Date post: | 03-Jun-2018 |
Category: |
Documents |
Upload: | sushant1903 |
View: | 231 times |
Download: | 0 times |
of 53
8/12/2019 Bajaj Allianz General Insurance
1/53
1
CHAPTERI
INTRODUCTION TO
GENERAL INSURANCE
8/12/2019 Bajaj Allianz General Insurance
2/53
2
INTRODUCTION
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.
In one form or another, we all own insurance. Whether it's auto, medical, liability,
disability or life, insurance serves as an excellent risk-management and wealth-preservation
tool. Having the right kind of insurance is a critical component of any good financial plan.While most of us own insurance, many of us don't understand what it is or how it works. In this
tutorial, we'll review the basics of insurance and how it works, then take you through the main
types of insurance out there.
Insurance allows individuals, businesses and other entities to protect themselves against
significant potential losses and financial hardship at a reasonably affordable rate. We say
8/12/2019 Bajaj Allianz General Insurance
3/53
3
"significant" because if the potential loss is small, then it doesn't make sense to pay a premium
to protect against the loss. After all, you would not pay a monthly premium to protect against a
$50 (Rs.3000) loss because this would not be considered a financial hardship for most
Insurance is appropriate when you want to protect against a significant monetary loss.
Take life insuranceas an example. If you are the primary breadwinner in your home, the loss
of income that your family would experience as a result of our premature death is considered a
significant loss and hardship that you should protect them against.
It would be very difficult for your family to replace your income, so the monthly
premiums ensure that if you die, your income will be replaced by the insured amount. Thesame principle applies to many other forms of insurance. If the potential loss will have a
detrimental effect on the person or entity, insurance makes sense.
INDIAN INSURANCE ACT,1938The insurance sector went through a full circle of phases from being unregulated to
completely regulated and then currently being partly deregulated. It is governed by a number of
acts. The Insurance Act of 1938 was the first legislation governing all forms of insurance to
provide strict state control over insurance business. Life insurance in India was completely
nationalized on January 19, 1956, through the Life Insurance Corporation Act. All 245
insurance companies operating then in the country were merged into one entity, the LifeInsurance Corporation of India.
8/12/2019 Bajaj Allianz General Insurance
4/53
4
The General Insurance Business Act of 1972 was enacted to nationalize the about 100
general insurance companies
then and subsequently mergingthem into four companies. All the
companies were amalgamated into
National Insurance, New India
Assurance, Oriental Insurance and
United India Insurance, which were
headquartered in each of the four
metropolitan cities. Until 1999, there
were no private insurance companies in India. The government then introduced the Insurance
Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector
and allowing private companies. Furthermore, foreign investment was also allowed and capped
at 26% holding in the Indian insurance companies.
The Insurance Act, 1938had provided for setting up of the Controller of Insurance toact as a strong and powerful supervisory and regulatory authority for insurance. Post
nationalization, the role of Controller of Insurance diminished considerably in significance
since the insurance companies were owned by the Government.
8/12/2019 Bajaj Allianz General Insurance
5/53
5
TYPE OF INSURANCE
All too often we hear about various types of insurance policies without really
understanding what they are and more importantly, what they protect. The truth is, there are
two main types of insurance, namely life insurance and general insurance which covers
different aspects in your life.
LIFE INSURANCE
Life insurance is an insurance coverage that pays out a certain amount of money to the
insured or their specified beneficiaries upon a certain event such as death of the individual who
is insured. This protection is also offered in a Family takaful plan, a Shariah-based approach to
protecting you and your family. The coverage period for life insurance is usually more than a
year. So this requires periodic premium payments, either monthly, quarterly or annually.
Protecting your family from financial disasters is one of the fundamental components of
financial planning. Life insurance should be a core part of that planning process. This article is
8/12/2019 Bajaj Allianz General Insurance
6/53
6
a basic primer on life insurance, which should introduce you to the concept and give you an
idea of how life insurance works.
Most people have a basic understanding of insurance. You receive financial compensation
when an insured event occurs. Consider auto insurance, for example. If your car is in an
accident or stolen, your insurance company provides compensation according to the terms
outlined in your insurance policy.
The risks that are covered by life insurance are:
Premature death
Income during retirement
Illness
The main products of life insurance include:
Whole life
Endowment
Term
Investment-linked
Life annuity plan
Medical and health
GENERAL INSURANCE
General insurance is basically an insurance policy that protects you against losses and
damages other than those covered by life insurance. For more comprehensive coverage, it is
vital for you to know about the risks covered to ensure that you and your family are protected
8/12/2019 Bajaj Allianz General Insurance
7/53
7
from unforeseen losses. The coverage period for most general insurance policies and plans is
usually one year, whereby premiums are normally paid on a one-time basis.
This is an area of financial planning that is often overlooked. Traditionally, we have our
buildings and contents with our mortgage lenders, which may be uncompetitive in a very
competitive marketplace. It may also be the case that a property may be underinsured, due to
decoration, extension or the increase in house prices.
General insurance is important for your peace of mind. It enables you to minimize the effects
of unexpected and often unwelcome future events, and helps you to organize your personal and
business life with greater confidence.
The risks that are covered by
general insurance are:
1) Property loss, for example,stolen car or burnt house.
2) Liability arising fromdamage caused by yourself
to a third party.
3) Accidental death or injury.
The main products of general insurance includes:
1) Motor insurance.2) Fire/ House owners/ Householders insurance.3) Personal accident insurance.4) Medical and health insurance.5) Travel insurance.
8/12/2019 Bajaj Allianz General Insurance
8/53
8
Important Sections:-
10. SEPARATION OF ACCOUNTS AND FUNDS
(1) Where the insurer carries on business of more than one of the 2[ following classes,
namely, life insurance, fire insurance, marine insurance or miscellaneous insurance], he shall
keep a separate account of all receipts and payments in respect of each such class of insurance
business 3[ and where the insurer carries on business of 2[ miscellaneous insurance] whether
alone or in conjunction with business of another class, he shall, unless the 4[ Controller]
waives this requirement in writing, keep a separate account of all receipts and payments in
respect of 2[ each of such sub- classes of miscellaneous insurance business] as may be
prescribed in this behalf: Provided that no sub- class of 2[ miscellaneous insurance business]
shall be prescribed under this sub- section if the insurance business comprised in the sub- class
consists of insurance contracts which are terminable by the insurer at intervals not exceeding
twelve months and under which, if a claim arises, the insurer' s liability to pay benefit ceases
within one year of the date on which the claim arose.]
(2) Where the insurer carries on the business of life insurance 5[ all receipts due in respect of
such business], shall be carried to and shall form a separate fund to be called the life insurance
fund 6[ the assets of which shall, after the expiry of six months from the commencement of the
Insurance (Amendment) Act, 1946 (6 of 1946 ), be kept distinct and separate from all other
assets of the insurer] and the deposit made by the insurer in respect of life insurance business
shall be deemed to be 7[ part of the assets of such fund (2A) 1[ No insurer carrying on life
insurance business shall be entitled to be registered for any class of insurance business in
addition to the class or classes for which he has been already registered unless the 2[
Controller] is satisfied that the assets of the life insurance fund of the insurer are adequate to
meet all his liabilities on policies of life insurance maturing for payment.]
http://indiankanoon.org/doc/1227515/http://indiankanoon.org/doc/1027962/http://indiankanoon.org/doc/186715/http://indiankanoon.org/doc/186715/http://indiankanoon.org/doc/1027962/http://indiankanoon.org/doc/1227515/8/12/2019 Bajaj Allianz General Insurance
9/53
9
11. ACCOUNTS AND BALANCE- SHEET
(1) Every insurer, in the case of an insurer specified in sub- clause (a) (ii) or sub- clause
(b) of clause (9) of section 2 in respect of all insurance business transacted by him, and in the
case of any other insurer in respect of the insurance business transacted by him in India, shall
at the expiration of each calendar year prepare with reference to that year--
(a) in accordance with the regulations contained in Part I of the First Schedule, a balance- sheet
in the form set forth in Part II of that Schedule;
(b) in accordance with the regulations contained in Part I of the Second Schedule, a profit and
loss account in the forms set forth in Part II of that Schedule, except where the insurer carries
on business of one class only of 1[ the following classes, namely, life insurance, fire insuranceor marine insurance] and no other business;
(c) 2[ in respect of each class or sub- class of insurance business for which he is required under
sub- section (1) of section 10 to keep a separate account of receipts and] 3[ payments, a
revenue account in accordance with the regulations, and in the form or forms, set forth in the
Third] Schedule applicable to 4[ that class of insurance business].
(2) Unless the insurer is a company 5[ as defined in clause (2) of sub- section (1) of section 2
of the Indian Companies Act, 1913 (7 of 1913 )] the accounts and statements referred to in sub-
section (1) shall be signed by the insurer, or in the case of a company by the chairman, if any,
and two directors and the principal officer of the company, or in the case of a firm by two
partners of the firm, and shall be 6[ accompanied by a statement containing the names
descriptions and occupations of, and the directorships held by, the persons in charge of the
management of the business] during the period to which such accounts and statements refer
and by a report 7[ on the affairs of the business during that period.
http://indiankanoon.org/doc/1522831/http://indiankanoon.org/doc/1563383/http://indiankanoon.org/doc/400046/http://indiankanoon.org/doc/1223339/http://indiankanoon.org/doc/435403/http://indiankanoon.org/doc/318370/http://indiankanoon.org/doc/318370/http://indiankanoon.org/doc/435403/http://indiankanoon.org/doc/1223339/http://indiankanoon.org/doc/400046/http://indiankanoon.org/doc/1563383/http://indiankanoon.org/doc/1522831/8/12/2019 Bajaj Allianz General Insurance
10/53
10
12. AUDIT
The balance- sheet, profit and loss account, revenue account and profit and loss
appropriation account of every insurer, in the case of an insurer specified in sub- clause (a) (ii)
or sub- clause (b) of clause (9) of section 2 in respect of all insurance business transacted by
him, and in the case of any other insurer in respect of the insurance business transacted by him
in India, shall, unless they are subject to audit under the Indian Companies Act, 1913 (7 of
1913 ), be audited annually by an auditor, and the auditor shall in the audit of all such accounts
have the powers of, exercise the functions vested in, and discharge the duties and be subject to
the liabilities and penalties imposed on, auditors of companies by section 145 of the Indian
Companies Act, 1913 .
14. REGISTER OF POLICIES AND REGISTER OF CLAIMS
Every insurer, in the case of an insurer specified in sub- clause (a) (ii) or sub- clause (b)
of clause (9) of section 2 in respect of all business transacted by him, and in the case of any
other insurer in respect of the insurance business transacted by him in India, shall maintain--
(a) a register or record of policies, in which shall be entered, in respect of every policy issued
by the insurer, the name and address of the policy- holder, the date when the policy was
effected and a record of any transfer, assignment or nomination of which the insurer has notice
and
(b) a register or record of claims, in which shall be entered every claim made together with the
date of the claim, the name and address of the claimant and the date on which the claim was
discharged, or, in the case of a claim which is rejected, the date of rejection and the groundstherefore
http://indiankanoon.org/doc/132249/http://indiankanoon.org/doc/1880542/http://indiankanoon.org/doc/535686/http://indiankanoon.org/doc/966513/http://indiankanoon.org/doc/966513/http://indiankanoon.org/doc/535686/http://indiankanoon.org/doc/1880542/http://indiankanoon.org/doc/132249/8/12/2019 Bajaj Allianz General Insurance
11/53
11
27B. FURTHER PROVISIONS REGARDING INVESTMENTS
(1)No insurer carrying on general insurance business shall, after the commencement of the
Insurance (Amendment) Act, 1968 (62 of 1968 ), invest or keep invested any part of this assets
otherwise than in any of the following approved investments, namely:--
(a) the investments specified in clauses (a) to (e), (n), (q) and (r) of sub- section (1) of section
27A;
(b) debentures secured by a first charge on any immovable property, plant or equipment of any
company which has paid interest in full for the three years immediately preceding or for at least
three out of the four or five years immediately preceding on such or similar debentures issued
by it;
(c) debentures secured by a first charge on any immovable property, plant or equipment of any
company where either the book value or the market value, whichever is less, of such property,
plant or equipment is more than twice the value of such debentures;
(2) Any prescribed assets shall, subject to such conditions, if any, as may be prescribed, be
deemed to be assets invested or kept invested in approved investments specified in sub- section(1)
(3)Notwithstanding anything contained in sub- section (1), an insurer may, subject to the
provisions contained in the next succeeding sub- sections, invest or keep invested any part of
his assets otherwise than in an approved investment specified in sub- section (1), if,--
(i) after such investment, the total amounts of all such investments of the insurer do not exceed
twenty- five per cent. of his assets, and
(ii) the investment is made, or, in the case of any investment already made, the continuance of
such investment is with the consent of all the directors, other than the directors appointed under
section 34C, present at a meeting and eligible to vote, special notice of which has been given to
http://indiankanoon.org/doc/450991/http://indiankanoon.org/doc/1709844/http://indiankanoon.org/doc/93901/http://indiankanoon.org/doc/719395/http://indiankanoon.org/doc/937111/http://indiankanoon.org/doc/198785/http://indiankanoon.org/doc/1665505/http://indiankanoon.org/doc/274147/http://indiankanoon.org/doc/990713/http://indiankanoon.org/doc/990713/http://indiankanoon.org/doc/274147/http://indiankanoon.org/doc/1665505/http://indiankanoon.org/doc/198785/http://indiankanoon.org/doc/937111/http://indiankanoon.org/doc/719395/http://indiankanoon.org/doc/93901/http://indiankanoon.org/doc/1709844/http://indiankanoon.org/doc/450991/8/12/2019 Bajaj Allianz General Insurance
12/53
12
all the directors then in India, and all such investments, including investments in which any
director is interested, are reported without delay
to the Controller with full details of the investments and the extent of the director' s interest in
any such investment: Provided that the making, or the continuance, of such investment is not
objected to by any director appointed under section 34C.
40. PROHIBITION OF PAYMENT BY WAY OF COMMISSION OR
OTHERWISE FOR PROCURING BUSINESS
(1)No person shall, after the expiry of six months from the commencement of this Act, pay or
contract to pay any remuneration or reward whether by way of commission or otherwise for
soliciting or procuring insurance business in India to any person except an insurance agent 1[
2[ or a principal, chief or special agent].
(1A) 3[ In this section and sections 4[ 40A], 41 and 43, references to an insurance agent shall
be construed as including references to an individual soliciting or procuring insurance business
exclusively in 5[ the territories which, immediately before the Ist November, 1956 , were
comprised in a Part B State] notified in this behalf by the Central Government in the Official
Gazette and holding a valid license as an insurance agent under the law of 6[ that Part B
State].]
(2)No insurance agent 1[ shall be paid or contract to be paid by way of commission or as
remuneration in any form an amount exceeding, in the case of life insurance business, forty per
cent. of the first year' s premium payable on any policy or policies effected through him and
five per cent. of a renewal premium, 3[ payable on such a policy], or, in the case of business of
any other class, fifteen per cent. of the premium: Provided that insurers, in respect of life
insurance business only, may pay, during the first ten years of their business, to their insurance
agents fifty- five per cent. of the first year' s premium payable on any policy or policies
effected through them and six per cent. of the renewal premiums 3[ payable on such policies]:
http://indiankanoon.org/doc/852291/http://indiankanoon.org/doc/991972/http://indiankanoon.org/doc/921657/http://indiankanoon.org/doc/1478302/http://indiankanoon.org/doc/1478302/http://indiankanoon.org/doc/921657/http://indiankanoon.org/doc/991972/http://indiankanoon.org/doc/852291/8/12/2019 Bajaj Allianz General Insurance
13/53
13
4[ Provided further that nothing in this sub- section shall apply in respect of any policy of life
insurance issued after the 31st day of December, 1950 (47 of 1950 ), or in respect of any policy
of general insurance issued after the commencement of the Insurance (Amendment) Act, 1950
.]
Insurance Regulatory And Development Authority (IRDA)
The IRDA (Insurance Regulatory And Development Authority) is the regulatory
authority, which looks over all related aspects of the insurance business.
The provisions of the IRDA bill acknowledge many issues related to insurance sector.
The IRDA bill provides guidance for three levels of players 1.Insurance Company
2.Insurance brokers and 3.Insurance agent. Life Insurance sector is one of the key areas where
enormous business potential exists. In India currently the life insurance premium as a
percentage of GDP is 1.3 % against, 5.2 per cent in the US. General Insurance is another
segment, which has been growing at a faster pace. But as per the current comparative statistics,
the general insurance premium has been lower than life insurance.
General Insurance premium as a percentage of GDP was a mere 0.5'per cent in 1996. In
the General Insurance Business, General Insurance Corporation (GIC) and its four subsidiaries
viz. New India Insurance, Oriental Insurance, National Insurance and United India Insurance,
are doing major business. The General Insurance Industry has been growing at a rate of 19
percent per year.
Insurance Regulatory Authority of India issued regulations on 15 subjects which
included appointed. Actuary, actuarial report, Insurance agents, Solvency margins, re-
8/12/2019 Bajaj Allianz General Insurance
14/53
14
insurance, registration of Insurers, and obligation of insurers to rural and social sector,
investment and accounting procedure. The reform in Insurance in India is guided by factors
like availability of a variety of products at a competitive price, improvement in the quality of
customer services etc.
Also the employment opportunities in the Insurance sector will increase as major players
set their business plans in India. The policy of the government to open up the financial sector
and the Insurance sector is expected to bring greater FDI inflow into the country. The increase
in the investment limit in this vital sector has generated considerable business interests among
the foreign Insurance companies" Their entry wil1 certainly change the Insurance sector
considerably.
Introduction to General Insurance
Insurance other than Life Insurance falls under the category of General Insurance.
General Insurance comprises of insurance of property against fire, burglary etc, personal
insurance such as Accident and Health Insurance, and liability insurance which covers legal
liabilities. There are also other covers such as Errors and Omissions insurance forprofessionals, credit insurance etc.
Non-life insurance companies have products that cover property against Fire and allied
perils, flood storm and inundation, earthquake and so on. There are products that cover
property against burglary, theft etc. The non-life companies also offer policies covering
machinery against breakdown, there are policies that cover the hull of ships and so on. A
Marine Cargo policy covers goods in transit including by sea, air and road. Further, insurance
of motor vehicles against damages and theft forms a major chunk of non-life insurance
business.
8/12/2019 Bajaj Allianz General Insurance
15/53
15
Personal insurance covers include policies for Accident, Health etc. Products offering
Personal Accident cover are benefit policies. Health insurance covers offered by non-life
insurers are mainly hospitalization covers either on reimbursement or cashless basis. The
cashless service is offered through Third Party Administrators who have arrangements with
various service providers, i.e., hospitals. The Third Party Administrators also
provide service for reimbursement claims. Sometimes the insurers themselves process
reimbursement claims.
Accident and health insurance policies are available for individuals as well as groups. A
group could be a group of employees of an organization or holders of credit cards or deposit
holders in a bank etc. Normally when a group is covered, insurers offer group discounts.
Liability insurance covers such as Motor Third Party Liability Insurance, Workmens
Compensation Policy etc offer cover against legal liabilities that may arise under the respective
statutes Motor Vehicles Act, The Workmens Compensation Act etc. Some of the covers
such as the foregoing (Motor Third Party and Workmens Compensation policy ) are
compulsory by statute. Liability Insurance not compulsory by statute is also gaining popularity
these days. Many industries insure against Public liability. There are liability covers available
for Products as well.
There are general insurance products that are in the nature of package policies offering a
combination of the covers mentioned above. For instance, there are package policies available
for householders, shop keepers and also for professionals such as doctors, chartered
accountants etc. Apart from offering standard covers, insurers also offer customized or tailor-
made ones.
8/12/2019 Bajaj Allianz General Insurance
16/53
16
It is important for proposers to read and understand the terms and conditions of a policy
before they enter into an insurance contract. The proposal form needs to be filled in completely
and correctly by a proposer to ensure that the cover is adequate and the right one.
8/12/2019 Bajaj Allianz General Insurance
17/53
17
TYPES OF GENERAL INSURANCE
Fire Insurance
Insurance that is used to cover damage to a property caused by fire. Fire insurance is aspecialized form of insurance beyond property insurance, and is designed to cover the cost of
replacement, reconstruction or repair beyond what is covered by the property insurance policy.
Policies cover damage to the building itself, and may also cover damage to nearby
structures, personal property and expenses associated with not being able to live in or use the
property if it is damaged.
Homeowners and property owners may
consider fire insurance in addition to a property
insurance policy if the property contains
valuable items. A best practice would be to
document the property and its related contents,
which makes identifying the value of items
damaged or lost much easier after a fire has
taken place.
A fire insurance policy may contain exclusions based on the cause of the fire, such as not
covering fires caused by wars.
8/12/2019 Bajaj Allianz General Insurance
18/53
18
Marine insurance
Marine insurance covers the loss or damage of ships, cargo, terminals, and anytransport or cargo by which property is transferred, acquired, or held between the points of
origin and final destination.
A type of insurance coverage that places a specific value on the insured property, such as
the hull or cargo of a shipping vessel. A valued marine policy pays up to, or in its entirety, the
specified value in the event of a total loss. It differs from an unvalued marine policy where the
value of the property would be determined
following the event of a loss. Marine insurance
provides coverage against losses sustained by ships
cargo and terminals.
The value is determined ahead of time in a
valued marine policy, and there is generally no
reassessment or revaluation necessary in the event
of an insured event or loss. A valued policy pays a pre-determined amount regardless of the
extent of the damages, as long as it is considered a total loss. It is important to note that if the
insured item depreciates in value, it will not affect the amount which can be claimed in the
event of a total loss. The same is also true if the value of the item appreciates - the insured is
unable to receive any addition damages based on the increase value of the item.
8/12/2019 Bajaj Allianz General Insurance
19/53
19
Miscellaneous Insurance
Includes insurance against loss from damage done, directly or indirectly by lightning,
windstorm, tornado, earthquake or insurance under an open policy indemnifying the producer
of any motion picture, television, theatrical, sport, or similar production, event, or exhibition
against loss by
Benefits thatcover most medical costsincurred while the insured receives treatment as
an inpatient. These benefits, usually provided by a group healthpolicy,will not cover surgical
costs or room andboard.
The accident or miscellaneous department
covers those types of risk which are not covered either
under Fire or Marine Departments. Its scope is
therefore, very vide and extensive and includes such a
wide range of contingencies as may not be included in
the strict interpretation of the term Accident. The
Accident or the miscellaneous insurance includes many sub-sections under which different
classes of business are transacted. A special feature of this department is that it covers many
branches which are grouped together in it which are apparently unrelated to each other
However in practice, unrelated risks are grouped together for the convenience of the insured.
http://www.businessdictionary.com/definition/benefit.htmlhttp://www.businessdictionary.com/definition/cover.htmlhttp://www.businessdictionary.com/definition/costs.htmlhttp://www.businessdictionary.com/definition/incurred.htmlhttp://www.businessdictionary.com/definition/insured.htmlhttp://www.businessdictionary.com/definition/receive.htmlhttp://www.businessdictionary.com/definition/group.htmlhttp://www.businessdictionary.com/definition/health.htmlhttp://www.businessdictionary.com/definition/policy.htmlhttp://www.businessdictionary.com/definition/board.htmlhttp://www.businessdictionary.com/definition/board.htmlhttp://www.businessdictionary.com/definition/policy.htmlhttp://www.businessdictionary.com/definition/health.htmlhttp://www.businessdictionary.com/definition/group.htmlhttp://www.businessdictionary.com/definition/receive.htmlhttp://www.businessdictionary.com/definition/insured.htmlhttp://www.businessdictionary.com/definition/incurred.htmlhttp://www.businessdictionary.com/definition/costs.htmlhttp://www.businessdictionary.com/definition/cover.htmlhttp://www.businessdictionary.com/definition/benefit.html8/12/2019 Bajaj Allianz General Insurance
20/53
20
SCHEDULE B [GENERAL INSURANCE]
PART 1-ACCOUNTING PRINCIPLES FOR PREPARATION OF
FINANCIAL STATEMENTS
1. Applicability of accounting standards:Every Balance sheet, Revenue account, Receipts and Payments a/cs and Profit & Loss
A/c of an insurer shall be in conformity with the Accounting Standards issued by ICAI
to the extent applicable to insurers carrying on general insurance except that:
Accounting standard 3-Cash Flow Statements shall be prepared only under the Direct
Method.
Accounting Standard 17-Segment Reporting shall apply to all insurers irrespective of the
requirements regarding the listing and turnover mentioned therein.
2. Premium:
Premium shall be recognized as income over the contract period or the period of risk
whichever is appropriate.
A reserve for unexpired risks must be created as the amount representing the part of the
premium written which is allocated to succeeding accounting periods.
Reserve for unexpired risks in respect of:
a. Fire and miscellaneous business,50 percent.b. Marine cargo business,50 percent, andc. Marine hull business,100 percent.
8/12/2019 Bajaj Allianz General Insurance
21/53
21
3. Premium Deficiency:
Premium deficiency shall be recognized if the sum of expected claim costs related
expenses and maintenance costs exceeds related reserve for unexpired risks.
4. Acquisition costs:
Acquisition costs shall be expensed in the period in which they are incurred. The most
essential test is the obligatory relationship between costs and execution of insurance contracts.
5. Claims:
A liability for outstanding claims shall be brought to account in respect of both direct
business reinsurance business. The liability shall include:
a. Future payments in relation to unpaid reported claims.
b. Claims incurred but not reported including inadequate reserves which will result in future
cash/asset out go for settling liabilities against those claims.
6. Procedure to determine the value of investments:
An insurer shall determine the values of investments in the following manner:
a. Real estate-Investment Property:The value of investment property shall be determined at the historical cost, subject to
revaluation at least once in every 3 yrs. The change in the carrying amount of the
investment property shall be taken to Revaluation Reserve.
b.
Debt Securities:Debt securities including government securities and redeemable preference shares shall
be considered as held to maturity securities and shall be measured of historical cost.
c. Equity Securities and Derivatives instruments that are in active markets.
8/12/2019 Bajaj Allianz General Insurance
22/53
22
d. Unlisted and other than actively traded Equity Securities and Derivatuve instruments7. Loans:
Loans shall be measured at historical cost subject to impairment provisions. The insurer
shall assess the quality of its loan assets and shall provide for impairment.\
8. Catastrophe Reserve:
Catastrophe reserve shall be created in accordance with norms, if any, prescribe the
authority.
PART 2-DISCLOSURES FORMING PART OF FINANCIAL
STATEMENTS
The following should be disclosed by the way of notes to Balance sheet:
1.Contingent Liability:
a. Partly paid up investments.b. Underwriting commitments outstanding.c. Claims, other than those under policies, not acknowledged as debts.d. Guarantees given by or on behalf of the company, etc.
2.Encumbrances to assets of the company in and outside India.
3.Commitments made and outstanding for loans, investments, fixed assets .
4.Claims,less reinsurance, paid to claimants in/outside India.
Actuarial assumptions for determination of claim liabilities in case of claims.
8/12/2019 Bajaj Allianz General Insurance
23/53
23
5.Ageing of claims-distinguishing between claims outstanding.
6.Premium , less reinsurance, written from business in/outside India.
Part 3-GENERAL INSTRUCTIONS FOR PREPARATION OF FINANCIAL
STATEMENTS:
1.The corresponding accounts for the immediately preceding financial year for all the items
shown in the Balance sheet, Revenue a/c and Profit and loss a/c should be given.
2.The figures in the financial statements may be rounded off to the nearest thousands.
3.Interest,dividends and rentals receivable in connection with an investment should be stated in
the gross value.
4.Income from rent shall not include any notional rent.
5.Extent of risk retained and reinsured shall be separately disclosed.
8/12/2019 Bajaj Allianz General Insurance
24/53
24
FORMATSName of the Insurer:
Registration No. and Date of Registration with the IRDA
FORM B-RA
REVENUE ACCOUNT FOR THE YEAR ENDED 31STMARCH,20
`
PARTICULARS SCHEDULE
1
2
3
4
CURRENT
YEAR(Rs.000
)
PREVIOUS
YEAR(Rs.000)
PARTICULARS
1. Premium earned(Net)2. Profit/Loss on sale/redemption of investments3. Others( to be specified)4. Interest, Dividend & Rent-Gross
TOTAL(A)
1. Claims Incurred2. Commission3. Operating Expenses related to Insurance
Business
TOTAL(B)
Operating Profit/Loss from
Fire/Miscellaneous Business /Marine
C= (A-B)
APPROPRIATIONS
Transfer to Shareholders account
Transfer to catastrophe reserve
Transfer to Other Reserves
TOTAL(C)
8/12/2019 Bajaj Allianz General Insurance
25/53
25
FORM B-PL
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31STMARCH,20
FORM B-
BSBALANC
E SHEET
AS AT
31ST
MARCH,2
0
PARTICULARS
1. OPERATING PROFIT/LOSSa. Fire Insuranceb. Marine insurancec. Miscellaneous insurance
2. INCOME FROM INVESTMENTSa. Interest, dividend and rent-grossb. Profit on sale of investmentsLess: loss on sale of investments
3. OTHER INCOME(TO BE SPECIFIED)TOTAL(A)
4. PROVISIONS(OTHER THANTAXATION)a. For diminution in the value ofinvestmentsb. For doubtful debtsc. Others(to be specified)
5. OTHER EXPENSESa. Expenses other than those related to
insurance businessb. Bad debts written offc.
Others(to be specified)
TOTAL(B)Profit before taxProvision for taxation
APPROPRIATIONS
a. Interim dividends paid during the yearb. Proposed final dividendc. Dividend distribution taxd. Transfer to any reserves or other
accounts(to be specified)
Balance of profit/loss brought forward fromlast year.
Balance carried forward to balance sheet
SCHEDULE CURRENT
YEAR(000)
PREVIOUS
YEAR(000)
8/12/2019 Bajaj Allianz General Insurance
26/53
26
Particulars Schedule Currentyear(000Rs)
Previousyear(000 Rs)
1.SOURCES OF FUNDSShare capitalReserves and surplusFair value change accountBorrowings
Total
2.APPLICATION OF FUNDSInvestmentsLoansFixed assetsCurrent assetscash and bank balancesAdvances and other assets
Sub-total(A)Current liabilitiesProvisions
Sub-total(B)
Net current assets(C)=A-B
Miscellaneous expenditure
(to the extent not written off oradjusted)Debit balance in profit and loss
account
TOTAL
56
7
8910
1112
1314
15
8/12/2019 Bajaj Allianz General Insurance
27/53
27
CONTIGENT LIABILITIES
Particulars Current year(000
Rs)
Previous
year(000)
1. Partly paid-up investments2. Claims, other than against
policies, not acknowledged asdebts by the company
3. Underwriting commitmentsoutstanding
4. Guarantees given by or on behalfof the company
5. Statutory demands/liabilities indispute, not provided for
6. Reinsurance obligations to theextent not provided for inaccounts
7. Others
TOTAL
8/12/2019 Bajaj Allianz General Insurance
28/53
28
SPECIFIED ITEMS IN GENERAL INSURANCE
REINSURANCE
Definition:
The practice of insurers transferring portions of risk portfolios to other parties by some
form of agreement in order to reduce the likelihood of having to pay a large obligation
resulting from an insurance claim. The intent of reinsurance is for an insurance company to
reduce the risks associated with underwritten policies by spreading risks across alternative
institutions.
Also known as "insurance for insurers" or "stop-loss insurance".
Overall, the reinsurance company receives pieces of a larger potential obligation in
exchange for some of the money the original insurer received to accept the obligation. The
party that diversifies its insurance portfolio is known as the ceding party. The party that accepts
a portion of the potential obligation in exchange for a share of the insurance premium is known
as the reinsurer.
There are two basic methods of reinsurance:1.Facultative Reinsurance:
It is negotiated separately for each insurance contract that is reinsured. Facultative
reinsurance is normally purchased by ceding companies for individual risks not covered,
or insufficiently covered, by their reinsurance treaties, for amounts in excess of the
monetary limits of their reinsurance treaties and for unusual risks. Underwriting
expenses, and in particular personnel costs, are higher for such business because each
risk is individually underwritten and administered. However as they can separately
8/12/2019 Bajaj Allianz General Insurance
29/53
29
evaluate each risk reinsured, the reinsurer's underwriter can price the contract to more
accurately reflect the risks involved.
2.Treaty Reinsurance:Treaty Reinsurance means that the ceding company and the reinsurer negotiate and
execute a reinsurance contract. The reinsurer then covers the specified share of all the
insurance policies issued by the ceding company which come within the scope of that
contract.
Functions of Reinsurance:
Almost all insurance companies have a reinsurance program. The ultimate goal of that
program is to reduce their exposure to loss by passing part of the risk of loss to a reinsurer or a
group of reinsurers. In the United States, insurance is regulated at the state level, which only
allows insurers to issue policies with a maximum limit of 10% of their surplus (net worth),
unless those policies are reinsured. In other jurisdictions allowance is typically made for
reinsurance when determining statutory required solvency margins.
CO-INSURANCE:
A co-sharing agreement between the insured and the insurer under a health insurance
policy which provides that the insured will cover a set percentage of the covered costs after the
deductible has been paid. Similar to co-pay insurance plans except co-pays require the insured
to pay a set dollar amount at the time the service is rendered.
For example, an 80/20 coinsurance plan with a $300 deductible requires the insured to
pay 20% of the covered costs after the deductible as been paid, while the insurance company
will be liable for the remaining 80%. Today, with the growing cost of prescription drugs and
8/12/2019 Bajaj Allianz General Insurance
30/53
30
medical expenses, more and more employers have switched from co-pay plans to coinsurance
plans to reduce employee-benefit costs.
UNEXPIRED RISKS AND RESERVES:
If an insurer considers its unearned premium reserve to be too small, then it may create
an unexpired risk reserve, more formally called an additional reserve for unexpired risk, in
addition to it. The unearned premium reserve always appears, the additional reserve for
unexpired risk appears when necessary.
If the estimated cost of claims and expenses resulting from claims exceeds the unearned
premium reserve, then an unexpired risk reserve should be created equal to this excess. This is
essentially a provision for an expected loss. The expected costs can be estimated from
the claims ratio, estimated changes in the level of claims, the effect of reinsurance.
8/12/2019 Bajaj Allianz General Insurance
31/53
31
CHAPTERII
CASE STUDY
(COMPANYS PROFILE)
BAJAJ ALLIANZ
GENERAL INSURANCE
8/12/2019 Bajaj Allianz General Insurance
32/53
32
BAJAJ ALLIANZ GENERAL INSURANCE
Introduction to Insurance The business is related to the protection of the economic values
of the assets. Every asset has value; the asset would have been created through the efforts of
the owner. The asset is valuable to the owner because he expects to get some of the benefits
from it. Insurance is a mechanism that helps to reduce the effect of such adverse situation.
Purpose And Need of Insurance
Assets are insured; because they are likely to be destroyed through accidental occurrences
such possible occurrences are called perils. Fire floods breakdowns, lighting, and earth quakesetc. If such perils can cause damage to the asset the asset is exposed to that risk. The risk only
means that there is a possibility of loss or damage. The damage may or may not happen.
Insurance is done against the contingency that it may happen. There has to be an
uncertainty about the risk. Insurance is relevant only if there are uncertain. In the
case of a person who is terminally ill the time of death is not uncertain though not exactly
known. Insurance does not protect the asset. It does not prevent its loss due to the peril .The
peril can sometimes be avoided, through better safety and damage control management
Insurance only tries to reduce the impact of the risk on the owner of the asset and those who
depend on that asset. It only compensates the looses and that too, not fully. Only
economic consequences can be insured. If the loss is not financial insurance may not be
possible
The Business of Insurance: The business of the insurance is to: Collect the share or contribution
8/12/2019 Bajaj Allianz General Insurance
33/53
33
Pay out compensations (called claims) both those who suffer. Bring together persons with common insurance interests (sharing the same risks)In India
insurance is classified primarily as life and non-life or general. Life insurance includes
all risks related to the lives of human beings and general insurance coversthe rest. General insurance has three classifications; Fire, Marine, Miscellaneous
Personal accident and sickness insurance, which are related to human beings is classified
as non life inIndia, but is classifieds life in many other countries. The business of the
insurance is nothing but one of sharing. It spreads loose of an individual over the group
of individuals who are exposed to similar risks. People who suffer loss get relief
because their loss is made good. People who do not suffer loss are relieved
because they were spared the loss.
INSURANCE BUSINESS:
Nature of insurance business Limitations of insurance Types of insurance Principles of insurance Insuranceis sharing of Risks.
RISKS
1 . Th e t e r m r i sk m ay b e d e f i n ed a s t h e p o ss i b i l i t y o f a f i n an c i a l l o s s
f l o wi ng f r o m an y occurrence2. In insurance it is essential that the risk should be
measurable in financial terms
Risk sharing and risk transfer:
Insurance is a complex mechanism, it has two fundamental characteristics:
1. Transferring or shifting of a risk from one individual to a group;
8/12/2019 Bajaj Allianz General Insurance
34/53
34
2. Sharing losses, on some equitable basis, by all members of the group.
Elements of an Insurable Risk:
Large numbers of exposure units Definite and measurable loss The loss must be fortuitous The loss must not be catastrophic Randomness-adverse selection Economic feasibility
Limitations of Insurance:
All risks cannot be insured There must be insurable interest Insurance is limited to the financial value There must be large number of similar risks It must be possible to calculate the risk of loss Losses should not be catastrophic
Losses must not be too small Losses must be reasonably unexpected Losses must be accidental It must be consistent with public policy
Insurance business is classified into four sections
1.Life Insurance Business:Life insurance originally conceived to protect a mans family when his death leftthem without
income has developed into a variety of policy plans.
8/12/2019 Bajaj Allianz General Insurance
35/53
35
2.Marine Insurance BusinessMarine insurance protects shipping companies against the loss of a ship or its cargo, as well
as many other items, and so-called inland marine insurance covers a vast
miscellany of items, including tourist baggage, express and parcel post packages, truckscargoes, goods in transit, and even bridges and tunnels.
3.Fire Insurance Business:Fire Insurance usually includes damage from lightning other insurance against
the el ements includes hail, tornado, flood, and drought.
4.Miscellaneous Insurance BusinessSpecial casualty forms are issued to cover the hazards of sudden explosions from
equipment such as steam boilers, compressors, electric motors, flywheels, air tanks, furnaces
and engines. Boilers and machinery insurance has several distinctive features. A substantial
portion of the collected is used for inspection services rather than loss protection. The
business if insurance started with marine business. Traders, who used to gather in
the Lloyds coffee house in London, agreed to share the losses to their goods while being
carried
by ships .the losses used to occur because of pirates who robbed on the high seas of badweathe
r spoiling the goods or sinking the skip. The first insurance policy was started in 1583 in
England .In India, insurance began in 1870.The business of the insurance is the protection of
economic values of the assets. Every asset is expected to last for a certain period
of t ime during which it will perform. Insurance is mechanism that helps to
reduce the effect of such adverse situation. Insurance is relevant only if there are uncertainties
Life Insurers transact life insurance business the rest is transacted by General
Insurers. No composites are permitted as per law. The business of insurance essentially means
8/12/2019 Bajaj Allianz General Insurance
36/53
36
defraying risks attached to any activity over time and sharing the risks between various entities
both persons and organizations. Insurance companies are important players in financia
markets as they collect and invest large amounts of the premium. Insurance products are multipurpose
and offer the following benefits.
1 ) P r o t ec t i o n t o t h e i n v es t o r s
2 ) A c c u m u l a t i v e s a v i n g s
3)Canalize savings
The last place where insurance companies are expected to be over active is
bourses.La t e l y i n su r an ce co mp an i e s h av e v en t u r ed i n t o p en s i o n s che mes a
nd mutual funds also.However, life insurance constitutes the major the major
share of insurance business. Life insurance depends upon the laws of mortality
and there lies the difference between life and general insurance businesses. Life has to
extinguish sooner or later and the claim in respect of life is certain. In case of general
insurance, however, there may never be a claim and the amount can never be
ascertained in advance. Hence, Life insurance includes, besides covering the risk of early
h ap p en i n g o f an ev en t , an e l em en t o f s av i n g s a l so f o r t h e b en e f i c i a r i e s .
Pension business also services from life insurance in as mush as the pension outgo
again depends upon the laws of mortality. The forays made by insurance in this area are,
therefore, natural corollary of their business
Duties, powers and functions of IRDA
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA.1 ) S u b je c t tot h e p r o v i s i o n s o f t h i s a c t an d an y o t h e r l aw f o r t h e t i m e b e i n g i n f o r ce ,
the authority shall have the duty to regulate, promote ensure orderly growth of
the insurance business and re-insurance business.2) Without prejudice to the generality of the
8/12/2019 Bajaj Allianz General Insurance
37/53
37
provisions contained in sub-section (1) the power and functions of the authority shall include)
Issue to the applicant a certificate of registration, renew, modify, withdraw,
suspend or cancel such registration. b) Protection of the interests of the policy holders
in matters concerning assigning of policy, nomination by policy holders, insurab le
interests, settlement of insurance claim, surrender value of policy and other terms and
conditions of contracts of insurances) Specifying requisite qualification, code of conduct and
practical training for intermediary or insurance intermediaries and agent.
8/12/2019 Bajaj Allianz General Insurance
38/53
38
CHAPTERIII
FINANCIAL STATEMENTS
(BAJAJ ALLIANZ GENERAL INSURANCE)
8/12/2019 Bajaj Allianz General Insurance
39/53
39
8/12/2019 Bajaj Allianz General Insurance
40/53
40
8/12/2019 Bajaj Allianz General Insurance
41/53
41
8/12/2019 Bajaj Allianz General Insurance
42/53
42
Schedules
8/12/2019 Bajaj Allianz General Insurance
43/53
43
8/12/2019 Bajaj Allianz General Insurance
44/53
44
8/12/2019 Bajaj Allianz General Insurance
45/53
45
8/12/2019 Bajaj Allianz General Insurance
46/53
46
8/12/2019 Bajaj Allianz General Insurance
47/53
47
8/12/2019 Bajaj Allianz General Insurance
48/53
48
8/12/2019 Bajaj Allianz General Insurance
49/53
49
8/12/2019 Bajaj Allianz General Insurance
50/53
50
8/12/2019 Bajaj Allianz General Insurance
51/53
51
8/12/2019 Bajaj Allianz General Insurance
52/53
52
8/12/2019 Bajaj Allianz General Insurance
53/53
CONCLUSION
Project on BAJAJ ALLIANZ General Insurance
This project revolves around the insurance products and services of Bajaj Allianz
General Insurance.
The project will help in exploring the factors behind growth, participants involved, and
the factors that affect the choice of the customer in selecting an i n s u r a n c e o f c o m p a n y o v e r t h e oh e r c o m p a n y. I t w o u l d a l s o h e l p i n k n o w i n g t h e customers, perception towards the present scenario
of the insurance industry. Since the costumer is only responsible to select the insurance
company through which they are associated so the data which affects the decision of a
customer is the best way to study the different factors responsible for the selection of
insurance products of a particular insurance company over the other company.
Primary data collection was done through websites and secondary data collection
through previous research reports and brochures. The whole s t u d y w i l l be b a s e d o n t h e r e s e a r c h o b
j e c t i v e s. The project includes the details of the insurance products and services of the Bajaj
Allianz general insurance. D e p e n d i n g u p o n t h e s e r v i c e s o f e r e d u n d e r t h e p a c k a g e p o l i c y b y v a r i o u s i n
s u r a n c e c o m p a n i e s c o m p a r i s o n h a s b e e n d o n e w i t h a n a l y s i s a n d d i s c u s s i o n s.
To understand what are areas where Bajaj Allianz general insurance is e x c e l l i n g u p o n a n d
w h a t a r e t h e a r e a s w h e r e t h e i m p r o v e m e n t i s n e e d e d . A t t h e e n d o f t h e p r o j e c t t h e c o n c l u s i o n, s u g g e
s t i o n , f i n d i n g a n d b i b l i o g r a p h y i s b e e n p r o v i d e d .the research work is all about to have a broad look
over the package policies and related services of Bajaj Allianz general insurance.