not. Mumbai floods

brought to fore the ill-preparedness both among the mega polis administrative officials

and the insurance sector. While the latter seems to have realized the damages, the former

is still grappling with the situation. As death toll continues to rise, insurance firms have

realized the need to better manage natural calamities. The premium for flood covers may

rise in coming years.

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• The effect: Here’s a warning to the lakhs of Mumbaikars who are planning to insure their houses in

the wake of the recent deluge. One will have to read the fine print carefully. Public sector

insurance firms are quietly planning to drop the word ‘flood’ from the policy.

As of now, a household insurance policy is basically a fire insurance policy, which also

incorporates a flood insurance policy. However, with 10,000 policy-holders filing claims

totalling Rs 1,500 crores, insurance firms are looking at new ways to keep their heads

above water. After the last calamity—the Latur quake of 1993— insurance firms had

dropped earthquakes from the household insurance policy.

Those wanting to insure their homes against flooding may now have to pay a separate

premium. The insurance sector has suffered losses of about Rs 1,500 crore. These

companies may not get re-insurance for these policies as they had not taken re-insurance

for these small individual polices.

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5

Classwise Break-up of Gross Premium Underwritten (In India)

2003-04

Liability; 2.30%

P. A.; 2.30%

Others; 10.05%

Motor TP; 13.32% Health; 8.64%Aviation; 3.01%

MRN Hull; 2.94%MRN Cargo;

4.48%

Fire; 20.36%

Motor OD; 28.04%

Engg.; 4.55%

2004-05

Motor TP; 13.30%

Health; 9.53%

Aviation; 1.88%

MRN Hull; 2.97%

MRN Cargo; 4.22%

Fire; 18.84%Motor OD; 29.51%

Engg.; 4.91%

Others; 9.99%

P. A.; 2.80%

Liability; 2.05%

2005-06

Liability; 2.01%

P. A.; 2.89%

Others; 9.99%

Motor TP; 12.43%Health; 11.06%

Aviation; 1.96%

MRN Hull; 2.50%MRN Cargo;

3.87%

Fire; 18.36%Motor OD; 30.15%

Engg.; 4.80%

6

34,1

7037

,999

35,2

41

40,4

5742

,108

47,9

06

28,3

21 30,1

78

35,2

51

30,6

69

29,4

45 31,5

45

4,76

3

8,56

112

,877

967 1,

701

2,20

4

1,11

71,

838

2,02

4 5,06

7

8,85

2

15,9

20

2,95

6 5,01

38,

961

1,61

1

1,61

71,

623

2,58

0

3,30

7

4,53

6

3,53

3

4,68

9

6,12

4

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

INR

Mill

ions

National New India Oriental United India Bajaj Allianz Cholamandalam HDFC Chubb ICICI Lombard IFFCO Tokio Reliance Royal Sundaram TATA-AIG

Company-wise Break-up of Gross Premium Underwritten (Industry Total)

2003-04 2004-05 2005-06

7

31,8

04

33,0

28 37,5

30

6,98

2

7,38

4

7,86

5

4,61

3

5,17

4

5,09

5

7,08

2 8,63

4

9,80

6

43,7

67

51,7

01

61,5

76

20,7

98 23,3

4425

,446

13,5

42 16,6

97

22,5

75

4,70

2

3,31

9

4,00

1

3,62

0

3,59

5

4,09

6

3,60

2

4,93

5

5,85

4

15,7

00 17,4

95 20,3

68

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

INR

Mill

ions

Fire MRN Cargo MRN Hull Engg. Motor OD Motor TP Health Aviation Liability P. A. Others

Class-wise Break-up of Gross Premium Underwritten (Industry Total)

2003-04 2004-05 2005-06

Questionnaire

Q1.) What according to you, Is the General Insurance market growing to its maximum level or some more products/dimensions are yet to be discovered? Q2.) According to what are the trends in General Insurance? Q3.) On an average how much time does it take to settle a claim (period)? Q4.) How important is re-insurance according to you? Q5.) In General Insurance Corporation, public Sector companies are dominating past many years? Why? Q6.) What are Challenges faced by General Insurance companies? Q7.) What are the future prospects of General Insurance?