INsUrAnCe..........iN brief......
Insurance in India refers to the market for insurance in India which covers both the public and private sector organisations. It is listed in the Constitution of India on the in the Seventh Schedule meaning it can only be legislated by the central government.
What is life insurance?
Life insurance (or commonly life assurance' especially in the Commonwealth) is a contract between an insured(insurance policy holder) and an insurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events.
What are the main products of life insurance?
* Whole life
* Term
* Life annuity plan
* Endowment
* Investment-linked
* Medical and health
What is general insurance?
General insurance is basically an insurance policy that protects you against losses and damages other than those covered by life insurance. The coverage period for most general insurance policies and plans is usually one year, whereby premiums are normally paid on a one-time basis.
What are the risks that are covered by general insurance?
* Property loss (eg stolen car or burnt house)
* Liability arising from damage caused by yourself to a third party
* Accidental death or injury
What are the main products of general insurance?
* Motor insurance
* Fire/ House owners/ Householders insurance
* Personal accident insurance
* Medical and health insurance
* Travel insurance
What are the major general insurance companies in India?
PublicSector..............................
* New India Assurance Company, Limited
* National Insurance Company Limited
* The Oriental Insurance Company
* United India Insurance Company
* Agriculture, Insurance Company of India
Private Sector......................
* Bajaj Allianz General Insurance
* ICICI Lornbard General Insurance
* IFFCO-Tokio General Insurance
* Retiance General Insurance
* Royal Sundaram Alliance lnsurance
* TATAAIG General Insurance
* Cholamandalam General Insurance
* HDFC Ergo
What is GIPSA?
After opening up of the insurance sector and de-linking from GIC in 2000, the four General Insurance Companies, namely,
National Insurance Company,
New India Assurance Company,
Oriental Insurance Company, and
United India Insurance' Company, are functioning independently. They have formed an association known as General Insurers' (Public Sector) Association of India (GIPSA) with headquarters in Delhi'
The CMD of New India Assurance G Srinivasan is the chairperson of the GIPSA.
Can a policy holder have both paper and electronic policies?
Policy holders can choose the form in which they want their policies issued, paper or electronic.
A policy can be bought or maintained in one form only either in electronic form or paper
but not in both. However, a policy holder can choose to keep
some policies in electronic form and others in paper form but he
can use repository services only for the electronic policies.
Important terms...............................................................................................................................
* Actuary: A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.
* Annuity: An agreement by an insurer to make periodic payments which continue during the survival of the
Annuitant (s) or for a specified period'
* Claim: A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
*Coverage: It is the range of protection that you are provided under an insurance policy.
* Death Benefit: The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
* Deductible: The amount you have to pay out of pocket for expenses before the insurance company will cover the remaining costs.
* Endowment Insurance: Endowment insurance pays the sum assured upon the death of the life insured during the policy term or on survival to the end of the policy term'
* Exclusive: Things that are'not covered under the policy.
* Indemnity: Restoration to the victim of a loss by payment, repair or replacement.
Insurable Interest: Interest in property such that loss or destruction of the property could cause a financial loss.
* Insurance Settlement: A payment on an insurance claim. That is, when a valid insurance claim is made, the insurer makes a payment to the policyholder. This is called the insurance settlement.
* Lapse: Termination of a policy due to failure to pay the required renewal premium.
* Maturity value: It is the amount the insurance company has to pay you when the policy matures. This would include the sum assured and the bonuses.
* Paid-up value: If you stop paying the premiums, but do not withdraw the money from your policy, the policy is referred to as paid-up.
* Peril: It is the cause of the possible loss or damage.
* Policy: Policy is the legal document issued by the insurance company that outlines the general, terms and conditions of the insurance.
* Premium: It is the amount you need to pay to the insurance company.
* Reinsurance: In effect, insurance that an insurance company buys for its own protection. The risk of loss is
spread so a disproportionately large loss under a single policy doesn't fall or-r one company. Reinsurance enables an insurance company to expand its capacity; stabilise its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; and withdraw from a line of business or a geographical area within a specified time period.
* Renewal: The automatic re-establishment of in-force status effected by the payment of another premium
* Rider: It is an optional feature that can be added to a policy. You will have to pay an additional premium to avail this benefit.
* Subrogation: It is the right for an insurer to pursue a third party that caused an insurance loss to the insured. This is done as a means of recovering the amount of the claim paid to the insured for the loss.
* Sum assured: It is the amount of money an insurance policy guarantees to pay before any bonuses are added. In other words, sum assured is the guaranteed amount you will receive. Halfway through the policy, you might want to discontinue it and take whatever money is due to you.
* Surrender value: The amount the insurance cornpany then pays is known as the surrender value.
The policy ceases to exist after this payment has been made. Do remember, you will lose out on returns if you withdraw your policy before time.
* Survival Benefit: This is the amount payable at the end of specified durations. These amounts are fixed and predetermined.
* Term insurance: It is the rnost traditional life insurance policy wherein the insured gets death benefit if anycontingency, happens within the policy temr. The insured is, however, not entitled to receive any survival benefit if he outlives the policy term.
* Urtderwriting: The process of selecting risks, "for insurance and determining in what amounts and on what terms the insurance company will accept. Unlike a term insurance cover, if you live, an amount will be paid to you on maturity of the plan.
Points to remember
* The advent of life insurance business started in India in 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however closed in 1834.
* An Ordinance was issued on l9 Jan, 1956 nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 245 Indian and foreign insurers in all.
* General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd in the year 1850 in Calcutta by the British. Established in 1907, the Indian Mercantile insurance was the first company to transact
all classes of general insurance business.
* Formed in 1957, the General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.
* The Export Credit Guarantee Corporation of India (ECGC) was established on 30 Jul 1957 with ur objectiveto provide insurance cover in respect of risks in export trade.
* With the passing of the General Insurance Business (Nationalisation) Act, general insurance business wasnationalised with effect from 1 Jan, 1973. I 07 insurers were amalgamated and grouped into four companies: National Insurance Company, the New India Assurance Company' the Oriental Insurance Company and the United India Insurance Company.
* The General Insurance Corporation (GIC) of India was incorporated as a company in 1971 and it commenced business on 1 Jan 1973.
* In 1993, the Govt. set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector, which, among other things, recommended that the private sector be permitted to enter the insurance industry.
* Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory andDevelopment Authority (IRDA) was constituted as an autonomous body to regulate and develop the insuranceindustry.
* The IRDA was incorporated as a statutory body in Apr 2000.
* The IRDA opened up the market in Aug 2000 and foreign companies were allowed ownership of up to 26%.
* The Authority has the power to frame regulations under Section I l4A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policy holders' interests.
* In December 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in Jul, 2002.
* Today there are 2& general insurance companies, including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies operating in the country.
* The insurance sector is growing at a speedy rate of 15-20 percent.
* Together with banking services, insurance services add about 7% to the country's GDP.
* The total business of all four public sector non-life insurance companies put together, which was at Rs.42,000 cr in 2013-14 is expected to cross Rs.1 lakh cr by 2020.
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