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INSURANCE HISTORY

HISTORICAL BACKGROUND,

LEGAL ANDREGULATORY FRAMEWORK

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ORIGINS OF INSURANCE

Bottomry bonds-advance of money on a

ship during voyage;if ship completed

journey, loan repaid,if not,no obligation torepay loan

Maritime perils, especially piracy

Burial societies

Great Fire of London

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INSURANCE IN INDIA

British brought both life and general

insurance to India in the 19th century

By 1956, there were 170 companies & 70

provident fund societies transacting life

insurance business in India

107 general insurance companies wereoperating till 1972

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INSURANCE IN INDIA

In 1956, the life insurance business wasnationalized and Life Insurance Corporation ofIndia(LIC) was formed by an Act of Parliamentcalled the LIC Act

The General Insurance Business (Nationalization)Act(GIBNA) of 1972 resulted in all the playersbeing grouped into 4 public sector generalinsurance companies under the holding company,General Insurance Corporation of India (GIC)

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INSURANCE IN INDIA

The 4 general insurance Public Sector

Undertakings (PSUs):

National Insurance Company Ltd.,Kolkata

The New India Assurance Company

Ltd.,Mumbai

Oriental Insurance Company Ltd.,DelhiUnited India Insurance Company

Ltd.,Chennai

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INSURANCE IN INDIA

In 1993, as part of financial sector reforms, a

committee was formed, headed by

Mr.R.N.Malhotra, to evaluate the insurancesector and recommend its future direction

The Malhotra Committee Report was

submitted to the Govt. in 1994

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RECOMMENDATIONS OF

REPORT Reduce Govt. stake in insurance companies

Open up the insurance sector to private

players Invite foreign companies as collaborators

with a FDI cap of 26%

Set up a regulatory body for insurance

Prescribe norms for investment,solvency etc

Improve customer service

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INSURANCE REGULATORY

& DEVELOPMENT

AUTHORITY(IRDA)

IRDA constituted by the IRDA Act of 1999

Act-To provide for the establishment of anauthority to protect the interests of

policyholders,to regulate,promote and

ensure orderly growth of the insuranceindustry and for matters connected

therewith or incidental thereto

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IRDA

Amendments in the Insurance Act,1938,the Life

Insurance Corporation Act,1956 and the General

Insurance Business (Nationalisation) Act,1972 To devise norms for new insurance companies and

issue licences

To regulate all intermediaries like

agents,brokers,surveyors and loss assessors,third

party administrators

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IRDA

Replace Controller of insurance

Control the Tariff Advisory Committee

Check books of accounts

Regulate investment of funds

Regulate solvency margins Adjudicate disputes between insurers and

intermediaries

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CURRENT INDUSTRY

SCENARIO

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NEW LIFE INSURANCE COS.

1. Bajaj Allianz Life Insurance Co. Ltd., Pune

2. Birla Sun Life Insurance Co. Ltd., Mumbai

3. HDFC Life Insurance Co. Ltd., Mumbai4. ICICI Prudential Life Insurance Co.Ltd.,

Mumbai

5. ING Life Insurance Co. Ltd., Bangalore

6. Max Life Insurance Co.Ltd., Gurgaon

7. Metlife India Insurance Co. Pvt. Ltd., Bangalore

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NEW LIFE INSURANCE COS...

8.Kotak Mahindra Old Mutual Life Insurance Co.

Ltd., Mumbai

9.SBI Life Insurance Co. Ltd.,Mumbai10.Tata AIA Life Insurance Co. Ltd., Mumbai

11.Reliance Life Insurance Co.Ltd., Mumbai

12. Aviva Life Insurance Co.Pvt.Ltd.,Gurgaon13.Sahara India Life Insurance Co. Ltd., Lucknow

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NEW LIFE INSURANCE COS...

14.Shriram Life Insurance Co. Ltd.,Hyderabad

15.Bharti Axa Life Insurance Co. Ltd., Mumbai

16.Future Generali India Life Insurance Co.Ltd.,Mumbai

17. IDBI Federal Life Insurance Co.Ltd.,Mumbai

18.Canara HSBC OBC Life Insurance Co.Ltd.19.Aegon Religare Life Insurance Co.Ltd., Delhi

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NEW LIFE INSURANCE COS...

20.DLF Pramerica Life Insurance Co.Ltd., Gurgaon

21.Star Union Dai-ichi Life Insurance Co.Ltd.,

Mumbai22.India First Life Insurance Co.Ltd., Mumbai

23.Edelweiss Tokio Life Insurance Co. Ltd.,Mumbai

23 new + LIC=24 Life insurance companies

currently

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On the General insurance side:1.General Insurance Corporation

(GIC) was de-linked from its

subsidiaries, National, New India,Oriental & United

2.GIC became Indias national re-

insurer3.The 4 PSUs became independent

companies

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NEW GENERAL INS.COS.

1. Bajaj Allianz General Insurance Co. Ltd., Pune

2. ICICI Lombard General Ins. Co.Ltd.,Mumbai

3. IFFCO Tokio General Ins. Co. Ltd., Gurgaon4. Reliance General Insurance Co. Ltd., Mumbai

5. Royal Sundaram Alliance Insurance Co.Ltd.,Chennai

6. Tata AIG General Insurance Co. Ltd.,Mumbai

7. Chola M S General Ins. Co. Ltd., Chennai

8. HDFC Ergo General Ins. Co. Ltd., Mumbai

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NEW GENERAL INS.COS

9. Future Generali India Ins. Co.Ltd., Mumbai

10. Universal Sompo General Ins. Co.Ltd., Mumbai

11. Shriram General Insurance Co.Ltd.,Jaipur

12.Bharti Axa General Insurance Co. Ltd., Gurgaon

13.Raheja QBE General Insurance Co.Ltd., Mumbai

14.SBI General Insurance Co.Ltd., Mumbai

15. L&T General Insurance Co. Ltd., Mumbai16.Magma HDI Gen.Ins.Co.Ltd., Kolkata

17.Liberty Videocon Gen.Ins.Co.Ltd., Mumbai

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NEW SPECIALIZED

GENERAL INS.COS18. Export Credit Guarantee Corporation Ltd.,

(ECGC)Mumbai-credit insurance only

19. Agriculture Insurance Co. of India Ltd.,

New Delhi-crop insurance only20. Star Health & Allied Ins Co. Ltd., Chennai

21.Apollo Munich Health Ins.Co, Gurgaon

22.Max Bupa Health Ins. Co. Ltd., New Delhi23.Religare Health Ins.Co.Ltd., New Delhi

(20 to 23 - Personal & health insurance only)

17 new+4 PSUs+6 special=27 Gen. Ins. Cos.

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IRDA REGULATIONS

Registration of Indian insurance companies

Assets,liabilities and solvency margins of

insurers Investments(life and general)

Statements of accounts, preparation of

financial statements and auditors report ofinsurance companies

Distribution of surplus

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IRDA REGULATIONS

Actuaries-appointment and actuarial report

Reinsurance-life and general

Obligations of insurers to rural and social

sectors

Manner of receipt of premium

Insurance advertisements and disclosures

Protection of policyholders interests

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IRDA REGULATIONS

For intermediaries for sales & distribution,

licencing of:

Insurance agents including corporate agents

Insurance broker

For intermediaries for claims, licencing of:

Third party administrators

Surveyors and loss assessors

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SALES INTERMEDIARIES

Types of agents:

Direct-An individual who is licenced by

IRDA to sell insurance policies of oneinsurer only, either life or general

Composite-An individual who is licenced

by IRDA to sell insurance policies of twoinsurers only, one life insurer & one general

insurer

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SALES INTERMEDIARIES

Types of agents:

Corporate-A firm or a corporate who is

licenced to sell insurance policies; could becorporate direct or corporate composite

Bancassurance-A corporate agency issued

to a bank. For eg. Citibank being acorporate agent of Royal Sundaram

All types of agents earn commissionLiba-IM2-SD 24

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SALES INTERMEDIARIES A broker is an intermediary licenced by

IRDA to sell insurance policies of all

insurance companies in India, both life &

general, & who earns brokerage

Types of brokers:

Direct-arranges insurance

Reinsurance-arranges reinsurance

Composite-arranges both insurance &

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CLAIMS INTERMEDIARIES

Surveyor:

Could be an individual or a firm

Job is to visit site of loss & assess losses

Is used only in property claims of general

insurers

Prepares a survey report for insurers

Gets paid survey fees

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CLAIMS INTERMEDIARIES

Third Party Administrators (TPAs):

Used in health insurance only

Is a firm or a corporate

Settle claims on behalf of insurer with

insured/hospital

Arrange cashless hospitalization

Gets paid TPA Fee

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THE LEGAL ENVIRONMENT

There are several other Acts that have

a bearing on both life and generalinsurance in India

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INSURANCE ACT,1938-

IMPORTANT PROVISIONS Formed to consolidate laws relating to

business of insurance

Registration norms

Accounts,returns,investments,limitations on

management expenses

Licensing of agents and surveyors

Tariff Advisory Committee

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OTHER IMPORTANT ACTS

Indian Contracts Act,1872

Motor Vehicles (MV) Act

Marine Insurance Act,1963

Workmens Compensation(WC) Act,1923

Indian Stamp Act,1899

Consumer Protection (COPRA)Act,1986

Income Tax (IT) Act

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OTHER IMPORTANT ACTS..

Employees State Insurance(ESI) Act,1948

Public Liability Insurance(PLI) Act,1991

Foreign Exchange MaintenanceAct(FEMA)

Arbitration and Conciliation Act,1996

M V Act-Lok Adalats Public Grievances Rule of Insurance Act-

Insurance Ombudsman