UNIVERSITY OF MUMBAI

PROJECT ON

“AN ANYLTICAL STUDY OF INSURANCE COMPANY

W.R.T. TATA AIG”

SUBMITTED BY

AMARKUMAR SYRYAWANSHI

ROLL NO.: 38

ADVANCED ACCOUNTANCY PART 1

ADVANVCED FINANCIAL ACCOUNTING

IN PARTIAL FULLFILLMENT OF THE DEGREE OF

MASTER OF COMMERCE

2015-16

UNDER THE GUIDENCE OF

PROF. NEELAM SHAIKH

VIDYA PRASARAK MANDAL, THANE

K.G.JOSHI COLLEGE OF ARTS &

N.G. BEDEKAR COLLEGE OF COMMERECE

CHENDANI BUNDER ROAD, THANE-400601

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Declaration

I, student of M.Com. (Part - I) Roll No. : 38 hereby declare that the

project title “AN ANLYTICAL STUDY OF INSURANCE COMPANY

W.R.T. TATA AIG” for the subject ADVANCED FINANCIAL

ACCOUNTING submitted by me for semester - II of the academic year 2015-16, is

based on actual work carried out by me under the guidance and supervision of PROF.

NEELAM SHAIKH. I further state that this work is original and not submitted

anywhere else for any examination.

PLACE AMARKUMAR SURYAWANSHI

ROLL NO: 38

DATE

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ACKNOWLEDGEMENT

It is indeed a great pleasure and proud privilege to present this project work.

I take this opportunity to express my gratitude and acknowledge to all the individuals involved both directly and indirectly for their valuable help and guidance.

This project has been an attempt to give information about the “AN

ANALYTICAL STUDY OF INSURANCE COMPANY W.R.T. TATA

AIG ”.

I expressed my deep since of gratitude to founder and president of Vidya Prasarak Mandal. I express my heartful thanks to our honorable Principal for her constant support and motivation.

I express special thanks to my guide Prof. NEELAM SHAIKH under whose guidence the project conceived , planned and executed.

I would also like to thank the college library and its staff for patiently listening and guiding me. I would like to thank my family also.

Thank You.

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Index

Chapter no

Subchapter Particulars Page no

1 1.1 Introduction 5

1.2 Insurability 7

1.3 Legal 9

1.4 Indemnification 10

1.5 Methods of insurance 12

1.6 Types of insurance 13

1.7 Review of insurance business in India 18

1.8 Policies and measures to develop insurance market

19

2 2.1 IRDA ACT 1999 20

2.2 Protection of interest of policy holders 22

2.3 Literature review 23

2.4 Research Methodology 25

3 3.1 Company profile 26

3.2 Financial statements 31

4 4.1 Conclusion 33

4.2 Bibliography 34

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Chapter 1

1.1 IntroductionMethods for transferring or distributing risk were practiced by Chinese and

Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively.[1] 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.

At some point in the 1st millennium BC, the inhabitants of Rhodes created the

'general average'. This 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.

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 insurance developed widely and

premiums were intuitively varied with risks.[3] These new insurance contracts allowed

insurance to be separated from investment, a separation of roles that first proved useful

in marine insurance.

Insurance is the equitable transfer of the risk of a loss, from one entity to another

in exchange for money. It is a form of risk management primarily used to hedge against

the risk of a contingent, uncertain loss. An insurer, or insurance carrier, is selling the

insurance; the insured, or policyholder, is the person or entity buying the insurance

policy. The amount of money to be charged for a certain amount of insurance coverage

is called the premium. Risk management, the practice of appraising and controlling risk,

has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively

small loss in the form of payment to the insurer in exchange for the insurer's promise to

compensate (indemnity) the insured in the case of a financial (personal) loss. The

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insured receives a contract, called the insurance policy, which details the conditions and

circumstances under which the insured will be financially compensated

Since the mankind, every individual were ready for some type of sacrifice to avoid

the evil consequences of flood and fire. The same instinct is now in today’s

businessmen to secure themselves against loss and disaster. This instinct was the main

reason for the birth of Insurance. Beginning date of Insurance is almost 6000 years back

but it largely developed in the past few centuries, particularly after the industrial era.

In India, insurance has a deep-rooted history. It finds mention in the writings of

Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The

writings talk in terms of pooling of resources that could be re-distributed in times of

calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to

modern day insurance. Ancient Indian history has preserved the earliest traces of

insurance in the form of marine trade loans and carriers’ contracts. Insurance in India

has evolved over time heavily drawing from other countries, England in particular.

1.2 Insurability

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Risk which can be insured by private companies typically shares seven common

characteristics:

1. Large number of similar exposure units: Since insurance operates through

pooling resources, the majority of insurance policies are provided for individual

members of large classes, allowing insurers to benefit from the law of large

numbers in which predicted losses are similar to the actual losses. Exceptions

include Lloyd's of London, which is famous for insuring the life or health of

actors, sports figures, and other famous individuals. However, all exposures will

have particular differences, which may lead to different premium rates.

2. Definite loss: The loss takes place at a known time, in a known place, and from

a known cause. The classic example is death of an insured person on a life

insurance policy. Fire, automobile accidents, and worker injuries may all easily

meet this criterion. Other types of losses may only be definite in theory.

Occupational disease, for instance, may involve prolonged exposure to injurious

conditions where no specific time, place, or cause is identifiable. Ideally, the

time, place, and cause of a loss should be clear enough that a reasonable person,

with sufficient information, could objectively verify all three elements.

3. Accidental loss: The event that constitutes the trigger of a claim should be

fortuitous, or at least outside the control of the beneficiary of the insurance. The

loss should be pure, in the sense that it results from an event for which there is

only the opportunity for cost. Events that contain speculative elements such as

ordinary business risks or even purchasing a lottery ticket are generally not

considered insurable.

4. Large loss: The size of the loss must be meaningful from the perspective of the

insured. Insurance premiums need to cover both the expected cost of losses, plus

the cost of issuing and administering the policy, adjusting losses, and supplying

the capital needed to reasonably assure that the insurer will be able to pay

claims. For small losses, these latter costs may be several times the size of the

expected cost of losses. There is hardly any point in paying such costs unless the

protection offered has real value to a buyer.

5. Affordable premium: If the likelihood of an insured event is so high, or the cost

of the event so large, that the resulting premium is large relative to the amount

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of protection offered, then it is not likely that the insurance will be purchased,

even if on offer. Furthermore, as the accounting profession formally recognizes

in financial accounting standards, the premium cannot be so large that there is

not a reasonable chance of a significant loss to the insurer. If there is no such

chance of loss, then the transaction may have the form of insurance, but not the

substance (see the U.S. Financial Accounting Standards Board pronouncement

number 113: "Accounting and Reporting for Reinsurance of Short-Duration and

Long-Duration Contracts").

6. Calculable loss: There are two elements that must be at least estimable, if not

formally calculable: the probability of loss, and the attendant cost. Probability of

loss is generally an empirical exercise, while cost has more to do with the ability

of a reasonable person in possession of a copy of the insurance policy and a

proof of loss associated with a claim presented under that policy to make a

reasonably definite and objective evaluation of the amount of the loss

recoverable as a result of the claim.

7. Limited risk of catastrophically large losses: Insurable losses are ideally

independent and non-catastrophic, meaning that the losses do not happen all at

once and individual losses are not severe enough to bankrupt the insurer;

insurers may prefer to limit their exposure to a loss from a single event to some

small portion of their capital base. Capital constrains insurers' ability to sell

earthquake insurance as well as wind insurance in hurricane zones. In the United

States, flood risk is insured by the federal government. In commercial fire

insurance, it is possible to find single properties whose total exposed value is

well in excess of any individual insurer's capital constraint. Such properties are

generally shared among several insurers, or are insured by a single insurer who

syndicates the risk into the reinsurance market.

1.3 Legal

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When a company insures an individual entity, there are basic legal requirements and

regulations. Several commonly cited legal principles of insurance include:[18]

1. Indemnity – the insurance company indemnifies, or compensates, the insured in

the case of certain losses only up to the insured's interest.

2. Benefit insurance – as it is stated in the study books of The Chartered Insurance

Institute, the insurance company doesn't have the right of recovery from the

party who caused the injury and is to compensate the Insured regardless of the

fact that Insured had already sued the negligent party for the damages (for

example, personal accident insurance)

3. Insurable interest – the insured typically must directly suffer from the loss.

Insurable interest must exist whether property insurance or insurance on a

person is involved. The concept requires that the insured have a "stake" in the

loss or damage to the life or property insured. What that "stake" is will be

determined by the kind of insurance involved and the nature of the property

ownership or relationship between the persons. The requirement of an insurable

interest is what distinguishes insurance from gambling.

4. Utmost good faith – (Uberrima fides) the insured and the insurer are bound by a

good faith bond of honesty and fairness. Material facts must be disclosed.

5. Contribution – insurers which have similar obligations to the insured contribute

in the indemnification, according to some method.

6. Subrogation – the insurance company acquires legal rights to pursue recoveries

on behalf of the insured; for example, the insurer may sue those liable for the

insured's loss. The Insurers can waive their subrogation rights by using the

special clauses.

7. Causa proxima, or proximate cause – the cause of loss (the peril) must be

covered under the insuring agreement of the policy, and the dominant cause

must not be excluded

8. Mitigation – In case of any loss or casualty, the asset owner must attempt to

keep loss to a minimum, as if the asset was not insured

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To "indemnify" means to make whole again, or to be reinstated to the position that one

was in, to the extent possible, prior to the happening of a specified event or peril.

Accordingly, life insurance is generally not considered to be indemnity insurance, but

rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified

event). There are generally three types of insurance contracts that seek to indemnify an

insured:

1. A "reimbursement" policy

2. A "pay on behalf" or "on behalf of policy"

3. An "indemnification" policy

From an insured's standpoint, the result is usually the same: the insurer pays the loss

and claims expenses.

If the Insured has a "reimbursement" policy, the insured can be required to pay for a

loss and then be "reimbursed" by the insurance carrier for the loss and out of pocket

costs including, with the permission of the insurer, claim expenses.

Under a "pay on behalf" policy, the insurance carrier would defend and pay a claim on

behalf of the insured who would not be out of pocket for anything. Most modern

liability insurance is written on the basis of "pay on behalf" language which enables the

insurance carrier to manage and control the claim.

Under an "indemnification" policy, the insurance carrier can generally either

"reimburse" or "pay on behalf of", whichever is more beneficial to it and the insured in

the claim handling process.

An entity seeking to transfer risk (an individual, corporation, or association of any type,

etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party,

by means of a contract, called an insurance policy. Generally, an insurance contract

includes, at a minimum, the following elements: identification of participating parties

(the insurer, the insured, the beneficiaries), the premium, the period of coverage, the

particular loss event covered, the amount of coverage (i.e., the amount to be paid to the

insured or beneficiary in the event of a loss), and exclusions (events not covered). An

insured is thus said to be "indemnified" against the loss covered in the policy.

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When insured parties experience a loss for a specified peril, the coverage entitles the

policyholder to make a claim against the insurer for the covered amount of loss as

specified by the policy. The fee paid by the insured to the insurer for assuming the risk

is called the premium. Insurance premiums from many insureds are used to fund

accounts reserved for later payment of claims – in theory for a relatively few claimants

– and for overhead costs. So long as an insurer maintains adequate funds set aside for

anticipated losses (called reserves), the remaining margin is an insurer's profit.

1.5 Methods of insurance

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In accordance with study books of The Chartered Insurance Institute, there are the

following types of insurance:

1. Co-insurance – risks shared between insurers

2. Dual insurance – risks having two or more policies with same coverage

3. Self-insurance – situations where risk is not transferred to insurance companies

and solely retained by the entities or individuals themselves

4. Reinsurance – situations when Insurer passes some part of or all risks to another

Insurer called Reinsure

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1.6 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 United

States 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 coverages that a

homeowner needs..

Auto insurance

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:

Property coverage, for damage to or theft of the car

Liability coverage, for the legal responsibility to others for bodily injury or property

damage

Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost

wages and funeral expenses

Gap insuranc

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 company's specific

policies it might or might not cover the deductible as well. This coverage is marketed

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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 a finance

company when the vehicle owner purchases their vehicle, but many 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.

Health insuranceHealth insurance policies cover the cost of medical treatments. Dental

insurance, like medical insurance, protects policyholders for dental costs. In most

developed countries, all citizens receive some health coverage from their governments,

paid for by taxation. In most countries, health insurance is often part of an employer's

benefits.

Income protection insuranceDisability 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.

Workers' compensation insurance replaces all or part of a worker's wages lost and

accompanying medical expenses incurred because of a job-related injury.

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LIFE INSURANCE

In 1870 two British life insurance companies entered in India and attempted to do life

insurance business on Indian lives. After that many Indian & foreign companies started

business in India and by the year 1955 there were 255 insurance companies operating in

India and transacting the business to the extent of Rs 200 crores. Due to the following

reasons the Government decided to nationalize the life insurance industry w.e.f 1/7/1956.

1. No full guarantee to the Policyholders (who are insured).

2. The concept of trusteeship (confidence) was lacking.

3. Many insurance companies went into liquidation (bankrupt).

4. There was malpractice in the business.

5. Non-Spreading of life insurance.

6. No insurance in rural areas.

7. No group insurance

8. No social security

To overcome the abovementioned problems the life insurance business was

nationalized and formed Life Insurance Corporation with following features: 1. The Central

Govt. guaranteed the Policyholders through the LIC. 2. Being a Corporation formed under

Special Act Passed by the Parliament therefore the public can trust. 3. The LIC cannot be

liquidated without the order of the Central Govt. 4. Under the LIC Act, all day-to-day

functions of the Corporation and the method of Investment in Govt. Securities were

defined. Therefore, the malpractices were eliminated. After the nationalization the life

insurance business has grown substantially in very first year i.e. from Rs 200 crore upto

1956 to Rs 328 crores in 1957 and till privatization in 2000 the business was transacting

worth Rs 73436 crores.

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GENERAL INSURANCE

Prior to nationalization of the General Insurance Business in 1972 by enactment of the

General Insurance Business Nationalization Act 1972 (GIBNA 1972) there were 55 Indian

Companies and 52 non-Indian Companies carrying of the business of General Insurance in

India. Before the nationalization the total premium written by these companies was Rs.170

crores as on 1971. At that time the “key Economic indicators” were as follows: Gross

Domestic Product Rs. 36503 Crores Per Capita Income Rs. 675 Crores Population 541 mns

To understand the why of nationalization in the first place it is sufficient to read the

following excerpts from the speech of the then Finance Minister Mr.Y.B.Chavan. “The

primary objective of nationalization of general Insurance was to make it meaningful to the

common man, to carry its message to the remotest corner of the country and to give it its

rightful place in the economy of the country.

When it was in the private sector it was a mere handmaid to trade and industry and

served to cater to the interests of a limited clientele. Worse still it functioned in a manner

favoring the interests of a few at the expense of, needless to say, the majority. There were

allegations of malpractices on a big scale.” “It was the objective of nationalization to

remove these malpractices and usher in an era of Insurance run on sound business

principles and functioning on healthy and egalitarian lines. The emphasis should be on

spreading the message of Insurance as widely as possible and on ensuring that it gives the

right weightage to the weaker sections of the society.

The principle of competition must have its useful role to play, but not at the expense of

unhealthy rivalry.” “General Insurance is a service and proper and efficient service is due to

the policyholder as a matter of right. The Corporation exists for the benefit of the

policyholder.” “Business must cease to work under purely mercenary motives. Whenever,

one feels the need for protection against an unpredictable contingency, a suitable Insurance

cover should be available. No excuse should be given that a particular cover is not

conventionally given or that other markets of the world do not give it.” “Healthy employer-

employees relationship is of vital importance to achieve the main objectives of

nationalization.” “It will be necessary for the Corporation to review the rating structure in

order to ensure that all classes of the policyholder receive a fair deal and the equitable rate

of premium.”

The Act led to the formation of the General Insurance Corporation (GIC) and the

shares of the Indian Insurance Companies and the units of other Insurance Companies

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operating in India along with the General Insurance business of LIC were transferred to the

GIC. The Indian companies became subsidiaries of GIC and the non-Indian Companies

were transferred to 4 companies selected as flag companies to operate from 4 zones as

under: 1. National Insurance Co. Ltd., with its Head Office at Calcutta. 2. The New India

Assurance Co. Ltd. with its Head Office at Mumbai. 3.

The Oriental fire & Insurance Co. Ltd., with its Head Office at New Delhi (from 1974)

(now named as The Oriental Insurance Co. Ltd.) 4. United India fire & General Insurance

Co. Ltd., with its Head Office at Madras (now named United India Insurance Co. Ltd.) The

basis of allocation of the 107 companies was the geographical areas of operation i.e. south

based companies were allotted to United India, the North based to the Oriental Insurance,

the West based to the New India Assurance and East based National Insurance. The 4 flag

companies became the subsidiaries of General Insurance Corp. with effect from

1/1/1973.The total business has gone from Rs 1145 crores in 1973 to Rs 9522 crores in

2000.

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1.7 Review Of Insurance Business In India

From above you must have observed that the insurance business has grown manifold

after the nationalization of Life Insurance in 1956 and General Insurance in 1972. But the

international comparison as per details given below will show that insurance penetration

and insurance density in India is at low level as compared to the developing/developed

countries. The reasons for low penetration may be that the insurance sector was totally in

the hands of the public enterprises. It is observed that the public enterprises in any country

can’t perform all the economic and business effectively. Even in the socialist country,

public enterprises in all the fields can’t discharge their full responsibilities. It is also said

that complete governmentalization or nationalization will lead towards slavery.

Though the Indian economy is a mixed economy (not in Insurance sector till 2000) but

the expectation from the public enterprises is too much. In fact, the support and subsidy

provided by the Govt. indirectly punishes the taxpayer and the countrymen. Keeping in

view these problems the Indian Govt. started the liberalization process in 1991. Though the

liberalization, privatization and globalization (LPG) has taken place in many sector but the

insurance sector was liberalized, privatization and globalized in the year 2000.

Liberalization: means abolition of industrial licensing, removal of the limit on industrial

investment & a more welcoming approach to foreign investment.

Globalization: means opening of the Indian economy for global cooperation in

economic activities. This would involve foreign direct investment in industry and foreign

institutional investors investing in the securities market by way of mutual funds etc.,

removal of quantitative restrictions on imports and reduction of import tariff. Privatization:

means refers to allowing private sector to invest in government companies as well as invest

in areas earlier reserved for the public sector. It also implies greater participation of private

sector in areas exclusively reserved for public sector.

Before liberalization the Insurance sector was controlled by Controller of Insurance but

now the corporate body known as Insurance Regulatory & Development Authority (IRDA)

has been formed under IRDA Act 1999 whose main objectives are as follows: So far, the

IRDA has issued licences to 20 Life Insurance companies and to 15 General Insurance

companies including exclusive health insurance company. The private insurers have started

their business during the year from 2000 to 2001; and till date there is growth in insurance

penetration from 1.93 to 2.40 as well as insurance density from 8.50 to 9.36.

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1.8 Policies And Measures To Develop Insurance Market

The Authority has taken a pro-active role in the establishment of a vibrant Insurance

market in the country by taking the following steps:

i) The market regulation by prudential norms,

ii) The registration of players who have the necessary financial strength

to withstand the demands of a growing and nascent market,

iii) ) The necessity to have “fit and proper” person in-charge of

businesses,

iv) The implementation of a solvency regime that ensures continuous

financial stability, and above all,

v) The presence of an adequate number of insurance companies to

provide competition and choice to customers all these steps lead to

the establishment of a regime committed to an overall development

of the market in normal times.

vi) Prescribed rural and social sector norms in respect of Insurance

business being underwritten by the companies.

vii) The companies have also been asked to devise insurance policy to

specific sector in the economically weak population.

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Chapter 2

2.1 IRDA act 1999

Insurance Regulatory & Development Authority (IRDA) Composition of

Authority under IRDA Act, 1999

As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development

Authority (IRDA, which was constituted by an act of parliament) specify the

composition of Authority

The Authority is a ten member team consisting of

(a) AChairman;

(b) Five whole-time members;

(c) four part-time members,

(all appointed by the Government of India)

Duties, Powers and Functions of IRDA:-

Section 14 of IRDA Act, 1999 laysdown the duties,powers and functions of IRDA..

(1) Subject to the provisions of this Act and any other law for the time being in force,

the Authority shall have the duty to regulate, promote and ensure orderly growth of the

insurance business and re-insurance business. Without prejudice to the generality of the

provisions contained in sub-section, the powers and functions of the Authority shall

include, -

A. Issue to the applicant a certificate of registration, renew, modify, withdraw,

suspend or cancel such registration

B. Protection of the interests of the policy holders in matters concerning assigning

of policy, nomination by policy holders, insurable interest, settlement of

insurance claim, surrender value of policy and other terms and conditions of

contracts of insurance;

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C. Specifying requisite qualifications, code of conduct and practical training for

intermediary or insurance intermediaries and agents;

D. Specifying the code of conduct for surveyors and loss assessors;

E. Promoting efficiency in the conduct of insurance business;

F. Promoting and regulating professional organisations connected with the

insurance and re-insurance business;

G. Levying fees and other charges for carrying out the purposes of this

Act;

H. Calling for information from, undertaking inspection of, conducting enquiries

and investigations including audit of the insurers, intermediaries, insurance

intermediaries and other organisations connected with the insurance business;

I. Control and regulation of the rates, advantages, terms and conditions that may

be offered by insurers in respect of general insurance business not so controlled

and regulated by the Tariff Advisory Committee under section 64U of the

Insurance Act, 1938 (4 of 1938);

J. Specifying the form and manner in which books of account shall be maintained

and statement of accounts shall be rendered by insurers and other insurance

intermediaries;

K. regulating investment of funds by insurance companies;

L. Regulating maintenance of margin of solvency;

M. Adjudication of disputes between insurers and intermediaries or insurance

intermediaries;

N. Supervising the functioning of the Tariff Advisory Committee;

O. Specifying the percentage of premium income of the insurer to finance schemes

for promoting and regulating professional organisations referred to in clause (f);

P. Specifying the percentage of life insurance business and general insurance

business to be undertaken by the insurer in the rural or social sector; and

Q. Exercising such other powers as may be prescribed.

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2.2 Protection of Interest of Policy Holders

IRDA has the responsibility of protecting the interest of insurance policyholders. Towards

achieving this objective, the Authority has taken the following steps:

IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for:

policy proposal documents in easily understandable language; claims procedure in both

life and non- life; setting up of grievance redressal machinery; speedy settlement of

claims; and policyholders' servicing. The Regulation also provides for payment of interest

by insurers for the delay in settlement of claim.

The insurers are required to maintain solvency margins so that they are in a position to

meet their obligations towards policyholders with regard to payment of claims.

It is obligatory on the part of the insurance companies to disclose clearly the benefits,

terms and conditions under the policy. The advertisements issued by the insurers should

not mislead the insuring public.

All insurers are required to set up proper grievance redress machinery in their head

office and at their other offices.

The Authority takes up with the insurers any complaint received from the policyholders

in connection with services provided by them under the insurance contract.

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2.3 Literature review

Khan, M.K. (1978) attempts to know the opportunities and prospects in the

career of a life insurance sector. He explains about what a good career is and how a

good career should be for selling of life insurance products. There is no age barrier

and it requires no previous occupational experience but one must be a professional

and capable of creating opportunities in building personality. The relationship of life

Insurance agent with clients is not temporary and the service rendered has no

substitutes. He also observes that life insurance agent remains, in a sense, permanent

server to the clients.

Ramesh Jain (1980) conducts a case study at Sagar branch, Calcutta, of Life

Insurance Company view the spread of life insurance in a particular area and to

channelize the mobilized saving for nation building activities. Analyzing the

processing of procurement of insurance business and administration of Life Insurance

Company in branch level, the study also brings out the growth of total new business

and about 30% of Life Insurance Companies individual assurance business originated

from the rural sector - it adds to the privilege of Life Insurance Company to contribute

their investments to many of the vital projects and schemes under 20 point

programmes. The findings of the study were to establish servicing center to have

continuous interaction with the policyholders and the sagar branch has still greater

potentialities of expansion in rural area.

Rajkumar (1985) views that advertising is to influence a customer, who has a

limited spending power and it seems to operate through familiarizing spreading news

over cog inertia and image building improving market share, educating,

informative and to have staff support. As far as insurance industry is concerned,

misconception is a common problem and the pre-testing revealed that most of the rich

people are associated with insurance and he viewed that the treatment of Life

Insurance Company to the public is always unfair.

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Shesha Ayyar, V. (1986) in his article entitled “Product Development” has

discussed various issues connected with developing new polices such as the

importance of developing new schemes and various problems involved in the

development of new schemes in Company. He suggested the need for including

ancillary benefits such as accident benefits, disablement and hospitalization benefits.

Rajan Saxena (1986) in his article entitled “Life Insurance Services”

discusses various issues relating to life insurance. The author insists on the

importance of life insurance and discusses on various strategies of life insurance.

Mishra, M.N. (1987) made a study to appraise the strategies of Life

Insurance Company. While reviewing the strategies, the author felt that before 1960

Life Insurance Company did not give much attention to the objective of customer

satisfaction, but from 1980 onwards the corporation has taken several remedial

measures to provide better customer service and improve the customer satisfaction.

Ashis Deb Roy (1987) in his article entitled “We Care for our Customers”

has examined the nature and importance of better customer services to policyholders

and has emphasized the need for quality in service. He has given a detailed note on

the various steps to be taken by Life Insurance Company to improve the customer

service such as training programmes conducted by Company to its agents and

employees, opening new branches and introduction of computers in insurance branch

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4.2 Research Methodology

The researcher has used descriptive type of research for the project. Descriptive

research is very common in business and other aspects of life. In fact, most of the marketing

research you’ve heard about or participated in can be categorized as descriptive research.

With a descriptive research design we are usually trying to describe some group of people or

otherentities. Descriptive research, is used to describe characteristics of a population or

phenomenon being studied.

Descriptive research does not fit neatly into the definition of either quantitative or

qualitative research methodologies, but instead it can utilize elements of both, often within

the same study. The term descriptive research refers to the type of research question, design,

and data analysis that will be applied to a given topic. Descriptive statistics tell what is, while

inferential statistics try to determine cause and effect.

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Chapter 3

3.1 Company Profile

Tata AIG General Insurance Company Limited is an Indian general insurance company,

and a joint venture between the Tata Group and American International Group (AIG). Tata

Group holds 74 per cent stake in the insurance venture with AIG holding the balance 26

percent. Tata AIG General Insurance Company, which started its operations in India on 22

January 2001, provides insurance to individuals and corporates. It offers a range of general

insurance products including insurance for automobile, home, personal accident, travel,

energy, marine, property and casualty as well as several specialized financial lines. The

Company's products are available through various channels of distribution

like agents, brokers, banks (through bank assurance tie ups) and direct channels

like Telemarketing, Digital Marketing, worksite etc.

History

Tata AIG General Insurance Company Limited (Tata AIG General) is a

business Collaboration of the Tata Group and American International Group, Inc. (AIG). Tata

AIG General merges two major finance organizations i.e. the Tata Group's prominent

headship place in India and AIG's global presence as the world's leading international

insurance and financial services Organization. This joint venture has started its operations

in India from 22 January 2001. The company provides both corporate and personal insurance

services. The organization offers an array of general insurance covers which are well thought-

out under commercial and consumer demands. The commercial sector

covers Energy, Marine, Property and several specialized Financial covers, while the

consumer insurance service offers a variety of general Insurance products such as insurance

for Automobiles, personal accident, casualty, home, health and travel. The company has

made the availability for its services from end to end channels of distribution like agents,

banks (through bancassurance tie ups), brokers and direct channels like tele-marketing, e-

commerce, website, etc. The headquarters of the company is situated in Mumbai. The

company has provided the employment to more than 2000 qualified professionals across the

country in more than 160 locations.

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The company announces a net profit of 260.31 crore for FY 2011-12

Profit goes up 402 percent - from Rs.51.79 crore to Rs. 260.31 crore

New business premium from traditional business at 45 percent - up from 29 percent

Operating expenses to total premium ratio drops to 21 percent from 24 percent

AUM grows by 15 percent

Tata AIG Life Insurance Company, the life insurance joint venture formed by Tata Sons

and AIA Group (AIA), today announced that it has changed its name to Tata AIA Life

Insurance Company (Tata AIA Life).

The company was set up as a joint venture between the leading Indian conglomerate Tata

group and the leading international insurance organisation American International Group

(AIG). It was licensed to operate in India on February 12, 2001, and started operations on

April 1, 2001. Since its inception, Tata Sons owns 74 percent stake in joint venture, with the

remaining 26 percent share held by AIA, a 100 percent owned subsidiary of AIG at that time.

In 2010, AIA went public in Hong Kong and raised $20.51 billion through an initial

public offering (IPO). The IPO was the third largest globally at the time of listing, after which

AIA emerged as the largest independent publicly listed Pan-Asian life insurance group in the

world. AIA has a strong heritage and fundamentals of over 90 years in the Asian insurance

market. It has wholly-owned main operating subsidiaries or branches in 14 markets in Asia

Pacific.

To create a uniform identity of AIA owned companies post this IPO, the two promoters

of this joint venture have chosen to change the company’s name to Tata AIA Life. However,

the company makes this transition just in its name; its single-minded focus in protecting the

financial well-being of its customers remains unchanged.

Commenting on the occasion, Farrokh K Kavarana, chairman, Tata AIA Life, said, “The

Tata group, along with our valued partner AIA, continue to remain committed to the Indian

market and our valued customers and partners through our renamed entity Tata AIA Life.

Over the past 11 years, we as a company have strived to build a solid foundation of providing

financial protection to our customers. We are confident that this strong foundation will enable

us to stand unwaveringly in good stead and realise full potential of the vast Indian market.”

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Huynh Thanh Phong, executive vice president and regional chief executive, AIA, said, “In

order to reflect the true brand identity of AIA and communicate its unique market position,

history and its ongoing commitment to customers and partners in Asia Pacific region, the

promoters of the joint venture have chosen to change the name of the company from Tata

AIG Life Insurance to Tata AIA Life Insurance. The rechristened Tata AIA Life will

continue to focus on building a premier agency sales force to meet the savings and protection

needs of the customers in India with protection-centric products.”

Suresh Mahalingam, managing director, Tata AIA Life, elaborated, “While we make

this transition in our name, nothing else will change. The promoters, the distribution network,

the teams, the products, the technology and more importantly, our commitment towards

putting the customers at the centre of everything we do, remain unchanged. The foundation of

trust that our company has been built upon will continue to be strengthened with the vast

expertise that AIA brings with over 90 years of leadership in the life insurance business in the

Asia Pacific region

Performance of Tata AIA Life for the financial year 2011-12

Tata AIA Life also announced its financial results for the fiscal 2011-12, posting a net profit

of Rs260.31 crore.

The total premium income for the financial year ending March 2012 stood at Rs3,630 crore

as against Rs3,985 crore posted for the financial year 2010-11. Of this, the new business

premium collection stood at Rs940 crore. The renewal premium for the same period was at

Rs2,690 crore, as against Rs2,653 crore in the last fiscal. Traditional business accounted for

45 percent of the new business premium as against 29 percent in the last fiscal.

During the financial year, the company further enhanced its operating efficiencies resulting in

the reduction of the operating expenses to total premium ratio to 21 percent against 24

percent in the previous financial year.

The total assets under management of the company has increased by 15 percent to Rs14,519

crore from Rs12,622 crore in the last fiscal. As on March 31, 2012, the paid-up capital of the

company stood at Rs1,954 crore.

Commenting on the company's performance, Mr Mahalingam said, “The company has

maintained focus on optimum utilisation of resources and a healthy balance in the product

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mix between traditional and unit linked business. The cost management effectively delivered

profitable growth for the company with statutory profit of Rs260.31 crore. A solvency margin

of 284 percent further underlines the robust financial health of the company.”

Recent Performance of AIA

For the year that ended November 30, 2011, AIA reported record new business growth with a

40 percent increase in value of new business and 22 percent increase in annualised new

premium. For the same period, AIA’s embedded value stood at $27,239 million, up by

$2,491 million from $24,748 million as on November 30, 2010. It had total assets of

$114,461 million as of November 30, 2011.

Tata Aig Health Insurance

TATA AIG Health insurance is an insurance against the risk of suffering medical expenses

among individuals. Simply AIG Health Insurance covers the cost of an insured medical and

surgical expenses. Difficulties never announce their arrivals. Some of these risks can often

bring unexpected hospitalization causing a financial burden on you and your family. The

medical costs, charges like diagnostic tests, Surgeon’s fees, etc. may turn out to be very

expensive. Tata AIG Health Insurance realizes your needs appear from such unpredicted

situations and offers a range of insurance policies that will help you maintain your savings.

About TATA AIG General Insurance

Tata AIG General Insurance Company Limited is an Indian General assurance company.

TATA AIG General Insurance company Ltd. is a joint venture between the Tata Group and

American International Group (AIG). TATA AIG General Insurance company limited

headquarters located in Mumbai, India. In Total Capital, TATA has 74% stake in the

enterprise while AIG held the remaining 26%. Tata AIG General Insurance Company started

its operations in India on 22 January 2001. Tata AIG provides insurance to individuals and

corporates.

Tata AIG General Insurance offers a wide range of insurance policies to fulfill the common

man needs. Tata AIG offers insurance plans in different domains like Motor, Travel, Health,

Individual Personal Accident, Home, Lifestyle Insurance. Tata Aig Health Insurance plan is

one of the most important general Insurance plans offered by Tata AIG.

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Tata AIG Health Insurance Plans

Tata AIG General Insurance offers Health Insurance plans. Here we are providing an

overview of Coverages, Benefits and Key features offered by Tata AIG Health Insurance

Policies.

List of Tata AIG General Health Insurance Plans offered by Tata AIG General

Insurance

1. Tata AIG MediPrime.

2. Tata AIG Wellsurance Executive Policy.

3. Tata AIG Wellsurance Family Policy.

4. Tata AIG Wellsurance Woman Policy.

5. Tata AIG Critical Illness.

6. Tata AIG Individual Accident and Sickness Hospital Cash Policy.

7. Tata AIG MediPlus.

8. Tata AIG MediSenior.

9. Tata AIG MediRaksha.

10. Tata AIG Group Accident and Sickness Hospital Cash Policy.

Overview of Tata AIG Health Insurance Plans

Tata AIG Health Insurance plans to help you to manage the medical costs the charges like

surgeon’s fees, diagnostic tests, etc. that may turn out to be expensive and protect your family

against financial emergencies. Today’s domain demands more of anyone looking to construct

a mark in this competitive world. Somewhere between the pressure to meet demands and the

burning desire to excel, one’s health is often the first of the compromises.

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(a) Share capital 5,509. 5,509.5(b) Reserves and surplus 209,434. 201,047.

Shareholders’ Funds 214,944. 206,557.Non-current liabilities

Long-term provisions .................................................................................................................................................

435.63

357.34

(a) Trade payables 467.9 668.3(b) Other current liabilities 138.2 157.4(c) Short-term provisions 11,327. 11,015.

Current Liabilities 11,933. 11,841.TOTAL 227,313.

36218,755.68

3.2 Financial Statement

BALANCE SHEET AS AT 31ST MARCH, 2015

EQUITY AND LIBILITIES

(a) Fixed assets Tangible assets 23.2 18.7Intangible assets 0.89 0.54

(b) Non-current investments 223,184. 192,365.(c) Deferred tax assets (net) - -(d) Long-term loans and advances 312.3 311.5

Non-current assets 223,521. 192,696.(a) Current - 21,796.1(b) Trade 48.24 176.65(c) Cash and cash 1,232.66 1,150.85(d) Short-term loans and 730.73 621.65(e) Other current 1,780.73 2,314.22

Current 3,792.36 26,059.5TOTAL .................................................................................................................. 227,313. 218,755.

ASSETS

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Particulars Year ended(` in lacs)

year ended31.3.2015 31.3.2014

Revenue from operations ..................................................................................................................................................... 12,997.41 12,674.35

Profit on sale of long term investments (net) 10,097.37 9,413.38

Other income ............................................................................................................................................................................. 16.93 216.94

Total Revenue .......................................................................................................................................................................... 23,111.71 22,304.67

Expenses :

Employee benefits expense ................................................................................................................................................. 954.30 725.68

Depreciation and amortisation expenses .......................................................................................................................

1.04 10.90

Other expenses ......................................................................................................................................................................... 554.05 800.25

Total Expenses 1,509.39 1,536.83

Profit before tax ........................................................................................................................................................................ 21,602.32 20,767.84

Tax expense :

(1) Current tax ......................................................................................................................................................................... 2,951.09 2,900.00

(2) Deferred tax ....................................................................................................................................................................... - -

Profit for the year ...................................................................................................................................................................... 18,651.23 17,867.84

Earnings per equity share (Face Value `10/- per share) .............................................................................................Basic and Diluted (`)................................................................................................................................................................ 33.85 32.43

Significant Accounting Policies ...........................................................................................................................................

Accompanying Notes are an integral part of the Financial Statements.

Profit And Loss Statement

Chapter 4

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Other income ............................................................................................................................................................................. 16.93 216.94

Total Revenue .......................................................................................................................................................................... 23,111.71 22,304.67

Expenses :

Employee benefits expense ................................................................................................................................................. 954.30 725.68

Depreciation and amortisation expenses .......................................................................................................................

1.04 10.90

Other expenses ......................................................................................................................................................................... 554.05 800.25

Total Expenses 1,509.39 1,536.83

Profit before tax ........................................................................................................................................................................ 21,602.32 20,767.84

Tax expense :

(1) Current tax ......................................................................................................................................................................... 2,951.09 2,900.00

(2) Deferred tax ....................................................................................................................................................................... - -

Profit for the year ...................................................................................................................................................................... 18,651.23 17,867.84

Earnings per equity share (Face Value `10/- per share) .............................................................................................Basic and Diluted (`)................................................................................................................................................................ 33.85 32.43

Significant Accounting Policies ...........................................................................................................................................

Accompanying Notes are an integral part of the Financial Statements.

4.1 Conclusion

After the deep study of insurance sector of India, I can tell that this is the sector, which has

most business opportunities perhaps in India. Insurance industry is one of the fastest sectors

in India.Insurance sector has been growing by 25% to 30% and it is expected to increase by

50% in coming 5 years. After the opening up of the insurance sector, it has become much

competitive and insurance awareness among people has increased. ¾ As far as the

comparison of Reliance Life Insurance and other players is concerned, there are both positive

as well as negative impacts on both the sides. ¾ For Reliance Life Insurance, the negative

aspect is that its market share is low. ¾ For private players the negative aspect is that they

have to fight with the public sector giant which is established player with a high brand value.

¾ But the positive impact is that the life insurance awareness has increased and the business

of Reliance Life Insurance has increased.

4.2 Bibliography

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BOOKS

Author name Book Name

CA (Dr.)Varsha Ainapure MANAN PAKSHAN

WEBSITES

www.google.com

www.wikipedia.com

www.scribd.com

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