Insurance Policies Offered

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INTRODUCTION TO INSURANCE

INSURANCE

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Definition

According to the Financial Accounting Standards Board (FASB)

insurance provides indemnification against loss or liability from

specified events and circumstances that may occur or be discovered

during a specified period.

Another definition of Insurance is that it is the benefit provided by a

particular kind of indemnity contract, called an insurance policy, that

is issued by one of several kinds of legal entities (for example, stock

company, mutual company, reciprocal, Lloyds syndicate), any of

which may be called the insurer, in which the insurer promises to pay

on behalf of or to indemnify another party, called a policyholder or

insured; that protects the insured against loss caused by those

perils subject to the indemnity in exchange for consideration known

as an insurance premium


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Features of Insurance

A contract of indemnity

A contract which enables the transfer of risk of loss

of assets arising out of the impending perils

The contract is known as insurance policy

Upfront payment of premium

Two parties- insurer and insured

Insurable interest


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Principles of Insurance

Large number of units

Definite loss

Accidental loss

The size of loss should be reasonably large to cover

the cost of losses consequent to an event

Affordable premium

The volume of losses can be estimated

Limited risk of catastrophically large losses


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Insurance in India

Originated in early 19th Century

The Insurance business in India was started with

establishment of the Oriental Life Insurance

Company in Culcutta in 1818

In 1870, Bombay Mutual Life Assurance Society

was established which provided insurance cover to

Indians at normal rates

In 1912 the Life Insurance Companies Act was

passed to regulate the insurance business In 1928 the Indian Insurance Companies Act was

passed

In 1938 the Insurance Act was passed which was

amended in 1956 and 1968


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Insurance in India

The General Insurance business in India was commenced by the

Trinitron Insurance Company Ltd in 1850. In 1907, the Indian Mercantile Insurance Ltd. was established as the

first company to transact all classes of general insurance business

The General Insurance Council was constituted as a wing of the

Insurance Association of India with the responsibility of framing ofcode of conduct for ensuring fair conduct and sound business

practices.

Tariff Advisory Committee set-up in 1968

In 1972 the Government of India nationalised the general insurance

business

In1993, the Government of India appointed Malhotra Committee to

evaluate the Indian insurance industry and to recommend future

direction


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Insurance in India

Malhotra Committee submitted their report in 1994 which

contained important recommendation covering the following

areas:

Structure

Competition

Regulatory Body

Investment

Customer Service

The IRDA Act was passed in 1999 and was amended in 2002

The IRDA was set up under the provisions of the IRDA Act.


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Insurance intermediaries Insurance surveyors

Product pricing

Investment issues

Restrcuturing

Liberalisation

Rural insurance

Regulation

Insurance regulatory authority

Malhotra Committee Recommendations


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Types of Insurance

Life Insurance

Term Life Insurance

Whole Life Insurance

Endowment Policies

Money Back Policies Childrens Assurance Plans

Annuity and Pension Plans

Unit Plans

Special Plans

Group Insurance Schemes

Bancassurance

Key-man Insurance


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Types of Insurance

Non-Life InsuranceCommercial Policies

Professional Policies

Industrial Insurance

Social Insurance

Credit Insurance

Farmers Insurance


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Insurance Companies in India

General Insurance Company

The New India Assurance Co. Ltd., - HO in Mumbai,

The United India Insurance Co. Ltd., HO in Chennal,

The Oriental Insurance Co. Ltd, HO in Delhi, and

The National Insurance Co. Ltd. HO in Calcutta.

Deposit Insurance Corporation

Export Credit and Guarantee Corporation of India Ltd Agricultural Insurance Company of India Ltd.

Employees State Insurance Corporation


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CEO (HO)

Sales head (Senr.VP)

Zonal Head(Zonal offices)

Reginal Head 1 Reginal Head 2

Area offices (Area Manager) Area offices (Area Manager)

Sales Training(Manager)

OperationsManager

Branch Offices (Branch manager)

Sales Operations

Training Executives

for Branch offices

Customer service

representatives/

Executives

Organizational Structure


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Managerial Functions

Functions of Head Office Accounts Department, HR Department, Actuarial Department etc

Product development

Submission of Returns to IRDA

Functions of Zonal Office Controlling office of Regional Offices and Branches

Functions of Regional Office

Monitoring and evaluating the business development of branches

Functions of Area Office/ Branches Acceptance of policy proposals

Issuing policies

Processing claims


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Marketing Process

Insurance is a risk related instrument, hencemarketing process differs

There are two segments in insurance business

Segment which need customer education and product

awareness

Segment where the insurance is a statutory or mandatory

requirement

Business development through agents/brokers


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Marketing Process

Functions of a Direct Broker

obtaining detailed information of the client's business and riskmanagement philosophy;

familiarising himself with the client's business and underwritinginformation so that this can be explained to an insurer andothers;

rendering advice on appropriate insurance cover and terms;

maintaining detailed knowledge of available insurance markets,as may be applicable;

submitting quotation received from insurer/s for considerationof a client;

providing requisite underwriting information as required by aninsurer in assessing the risk to decide pricing terms andconditions for cover;

acting promptly on instructions from a client and providing himwritten acknowledgements and progress reports;

assisting clients in paying premium under section 64VB ofInsurance Act, 1938 (4 of 1938);

providing services related to insurance consultancy and riskmanagement;

assisting in the negotiation of the claims; and

maintaining proper records of claims;


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Eligibility Criteria for Brokers

Free from disqualifications

Availability of adequate office space and infrastructure

Minimum of two experienced and qualified persons to undertake

insurance broking

Applicant should not have been denied the license on a previous

occasion

Fulfill the following capital requirements Direct Broker Minimum of Rs. 50 lakhs

Reinsurance Broker- Minimum of Rs. 200 lakhs

Composite Broker- Minimum of Rs250 lakhs

Capital should be in the form of equity shares

Capital should be brought by cash Shall do only insurance broking

Non-resident interest should not exceed 26 per cent

Marketing Process


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Qualifications of Principal Officer of Broker

Bachelors/ Masters degree in Arts, Science, or Social Sciences or Commerce or its

equivalent from any institution/ university recognized by any State Government or the

Central Government; or

Bachelors degree in engineering or its equivalent from any institution/ university

recognized by any State government or the Central government; or

Bachelors degree in law or its equivalent from any institution/ University recognized by

any State Government or the Central Government; or

Masters in Business Administration or its equivalent from any institution/ universityrecognized by any State Government or the Central Government; or

Associate/ Fellow of the Insurance Institute of India, Mumbai; or

Associate/ Fellow of the Institute of Risk Management, Mumbai; or

any post graduate qualification of the Institute of Insurance and Risk Management,

Hyderabad; or

Associate/ Fellow of the Institute of Chartered Accountants of India , New Delhi; or Associate/ Fellow of the Institute of Cost and Works Accountants of India, Kolkata; or

Associate/ Fellow of the Institute of Company Secretaries of India, New Delhi; or

Associate/ Fellow of the Actuarial Society of India; or

Certified Associateship of the Indian Institute of Bankers, Mumbai; or

any other qualification specified from time to time by the Authority under these

regulations; and

Marketing Process


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(ii) the principal officer of the applicant has received at least one

hundred hours of theoretical and practical training from an institution

recognised by the Authority from time to time. The theoretical and practical training from an institution recognised by

the Authority from time to time according to a syllabus approved by the

Authority shall be fifty hours, provided the principal officer of the

applicant :

has been carrying on reinsurance related activity or insurance consultancy

for a continuous period of seven years, preceding the year in which such an

application is made; or

has for a period of, not less than seven years prior to the application made to

the Authority has been a principal underwriter or has held the position of a

Manager in any one of the nationalised insurance companies in India; or

is an Associate/ Fellow of the Insurance Institute of India, Mumbai; or

Associate/ Fellow of the Institute of Risk Management, Mumbai; or Associate/Fellow of the Actuarial Society of India; or any post graduate qualification of

the Institute of Insurance and Risk Management, Hyderabad;

has passed an examination, at the end of the period of training mentioned in

the proviso above, conducted by the National Insurance Academy, Pune or

any other examining body recognised by the Authority.

Marketing Process


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The Principal Officer should not have violated the code of

conduct as per IRDA regulations

The applicant should not be engaged in any other business

The grant of license shall be in the interest of the policy

holders

Marketing Process


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Advertisement and Sales Promotion Advertisements in the visual media

Advertisements in print media

Internet Advertisements

Radio Jingles

Hoardings

Moving display

Digital display

Sponsoring of events

Incentive Schemes like Crorepathi,

Membership in Chairmans Club etc.

Marketing Process


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Advertisement in Print Media

Marketing Process


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IRDA Guidelines on Advertising

The following are considered as advertising under the

provisions of IRDA Act: newspapers, magazines and sales talks;

billboards, hoardings, panels;

radio, television, website, e-mail, portals;

representations by intermediaries;

leaflets; descriptive literature/ circulars;

sales aids flyers;

illustrations form letters;

telephone solicitations;

business cards;

videos;

faxes; or

any other communication with a prospect or a policyholder that

urges him to purchase, renew, increase, retain, or modify a policy

of insurance.


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IRDA Guidelines on Advertising

The following are exempted

materials used by an insurance company within its own

organization and not meant for distribution to the public;

communications with policyholders other than materials urging

them to purchase, increase, modify surrender or retain a policy; materials used solely for the training, recruitment, and education

of an insurer's personnel, intermediaries, counselors, and

solicitors, provided they are not used to induce the public to

purchase, increase, modify, or retain a policy of insurance

any general announcement sent by a group policyholder to

members of the eligible group that a policy has been written or

arranged.


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Distribution Intermediary

The Insurance Intermediary is defined as:

insurance brokers, reinsurance brokers, insurance consultants,surveyors and loss assessors, or any other person representingor assisting an insurer in one or more of the following :

soliciting, negotiating, procuring, or effectuating an insurancecontract or a renewal of an insurance contract;

disseminating information relating to coverage or rates;

forwarding an insurance application; servicing and delivering an insurance policy or contract;

inspecting a risk;

setting a rate;

investigating or assessing a claim or loss;

transacting a matter after the effectuation of a contract; or representing or assisting an insurer or other person in any other

manner in the transaction of insurance with respect to a subjectof insurance resident, located or to be performed in India.

servicing a policy or contract.

Ri k M t


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Risk Management

Insurance is a process of risk management

Insurance companies generally reinsure their

business with reinsurers. International reinsurer is

Berne Union

In India General Insurance Corporation provides the

reinsurance service

M t I f ti S t b IRDA


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Management Information System by IRDA

IRDA exercises off-site surveillance of insurance companies

through periodical returns

Insurance companies are required to submit 4 copies of

audited financial statements and abstract of report for every

year to IRDA with in 6 months

Insurance companies are also required to submit the following

additional statements:

Statement of assets duly audited by a competent person

Audited revenue account for the financial year

A separate abstract of the valuation report of all business

transacted in India

A declaration regarding the revenue receipts from abroad

M t I f ti S t


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Management Information System

The insurance companies are also required to

submit the following returns: Annual statement of investments and Income from

investments

Annual Statement of Prudential Investment Norm

Quarterly Statement of accounts

Quarterly Statement of Investment

A certified copy of every report on the affairs of the concern

which is submitted to the members or policy-holders of the

insurer A certified copy of the minutes of the proceedings of every

general meeting, as entered in the Minutes Book of the

insurer

Mi I


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Micro Insurance

Micro insurance is the new initiative of the

Government of India for making available the

insurance products to rural sector through Self Help

Groups

Micro insurance policies are issued under life and

non-life categories

Life insurance policies are issued under various

categories

Mi Lif I S h


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Micro Life Insurance Schemes

Type of Cover Minimum

Amount of

Cover

Maximum

Amount of

Cover

Minimum

Term of

Cover

Maximum

Term of

Cover

Minimum

age

at Entry

Maximum

age

at Entry

Term

Insurance

with or

without

Premium

Rs.5000 Rs.50000 5 years 15 years 18 years 60 years

Endowment

InsuranceRs.5000 Rs.30000 5 years 15 years 18 years 60 years

Health

insurance

(Individual)

Rs.5000 Rs.30000 1 year 7 years Insurers

discretion

Insurers

discretion

HealthInsurance

(Family)

Rs.10000 Rs.30000 1 year 7 years Insurersdiscretion

Insurersdiscretion

Accident

Benefit

as rider


Mi N lif I S h


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Micro Non-life Insurance Scheme

Covers health insurance, insurance of hut,

livestock, tools and instruments, personal

accident etc.

The terms of insurance is as follows:

Mi N lif I S h T f i


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Micro Non-life Insurance Scheme- Terms of insurance

Type of Cover Minimum

Amount of

Cover

Maximum

Amount of

Cover

Minimum

Term of

Cover

Maximum

Term of Cover

Minimum age

at Entry

Maximum age

at Entry

Dwelling&

contents or

livestock or tools

or implements or

other named

assets/ cropinsurance against

all perils

Rs.5000 Rs.50000 1 year 1 year NA NA

Endowment

Insurance


Health insurance

(Individual)

Rs.5000 Rs.30000 1 year 7 years Insurers

discretion

Insurers

discretion

Health Insurance(Family)

Rs.10000 Rs.30000 1 year 7 years Insurersdiscretion

Insurersdiscretion

Accident Benefit

as rider


Mi I A i


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Micro Insurance Agencies

Self Help Groups (SHG)

informal groups consisting of ten to twenty or persons

working for at least three years with marginalized groups

proven track record, clearly stated aims and objectives

transparency and accountability as outlined in its memorandum,

rules, bye laws or regulations

demonstrate involvement of committed people

Non-Government Organizations (NGO)

non-profit organizations registered as a society under any law

Micro Finance Institutions (MFI)

institutions or entities or associations registered under any law for

the registration of societies or co-operative societies for

sanctioning of loans/finance to its members



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Conditions for Appointment

Deed of agreement specifying the terms of agreement

MIA should confine to one life insurer and one general insurance

The deed of agreement should cover the following functions:

Collection of proposal forms

Collection of self declaration form from the proposer tha he/she is ingood health

Collection and remittance of premium

Distribution of policy documents

Maintenance of register of all those insured and their dependentscovered under the micro insurance scheme, together with details ofname, sex, age, address, nominees and thumb impression/signatureof the policyholder

Assistance in the settlement of claims

Ensuring nomination to be made by the insured Any policy administrative service

Termination clause with a notice period of 3 months

Appointment of persons with the approval of insurer

Termination if the code of conduct and/or advertisement ofdisclosure norms are violated


Code of Conduct for Insurers


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Every micro insurer shall be subject to file and use procedure

Every micro insurance product shall carry the caption Micro InsuranceProduct.

Every micro insurer shall issue insurance contracts to the individual

micro insurance policyholders in the vernacular language

Every micro insurer shall issue insurance contracts to the micro

insurance policyholder in an unalterable form along with a schedule

showing the details of individuals covered under the group, and also

issue a separate certificate

No insurer shall authorize any MIA or any other outsider to underwrite

any insurance proposal

Every insurer shall impart at least twenty five hours of training at its

expense

A MIA may be paid remuneration for all functions rendered, including

commission, by the insurer, subject to the following limit




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Life Insurance Business

Single premium policies: Ten per cent of the single premium

Non-single premium policies: Twenty per cent of the

premium for all the years of the premium paying term

For non-Life Insurance Business: Fifteen per cent of the

premium Where the agreement between the micro insurer and MIA

is terminated for any reason, whatsoever, no future

commission / remuneration shall be payable

For group insurance products the insurer shall decide thecommission subject to the overall limit specified above.

All insurers ensure that all transactions in connection

with the provisions of the Act, the IRDA Act 1999 and the

rules and regulations made thereunder


Insurance Ombudsman Scheme


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A mechanism for redressal of grievances bypolicyholders

Was established in November 1998

Enables speedy disposal of complaints

Protects the interests of the policyholders

Builds confidence in the system among the

policyholders

Simple and costless process



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Ombudsman is appointed by the governing body ofinsurance council

Ombudsman is drawn from insurance industry

Appointment is for 3 years

There are 12 Ombudsman across the country

The secretarial staff manages the office

Governing body has the power to remove the

Ombudsman if grave misconduct is observed



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Powers of Ombudsman

Conciliation,

The insurance Ombudsman is empowered to receive and consider

complaints in respect of personal lines of insurance from any person

who has any grievance against an insurer.

The complaint may relate to any grievance against the insurer i.e.

any partial or total repudiation of claims by the insurance companies,

dispute with regard to premium paid or payable in terms of the policy,

dispute on the legal construction of the policy wordings in case such

dispute relates to claims;

delay in settlement of claims and

non-issuance of any insurance document to customers after receipt of

premium

The value of the insurance contract is restricted to Rs.20 lakhs

Insurance companies have to honour the awards passed by the

Ombudsman within 3 months




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Manner of Lodging Claims

Complaint should be by an aggrieved person and should be in

writing

Complaint should be submitted to the Ombudsman under whose

jurisdiction the insurer falls

Legal heirs of a deceased can also file complaint

The complaint should be either rejection of claims or not

responding to the complaint by the insurer with in one month

The complaint should be made within one year after the insurer

replied

The same complaint should not be pending with any court of law.




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Settlement

When a complaint is settled through mediation by the Ombudsman, hemakes recommendations to the complainant as well as to the insurer

with in one month

If the complainant accept the recommendations, he has to

communicate the same to the Ombudsman with in 15 days

On receipt of the complainants response, the Ombudsman will pass

an award which will be binding on the insurance company

If the complainant is not satisfied with the award, he can approach

other avenues like Consumer Forums or Court of Law

The policies issued should carry the name of the Ombudsman underwhose jurisdiction the insurer falls

The statistics relating to receipt and disposal of complaints at the

Ombudsmans office shows that the policyholders are utilizing the

services of Ombudsman for redressal of their grievances extensively.


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