“INSURANCE”

A Project submitted to

University of Mumbai for partial completion of the degree of

Bachelor in Commerce (Banking & Insurance)

Under the Faculty of Commerce

By
Ms. Tejasvinee Daund

Under the Guidance of

Mr. Kishor Chauhan

JVM’s Mehta College

Plot no. 9, Sector 19, Airoli, Navi Mumbai 400708

March 2020
 DECLARATION

I the undersigned Ms. Tejasveeni Daund hereby, declare that the work embodied in this project
work titled “Insurance”, forms my own contribution to the research work carried out under the
guidance of Mr. Kishor Chauhan is a result of my own research work and has not been
previously submitted to any other University for any other Degree/ Diploma to this or any other
university.

Wherever reference has been made to previous works of others, it has been clearly indicated as
such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and presented
in accordance with academic rules and ethical conduct.

Name and Signature

Certified by

Name and signature of the guiding teacher

 ACKNOWLEDGEMENT
To list who all have helped me in difficulty because they are so numerous and the depth is so
enormous.

I would like to acknowledge the following as being idealistic channels and fresh dimensions in
the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to do this project.

I would like to thank my principal, Dr. (Mrs.) Leena Sarkar for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank our co-coordinator, Mr. Kishor Chauhan for his moral support
and guidance.

I would also like to express my sincere gratitude towards my project guide Mr. Kishor Chauhan
whose guidance and care made the project successful.

I would like to thank my college library JVM’s Mehta College, for having provided various
reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me throughout my
project.
 INDEX
Sr.no. Particular Page no.

Chapter 1 Introduction To Insurance 1

1.1 Insurance 2
1.2 History Of Insurance 3
1.3 What Is Insurance 5
1.4 Definition Of Insurance 6
1.5 Principle Of Insurance 7
1.6 Method Of Insurance 9
1.7 Nature Of Insurance 10
1.8 Benefits Of Insurance 11
1.9 Functions Of Insurance 12
1.10 Insurance Rules And Regulations 15

Chapter 2 Liberalization Of Insurance Sector 17

2.1 Introduction 18
2.2 Need For Raising FDI Limit 19
2.3 Micro Insurance In Rural Market Of India 20
2.4 Schemes Of Micro Insurance 21
2.5 Reinsurance 22
2.6 Regulation Regarding Reinsurance In India 23
2.7 Bancassurance 24
2.8 Risk Transfer 25

Chapter 3 Overview Of Insurance Sector In India 26

3.1 The Indian Insurance Sector 27
3.2 Present Insurance Sector 28
3.3 Future Of Insurance Sector 31
3.4 Marketing Strategies Of Insurance Companies 32
3.5 Distribution Channel 34

Chapter 4 Types Of Insurance Policies 42

4.1 Introduction 43
4.2 Life Insurance 44
4.3 Benefits Of Life Insurance 45
4.4 Types Of Life Insurance 46
4.5 Points To Be Considered For Life Insurance 47
4.6 Life Insurance Companies In India 48
4.7 Health Insurance 49
4.8 Benefits Of Health Insurance 50
4.9 Types Of Health Insurance 51
4.10 Health Care Schemes By Government Of India 52
4.11 Health Insurance Claim Process 54
4.12 Car Insurance 55
4.13 Benefits Of Car Insurance 56
4.14 Points To Be Considered 57
4.15 Coverage Under Car Insurance 58
4.16 Claim Settlement Ratio 59
4.17 IRDA Guidelines On Car Insurance 60
4.18 Travel Insurance 61
4.19 Types Of Travel Insurance 62
4.20 Benefits Of Travel Insurance 64
4.21 Child Insurance Plans 66
4.22 Working Of Child Insurance 67
4.23 Benefits Of Child Insurance 68
4.24 Claim Process Of Child Insurance 70
4.25 Home Insurance 71
4.26 Types Of Home Insurance 72
4.27 Benefits & Reasons Of Home Insurance 74
4.28 Inclusion & Exclusion Of Health Insurance 75
4.29 Claim Settlement In Home Insurance 76
4.30 Role Of Insurance Agent 77

Chapter 5 Analysis & Conclusion 78

5.1 SWOT Analysis 79
5.2 Conclusion 80
5.3 Recommendation 81

Chapter 6 Annexure 82
6.1 Questionnaire 83
6.2 Bibliography 85
INTRODUCTION TO
INSURANCE

1
 INSURANCE
Insurance is a means of protection from financial loss. It is a form of risk management,
primarily used to hedge against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, insurance

carrier or underwriter. A person or entity who buys insurance is known as an insured or as a
policyholder. The insurance 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 the insured in the event of a covered loss. The loss may or may not be financial,
but it must be reducible to financial terms, and usually involves something in which the insured
has an insurable interest established by ownership, possession, or pre-existing relationship.

The insured receives a contract, called the insurance policy, which details the conditions
and circumstances under which the insurer will compensate the insured. The amount of money
charged by the insurer to the policyholder for the coverage set forth in the insurance policy is
called the premium. If the insured experiences a loss which is potentially covered by the
insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster.
The insurer may hedge its own risk by taking out reinsurance, whereby another insurance
company agrees to carry some of the risks, especially if the primary insurer deems the risk too
large for it to carry.

None of us know what is going to happen to us in the future but what we do know is that
accidents happen. This is the simple idea that the insurance industry is founded on. You never
know when you might crash your car or come home to find someone has broken into your home.
But what you can do is protect yourself financially against something going wrong at some point
in the future. This protection is what we call insurance. The business of insurance is related to
the protection of the economic values of assets. The asset would have been createdthrough
theefforts of the owner.The asset is valuable to the owner, because he expects to get some
benefits from it because it meets some of his needs. This benefit may be an income or in
some other form. In the case of a factory or a cow, the product generated by it is sold and income
is generated. In the case of a motor car, it provides comfort and convenience in transportation,
there is no direct income.

2
 HISTORY OF INSURANCE
Insurance became far more sophisticated in Enlightenment era Europe, and specialized varieties
developed.

Lloyd's Coffee House was the first organized market for marine insurance.

Property insurance as we know it today can be traced to the Great Fire of London, which in 1666
devoured more than 13,000 houses. The devastating effects of the fire converted the
development of insurance "from a matter of convenience into one of urgency, a change of
opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his
new plan for London in 1667."[4] A number of attempted fire insurance schemes came to nothing,
but in 1681, economist Nicholas Barbon and eleven associates established the first fire insurance
company, the "Insurance Office for Houses", at the back of the Royal Exchange to insure brick
and frame homes. Initially, 5,000 homes were insured by his Insurance Office.[5]

At the same time, the first insurance schemes for the underwriting of business ventures became
available. By the end of the seventeenth century, London's growing importance as a center for
trade was increasing demand for marine insurance. In the late 1680s, Edward Lloyd opened a
coffee house, which became the meeting place for parties in the shipping industry wishing to
insure cargoes and ships, and those willing to underwrite such ventures. These informal
beginnings led to the establishment of the insurance market Lloyd's of London and several
related shipping and insurance businesses.[6]

Leaflet promoting the National Insurance Act 1911.

The first life insurance policies were taken out in the early 18th century. The first company to
offer life insurance was the Amicable Society for a Perpetual Assurance Office, founded in
London in 1706 by William Talbot and Sir Thomas Allen.[7][8] Edward Rowe Mores established
the Society for Equitable Assurances on Lives and Survivorship in 1762.

It was the world's first mutual insurer and it pioneered age based premiums based on mortality
rate laying "the framework for scientific insurance practice and development" and "the basis of
modern life assurance upon which all life assurance schemes were subsequently based."[9]

3
In the late 19th century "accident insurance" began to become available. [10] The first company to
offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in
England to insure against the rising number of fatalities on the nascent railway system.

By the late 19th century governments began to initiate national insurance programs against
sickness and old age. Germany built on a tradition of welfare programs in Prussia and Saxony
that began as early as in the 1840s. In the 1880s Chancellor Otto von Bismarck introduced old
age pensions, accident insurance and medical care that formed the basis for Germany's welfare
state.[11][12] In Britain more extensive legislation was introduced by the Liberal government in
the 1911 National Insurance Act. This gave the British working classes the first contributory
system of insurance against illness and unemployment. [13] This system was greatly expanded
after the Second World War under the influence of the Beveridge Report, to form the first
modern welfare state.

4
 WHAT IS INSURANCE?

Insurance may be defined as form of contract between two parties (namely insurer and
insured or assured) whereby one party (insurer) undertakes in exchange for a fixed amount of
money (premium) to pay the other party (Insured), a fixed amount of money on the happening of
certain event (death or attaining a certain age in case of life) or to pay the amount of actual loss
when it takes place through the risk insured (in case of property.

Everyone is exposed to various risks. Future is very uncertain, but there is way to protect
one’s family and make one’s children’s future safe. Life Insurance companies help us to ensure
that our family’s future is not just secure but also prosperous. Life Insurance is particularly
important if you are the sole breadwinner for your family. The loss of you and your income
could devastate your family. Life insurance will ensure that if anything happens to you, your
loved ones will be able to manage financially. This study titled “Study of Consumers Perception
about Life Insurance Policies” enables the Life Insurance Companies to understand how
consumer’s perception differs from person to person. How a consumer selects organizes and
interprets 

The primary regulator for insurance in India is the Insurance Regulatory and

Development Authority of India (IRDAI) which was established in 1999 under the government
legislation called the Insurance Regulatory and Development Authority Act, 1999.

The industry recognises examinations conducted by the IAI (for 280 actuaries), III (for
2.2 million retail agents, 361 brokers, 175 bancassurers, 125 corporate agents and 29 third-party
administrators) and IIISLA (for 8,200 surveyors and loss assessors). There are 9 licensed web
aggregators. TAC is the sole data repository for the non-life industry. IBAI gives voice to
brokers while GI Council and LI Council are platforms for insurers. AIGIEA, AIIEA, AIIEF,
AILICEF, AILIEA, FLICOA, GIEAIA, GIEU and NFIFWI cater to the employees of the
insurers. In addition, there are a dozen Ombudsman offices to address client grievances.

5
 DEFINITION OF INSURANCE
Insurance has been defined to be that in, which a sum of money as a premium is paid by
the insured in consideration of the insurer’s bearings the risk of paying a largesum upon a given
contingency. The insurance thus is a contract whereby: I. Certain sum, termed as premium, is
charged in consideration, ii. Against the said consideration, a large amount is guaranteed to be
paid by the insurer who received the premium, iii. The compensation will be made in certain
definite sum, i.e., the loss or the policy amount which ever may be, and
iv. The payment is made only upon a contingency More specifically, insurance may be defined
as a contact between two parties, wherein one party (the insurer) agrees to pay to the other party
(the insured) or the beneficiary, ascertain sum upon a given contingency (the risk) against which
insurance is required. The Insurance Regulatory and Development Authority, an agency of the
Government of India, is the regulatory body for the insurance sector's supervision and
development.

Terminology used in definition of Insurance

Insurer or insurance company – The agency involved in Insurance business is known as insurer.

Insured/ Assured – The person who gets his property/life insured is known as insured

Policy - The agreement or contract which is put in writing is known as a Policy.

Premium – The consideration in return of which the insurer undertakes to make goods the loss or
give a certain amount in case of life insurance is known as premium

6
 PRINCIPLE OF INSURANCE
Insurance policies are contracts that provide people with financial security and protection from
future uncertainty. In order for the relationship between the insurer and the insured to work,
however, there are certain important principles that must be upheld. Read on to learn about the
principles of insurance contracts.

Indemnity

The principle of indemnity ensures that an insurance contract protects you from and compensates
you for any damage, loss, or injury. The purpose of an insurance contract is to make you "whole"
in the event of a loss, not to allow you to make a profit. Thus, the amount of your compensation
for a loss is directly related to the amount of loss that you actually suffered.

Contribution

Contribution is a similar principle to indemnity, and it applies to situations where you have more
than one insurance policy for the same asset or entity. For example, imagine that you own a truck
that is insured by both Company A and Company B. If another driver hits your truck and it will
cost you $5,000 to fix it, you can submit your claim to Company A, Company B, or to both
companies. If Company A compensates you fully, then it can claim a proportionate contribution
from Company B. However, if both companies compensate you fully, you can't keep the full
amount and turn a profit, because this would amount to an unfair windfall.

Insurable Interest

The insurable interest principle requires that the owner of a particular insurance policy have an
ownership interest in the particular subject matter of the insurance policy. For example, the
owner of a hot dog cart has an insurable interest in the cart because he owns it and is earning
money from it. However, if he sells the hot dog cart, this means he will no longer have an
insurable interest in it. Creditors also have an insurable interest in debt. The absence of an
insurable interest can make the insurance policy in question null and void.

7
Subrogation

Subrogation means that one party stands in for another. In the insurance context, subrogation will
arise if you are injured by a negligent third party, and your insurance company reimburses you
for your damages. Under the principle of subrogation, your insurance company can stand in your
shoes and recover the pay-out from the negligent party. The goal of this principle is to encourage
responsibility and accountability by holding negligent parties responsible for injuries they cause.

Loss Minimization

As the owner of an insurance policy, you have an obligation to take necessary steps to minimize
the loss of your insured property. The law doesn't allow you to be negligent or irresponsible just
because you know you're insured. For example, if a fire breaks out in your kitchen, you have an
obligation to take reasonable steps to put it out, like using a fire extinguisher or calling the fire
department. You can't just stand back and allow the fire to burn down your house because you
know that insurance will pay for it.

Proximate Cause

The principle of proximate cause, or nearest cause, comes into play when more than one event or
bad actor causes an accident or injury. An example would be if two separate landowners
carelessly burn piles of leaves, and the fires eventually join together and burn down your house.
The insurance principle of proximate cause dictates that nearest or closest cause should be taken
into consideration to decide the liability.

Utmost Good Faith

Insurance contracts also require that both parties act with the utmost good faith. This means that
both parties must accurately and fully disclose all material information. This not only ensures
fairness, but also helps insurance companies accurately price premiums for insurance applicants.
Insurance policies can be declared null and void if an applicant made a misrepresentation of
material fact that was relied on by the insurance company.

8
 METHODS OF INSURANCE

According to the study books of The Chartered Insurance Institute, there are variant methods of
insurance as follows:

1. Co-insurance – risks shared between insurers

2. Dual insurance – having two or more policies with overlapping coverage of a risk (both
the individual policies would not pay separately – under a concept named contribution,
they would contribute together to make up the policyholder's losses. However, in case of
contingency insurances such as life insurance, dual payment is allowed)
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 the insurer passes some part of or all risks to another
Insurer, called the reinsurer

9
 NATURE OF INSURANCE

Following are the main characteristics of insurance which are applicable to all types of insurance
(life, fire, marine and general insurance).

1. Sharing of Risks - Insurance is a device to share the financial losses which may occur to
individual or his family on the happening of certain events
2. Cooperative Device – Insurance is a co-operative device to spread the loss caused by a
particular risk over a large caused by a particular risk over a large number of persons who are
exposed to it and who agree to insure themselves against the risk.
3. Value of Risk – Risk is evaluated at the time of insurance. There are several methods of
valuing the risk. Higher the risks, higher will be premium
4. Payment on Contingency -If the contingency occurs, payment is made; payment is
made only for insured contingency. If there is no contingency, no payment is made. In life
insurance contract, payment is certain because the death or the expiry of term will certainly
occur. In other insurance contract like fire, marine, the contingency may or may not occur
5. Amount of Payment of Claim - The amount of payment depends upon the value of loss
occurred due to the particular insured risk. The insurance is there upto that amount. In life
insurance insurer pay a fixed sum on the happening of an event or within a specified time period.

Example 
– In fire insurance, if fire occurs and half the property is destroyed, but the whole property is
insured, then payment of claim will be made only for that half building that is destroyed not the
whole amount of insured.

6. Insurance is different from Charity - In charity, there is no consideration but insurance

is not given without premium
6. Large number of Insured Person - Insurance is spreading of loss over a large number
of persons. Larger the number of persons, lower the cost of insurance and amount of
premium and incase lower the number of persons, higher the.

10
 BENEFITS OF INSURANCE
Insurance benefits individuals, organizations and society in more ways than the average person
realizes.  Some of the benefits of insurance are obvious while others are not.

1. The obvious and most important benefit of insurance is the payment of losses.  An
insurance policy is a contract used to indemnify individuals and organizations for covered
losses.
2. The second benefit of insurance is managing cash flow uncertainty.  Insurance provides
payment for covered losses when they occur.  Therefore, the uncertainty of paying for
losses out-of-pocket is reduced significantly.
3. A third and uncommon benefit of insurance is complying with legal requirements. 
Insurance meets statutory and contractual requirements as well as provides evidence of
financial resources.
4. Another very important benefit of insurance is promoting risk control activity.  Insurance
policies provide incentives to implement a loss control program because of policy
requirements and premium savings incentives.
5. The fifth benefit of insurance is the efficient use of an insured's resources.  Insurance
makes it unnecessary to set aside a large amount of money to pay for the financial
consequences of the risk exposures that can be insured.  This allows that money to be
used more efficiently.
6. Another uncommon, important benefit of insurance is support for the insured's credit. 
Insurance facilitates loans to individuals and organizations by guaranteeing that the
lender will be paid if the collateral for the loan is destroyed or damaged by an insured
event.  This reduces the lender's uncertainty of default by the party borrowing funds.
7. The seventh benefit of insurance is it provides a source of investment funds.  Insurance
companies collect premiums up front, invest those premiums in a variety of investment
vehicles, and pay claims if they occur.
8. The last benefit of insurance is reducing social burden.  Insurance helps reduce the
burden of uncompensated accident victims and the uncertainty of society.

11
 FUNCTION OF INSURANCE
Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a
number of persons who are exposed to it and who agree to ensure themselves against that risk.
Risk is uncertainty of a financial loss. It should not be confused with the chance of loss which is
the probable number of losses out of a given number of exposures.

It should not be confused with peril which is defined as the cause of loss or with hazard which is
a condition that may increase the chance of loss.

Finally, risk must not be confused with loss itself which is the unintentional decline in or
disappearance of value arising from a contingency. Wherever there is uncertainty with respect to
a probable loss there is risk.

Every risk involves the loss of one or other kind. The function of insurance is to spread the loss
over a large number of persons who are agreed to co-operate each other at the time of loss. The
risk cannot be averted but loss occurring due to a certain risk can be distributed amongst the
agreed persons. They are agreed to share the loss because the chances of loss, i.e., the time,
amount, to a person are not known.

Anybody of them may suffer loss to a given risk, so, the rest of the persons who are agreed will
share the loss. The larger the number of such persons the easier the process of distribution of
loss, In fact; the loss is shared by them by payment of premium which is calculated on the
probability of loss.

In olden time, the contribution by the persons was made at the time of loss. The insurance is also
defined as a social device to accumulate funds to meet the uncertain losses arising through a
certain risk to a person insured against the risk.

The functions of insurance can be studied into two parts (i) Primary Functions, and (ii)
Secondary Functions.

12
Primary Functions:
(i) Insurance provides certainty:
Insurance provides certainty of payment at the uncertainty of loss. The uncertainty of loss can be
reduced by better planning and administration. But, the insurance relieves the person from such
difficult task. Moreover, if the subject matters are not adequate, the self-provision may prove
costlier.

There are different types of uncertainty in a risk. The risk will occur or not, when will occur,
how much loss will be there? In other words, there are uncertainty of happening of time and
amount of loss. Insurance removes all these uncertainty and the assured is given certainty of
payment of loss. The insurer charges premium for providing the said certainty.

(ii) Insurance provides protection:

The main function of the insurance is to provide protection against the probable chances of loss.
The time and amount of loss are uncertain and at the happening of risk, the person will suffer
loss in absence of insurance. The insurance guarantees the payment of loss and thus protects the
assured from sufferings. The insurance cannot check the happening of risk but can provide for
losses at the happening of the risk.

(iii) Risk-Sharing:
The risk is uncertain, and therefore, the loss arising from the risk is also uncertain. When risk
takes place, the loss is shared by all the persons who are exposed to the risk. The risk-sharing in
ancient time was done only at time of damage or death; but today, on the basis of probability of
risk, the share is obtained from each and every insured in the shape of premium without which
protection is not guaranteed by the insurer.

Secondary functions:
Besides the above primary functions, the insurance works for the following functions:

(i) Prevention of Loss:

The insurance joins hands with those institutions which are engaged in preventing the losses of
the society because the reduction in loss causes lesser payment to the assured and so more saving

13
is possible which will assist in reducing the premium. Lesser premium invites more business and
more business cause lesser share to the assured.

So again premium is reduced to, which will stimulate more business and more protection to the
masses. Therefore, the insurance assist financially to the health organisation, fire brigade,
educational institutions and other organisations which are engaged in preventing the losses of the
masses from death or damage.

(ii) It Provides Capital:

The insurance provides capital to the society. The accumulated funds are invested in productive
channel. The dearth of capital of the society is minimised to a greater extent with the help of
investment of insurance. The industry, the business and the individual are benefited by the
investment and loans of the insurers.

(iii) It Improves Efficiency:

The insurance eliminates worries and miseries of losses at death and destruction of property. The
carefree person can devote his body and soul together for better achievement. It improves not
only his efficiency, but the efficiencies of the masses are also advanced.

(iv) It helps Economic Progress:

The insurance by protecting the society from huge losses of damage, destruction and death,
provides an initiative to work hard for the betterment of the masses. The next factor of economic
progress, the capital, is also immensely provided by the masses. The property, the valuable
assets, the man, the machine and the society cannot lose much at the disaster.

14
 INSURANCE RULES AND REGULATION

Insurance laws and regulations in India takes care of all matters related to various
insurance companies in the country. Much of the development and growth of the insurance
sector in India is due to the government's decision to nationalize the insurance business and to
allow private and foreign insurance companies to establish their businesses here. In India, there
is one regulatory authority i.e. IRDA which oversees different functioning of the life insurance
companies in India and provide them with guidelines.

Insurance Regulatory and Development Authority (IRDA)

Insurance Regulatory and Development Authority (IRDA) is the controlling body,
overseeing important aspects and functioning of various insurance companies in India.
Established by the government, it safeguards the interest of the insurance policy holders of the
country.

15
Some of IRDA's functions include:
 To regulate, ensure and promote the orderly growth of the insurance business
 To prescribe regulations on the investment of funds by insurance companies
 To regulate the maintenance of the margin of solvency
 To adjudicate the disputes between insurers and intermediaries
 To supervise the functioning of the Tariff Advisory Committee

Other supporting organizations which facilitate in the working of the industry are:

1. Tariff Advisory Committee

The main task of Tariff Advisory Committee is to regulate and control the rates, benefits, terms
and conditions offered by life insurance companies in India.

2. Insurance Association of India

All insurance companies in India are members of the Insurance Association of India. It has two
councils under its patronage, mainly
a. Life Insurance Council
b. General Insurance Council

3. Ombudsmen
Ombudsmen play important role in regulating and ensuring smooth functions of the insurance
companies. They are appointed to address all complaints relating to settlements of claims.
Anyone having a grievance against an insurance company can approach Ombudsmen for
redressal.

16
LIBERALIZATION
OF INSURANCE
SECTOR

17
 INTRODUCTION
The world has become a global village. The Liberalisation, Privatization and Globalisation
(LPG) wave has sweeped across the global economies. The two pillars of India’s economic
policy before 1991 have been protection and public sector.
Thus the New Economic Policy 1991 was a departure from the regulated planned economic
tradition to that of LPG movement. After nearly a decade of intense debate a consensus
developed in India for ending the public sector monopoly in insurance and opens the industry to
private sector participants subject to suitable prudential regulation.
Today, to the credit of combined efforts of both the regulator and industry players, benefits of
insurance are widely acknowledged, public confidence in the industry has been very much
restored and the industry has become more dynamic. Following the recent reform in the
insurance sector, Indian insurance industry is moving ahead.

The main element in the reform process was the opening up of the insurance industry in 2000
with foreign direct investment permitted up to 26 per cent of equity. With this change global
insurers have rushed into the country to capture the market. The reforms have two objectives.

One to capture  a vast untapped population under suitable insurance cover. The second, to
create a more efficient and competitive insurance industry and elevate the performance of
insurance companies.

The Insurance Regulatory and Development Authority (IRDA) since its incorporation as a
statutory body in April 2000 has regulated the opening of insurance sector which has seen  15
life and 23 non life private companies launch their operations in India In the post liberalization
phase, insurance industry has witnessed beneficial effects of competition.

The market for pension product is developing and there is a unit linked insurance plan generated
by private players. Opening of the insurance market to private and foreign players and a
conversion of a monopolistic market to a liberalized one has transformed the insurance industry
in India.

18
 NEED FOR RAISING FDI LIMIT
Reforms in Insurance sector was started in India way back in 1993 as a part of overall financial
reforms. The main idea was to make insurance industry vibrant and dynamic so that it can
support the growth process leading to overall economic growth of the country in post
liberalization era. At present the foreign direct investment in insurance sector is permitted up to
26 per cent of equity.

Higher amount of Foreign Direct Investment (FDI) in insurance sector would increase
penetration of insurance in India as existing companies will try to expand their reach and new
companies making entry into the market will work for their space in the market. Higher amount
of FDI is likely to enrich the business by bringing world class business practices and process.
Simultaneously it would help expand distribution capabilities. It is proposed therefore to raise
FDI limit from existing 26% to 49%. This will help the insurance industry in the following ways.

1. Higher FDI in insurance sector can give much needed capital for growth of insurance
sector which in turn will help in the long term economic development.
2. Ambitious infrastructure projects of Government can get stable long term source of
funds.
3. Higher amount of FDI in insurance would increase penetration of insurance in India
which is low compared to global average.
4. An increase in FDI in insurance will benefit the economy as people will invest in long
term fund which will increased the growth of economy.
5. Insurance in India is mainly confined to urban sector Vast potentials are lying untapped
in rural India. For accessing into these areas new approach is necessary in the matter of product
design, pricing and product delivery mechanism. As far as rural health is concerned there are
many new entrants waiting for making entry into the market, considering huge potential. Private
players may tap these potentials. Thus raising of FDI limit in insurance sector will strengthen the
market and thus lead to the economic growth of the country.

19
 MICRO INSURANCE IN RURAL MARKET OF INDIA
World’s poor are entrapped in a vicious cycle of poverty. The vicious cycle of low income – low
savings low investments. To break this vicious cycle the Government of India (GOI) and Non
Government Organizations (NGOS) have started the micro insurance schemes in India. The
Indian rural market with its enormous size, demand base, variety, and divergent customs offers
great opportunities to marketers.

With the rural population having increased to about 75% of the total population the demand for
products and services has increased in rural areas but the supply and penetration is almost
nonexistent. The insurance sector has not made much headway in the rural sector.

The insurance market in India was liberalized in the year 2000 but has not expanded much in real
terms beyond the urban domains. It is a common belief amongst the insurance companies that it
is expensive to do business in rural areas.

There are many challenges in providing micro insurance to rural population since low income
people are susceptible to risks. Commercial insurers have largely stayed away from the low
income market mainly because of high cost and small premiums. In rural areas infrastructure is
lacking and literacy levels are low.

Thus the rural poor who are low income people are protected against health risk (death,
disability, illness, injury, hospitalization) and property risk (damage, loss of crop/ livestock,
cattle, theft,) which take place due to natural calamities such as drought, flooding, tremor,
devastating disease, death and widowhood.

Thus micro insurance is the use of insurance as an economic instrument at the ‘micro’ (i.e.
smaller than national) level of society. It refers to providing cover for insurable risks of micro
entrepreneurs, small and landless farmers, women and low income people through recognized,
semiformal and informal institutions.

India has a special Micro insurance Act that regulates the suppliers through its special agency for
insurance regulation- the IRDA. Under this Act the insurance companies are obliged to conduct a
certain percentage of their business in rural areas or with marginalised groups.

20
 SCHEMES OF MICRO INSURANCE
1. The Personal Accident Insurance Scheme (PAIS) which is being provided along with the
Kisan Credit Card (KCC) and Rashtriya Krishi Bima Yojana (RKBY) for insuring crops are the
only risk mitigation mechanism available to rural households.
2. Many State Governments are offering Health Insurance facilities to the rural poor which
have also generated considerable acceptance and awareness about insurance products in the rural
areas.
3. In October 2004 the RBI permitted Regional Rural Banks (RRBs) to take on insurance
business as a “Corporate agent”. RRBs have several branches is rural areas & they can play an
important role.
4. In IRDA regulations have certain most innovative features in legally recognizing NGOS,
MFIs (Micro Finance Institutions) and SHGs as “micro insurance agents”. This has the potential
of significantly increasing rural insurance dispersion.
5. A lot of commercial banks have united foreign insurance policies. Thus banking outlets
and Co-operative societies could provide the needed outreach to provide micro insurance
facilities without any further adding to business costs.
6. The GOI has also launched its new Social Security initiative – Aam Admi Bima Yojana
( Common Person’s Insurance Programme) for poor families that do not own agricultural land. It
extends death and disability coverage to an estimated 15 million rural and landless households.
Under this programmes the State and the Union governments are expected to bear the premium
of Rs. 200 for every policy holder who is insured to the extent of Rs. 50,000 in case of natural
death and 75,000 in case of an accident. A number of micro insurance schemes are state led.
Many others are partnership between private insurance companies and microfinance institutions.
In such a partnership the microfinance institutions assume the role of an agent and distributes the
product of the insurance company to its clients. This helps the insurance company to reach
difficult markets cheaply. The insurance company benefits from the trust relationship the local
microfinance institution has established with the target population.

21
 REINSURANCE
The term ‘reinsurance’ stands for the practice whereby a reinsurer, in return of premium paid to
it, indemnifies another insurer for a portion or all of the liability taken up by the latter due to a
policy of insurance that it has issued. This latter party is called the ‘reinsured’. Reinsurance is a
type of risk management involving transfer of risk from insurer to reinsurer.

It works like this- the insurer gives the reinsurer a portion of premium it collects from the insured
and in return is covered for losses above a particular limit. A reinsurer enters into a reinsurance
agreement for a very specific reason- either the nature of risk insured or the business strategies of
the insurer or other reasons.

It is an independent contract between the reinsurer and the insurer and the original insurer is not
a part of the contract. If the claimant is an individual or even a group of individuals an insurance
company will find it, relatively easy to cover the claims. But if there are a huge number of claims
at the same time and loss is massive and wide spread this may not be possible. It is in this
context that reinsurance plays an important part in determining the success of the insurance
business.

Reinsurance primary deals with risks that are not predictable and cause the greatest exposure for
the insurance company. A single insurer will not be able to bear the damaging financial impact
of such losses. Therefore an unbearable loss is broken down into bearable units by risk transfers.

An insurance company limits the amount of risk it takes depending on the reinsurance terms
along with factors like the worth of its assets, trend of inflation in the economy, a price of the
insurance products and the type of risk.

The reinsurance business hinges on successful partnerships. As the Indian market grows the
regulator and the players are expected to realize the advantages of the reinsurer as a partner
rather than as a means of risk reduction. If an insurance company relied too heavily on a weak
reinsurer it will be unable to meet heavy losses since the reinsurer itself might be insolvent.

22
 REGULATION REGARDING REINSURANCE IN INDIA

Given the importance of reinsurance there are several guidelines laid down by Insurance
Regulatory Development Authority of India (IRDA) to ensure fair play. Some of these are as
follows.

1. Every insurer should retain risk proportionate to its financial strength and business
volume.
2. Certain percentage of the sum assured on each policy by an insurance company is to be
reinsured with the National Reinsurer. National reinsurer has been made compulsory only in the
non life sector.
3. The reinsurance programme will begin at the start of each financial year and has to be
submitted to the IRDA forty five days before the start of the financial year.
4. Insurers must place their reinsurance business, in excess of limits defined outside India
with only those reinsurers who have a rating of at least BBB standard and Poor (S & P) for the
preceding five years. This limit has been derived from India’s own Sovereign rating, which
currently stands at BBB.
5. Private life insurance companies cannot enter into reinsurance with their promoter
company or its associates though the LIC can continue to reinsure its policies with GIC.

23
 BANCASSURANCE
One of the more recent examples of financial diversification is ‘bancassurance’ the term given to
the distribution of insurance products through branches or other distribution channels of banks.

In India the concept of bancassurance appears to be gaining ground quite rapidly both through
commission based arrangements and joint ventures between banks and insurance companies.
There are costs associated with setting up a successful bancassurance network. The proper
training of bank personnel to understand the market insurance schemes is vital to the success of
these ventures.

There is also a need to invest extensively in IT and other support systems that would provide an
integrated backup for banking and insurance services. Regulatory issues need to be addressed
comprehensively and sorted out particularly with respect to competition and market structure
problems. Given these changes bancassurance and collaboration between banks and insurers has
a long way to go in India.

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 RISK TRANSFER
Despite the total transformation of Insurance sector after the liberalisation Indian insurance has
been still behind in comparison with the world wide insurance development which has brought
the convergence of insurance markets with money markets and capital markets.

The service sectors like banking and insurance have adopted a new mechanism called
Alternative Risk Transfer (ART) to meet the incidence of costly insurance losses which cannot
be covered by the traditional insurance & reinsurance. Thus bankers and investors have adopted
alternative risk transfer for their success and survival.

The earthquake, hurricane, Tsunami and other natural disasters and their ever increasing
exposures have brought some revolution and breakthrough in the traditional or conventional
insurance and reinsurance practices. The ART products are Insurance derivatives which involve
transfer of property and casualty risk through the issuance of derivative instruments.

Another is Insurance securitisation  which involves the process of transfer of property and
casualty risks from one party (the issuer) to another party (the investors). The ART products
have not found significant place in Indian insurance industries. At present Indian general insurers
do not find any much difficulty for reinsurance for protection against large loss arising out of any
single events.

With the increasing operations of MNCs in this sector and full-fledged operation of
bancassurance by general insurance companies and introduction of credit insurance by state
owned company like New India Assurance Company and prospects of agriculture insurance in
India there will be need for more ART products in the near future.

Further recent IRDA regulations on solvency margins for insurers and reinsurers rising market
expectations for more efficient risk financing programmes development of Indian capital market
and replacement of FERA by FEMA are all inducing factors for insurers, re-insurers, investors
and bankers to make a proper use of essential ART products to transfer insurance risks from
insurance market to capital markets.

25
 OVERVIEW OF
INSURANCE
SECTOR IN INDIA

26
 THE INDIAN INSURANCE SECTOR

The Indian Insurance Sector is basically divided into two categories – Life Insurance and
Non-life Insurance. The Non-life Insurance sector is also termed as General Insurance. Both the
Life Insurance and the Non-life Insurance is governed by the IRDAI (Insurance Regulatory and
Development Authority of India).

The role of IRDA is to thoroughly monitor the entire insurance sector in India and also
act like a custodian of all the insurance consumer rights. This is the reason all the insurers have
to abide by the rules and regulations of the IRDAI.

The Insurance sector in India consists of total 57 insurance companies. Out of which 24
companies are the life insurance providers and the remaining 33 are non-life insurers. Out which
there are seven public sector companies.

Life insurance companies offer coverage to the life of the individuals, whereas the non-
life insurance companies offer coverage with our day-to-day living like travel, health, our car and
bikes, and home insurance. Not only this, but the non-life insurance companies provide coverage
for our industrial equipment’s as well. Crop insurance for our farmers, gadget insurance for
mobiles, pet insurance etc. are some more insurance products being made available by the
general insurance companies in India.

The life insurance companies have gained an investment prospectus in the recent times
with an idea of providing insurance along with a growth of your savings. But, the general
insurance companies remain reluctant to offer pure risk cover to the individuals.

27
 PRESENT INSURANCE SECTOR

So far as the industry goes, LIC, New India, National Insurance, United insurance and
Oriental are the only government ruled entity that stands high both in the market share as well as
their contribution to the Insurance sector in India. There are two specialized insurers –
Agriculture Insurance Company Ltd catering to Crop Insurance and Export Credit Guarantee of
India catering to Credit Insurance. Whereas, others are the private insurers (both life and general)
who have done a joint venture with foreign insurance companies to start their insurance
businesses in India.

Life Insurance Companies:

Private Sector Companies

 Aegon Life Insurance Co. Ltd.

 Aviva Life Insurance Co. India Ltd.
 Bajaj Allianz Life Insurance Co. Ltd.
 Bharti AXA Life Insurance Co. Ltd.
 Birla Sun Life Insurance Co. Ltd.
 Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.
 DHFL Pramerica Life Insurance Co. Ltd.
 Edelweiss Tokio Life Insurance Co. Ltd
 Exide Life Insurance Co. Ltd.
 Future Generali India Life Insurance Co. Ltd.
 HDFC Standard Life Insurance Co. Ltd.
 ICICI Prudential Life Insurance Co. Ltd.
 IDBI Federal Life Insurance Co. Ltd.
 IndiaFirst Life Insurance Co. Ltd
 Kotak Mahindra Old Mutual Life Insurance Ltd.
 Max Life Insurance Co. Ltd.
 PNB MetLife India Insurance Co. Ltd.

28
  Reliance Life Insurance Co. Ltd.
 Sahara India Life Insurance Co. Ltd.
 SBI Life Insurance Co. Ltd.
 Shriram Life Insurance Co. Ltd.
 Star Union Dai-Ichi Life Insurance Co. Ltd.
 Tata AIA Life Insurance Co. Ltd.

General Insurance Companies:

Private Sector Companies

 Aditya Birla Health Insurance Co. Ltd.

 Bajaj Allianz General Insurance Co. Ltd.
 Bharti AXA General Insurance Co.Ltd.
 Cholamandalam General Insurance Co. Ltd.
 Future Generali India Insurance Co.Ltd.
 HDFC ERGO General Insurance Co. Ltd.
 ICICI Lombard General Insurance Co. Ltd.
 IFFCO-Tokio General Insurance Co. Ltd.
 Kotak General Insurance Co. Ltd.
 L&T General Insurance Co. Ltd.
 Liberty Videocon General Insurance Co. Ltd.
 Magma HDI General Insurance Co. Ltd.
 Raheja QBE General Insurance Co. Ltd.
 Reliance General Insurance Co. Ltd.
 Royal Sundaram Alliance Insurance Co. Ltd
 SBI General Insurance Co. Ltd.
 Shriram General Insurance Co. Ltd.
 TATA AIG General Insurance Co. Ltd.

29
  Universal Sompo General Insurance Co.Ltd.

Health Insurance Companies

 Apollo Munich Health Insurance Co.Ltd.

 Star Health Allied Insurance Co. Ltd.
 Max Bupa Health Insurance Co. Ltd.
 Religare Health Insurance Co. Ltd.
 Cigna TTK Health Insurance Co. Ltd.

This collaboration with the foreign markets has made the Insurance Sector in India only
grow tremendously with a high current market share. India allowed private companies in
insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014.
IRDAI states –  Insurance Laws (Amendment) Act, 2015 provides for enhancement of the
Foreign Investment Cap in an Indian Insurance Company from 26% to an Explicitly Composite
Limit of 49% with the safeguard of Indian Ownership and Control.

Private insurers like HDFC, ICICI and SBI have been some tough competitors for
providing life as well as non-life products to the insurance sector in India.

30
 FUTURE OF INSURANCE SECTOR

Though LIC continues to dominate the Insurance sector in India, the introduction of the
new private insurers will see a vibrant expansion and growth of both life and non-life sectors in
2017. The demands for new insurance policies with pocket-friendly premiums are sky high.
Since the domestic economy cannot grow drastically, the insurance sector in India is controlled
for a strong growth.

With the increase in income and exponential growth of purchasing power as well as
household savings, the insurance sector in India would introduce emerging trends like product
innovation, multi-distribution, better claims management and regulatory trends in the Indian
market.

The government also strives hard to provide insurance to individuals in a below poverty
line by introducing schemes like the

 Pradhan Mantri Suraksha Bima Yojana (PMSBY),

 Rashtriya Swasthya Bima Yojana (RSBY) and
 Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).

Introduction of these schemes would help the lower and lower-middle income categories
to utilize the new policies with lower premiums in India.

With several regulatory changes in the insurance sector in India, the future looks pretty
awesome and promising for the life insurance industry. This would further lead to a change in
the way insurers take care of the business and engage proactively with its genuine buyers.

Some demographic factors like the growing insurance awareness of the insurance,
retirement planning, growing middle class and young insurable crowd will substantially increase
the growth of the Insurance sector in India.

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 MARKETING STRATEGIES OF INSURANCE COMPANIES
Having an incredible marketing campaign can go a long way in determining your
company’s future. It’s crucial to know what your marketing goals are and how to achieve them.
A great marketing strategy will definitely help you improve and expand your business to reaches
that are usually far beyond your grasp. But you can’t do this if you don’t know how to run a
proper marketing campaign. Sure, you might have a great idea, but if you can’t realize that idea,
there’s no way that any change will happen. What you need is knowledge and imagination
because both of these traits will enrich your marketing campaign and let you create something
unique. Your main goal should be to create an amazing marketing campaign that will bring even
more customers your way.

Regarding insurance companies, if you’re an owner of such a company you shouldn’t

have any difficulty running a successful marketing campaign using these tricks. You’ll even be
able to negotiate lower car insurance. Without further ado, here are the top 5 marketing strategies
for insurance companies!

Be aware of the market

Being aware of the market will bring you an advantage over your competitors plus you’ll
be able to know exactly what the people are looking for. If you don’t constantly keep track of the
market, there’s a high possibility that you will lag behind others. Don’t allow this to happen by
monitoring the market at all times. As the market changes, so should you and your marketing
campaign. Staying in the past, even though it is more stable, generally means that you won’t be
able to stay in front of the competition. Dedicate some of your resources into keeping track of the
market, and you’re all set!

Initial situation and project goal

Once you start your company, set an immediate goal that you’ll strive to achieve in a
personally given amount of time. Goals are crucial for all companies because you must have
something to strive for. If you don’t, then chaos appears, and chaos isn’t good. The organization
is key and, we can’t stress this enough, invest in some great organization – it will make your life

32
easier. Take a look at the initial situation, and you’ll get an idea of what exactly you want to
achieve and which way to take to that destination.

Measure the effectiveness of marketing

Once you develop a marketing campaign, make sure you check out all the variables and
see if the campaign is any good. If there are too many faults and possible room for error, then it
might not be a good idea to go through with that particular campaign. Otherwise, simply polish
the plan and start working. Measuring the effectiveness isn’t only necessary at the beginning of
your marketing campaign as the effectiveness itself can change depending on the circumstances.
In short, you should constantly keep checking on things, so you know everything is going great
and if, in the case of an issue or two, you need to make changes, you’ll be able to make them
quickly and efficiently.

Project results and outlook

Once you run your marketing campaign and strategy, you’ll need to keep checking on
how well they’re doing. Of course, we covered this in the previous part of the article. This is the
part where we talk about the end-result of a marketing strategy. You should project the results
and check if there is any room for improvement. Of course, you should fix the bad parts and
issues, but you should also perfect the good parts. Once this is done, take a look at the results as
a whole and see which smaller part simply doesn’t fit. If you do this with enough attention to
detail, your next marketing campaign will fare much better.

Accumulate feedback
Finally, listen to your customers and employees. Listen to what they say because their
feedback is incredibly important. If there is anything wrong with what you chose to do, then your
customers will notify you. Accumulate all of this feedback and take a long, hard look. You’ll
know if what you’re doing is right or wrong, which lets you plan what to do in the future
accordingly!

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 DISTRIBUTION CHANNELS
Insurers and underwriters need to decide on the way, or channel through which, their products
are distributed. The aim of a distribution channel is to allow customers to access and purchase
products in the most efficient way for the business.

A variety of distribution channels are available, and the business's choice will be determined by
its structure, strategy and position in the market. Each channel requires different resources to be
effective and will impact the pricing structure.

Distribution channels can be divided into two categories:

 Direct channels- these give the insurer direct contact with the customer. The business
employs sales personnel with the skills to provide the product to the customer.
 Indirect channels - these contain a break in the link between the customer and the
business. The break is filled by a skilled intermediary with a customer base that is the
insurer's target audience.

We will now look at the different types of direct and indirect channels available.

Direct channels

1. Call centres

Call centres provide insurance companies with an efficient method of transacting insurance with
customers. Their sales activities are focused on achieving specific targets, such as defined sales
volumes, call queuing times and numbers' of customers purchasing. The popularity of call
centres has grown out of the competitive market as their efficiency reduces the transaction costs
of policies.

Call centres can be located in any place where employees may be trained. This includes countries
such as India where employee costs are much lower than in the UK. However, some customers
now prefer call centres to be operated in their own country as a result of poor past experiences.

34
When a business is considering how much investment is necessary for the operation, it is
important that it takes the design and cost of the technology which will be used into account. To
reduce the call centre's set-up costs, the business can operate a virtual call centre, where
employees are home based and calls are routed to them from a central point. These can be set up
quickly using secure networks.

Employees, who are often referred to as agents or operators, are guided by the software through a
series of question prompts to ask customers. Telephone calls are held in a queue until one of the
agents is ready to handle the call. The process is automated with the caller hearing an
introductory message before the agent begins the conversation.

Call centres may collate data that can be used to improve the efficiency of their operations. For
example, this could help the business to provide ways of ensuring that the centre has a sufficient
number of employees available in peak times. Another way of increasing operational efficiency
is to use computer-based, rather than paper-based, records when answering customer queries.

In addition to making new business sales, call centres are often used to support and develop the
customer relationship. Outbound calls can promote the benefits of alternative products to
existing customers; for example, motor insurance customers usually require home insurance as
well. The more products that a customer buys from a certain organisation, the more likely they
are to remain with it. Customers are also likely to become less price-sensitive as they associate
themselves with a brand. Where insurers provide white label products (i.e. products provided by
an insurer that are promoted using the branding of another organisation), call centres often divide
themselves into different teams representing the different brands.

2. Insurance agents

An agent is an individual who acts on behalf of another person or group. For example, a call
centre employee. Some insurers use external sales employees to act as agents and visit
customers; they are paid a commission based on sales in addition to a basic salary. In Britain,
insurance agents were a popular method for selling home and accident insurance, and life
assurance. However, with the introduction of other channels, such as the internet, the
administration costs of using agents were too high in the competitive market and customers

35
began choosing other channels with lower priced offerings. This is partly because customers are
now better educated in insurance products as a result of the discussions often had across various
media, such as magazines, radio, TV and websites.

3. Lloyd's agents

These agents are appointed by Lloyd's as marine service providers to supply local shipping and
casualty information. They also carry out pre- and post-loss marine cargo surveys, so are
specialists in hull and machinery surveys. They perform a number of claims activities as well.
There are approximately 300 agents worldwide in major ports and commercial centres, with a
similar number of sub-agents, and they carry out around 100,000 surveys each year.

4. Appointed representatives

An agent can be appointed to provide advice and sell insurance products for a particular
insurance company, but be independent of that company. These agents are referred to as
appointed representatives, and may be an individual or a business which is representing another
Financial Conduct Authority (FCA) regulated business. The appointed representative is only able
to operate within the regulated activity of that insurer. If it carries out any other activities outside
of its appointed representative status, it must be registered directly with the FCA. The insurer
that grants appointed representative status is known as the 'principal' and is responsible for the
activities of the appointed representative. The principal must monitor the appointed
representative's activities to ensure that it acts in accordance with the regulations at all times.

5. Mutual organisations

In the past, tradesmen grouped together to form mutual organisations which provided protection
for the risks that insurance companies were not willing to cover. For example, risks such as
liability insurance or accident and injury benefits may be too high for an insurer's portfolio.
Members own the mutual organisation and receive a variety of financial benefits, so it is in their
best interests to support the organisation that represents them.  Examples include the following:

 P&I clubs - offer marine liability cover

36
  National Farmers' Union - represents the agricultural and horticultural industries;
provides a variety of financial services products
 DG Mutual - originally formed to provide injury and accident benefits to dentists, now
represents most professional persons.

Indirect channels

1. Insurance brokers

Insurance brokers are independent of any insurance company and therefore able to provide
advice and products to the customers from a variety of companies. Brokers select a panel of
insurers they would like to represent and which meets the needs of their customers. The FCA
requires brokers to have access to a sufficient number of insurers on their panel so that customers
can make an informed choice. Some markets may be limited as a result of their specialist nature
with few insurers offering cover. In these circumstances, the broker will advise the customer on
why only these insurers may be approached.

Brokers may specialise in a segment of the market that they have knowledge and expertise in.
This is attractive for customers, as they feel more confident that the broker will be able to
identify their risks and source an insurer to provide cover. Brokers are responsible for collecting
premiums from customers and have a credit agreement with insurers. As part of this agreement,
brokers receive commission from insurers when placing risks with them. Some brokers charge
customers a fee for their services in addition to or instead of the commission received from
insurers. For example, when a customer, such as a manufacturing business, has several insurance
policies arranged through a broker, the broker may charge a fee for placing the risk with a
number of insurers instead of receiving a commission. Larger risks attract competition from
other brokers and so the broker may charge customers a fee instead of receiving commission to
keep the overall insurance cost at a competitive level.

Some brokers offer additional services to customers, such as business continuity planning or risk
management advice. As no insurance product is provided with these services, the broker charges
a fee for their use so that they create an additional revenue stream. Offering such services helps

37
the broker to negotiate terms with the insurer, as the additional details supplied by customers can
be used to help the underwriter understand their risks.

Large groups of people, such as a car club, are attractive to insurers because they offer a high
premium volume and are more likely to be retained by a broker. The insurer benefits from the
broker's knowledge, relationship with the group and processing of documents.

The insurer can reduce the cost of providing and administering the product further when it
delegates an agreed authority to the broker. This is where an insurer gives the broker the
authority to carry out certain actions; for example, relating to the types of risks that the broker
can accept without referral to an underwriter, or to the premium rates and limits of cover that it
can authorise. Whether the insurer chooses to delegate an agreed authority depends on the
broker's expertise and the profitability of the scheme. The insurer will receive a monthly
bordereau of the risks placed, premiums collected and details of any claims made. The broker
benefits from having a stable and loyal customer base that it can cross-sell other products to,
such as home insurance in the example of a car club. Some schemes may be available to another
broker on a shared commission basis, creating a new link in the chain between the insurer and
the customer.

2. Reinsurance brokers

An insurer may place a proportion of its risk with reinsurers in order to reduce the possibility of
it suffering a major loss or catastrophe to its own account. Spreading the risk in this way allows
the insurer to write higher limits of cover. Reinsurance brokers have specialist knowledge of
which reinsurers an insurer may share its account with or place one-off risks with under a
facultative facility.

The amount that can be reinsured depends on the account and the risk, and the cover may be
proportional or non-proportional. Proportional reinsurance can be provided on a quota share
basis where the insurer and reinsurer share an agreed quota of the premium and claims. It can
also be provided on a surplus basis where the insurer requires reinsurance above a set limit,
known as a 'line'; the reinsurance is arranged on the basis of a number of these lines which add
up to the overall limit required by the insurer.

38
Non-proportional risks can be covered on an excess of loss, stop loss or catastrophe excess of
loss basis:

 Excess of loss basis - the reinsurer is responsible for any claim amount above an agreed
limit
 Stop loss basis - applies across the account and stops account loss at an agreed level, so
that the reinsurer is responsible for losses above that limit
 Catastrophe excess of loss basis - provides protection when a catastrophe occurs on the
account as a result of an event which has caused an accumulation of losses, such as storm
damage.

As well as having a risk management team, major corporations often appoint a captive insurer.
Captive insurers offer a number of benefits; for example, they can provide wider cover than that
given by the risk management team and retain premiums that would normally be passed to the
insurance market. They are usually based in regions with lower tax rates, such as Bermuda. A
reinsurance broker may then help to provide the captive insurer with reinsurance cover in order
to protect it from catastrophic loss. 

3. Independent financial advisers (IFAs)

Independent financial advisers (IFAs) provide advice to customers and businesses on life
assurance, pensions and investments, and are regulated in the UK by the FCA. IFAs may also
offer products that contain no investment element, such as personal accident insurance,
permanent health insurance and medical insurance. They may belong to an insurance broking
firm and use their specialist knowledge to provide non-life insurance products in addition to
financial advice. Broking firms can also refer their customers to IFAs for financial advice. 

4. Financial organisations

Financial organisations, such as banks and building societies, provide insurance to their
customers in various ways. For example, a bank may have its own insurance broking firm. If a
bank has provided a loan for premises or equipment, it will have an interest in making sure that

39
adequate cover is arranged to protect the item. The bank's broking team will be able to assist with
arranging insurance to protect both the customer's and the bank's interests. 

'Bancassurance' refers to when a bank owns an insurer or works directly with an insurer through
an affinity group. When a bank incorporates an insurance company into part of its group, this
creates a direct relationship between the customer and the insurer.  Not all banks have their own
insurance company or broker; some have an affinity group, discussed later in this fact file, which
are operated by their employees or white label products provided by an insurer for the bank.

5. Retail organisations

When a customer acquires a retailer's loyalty card, the retailer gains information about the
customer which enables it to target them with other branded products. Customers are more likely
to buy products, such as insurance policies, from brands they trust. Retailers selling insurance
policies offer white label products that are administered by an insurer through a call centre. The
call centre may either have a team which is dedicated to that insurer or answer calls in the name
of the retailer, having identified which is being used by the specific telephone number that callers
have been given. Selling insurance in this way provides the retailer with an additional revenue
stream in a short period of time, without the costs of setting up an insurance company.

6. Peer-to-peer (P2P) groups

Peer-to-peer (P2P) group insurance is a recent innovation which has created interest in the USA,
UK and Germany. It aims to save money by removing inefficiencies and the conflicts of interest
that arise between the insurer and customer at the time of a claim. A P2P group is made up of
people who share similar characteristics; its premiums are calculated by assessing a number of
factors that are common to all members. A motor insurer, for example, will consider a driver's
age, location, car and experience, and then add them to a group of similar motorists, or peers.

Half of the premium paid by the group's members contributes to its management and the other
half is injected into the premium pool. Claims made during the year are paid from the pool; if
funds become depleted, they are topped up by the group's fees. Any premium in the pool that is
not used will be carried forward to the next year, when the group's members will pay premiums

40
to top up the pool again. The group's members have an interest in keeping claims low so that
they will benefit from lower premiums.

7. Broker networks

A broker network is made up of predominantly small, independent insurance brokers who join to
form a club. The network uses its collective buying power to obtain terms of cover, premiums,
facilities and commissions that are normally only available to larger broking organisations. The
network requires its members to commit a level of premium to a panel of partner insurers. This
enables members to demonstrate their support for the panel and network without compromising
their customer relationships. 

Additional services provided by broker networks include marketing advice and business
planning support, which can help to increase brokers' incomes, and regulatory support and
advice, which helps brokers to remain compliant. Insurers may review their agency network with
the aim of reducing their overall operating costs; however, broker networks are protected by their
collective relationships with insurers. Networks charge a fee to brokers for the support they
provide, which may be based on either the volume of premium income arranged with the insurers
or an agreed fixed charge for services.

41
 TYPES OF
INSURANCE
POLICIES

42
 INTRODUCTION
No one’s life is perfect! Whatever may be our background, monetary-wise, health-wise,
family-wise et al. And none of us can ever predict the unexpected surprises life has in store,
some positive and some negative. And in such situations, insurance prepares you to handle those
unpleasant surprises that could arise during our entire lifetime!

What is Insurance?

Insurance is a protective net that you take to secure yourself against unpredictable
situations, or against unforeseen emergencies.
By and large insurance can be classified into two types- General Insurance and Life
Insurance! Lest we say, both are equally important.

Different types of Insurance Policies

1. Life Insurance

2. Health Insurance

3. Car Insurance

4. Two Wheeler Insurance

5. Travel Insurance

6. Home Protection Insurance

7. Mobile Insurance

8. Cycle Insurance

9. Jewelry Insurance

43
 LIFE INSURANCE
As the name suggests, this insurance covers your life. Literally! It ensures that you and your
family are financially stable in the unfortunate case of you becoming disabled due to a mishap,
or worse.

While taking a Life Insurance policy you either make a lump-sum payment while purchasing a
life insurance policy or make periodic payments to the insurer. These are known as premiums. In
exchange, your insurer promises to pay an assured sum to your family in the event of death,
disability or at a set time.

Life Insurance has different plans based on the kind of coverage it offers:

 Term Plans

 Endowment Plans

 Moneyback Plans

 Pension Plans

So, Life insurance can also help you support your family even after retirement.

Life insurance not only ensures the well-being of your family, it also brings tax benefits:

 The amount you pay as premium can be deducted from your total taxable income.

 However, this is subject to a maximum of Rs 1.5 lakh, under Section 80C of the Income
Tax Act.

 The premium amount used for tax deduction should not exceed 10% of the sum assured.

44
 BENEFITS OF LIFE INSURANCE

1. Risk Coverage:

  Insurance provides risk coverage to the insured family in form of monetary compensation
in lieu of premium paid.

2. Difference plans for different uses:

  Insurance companies offer a different type of plan to the insured depending on his need
for insurance. More benefits come with the more premium.

3. Cover for Health Expenses:

These policies also cover hospitalization expenses and critical illness treatment.

4. Promotes Savings/ Helps in Wealth creation:

  Insurance policies also come with the saving plan i.e. they invest your money in
profitable ventures.

5. Guaranteed Income:

  Insurance policies come with the guaranteed sum assured amount which is payable on
happening of the event.

6.  Loan Facility:

Insurance companies provide the option to the insured that they can borrow a certain sum
of amount. This option is available on selected policies only.  

7. Tax Benefits:

Insurance premium is tax deductible under section 80C of the income tax Act, 1961.

45
 TYPES OF LIFE INSURANCE
1. Term insurance plan

As the name says Term insurance plan are those plan that is purchased for a fixed period of time,
say 10, 20 or 30 years. As these policies don’t carry any cash value their policies do not carry
any maturity benefits, hence their policies are cheaper as compared to other policies. This policy
turns beneficial only on the occurrence of the event.

2. Endowment policy

The only difference between the term insurance plan and the endowment policy is that
endowment policy comes with the extra benefit that the policyholder will receive a lump sum
amount in case if he survives until the date of maturity. Rest details of term policy are same and
also applicable to an endowment policy.

3. Unit Linked Insurance Plan

These plans offer policyholder to build wealth in addition to life security. Premium paid into this
policy is bifurcated into two parts, one for the purpose of Life insurance and another for the
purpose of building wealth. This plan offers to partially withdraw the amount.

4. Money Back Policy

This policy is similar to endowment policy, the only difference is that this policy provides many
survival benefits which are allotted proportionately over the period of the policy term.

5. Whole Life Policy

Unlike other policies which expire at the end of a specified period of time, this policy extends up
to the whole life of the insured. This policy also provides the survival benefit to the insured.  In
this type of policy, the policyholder has an option to partially withdraw the sum insured.
Policyholder also has the option to borrow sum against the policy.

6. Annuity/ Pension Plan

46
Under this policy, the amount collected in the form of a premium is accumulated as assets and
distributed to the policyholder in form of income by way of annuity or lump sum depending on
the instruction of insured.

POINTS TO BE CONSIDERED FOR LIFE INSURANCE

 Research:

 As an applicant for life insurance, there are numerous policy options at your fingertips to
choose from. It is essential that you do your research before making an informed decision on
purchasing a life insurance policy, as it can help you save money and receive maximum
benefits.

 Read terms and conditions:

 The terms and conditions of an insurance plan contain all relevant information regarding the
particular policy. Make sure that you read the fine print in detail and completely understand it
before purchasing an insurance policy of your choice.

 Remember lock-in period:

 There are instances when individuals purchase insurance policies without making an
informed decision and later realise that they are unhappy with the insurance policy. In such
scenarios, some insurance companies offer a lock-in time frame, which is a short time usually
15 days where a policyholder can return the policy to the insurer and purchase another in
case they were unsatisfied with the initial purchase.

 Consider premium payment options:

 Almost all insurance providers offer premium payment options consisting of annual, semi-
annual, quarterly or on monthly basis. It is essential that you opt for Electronic Check System
(ECS) payment that will periodically debit your bank account with the required insurance

47
amount. Also, you can choose from a schedule that will allow you to make a premium
payment with the convenience of interval payments.

48
 LIFE INSURANCE COMPANIES IN INDIA

Some of the prominent life insurance companies in India are:

  LIC – Life insurance corporation of India

 SBI Life Insurance
 ICICI Prudential Life Insurance
 HDFC Standard Life Insurance
 Bajaj Allianz Life Insurance
 Max Life Insurance
 Birla Sun Life Insurance
 Kotak Life Insurance

We all are uncertain of the future and although no one wishes anything unfortunate to
happen to them, we should be prepared for unforeseen circumstances. Having a life insurance
policy is a financial cushion that makes sure your family is well protected. A life insurance
policy hence is a very small investment compared to the greater peace of mind it will bring you.

49
 HEALTH INSURANCE
Health insurance is an insurance that covers the whole or a part of the risk of a person
incurring medical expenses, spreading the risk over numerous persons. By estimating the overall
risk of health care and health system expenses over the risk pool, an insurer can develop a
routine finance structure, such as a monthly premium or payroll tax, to provide the money to pay
for the health care benefits specified in the insurance agreement. [1] The benefit is administered by
a central organization such as a government agency, private business, or not-for-profit entity.

According to the Health Insurance Association of America, health insurance is defined

as "coverage that provides for the payments of benefits as a result of sickness or injury. It
includes insurance for losses from accident, medical expense, disability, or accidental death and
dismemberment"

Health insurance is a type of insurance coverage that pays for medical, surgical, and
sometimes dental expenses incurred by the insured. Health insurance can reimburse the insured
for expenses incurred from illness or injury, or pay the care provider directly. It is often included
in employer benefit packages as a means of enticing quality employees, with premiums partially
covered by the employer but often also deducted from employee paychecks. The cost of
health insurance premiums is deductible to the payer, and the benefits received are tax-free.

Increasingly, health insurance plans also have co-pays, which are set fees that plan
subscribers must pay for services such as doctor visits and prescription drugs; deductibles that
must be met before health insurance will cover or pay for a claim; and coinsurance, a percentage
of healthcare costs that the insured must pay even after they've met their deductible (and before
they reach their out-of-pocket maximum for a given period).

Insurance plans with higher out-of-pocket costs generally have smaller monthly
premiums than plans with low deductibles. When shopping for plans, individuals must weigh the
benefits of lower monthly costs against the potential risk of large out-of-pocket expenses in the
case of a major illness or accident.

50
51
 BENEFITS OF HEALTH INSURANCE
1. Cashless Treatment:

 If you are insured, you can get cashless treatments as your insurance company would
work in collaboration with various hospital networks.

2. Pre and post hospitalization cost coverage:

 Insurance policy also covers pre and post hospitalization charges up to the period of 60
days, depending on the insurance plans purchased.

3. Transportation Charges:

 Insurance policy also covers the amount paid to ambulance towards the transportation of
insured.

4. No Claim Bonus (NCB):

This is the bonus element which is paid to the insured if the insured does not file a claim
for any treatment in the previous year.

5. Medical Checkup:

 Insurance policy also provide options for health checkups. Free health checkup is also
provided by some insurers based on your previous NCBs.

6. Room Rent:

 Insurance policy also covers room expenses depending on the premium being paid by the
insured.  

7. Tax Benefit:

 Premium paid on Health insurance is tax deductible under section 80D of the Income
Tax Act.

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 TYPES OF HEALTH INSURANCE
1. Individual Health Insurance: 

 This policy covers the health expenses and hospitalization expenses of individual who
has taken the policy. Premium under this policy is determined as per the age of insured.

2. Family Health Insurance Plan:

 Under this policy, an individual can include all the family members against multiple
diseases under a single cover.  Family health plan offers a fixed sum assured for the family
members, which can be availed by all members of the family or by any one individual in the
family.

3. Senior Citizen Health insurance Plan: 

This policy is designed for the senior citizens or individuals over 60 years of age offering
protection from health issues during old age.

4. Surgery and Critical Illness Insurance Plan:

 This plan is suitable for the insured that requires treatment against critical illness, such as
kidney failure, paralysis, cancer, heart attack etc. As the medical expenses of these treatments are
very high, the premium applicable to these types of policies is also high.

5. Maternity Health Insurance Plan:

 This policy covers costs, including pre and postnatal care, child delivery expenses of
newborn babies. This policy is also covered for the newborn up to a certain period of time as
mentioned in the plan. Ambulance costs are also covered.

6. Personal Accident Plan:

 This policy covers hospitalization expenses in the event of an accident. Premium amount
is depending upon the amount of cover taken.

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 HEALTH CARE SCHEMES BY GOVERNMENT OF INDIA
The Indian government (center & state) have launched numerous medical
insurance schemes to improve healthcare and make it accessible for the weaker sections of
society Here is a list of health insurance schemes provided by the government:

 Rashtriya Swasthya Bima Yojana (RSBY):

 This scheme was launched by the Ministry of Labour and Employment to

provide health insurance coverage for families below the poverty line. The Beneficiaries
under this scheme can avail a health benefits cover of up to Rs.30,000. A registration fee
of Rs 30 is chargeable.

 Pradhan Mantri Suraksha Bima Yojana:

Is an initiative by the government to bring access to insurance especially for the

economically weaker sections of society. This scheme features affordable premiums and
provides compensation to the family of the deceased.

 Central Government Health Scheme (CGHS):

 This scheme was launched in 1954. It provides comprehensive healthcare

facilities to the central government employees, pensioners and dependents of these
employees.

 Aam Aadmi Bima Yojana (AABY):

 This is a social security scheme launched in 2017 to provide healthcare facilities

for rural landless individuals. The head of the household or earning member of a family
will be covered under the scheme (AABY). The beneficiary should be between 18 to 59
years of age. The dependent of the beneficiary will receive Rs.30,000 upon natural death,
Rs.75,000 upon accidental death or permanent disability, and Rs.37,500 on partial
disability.

54
 Janashree Bima Yojana (JBY):

 This scheme was launched in August 2000. This scheme targets people falling
below the poverty line (BPL) in 45 occupational groups covered under the scheme.

 Employment State Insurance Scheme (ESIS):

 This is a social security initiative aimed at providing socio-economic protection

to the working class and their dependents. The scheme ensures that all member and their
family will receive full medical care from day one.

 Universal Health Insurance Scheme (UHIS):

 The Indian public sector insurance companies have implemented this scheme to
improve the access to healthcare for poor underprivileged families. Beneficiaries will
receive reimbursement for medical expenses up to Rs.30,000 and accidental death cover
up to Rs.25,000. The insurance premium for this scheme is Rs.200 per person, Rs.300 for
a family of five, and Rs.400 for a family of seven.

HEALTH INSURANCE COMPANIES IN INDIA:

 Max Bupa Health Insurance

 HDFC Ergo Health Insurance
 Bharti Axa Health Insurance
 SBI Health Insurance
 L&T Health Insurance
 Bajaj Allianz Health Insurance
 Apollo Munich Health Insurance
 National Health Insurance

55
 HEALTH INSURANCE CLAIM PROCESS

A health Insurance policy equips you to get the best healthcare treatment without
worrying about the huge costs payable at the time of discharge. Therefore knowing about the
claim process is an essential piece of information that the insured individual should be aware of
at all times.

The two main types of health insurance claim which an individual can choose from when
making a claim are:

 Cashless Claim Process

When the insured individual provides their health insurance details to the respective
hospital, he/she begins to receive treatment. Upon discharge, the hospital will forward the
medical bills to the designated health insurance company. The company will then audit the
expenses and settle the outstanding payment due to the hospital. This process is hassle-free for
the insured as the payments are between the hospital and insurance company.

 Reimbursement Claim Process

In the reimbursement claim process, the insured individual who has been admitted to a
certain hospital pays for the entire treatment until discharge. Once the insurer has paid for the
treatment and hospitalization costs incurred, he/she have to make a reimbursement claim to the
particular insurance company. The insured individual will have to provide original bills of the
hospital to the health insurance and claim reimbursement. The insurance company will audit the
claim and will then decide to approve or reject it. On approval of the insurance company, the
claim will be made to the policyholder. The insurance company will notify the insured individual
in case the claim has been rejected.

56
 CAR INSURANCE
Having a car is good. Having a car insurance is even better. A car insurance will come in
handy to cover up your costs if it gets damaged or stolen for some unthinkable reasons.

Vehicle insurance (also known as car insurance, motor insurance, or auto insurance)

is insurance for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide
financial protection against physical damage or bodily injury resulting from traffic collisions and
against liability that could also arise from incidents in a vehicle. Vehicle insurance may
additionally offer financial protection against theft of the vehicle, and against damage to the
vehicle sustained from events other than traffic collisions, such as keying, weather or natural
disasters, and damage sustained by colliding with stationary objects. The specific terms of
vehicle insurance vary with legal regulations in each region.

Car Insurance also called motor insurance covers the losses that you might incur in case
your car gets damaged or stolen. A person has to pay the premium on an annual basis to get the
car insurance. The premium is calculated on the Insured Declared Value (IDV). If the IDV of the
vehicle is high then the premium amount will be high, if the IDV is less then the premium
amount will accordingly go down.

As per the Motor Vehicle’s Act, 1988, It is mandatory for a motor vehicle operating in
public space to be insured, to cover any damage to property or life. The insurance company bears
the damage to property or injury towards a third party.

In many jurisdictions, it is compulsory to have vehicle insurance before using or keeping

a motor vehicle on public roads. Most jurisdictions relate insurance to both the car and the
driver; however, the degree of each varies greatly.

Several jurisdictions have experimented with a "pay-as-you-drive" insurance plan which

utilizes either a tracking device in the vehicle or vehicle diagnostics. This would address issues
of uninsured motorists by providing additional options and also charge based on the miles
(kilometers) driven, which could theoretically increase the efficiency of the insurance, through
streamlined collection.

57
 BENEFITS OF CAR INSURANCE
Taking a car insurance comes with the following benefits:

1. It covers the losses against any damage or loss to the insured vehicle

2. It covers any loss or damage to your vehicle caused by accident, theft, fire, explosion, riots,
strikes or any act of terrorism.

3. It covers the financial liability caused by injury/death of a third party or damage to the
property.

4. Personal accident cover.

HOW PREMIUM IS DECIDED

1. Car make and model: 

Vehicle make and model play an important role in determining your premium. Some
vehicles fare better when it comes to collisions which result in lesser injuries to the occupants
and also the damages to the vehicle would be minimal.

2. City:

 The city in which you live also has a say in the premium you pay. People living in
metros and tier 1 cities have to pay more as the possibility of occurrence of accidents and thefts
are more compared to other cities.

3. NCB percentage:

 The premium will tend to decrease if you have not made any claims previously.

4. Add-on benefits:

 Some add-on benefits like roadside assistance, cover for CNG/LPG kits, will increase
the premium you pay.

58
 POINTS TO BE CONSIDERED
It is always necessary to compare the Vehicle Insurance as it can save a substantial amount of
money and give you better coverage options. The following points should be considered before
taking any policy:

1. Shortlist your coverage requirement:

Before comparing the policies, you should ascertain as to what is your requirements and
what coverage you need. A Liability coverage is cheaper than the comprehensive coverage but
then the latter offers the best coverage. So if you are ready to compromise on some benefits then
liability coverage is beneficial for you.

2. Compare the Coverage option:

 Once you have decided on which policy option is required, then you need to start
comparing the coverage options. There are times when different insurance companies give
various add-on in their policies.

3. Compare the Insured Declared Value (IDV):

 The different rate of IDV’s reflects the different rate of premium. IDV is the current
value of the car after appropriate reduction. The rate of depreciation depends on the age of the
car. The older the car, the higher would be the depreciation and thus lower IDV. Hence, it’s
important to look carefully at IDV value quoted by different insurance agencies.

4. Comparison of  Insurer’s Claim Settlement Practice:

 It is the most crucial part of an insurance policy. Every policyholder expects a hassle-
free claim. All insurance companies have their own procedure. Hence, it is essential to compare
the claim settlement process and records of the insurance companies

59
 COVERAGE UNDER CAR INSURANCE
There are 3 types of car insurance, namely:

1. Comprehensive Coverage: This coverage is extensive and includes damage to the car, theft
of the vehicle, third party legal liability and personal accident cover. This policy can be further
extended for add-ons like accessories, zero depreciation cover etc. This is the most popular
coverage as it offers end to end coverage and is hassle free for the policyholder.

2. Third Party Liability Coverage: The third-party car insurance provides the cover against any
liability to the third party when it’s your faulty during driving the car. It covers any damage or
injury caused by you to any other person/property.

Note: A third party liability is mandatory in India under the Motors Vehicle Act.

3. Collision Cover: The Collision Covers your own car financially against damage caused by the
collision which is usually an accident. It does not cover the damage or loss due to theft or
vandalism.

DOCUMENTS
The following documents will be necessary to file an insurance claim:

1. Completely filled claim form

2. Original FIR, if applicable

3. A copy of the insurance policy

4. A copy of the owner’s driver license

5. A copy of the Vehicle’s RC document

6. Estimates cost of repairs

7. Related medical bills in case of any injuries.

60
 CLAIM SETTLEMENT RATIO
Claim settlement ratio is defined as the percentage of total claims settled to that of the total
claims received.

The following table lists the insurance companies which have a high settlement ratio. 

Insurance Company Incurred Claim Ratio Grievances settled (%)

HDFC Ergo General Insurance 89.43 100

IFFCO Tokio General Insurance 84.37 99.94

Future Generali India Insurance 81.77 99.86

Cholamandal MS General 79.82 99.82

Bharti Axa General Insurance 89.09 99.81

Bajaj Allianz General Insurance 69.19 99.28

Liberty General Insurance 77.29 99.06

ICICI Lombard General Insurance 78.91 97.61

National Insurance 89.91 96.11

Magma HDI General Insurance 78.49 84.96

61
 IRDA GUIDELINESS ON CAR INSURANCE
Coverage under any motor insurance policy:

 Natural Disasters – Earthquakes, Floods, Fire, Lightning

 Man-made Hazards – Theft, Explosion, Riots, During Transit

Exclusion Under motor insurance policy:

 Individuals driving with no/invalid driving license

 Driving under the influence of alcohol or other intoxicating elements
 If an accident or damage has taken place outside the geographical coverage of the policy
 Mechanical or Electrical failures in the vehicle
 A scenario where the insured vehicle has been used for illegal purposes

Response Time for Insurance Companies

Issuing, processing and Cancelling of policies  15 days

Issuing proposal copy 30 days

Refund of deposits & No-claim requests 10 days

Submission of reports 30 days

Claims settlement/rejection 30 days

Acknowledgement of a grievance 3 days

Resolution of a grievance 15 days

TRAVEL INSURANCE

62
 Many companies selling tickets or travel packages, give consumers the option to
purchase travel insurance, also known as travelers insurance. Some travel policies cover damage
to personal property, rented equipment, such as rental cars, or even the cost of paying a
ransom. Frequently sold as a package, travel insurance may include several types of
coverage. The main categories of travel insurance include trip cancellation or interruption
coverage, baggage and personal effects coverage, medical expense coverage, and accidental
death or flight accident coverage.

Coverage often includes 24/7 emergency services, such as replacing lost passports, cash
wire assistance, and re-booking canceled flights. Also, some travel insurance policies may
duplicate existing coverage from other providers or give protection for costs that are refundable
by other means. 

TYPES OF TRAVEL INSURANCE

1. Trip Cancellation or Interruption Coverage

63
 Trip cancellation insurance, sometimes known as trip interruption insurance or trip delay
insurance, reimburses a traveler for prepaid, nonrefundable travel expenses. Providers vary
on acceptable cancellation and interruption causes and the amount of reimbursement available.
The most common acceptable reasons include illness, a death in the immediate family, sudden
business conflicts, and weather-related issues.

Trip cancellation is beneficial when paying more upfront than what you're comfortable
losing. For example, if you pay $2,000 for a package tour and the tour's cancellation policy
stipulates that all but $100 is refundable upon cancellation. The insurance will cover only the
nonrefundable $100. Also, there is no need to protect a refundable airline ticket. 

2. Baggage and Personal Effects Coverage

Baggage and personal effects coverage protects lost, stolen, or damaged belongings
during a trip. It may include coverage during travel to and from a destination. Most carriers, such
as airlines, reimburse travelers if baggage is lost or destroyed because of their error. However,
there may be limitations on the amount of reimbursement. Therefore, baggage and personal
effects coverage provides an additional layer of protection.

The possibility of baggage and personal belongings being lost, stolen, or damaged is a

frequent travel problem. Many travel insurance policies pay for belongings only after you
exhaust all other available claims. Your homeowners or renters insurance may extend coverage
outside of your domicile, and airlines and cruise lines are responsible for loss and damage to
your baggage during transport. Also, credit cards may provide automatic protection for things
like delays and baggage or rental car accidents if used for deposits or other trip-related expenses.

3. Short-Term Medical and Major Medical Coverage

The two primary types of medical travel insurance policies are short-term medical and
major medical coverage. Short-term policies cover a traveler from five days to one year,
depending on the policy chosen. Major medical coverage is for travelers who are planning to
take longer trips ranging from six months to one year or longer.

Medical coverage can help with medical expenses, help to locate doctors and healthcare

facilities, and even assist in obtaining foreign-language services. As with other policies, coverage

64
will vary by price and provider. Some may cover airlift travel to a medical facility, extended
stays in foreign hospitals, and medical evacuation at home to receive care.

The U.S. government urges Americans to consult their medical insurance providers
before traveling to determine whether a policy extends its coverage abroad. For example,
medical insurance may cover the insured in the U.S. and Canada, but not in Europe. Also,
some health insurance providers may require prior approval for coverage to remain valid.

Before purchasing a policy, it is imperative to read the policy provisions to see what
exclusions, such as preexisting medical conditions, apply and not assume that the new coverage
mirrors that of an existing plan.

Emergency medical coverage may be redundant. Most health insurance companies pay

“customary and reasonable” hospital costs if you become sick or injured while traveling, but few
will pay for a medical evacuation. Note that Medicare does not cover any expenses outside the
U.S. 

4. Accidental Death and Flight Accident Coverage

If an accident results in death, disability, or serious injury to the traveler or a family
member accompanying the traveler, an accidental death and flight accident policy pays benefits
to surviving beneficiaries. Flight accident insurance provides coverage for accidents and deaths
occurring during flights on a licensed commercial airliner. General exclusions will apply, such as
death caused by drug overdose, death resulting from sickness, et al. 

Accidental death coverage may not be necessary if you already have a life
insurance policy. However, benefits paid by your travel insurance coverage may be in addition to
those paid by your life insurance policy, thus leaving more money to your beneficiaries. 

BENEFITS OF TRAVEL INSURANCE

1. Overseas emergency medical assistance

65
 24 hour cover for medical evacuations, ambulances, funeral arrangements and more.

2. Overseas emergency medical and hospital costs

If you need to go to hospital suddenly because of injury or illness you’re covered for
hospital stays, surgery, and emergency dental treatment.

3. Accommodation and travel expenses

If you’re sick or injured and can’t get home, travel insurance will cover your unforeseen
additional accommodation and travel costs.

4. Family emergency
You’re covered for your unexpected travel expenses if a close relative, or the person
you’re travelling with dies unexpectedly, or is disabled or injured and needs to be hospitalised.*
Find out more about family emergencies here.
5. Cover for your travelling companion
If your travelling companion can no longer continue with their holiday because of injury
or illness, any unforeseen accommodation or travel expenses would be reimbursed by travel
insurance.

6. Resumption of journey
If you need to return home because of a death in the family, or severe sickness that
requires a hospital stay and they are a close family member, your flights will be covered to get
you home.*

7. Hospital cash allowance

An amount you’ll be given per day if you’re hospitalised for more than 2 days overseas.*

8. Accidental death
If you die within 12 months of your trip because of an injury you experienced during
your holiday, a death payment is offered.

9. Permanent disability
If you lose your sight, or any of your limbs while on holiday, a disability payment will be
paid to you for at least 12 months after you return home.

10. Loss of income

66
 If you're injured during your trip and can no longer work, you’ll be paid a loss of income
benefit for a set period of time.

11. Credit Card fraud and replacement

You’ll be reimbursed for any costs to replace your credit cards, or for any fraudulent use,
if they are lost or stolen on your trip.

12. Theft of cash, travellers cheques and travel documents

You’ll be reimbursed for any costs to replace your passport, travel documents or
travellers cheques if they are lost or stolen on your trip. And if your cash is stolen - you’re
covered.

13. Luggage, personal effects and delays

You’re covered if your things are lost or stolen during your trip.

If your luggage is delayed more than 12 hours and you need to buy some clothes, travel
insurance will reimburse these costs – in moderation. You can’t go buying a Gucci handbag and
claim that on your travel insurance for example!

14. Cancellation fees and lost deposits

You’re covered for any cancellation fees and lost deposits for your pre-paid travel
arrangements if you cannot make your flights or planned accommodation due to circumstances
out of your control such as sickness, injuries, strikes or natural disasters. Understand cancellation
cover fully to know when you're covered.
15. Disruption of your journey
If your flight is delayed for more than 6 hours, your food and any unforeseen
accommodation you might need to pay for will be reimbursed.

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 CHILD INSURANCE PLANS
The child education policy is a life insurance product specially designed as a savings tool
to provide an amount of money when your child reaches the age for entry into college (18 years
and above). The funds can be used to pay for your child's higher education expenses. Under this
policy, the child is the life assured, while the parent/legal guardian is the policy owner.

If you opt for a payor benefit rider, the education policy also provides assurance that, in
the event of the policy owner's untimely demise, the child will have access to the funds to help
finance his or her studies.

The cost of higher education is increasing. The need for access to higher education and
the cost will put a financial strain on you and your family. That is why it is important to start
planning for your child's education as soon as possible, because the earlier you begin, the more
time you allow your money to grow. The child education policy will provide the funds needed by
your child to pursue further education and assures that whatever happens in the future, your child
will still have the means to pursue some of his/her goals in life

Child Plans provide the dual benefit of life insurance as well as investment. This policy
enables the policyholder to secure their children’s future; while simultaneously building up an
investment corpus to help meet the major milestones in a child’s life. In case of a child insurance
plan, the parent is the policy owner while the child is the beneficiary.

If you are a concerned parent, you might already be overwhelmed with the increasing
cost of education in India, which registered a hike of about 169% between 2005 to 2011. In
2018, parents are spending approximately ₹2 lakh and above for providing primary education,
while this cost increases to almost ₹4 lakh in case of secondary and higher education. College
and university level education can cost you anywhere between ₹8 lakh to ₹35 lakh.

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 WORKING OF CHILD INSURANCE

 Child Plans are generally designed to serve two purposes together – of

an insurance product and of an investment tool. The product provides financial security to
your child at all crucial stages of his/her life
 If you buy the plan, you will be the policyholder, while your child will be the nominee.
However, in your absence, the insurance component ensures that your child, being the
nominee, receives a substantial amount of money to be able to manage his/her finances
seamlessly
 Talking about the investment component, it helps to build a substantial fund to
accumulate enough money to meet the necessary expenses in future like travelling abroad
for higher education, getting admission and paying fees for a university abroad, marriage
or setting up his/her own business.
 With guaranteed financial stability, the parents will be able to concentrate on other
aspects of their child’s growth and development.

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 BENEFITS OF CHILD INSURANCE PLAN

 Liquidity during Medical Emergency:

 One of the advantages of a child insurance plan is that they offer partial
withdrawal. Hence, the amount can be withdrawn in times of medical emergency when
the child is hospitalised due to accident, illness or some serious medical condition. In a
way, child plans help reduce the financial burden caused due to sudden medical expense.

 Provides Income Protection for Child:

  This benefit is primarily for those children who start earning at a young age. It
protects their income and provides the benefit of capital appreciation over the long-term
for a child plan. This is mainly useful for child actors, performers, musicians, etc.

 Collateral for Education Loan:

 The monthly savings would never be enough to meet the soaring cost of higher
education, be it in India or abroad. Thus, arises the need for taking education loan. Child
plans can help in securing a loan for higher education as they are allowed to be used as
collateral for a loan as well as other child-related borrowings.

 Financial Support in Absence of Parent(s):

  In case of the sudden demise of one or both parents, it is natural for the child to be
shocked and shattered. Insurance companies provide a premium waiver rider if the
policyholder passes away during the policy term of the child plan. However, this does not
mark an end to the plan, and the policy does not lapse. In such cases, the child is entitled
to a lump sum amount promised at the time of purchasing the child policy without paying

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 the balance premium. The rider enables the policy to continue without any breaks or
lapse wherein the responsibility of paying the balance premium lies on the insurer.

 Riders or Additional Benefits:

The riders can be availed on payment of extra amount. They extend the coverage
by giving extra benefits. These riders help in case the parent passes away or becomes
permanently disabled in mishap or accident or is suffering from or diagnosed with a
critical illness mentioned in the policy. Here are some riders available with child
insurance plans:

 Income Benefit Rider

 Waiver of Premium Benefit Rider
 Accidental Permanent Total/Permanent Disability Benefit Rider
 Critical Illness Benefit Rider
 Accidental Death Benefit Rider

 Tax Benefits:

  With child plans you can claim deductions in tax under Section 80C of the
Income Tax Act. Also, you can claim tax exemptions under Section 10(10D) on the
returns you get. Here, if the premium paid in any year does not exceed one-tenth of the
basic sum assured, you can claim tax exemption for interest earned on the investment.

 Fund for Child’s Education:

The primary focus of a child insurance plan is to secure your child’s future. The
funds accumulated over a period can be used for your child’s higher education, or can be
utilised for important events like marriage. The cost of pursuing higher education is
gradually rising and a child plan helps meet these needs. The best child plans also
take into account the inflation as they offer benefits on total premium paid over the policy
tenure on maturity.

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72
 CLAIM PROCESS FOR CHILD INSURANCE

Get the child insurance plan from an insurance company that boasts of a high claim
settlement ratio. This ensures of a smooth and quick claim processing and settlement in times of
crisis. Let’s get acquainted with the claim process.

 In case of an event for which a claim needs to be filed, inform the insurance company
about the incident as soon as possible. This can be done by visiting the nearest branch
office or calling at their toll-free number or sending an email
 Also submit the claim form and give other details like particulars of the policy, the date
and cause of the incident, name of nominee, etc.
 Once the claim is registered, provide other supporting documents and  reports
 The company will appoint an assessor to verify the documents and the case
 If approved, and no further investigation is needed, the claim benefit is transferred with
30 days of furnishing the documents

Documents Required for Claim Process

In order to make claims in case of any eventuality, keep the following documents in place
to avoid any rejection. The documents required vary with case to case.

 Duly filled in claim form

 Policy document
 Death certificate
 Medical certificate
 Prescriptions
 Diagnostic reports
 FIR copy (unnatural death)
 Postmortem report(unnatural death)
 KYC of insured and nominee
 NEFT details

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 HOME INSURANCE
Home Insurance is an arrangement in which the company undertake a guaranty for
loss arising from insured property, its contents, loss of use, and other thing in personal
possession in the insured property. It also includes any accident which may arise in the property
of insured or area near by insured property which is included in policy document along with the
damages caused by household pets or any members of family to other people.

Offered by every leading insurance company, as the name of the policy suggests, it provides
coverage against certain special perils and fire outbreak. This coverage can be bought by house
owners (for their own house) and also by tenants residing in a rented house. The sum insured, for
this policy, is calculated as Building - Cost of reconstruction (exclusive of land value). A
Standard Fire and Special Perils policy covers the insured home against loss and damages caused
due to following causes –

 Natural calamities like lightning, fire, volcanic eruptions, bush fire, forest fire,
earthquakes, storms, floods.
 Damages caused due to explosion/implosion, man-made anti-social activities like strikes,
riots, damage caused with malicious intent
 Damage caused by direct contact of rail/road, vehicle. Damage caused due to the insured
house, with your own vehicle, is not included in this cover.
 Damage caused due to bursting or/and overflowing of water tanks, pipes and apparatus
 Subsidence including rockslide and landslide
 Missile testing operations
 Damage caused due to leakage from automatic sprinkler installations

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 TYPES OF HOME INSURANCE

 Home Structure/Building Insurance

This type of home insurance covers the structure of your house from any kinds of dangers
and risks. In addition to this, the policy also protects any permanent fixtures within the house.
This includes your kitchen and bathroom fittings, and also the ceiling/roof of the insured house.
Some houses have garages, an outdoor room/house or sheds. This type of insurance usually
extends to these structures as well.

 Public Liability Coverage

If any guests or third party experience damage caused to them or their property inside the
insured’s home, then this type of home insurance policy provides coverage against the same.

 Personal Accident

This type of home insurance covers you and your family. A compensation is given in
case of permanent disablement or death of the insured person due to accidental or physical
injury, even if it has happened anywhere is the world.

 Burglary & Theft

In case of an occurrence of burglary or theft in the insured house, if any valuable contents
are stolen or damaged, the policy covers you for it.

 Contents Insurance

It is not just the house, that you have insured, but also the contents inside the house on
which you would have spent a lot of time and money deserve equal protection. This type of
home insurance policy protects the goods inside your house from damages and loss owing to
theft, fire, flood and other such mishaps. Your documents, portable equipment, jewelry, TV,
refrigerator, etc. are covered. It does help you when you have to replace the interiors of house if
your house is flooded, or has been burnt to ashes by break out of fire.

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  Tenants’ Insurance

As a tenant you would have obviously rented a house or flat. In that case, it is the wisest
option to not opt for a buildings cover, instead you need to focus entirely on protecting your
contents. This type of insurance is a must have for every tenant. Though you live in a rented
house, it is very much yours, at least, till the time you reside in it.

 Landlords' insurance

As a landlord, the maintenance and upkeep of the building/apartment/structure of the

house (that you are renting out) are clearly your responsibility. A standard buildings insurance
policy usually aren’t exclusively designed for the need of landlords, because there are also other
residents who live in the building. As a landlord you need something specifically designed for
landlords. Hence, a landlords’ insurance policy is ideal for you and it also covers things like loss
of rent and public liability.

 THINGS NOT COVERED :

 Destruction of property willfully.

 Damages to property due to wear and tear.
 Loss to property due to war.
 Loss to property unoccupied for more than a certain specified period.
 Money in the form of cash, antiques and collectibles.

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 BENEFITS & REASONS OF HOME INSURANCE

 Reasons to  buy a  home insurance policy :

1. Home insurance provides safety against loss or damages caused to property

2. Policy is not limited to owner it also covers tenants, any other people living in the Insured
property.

3 . Insurance property not only covers home, but the same extends to its contents, loss of use, and
any other personal assets in the personal possession of insured.

4.  Policy remains in force at all the time, even when you are away from the home.

 Benefits of taking home insurance :

1 .It provides protection against all the valuable assets in the property. Ex- Gold, Silver, Art etc.

2 .It covers all the contents  in the insured property

3. It provides complete security and safety.

4 .It also covers cost of repair and replacement of the contents in the property.

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 INCLUSIONS AND EXCLUSIONS IN HOME INSURANCE

 Inclusions in Home Insurance

1 .Aircraft damages

2. Storm Testing operations

3. Lightening

4. Riots, Strike

5 .Earthquake cover

6. Burglary and Theft Cover

 Exclusion in Home Insurance

1 .Normal Loss and damages caused due to wear and tear or depreciation

2. Damages caused due to nuclear war

3 .Loss arising due to electronic equipment

4. Loss arising due to war, invasion, act of foreign country

5. Loss of Cash  

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 CLAIM SETTLEMENT IN HOME INSURANCE

 On happening of an event policy owner have to ascertain the quantum of loss or damage.
 In case of theft, policy owner have to file an FIR and then he has to contact the
insurance company for claim.
 Take photograph or record the video of the property in question.
 Prepare estimate of the loss or damaged caused taking into consideration all possible
expenses like materials, labour cost, cost of articles or things, cost incurred in arranging
alternate living arrangement, etc.
 In case of accidents, Insurance company may also ask for Medical report, discharge
document, disability certificate, etc.
 Notify the insurance company about the loss. Fill the claim form
 Make sure that you did not miss out any details and do provide the correct information.
 Provide all the information and details seeked by the surveyor, sent by the insurance
company.
 On acceptance of claim the insurance company will notify you.
 After acceptance of claim insurance company will process your claim on the basis of
documents provided by you, actual expenses and taking into consideration other details
like report of surveyor.

 Companies offering Home insurance in India

 HDFC Ergo Home Insurance

  ICICI Lombard Home Insurance
  TATA AIG Home Insurance
 Bajaj Allianz Home Insurance

ROLE OF AN INSURANCE AGENT

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 FULL information must be provided to the proponent at the point   of sale to enable him
to decided on the best cover or plan to minimize insurances of cooling off by the
proponents . 
 An agent should be  well versed in all the paln the selling points and also be equipped
to asses the need of client . 
 Adherence agent must code of conduct for agent is crucial important agents must there
for familiarize themselves with provision of the code of conduct .
 Agents Must Provide  the offices with the accrued information about the prospect for a
fair assement  of the risk involved . the against confidential report must there for be
completed very carefully .
 Agents must also possess adequate knowledge of policy servicing and claim settlement
procedure so that the policy holder can be guided correctly . 
 Submission of proposal forms and proposal deposit to the branch office immediately to
avoid delays and to enable the office to taken timely decision .
 Aleaflet or brochure containing relevant features of the plan that is being sold should be
available with the agent .

a) If the agent are well conversant with the claim settelement producer and Assis the
claimant in completing the nassary  requirement , it would not only quacked the
process of claim settlement
b) Professional status but also help the organization to improve upon their service
quality.

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ANALYSIS &
CONCLUSION

81
 SWOT ANALYSIS OF INSURANCE SECTOR

 STRENGTH:
 New products
 Business growth
 Rise in per capita income
 Emerging middle income group

 WEAKNESS:
 Low investment
 Dominance of public sector
 Promotion as a barrier
 Old tariff structure
 Limited facilities

 OPPORTUNITIES:
 Creation of stronger demand
 Strong future growth
 Rise in income and awareness
 Health insurance

 THREATS:
 The political environment is not conductive to constructive change
 The dominance of players who make the industry stagnate
 The legal framework, bureaucracy, and financial infrastructure worsen the insurance
business environment.

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83
 CONCLUSION

India is among the important emerging insurance markets in the world. Life insurance
will grow very rapidly over the next decades in India. The major drivers include sound economic
fundamentals, a rising middle- income class, an improving regulatory framework and rising risk
awareness. The fundamental regulatory changes in the insurance sector in 1999 will be critical
for future growth. Despite the restriction of 26% on foreign ownership, large foreign insurers
have entered the Indian market. State-owned insurance companies still have dominant market
positions. But, this would probably change over the next decade. In the life sector, new private
Insurers are bringing in new products to the market. They also have used innovative distribution
channels to reach a broader range of the population. There is huge in the largely undeveloped
private pension market. The same is true for the health insurance business. The Indian general
insurance segment is still heavily regulated. Three quarters of premiums are generated under the
tariff system. Reinsurance in India is mainly provided by the General Insurance Corporation of
India,
Which receives20%compulsorycessionsfromothergeneralinsurers.Finally,the rural sector
has potential for both life and general insurance.
To realize this potential, designing suitable products is important. Insurers will need to
pay special attention to the characteristics of the rural labor force, like the prevalence of irregular
income streams and preference for simple products.

84
 RECOMMENDATIONS
Some of the specific services and solutions for the Life Insurance sector
include the following:
 Improving time-to-market
 Claims transformation
 Policy administration transformation
 Enabling efficiency in new business acquisition
 Multi-channel distribution management solution
 Package evaluation of insurance products
 Insurance business intelligence solutions
 Insurance CRM solutions
 Simplifying business process management
 Underwriting optimization
 Web and mobile solutions
 Fraud detection and analytics
 Predictive analytics

Some of the specific services and solutions for the Non Life Insurance sector
include the following:
 Multi-Line Rate, Quote & Issue
 Web Interfaces for Agents/Policyholders
 Integrated Billing and Receivables Module
 Integrated Claims System with Coverage Verification
 Flexible design that can grow as your organization grows
 Fast implementation model
 High quality product with low acquisition cost.

85
ANNEXURE

86
 QUESTIONNAIRE
1. Do you have an insurance policy?
Yes

No

2. What type of insurance do you have?

Private

Public

3. Who influenced you to get an insurance policy?

The media

Insurance agents

Federal government

Friends, family and colleagues

Other

4. What kind of insurance policies do you have? Check as many as you’d like.
Savings policy

Whole life policy

Endowment policy

Money back policy

Automobile insurance

Pension plan policy

Property insurance

Any other

87
 5. What is the average term of the policies you have?
Up to 5 yrs.

Above 20 years.

6. Have you ever received any benefits from any of the policies you currently have?
Yes

No

7. If yes, how many times have you received it?

1

More than three

8. How regularly do you pay your premiums?

Monthly

Quarterly

Half year

Yearly

 
9. Have you received any incentives from your insurance company on the insurance
premiums?
Yes

No

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 BIBLIOGRAPHY

 www.google.com
 www.wikipedia.com
 www.investopedia.com
 www.policybazar.com
 www.quora.com
 www.business.mapsofinida.com
 www.thinkrupee.com

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