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FINANCE PROJECT

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Executive Summary

Someone has greatly said that practical knowledge is better than classroom teaching

During this project I fully realized this and come to know about the present real world of

Insurance sector it includes all the actives involved in providing insurance products to

The final customers aim pleased to know about the customers wants and competitors

Actives in the real world of insurance

The subject of my study is to analyze the present

insurance sector and products offered by lic by Appling various tools like sold calling and

Through direct interaction with customers have also done research on the growth of

Private life insurance companies in the last five years lic provides stats factory in the

Sector

ICICI prudential life insurance is one of the largest

Insurance networks in the country 2nd life insurance company in India the icici group has

Been in existence in 1995 when icici ltd was created icici prudential started in 2002 is

Subsidiary of icici ltd today icici life insurance has 4 customer million with total 100000

cr making 2nd the largest life insurance company in the country of lic

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CONTENTS

Introduction of insurance company

Classification of Indian insurance industry

A. Govt company

1. Life insurance corporation of India introduction2. Types of life insurances

3. Products of life insurance India

4. Risks and gains

B. Private company

1. Icici prudential life insurance introduction

2. Products of icici prudential life insurance

3. Risks and gains

Compartivitive analysis of icici and prudential life insurance

Conclusion

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History of insurance in India

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu( Manusmrithi ), Yagnavalkya (Dharmasastra ) and Kautilya ( Arthasastra ). The writings

talk in terms of pooling of resources that could be re-distributed in times of calamities suchas fire, floods, epidemics and famine. This was probably a pre-cursor to modern dayinsurance. Ancient Indian history has preserved the earliest traces of insurance in the formof marine trade loans and carriers contracts. Insurance in India has evolved over timeheavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of theOriental Life Insurance Company in Calcutta. This Company however failed in 1834. In1829, the Madras Equitable had begun transacting life insurance business in the MadrasPresidency. 1870 saw the enactment of the British Insurance Act and in the last threedecades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire

of India (1897) were started in the Bombay Residency. This era, however, was dominatedby foreign insurance offices which did good business in India, namely Albert LifeAssurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian officeswere up for hard competition from the foreign companies.

In 1914, the Government of India started publishing returns of Insurance Companiesin India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure toregulate life business. In 1928, the Indian Insurance Companies Act was enacted to enablethe Government to collect statistical information about both life and non-life businesstransacted in India by Indian and foreign insurers including provident insurance societies.In 1938, with a view to protecting the interest of the Insurance public, the earlier legislationwas consolidated and amended by the Insurance Act, 1938 with comprehensive provisionsfor effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, therewere a large number of insurance companies and the level of competition was high. Therewere also allegations of unfair trade practices. The Government of India, therefore, decidedto nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sectorand Life Insurance Corporation came into existence in the same year. The LIC absorbed154 Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreigninsurers in all. The LIC had monopoly till the late 90s when the Insurance sector wasreopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in the west andthe consequent growth of sea-faring trade and commerce in the 17th century. It cameto India as a legacy of British occupation. General Insurance in India has its roots in theestablishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by theBritish. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first

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company to transact all classes of general insurance business. 1957 saw the formation ofthe General Insurance Council, a wing of the Insurance Associaton of India. The GeneralInsurance Council framed a code of conduct for ensuring fair conduct and sound businesspractices.

The History of Insurance Worldwide:

The roots of insurance might be traced to Babylonia, where traders were encouraged toassume the risks of the caravan trade through loans that were repaid (with interest) onlyafter the goods had arrived safelya practice resembling bottomry and given legal force inthe Code of Hammurabi (c.2100 B.C.). The Phoenicians and the Greeks applied a similarsystem to their seaborne commerce. The Romans used burial clubs as a form of lifeinsurance, providing funeral expenses for members and later payments to the survivors.

With the growth of towns and trade in Europe, the medieval guilds undertook to protecttheir members from loss by fire and shipwreck, to ransom them from captivity by pirates,and to provide decent burial and support in sickness and poverty. By the middle of the 14 th

cent., as evidenced by the earliest known insurance contract (Genoa, 1347), marineinsurance was practically universal among the maritime nations of Europe. In London,Lloyd's Coffee House (1688) was a place where merchants, ship-owners, and underwritersmet to transact business. By the end of the 18th cent. Lloyd's had progressed into one of thefirst modern insurance companies. In 1693 the astronomer Edmond Halley constructed thefirst mortality table, based on the statistical laws of mortality and compound interest. Thetable, corrected (1756) by Joseph Dodson, made it possible to scale the premium rate toage; previously the rate had been the same for all ages. Insurance developed rapidly withthe growth of British commerce in the 17th and 18th cent. Prior to the formation ofcorporations devoted solely to the business of writing insurance, policies were signed by anumber of individuals, each of whom wrote his name and the amount of risk he wasassuming underneath the insurance proposal, hence the termunderwriter. The first stock companies to engage in insurance were chartered in England in1720, and in 1735, the first insurance company in the American colonies was founded atCharleston, S.C. Fire insurance corporations were formed in New York City (1787) and inPhiladelphia (1794). The Presbyterian Synod of Philadelphia sponsored (1759) the first lifeinsurance corporation in America, for the benefit of Presbyterian ministers and theirdependents. After 1840, with the decline of religious prejudice against the practice, lifeinsurance entered a boom period. In the 1830s the practice of classifying risks was begun.

The New York fire of 1835 called attention to the need for adequate reserves to meetunexpectedly large losses; Massachusetts was the first state to require companies by law(1837) to maintain such reserves. The great Chicago fire (1871) emphasized the costlynature of fires in structurally dense modern cities. Reinsurance, whereby losses aredistributed among many companies, was devised to meet such situations and is nowcommon in other lines of insurance.

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The Workmens Compensation Act of 1897 in Britain required employers to insure theiremployees against industrial accidents. Public liabilityInsurance, fostered by legislation, made its appearance in the 1880s; it attained majorimportance with the advent of the automobile.

Terminology used in insurance-Principles

Insurance involvespooling funds from many insured entities (known as exposures) to pay

for the losses that some may incur. The insured entities are therefore protected from risk for

a fee, with the fee being dependent upon the frequency and severity of the event occurring.

In order to be insurable, the risk insured against must meet certain characteristics in order

to be an insurable risk. Insurance is a commercial enterprise and a major part of the

financial services industry, but individual entities can also self-insure through saving

money for possible future losses.

Insurability

Risk which can be insured by private companies typically share seven common

characteristics:

1. Large number of similar exposure units: Since insurance operates through

pooling resources, the majority of insurance policies are provided for individual

members of large classes, allowing insurers to benefit from the law of large

numbers in which predicted losses are similar to the actual losses. Exceptions

include Lloyd's of London, which is famous for insuring the life or health of actors,

sports figures and other famous individuals. However, all exposures will have

particular differences, which may lead to different premium rates.

2. Definite loss: The loss takes place at a known time, in a known place, and

from a known cause. The classic example is death of an insured person on a life

insurance policy. Fire,automobile accidents, and worker injuries may all easily

meet this criterion. Other types of losses may only be definite in theory.Occupational disease, for instance, may involve prolonged exposure to injurious

conditions where no specific time, place or cause is identifiable. Ideally, the time,

place and cause of a loss should be clear enough that a reasonable person, with

sufficient information, could objectively verify all three elements.

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3. Accidental loss: The event that constitutes the trigger of a claim should be

fortuitous, or at least outside the control of the beneficiary of the insurance. The

loss should be pure, in the sense that it results from an event for which there is only

the opportunity for cost. Events that contain speculative elements, such as ordinary

business risks or even purchasing a lottery ticket, are generally not considered

insurable.

4. Large loss: The size of the loss must be meaningful from the perspective of

the insured. Insurance premiums need to cover both the expected cost of losses,

plus the cost of issuing and administering the policy, adjusting losses, and

supplying the capital needed to reasonably assure that the insurer will be able to

pay claims. For small losses these latter costs may be several times the size of the

expected cost of losses. There is hardly any point in paying such costs unless the

protection offered has real value to a buyer.5. Affordable premium: If the likelihood of an insured event is so high, or the

cost of the event so large, that the resulting premium is large relative to the amount

of protection offered, it is not likely that the insurance will be purchased, even if on

offer. Further, as the accounting profession formally recognizes in financial

accounting standards, the premium cannot be so large that there is not a reasonable

chance of a significant loss to the insurer. If there is no such chance of loss, the

transaction may have the form of insurance, but not the substance.

6. Calculable loss: There are two elements that must be at least estimable, if

not formally calculable: the probability of loss, and the attendant cost. Probability

of loss is generally an empirical exercise, while cost has more to do with the ability

of a reasonable person in possession of a copy of the insurance policy and a proof

of loss associated with a claim presented under that policy to make a reasonably

definite and objective evaluation of the amount of the loss recoverable as a result

of the claim.

Legal

When a company insures an individual entity, there are basic legal requirements. Severalcommonly cited legal principles of insurance include:

1. Indemnity the insurance company indemnifies, or compensates, the

insured in the case of certain losses only up to the insured's interest.

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2. Insurable interest the insured typically must directly suffer from the loss.

Insurable interest must exist whether property insurance or insurance on a person is

involved. The concept requires that the insured have a "stake" in the loss or

damage to the life or property insured. What that "stake" is will be determined by

the kind of insurance involved and the nature of the property ownership or

relationship between the persons.

3. Utmost good faith the insured and the insurer are bound by a good

faith bond of honesty and fairness. Material facts must be disclosed.

4. Contribution insurers which have similar obligations to the insured

contribute in the indemnification, according to some method.

5. Subrogation the insurance company acquires legal rights to pursue

recoveries on behalf of the insured; for example, the insurer may sue those liable

for insured's loss.6. Causa proxima, or proximate cause the cause of loss (the peril) must be

covered under the insuring agreement of the policy, and the dominant cause must

not beexcluded

7. Mitigation - In case of any loss or casualty, the asset owner must attempt to

keep the loss to a minimum, as if the asset was not insured.

Indemnification

To "indemnify" means to make whole again, or to be reinstated to the position that one was

in, to the extent possible, prior to the happening of a specified event or peril.

Accordingly, life insurance is generally not considered to be indemnity insurance, but

rather "contingent" insurance (i.e., a claim arises on the occurrence of a specified event).

There are generally two types of insurance contracts that seek to indemnify an insured:

1. an "indemnity" policy, and

2. a "pay on behalf" or "on behalf of"[4] policy.

The difference is significant on paper, but rarely material in practice.An "indemnity" policy will never pay claims until the insured has paid out of pocket to

some third party; for example, a visitor to your home slips on a floor that you left wet and

sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to

come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by

the insurance carrier for the out of pocket costs (the $10,000).

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Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the

claim and the insured (the homeowner in the above example) would not be out of pocket

for anything. Most modern liability insurance is written on the basis of "pay on behalf"

language.

An entity seeking to transfer risk (an individual, corporation, or association of any type,

etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by

means of a contract, called an insurance policy. Generally, an insurance contract includes,

at a minimum, the following elements: identification of participating parties (the insurer,

the insured, the beneficiaries), the premium, the period of coverage, the particular loss

event covered, the amount of coverage (i.e., the amount to be paid to the insured or

beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus

said to be "indemnified" against the loss covered in the policy.

When insured parties experience a loss for a specified peril, the coverage entitles the

policyholder to make a claim against the insurer for the covered amount of loss as specified

by the policy. The fee paid by the insured to the insurer for assuming the risk is called the

premium. Insurance premiums from many insureds are used to fund accounts reserved for

later payment of claims in theory for a relatively few claimants and

foroverhead costs. So long as an insurer maintains adequate funds set aside for anticipated

losses (called reserves), the remaining margin is an insurer'sprofit.

Effects

Insurance can have various effects on society through the way that it changes who bears the

cost of losses and damage. On one hand it can increase fraud, on the other it can help

societies and individuals prepare for catastrophes and mitigate the effects of catastrophes

on both households and societies.

Insurance can influence the probability of losses through moral hazard,insurance fraud,

and preventive steps by the insurance company. Insurance scholars have typically

usedmorale hazard to refer to the increased loss due to unintentional carelessness and

moral hazard to refer to increased risk due to intentional carelessness or

indifference. Insurers attempt to address carelessness through inspections, policy

provisions requiring certain types of maintenance, and possible discounts for loss

mitigation efforts. While in theory insurers could encourage investment in loss reduction,

some commentators have argued that in practice insurers had historically not aggressively

pursued loss control measures - particularly to prevent disaster losses such as hurricanes -

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because of concerns over rate reductions and legal battles. However, since about 1996

insurers began to take a more active role in loss mitigation, such as throughbuilding codes.

Insurers' business model-

Underwriting and investing

The business model is to collect more in premium and investment income than is paid out

in losses, and to also offer a competitive price which consumers will accept. Profit can be

reduced to a simple equation: Profit = earned premium + investment income - incurred loss

- underwriting expenses.

Insurers make money in two ways:

1. Throughunderwriting, the process by which insurers select the risks to

insure and decide how much in premiums to charge for accepting those risks;2. By investing the premiums they collect from insured parties.

The most complicated aspect of the insurance business is the actuarial science of

ratemaking (price-setting) of policies, which usesstatistics andprobability to approximate

the rate of future claims based on a given risk. After producing rates, the insurer will use

discretion to reject or accept risks through the underwriting process.

At the most basic level, initial ratemaking involves looking at thefrequencyand severity of

insured perils and the expected average payout resulting from these perils. Thereafter an

insurance company will collect historical loss data, bring the loss data topresent value, and

compare these prior losses to the premium collected in order to assess rate adequacy. Loss

ratios and expense loads are also used. Rating for different risk characteristics involves at

the most basic level comparing the losses with "loss relativities" - a policy with twice as

many losses would therefore be charged twice as much. More complex multivariate

analyses are sometimes used when multiple characteristics are involved and a univariate

analysis could produce confounded results. Other statistical methods may be used in

assessing the probability of future losses.

Upon termination of a given policy, the amount of premium collected and the investment

gains thereon, minus the amount paid out in claims, is the insurer'sunderwriting profiton

that policy. Underwriting performance is measured by something called the "combined

ratio" which is the ratio of expenses/losses to premiums. A combined ratio of less than 100

percent indicates an underwriting profit, while anything over 100 indicates an underwriting

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loss. A company with a combined ratio over 100% may nevertheless remain profitable due

to investment earnings.

Insurance companies earn investment profits on "float". Float, or available reserve, is the

amount of money on hand at any given moment that an insurer has collected in insurance

premiums but has not paid out in claims. Insurers start investing insurance premiums as

soon as they are collected and continue to earn interest or other income on them until

claims are paid out. The Association of British Insurers (gathering 400 insurance

companies and 94% of UK insurance services) has almost 20% of the investments in

theLondon Stock Exchange.

In the United States, the underwriting loss ofproperty and casualty insurancecompanies

was $142.3 billion in the five years ending 2003. But overall profit for the same period was

$68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank

Greenberg, do not believe that it is forever possible to sustain a profit from float without an

underwriting profit as well, but this opinion is not universally held.

Naturally, the float method is difficult to carry out in an economically

depressed period.Bear markets do cause insurers to shift away from investments and to

toughen up their underwriting standards, so a poor economy generally means high

insurance premiums. This tendency to swing between profitable and unprofitable periods

over time is commonly known as the underwriting, or insurance, cycle.

Claims

Claims and loss handling is the materialized utility of insurance; it is the actual "product"

paid for. Claims may be filed by insureds directly with the insurer or throughbrokers or

agents. The insurer may require that the claim be filed on its own proprietary forms, or may

accept claims on a standard industry form, such as those produced by ACORD.

Insurance company claims departments employ a large number ofclaims

adjusters supported by a staff ofrecords management and data entry clerks. Incoming

claims are classified based on severity and are assigned to adjusters whose settlement

authority varies with their knowledge and experience. The adjuster undertakes an

investigation of each claim, usually in close cooperation with the insured, determines if

coverage is available under the terms of the insurance contract, and if so, the reasonable

monetary value of the claim, and authorizes payment.

The policyholder may hire their ownpublic adjusterto negotiate the settlement with the

insurance company on their behalf. For policies that are complicated, where claims may be

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complex, the insured may take out a separate insurance policy add on, called loss recovery

insurance, which covers the cost of a public adjuster in the case of a claim.

Adjusting liability insurance claims is particularly difficult because there is a third party

involved, theplaintiff, who is under no contractual obligation to cooperate with the insurer

and may in fact regard the insurer as adeep pocket. The adjuster must obtain legal counsel

for the insured (either inside "house" counsel or outside "panel" counsel), monitor litigation

that may take years to complete, and appear in person or over the telephone with settlement

authority at a mandatory settlement conference when requested by the judge.

If a claims adjuster suspects under-insurance, the condition of average may come into play

to limit the insurance company's exposure.

In managing the claims handling function, insurers seek to balance the elements of

customer satisfaction, administrative handling expenses, and claims overpayment leakages.As part of this balancing act, fraudulent insurance practicesare a major business risk that

must be managed and overcome. Disputes between insurers and insureds over the validity

of claims or claims handling practices occasionally escalate into litigation (see insurance

bad faith).

Marketing

Insurers will often use insurance agents to initially market or underwrite their customers.

Agents can be captive, meaning they write only for one company, or independent, meaning

that they can issue policies from several companies. Commissions to agents represent a

significant portion of an insurance cost and insurers that sell policies directly via mass

marketing campaigns can offer lower prices. The existence and success of companies using

insurance agents (with higher prices) is likely due to improved and personalized service

TYPES OF INSURANCE

Insurance can be termed as a form of risk management which is mainly used to protectan individual against the risk of prospective financial loss, if any. Insurance can be usedas a tool to shield an individual against potential risks like travel accidents, death,unemployment, theft, property destruction by natural calamities, fire mishaps etc.

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Different types of insurance is used to cover different properties and assets such asvehicles, home, health care etc. Basically, an insurance policy can also be known as aprotection net which secures you from any financial losses in future.All you have to do is pay the insurance agencies a specified amount every month,known as premium, so that they can take care of you by providing you financial back up

in case of a sudden health emergency or a fatal incident.

There are two ways for getting an insurance done.

One way is to visit an agent and consult him for the best option you can avail for yoursituation. And then, trust him/her for their suggestion on the type of insurance they feelis right for you.

The other way is to research and choose on your own, the type of insurance which willbe best suited for your situation. You should research the market as well as the net, tolook for the best insurance companies, and furthermore, the most suitable type of

insurance that they offer.Also explore the various types of policies which are available to you in the market, andthen compare to decide which one to choose finally.

TheLoanBazaar.com offer our clients with various types of insurance schemes andpolicies such as health insurance, travel insurance, life insurance etc, to name a few. Thedetail about all these types of insurance offered by us is as follows:

Health Care Insurance

With such high medical and health care costs these days, its hard to even think aboutvisiting a doctor. But what about an unexpected mishap or an unforeseen disability orattack, where the potential medical bills could shoot up to a sky? Where would you getso much money from?These are exactly the situations where you feel you had a security, something whichcould come to your rescue and save you from such financial crisis. While somecompanies do provide its employees with health insurance, for others, this is a must.Especially for the aging couples, who have a comparatively more chances of needingemergency bill money. The health insurance does it all, so that they do not have toworry for the huge payments at the last minute.A health insurance can cover all from a routine immunization to a major illness.

Life Insurance

Loss of a family member is a catastrophe which glooms a familys life. But even moretragic is the death of a sole bread earner for the family, who then has to go through thepain of losing their loved one, as well as the financial loss putting their survival injeopardy.This financial hardship due to a sudden death of a family member or a disability

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resulting to a loss of job or inability to work can be avoided to a great extent by takingup a life insurance policy.A Life insurance or disability insurance covers such losses and pays a family,compensation to restore the earnings lost by them due to a sudden death or disability.

The monthly premiums for a life insurance are generally based upon the age, health, andoccupation information of the applicant, in addition to the total benefits to be paid tohim for his policy.

Home Insurance

Real estate property and hard assets are subject to accidental risks like theft, destructiondue to natural disasters or fire accidents etc. with such huge investments gone intobuying a real estate property like your home or office, the risk involved is a loss of largeamount of money.

Home and property insurance helps you in managing and protecting against these risks.The cost of a real estate property and its insurance is mostly based upon the worth of thealready insured hard assets and also the location in which the assets are situated.

Travel Insurance

This is intended to cover any of the financial or any other losses which were incurred bythe insured while traveling, be it nationally or internationally, such as mountaintrekkers, cruise travelers etc.

Auto Insurance

Any vehicle on road, no matter how safe its driver is, is bound to meet with an accidentor two, which may leave it with just a few scratches, or crash it up totally. Mostcountries today require you to have an auto insurance while on road in your vehicles.

If you have an accidental car crash, a total repair could cost you a fortune. On the otherhand, a little scratch on your Land Cruiser might also soar up your bills to a high.Whether or not you need an auto insurance mostly depends on the type of car you own.

If you have an expensive car and a little repair could wipe you out financially, youshould very well go in for a buying an all-inclusive and crash insurance which couldprotect you against any and every harm done to your vehicle.

Introduction of insurance company

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Introduction to insurance companies an accident or emergency can cripple you financiallyto prepare yourself use the guide to learn what type of coverage insurance companies offerand how to pick best policy for your budget.General insurance companies have willinglycastrated to these increasing demands and have offered plethora of insurance covers that

almost cover any thing under the sun.

Any insurance other than life insurance falls under the classification of general insurance itcomprises

Personal insurance such as accidents policy health insurance and liabilityinsurance which covers legal liabilities.

Insurance of property against fire theft burglary terrorism natural disasters

etc

Errors and omissions insurance for professional and credit insurance etc

Insurance of motor vehicle against damage of accidents and theft

Classification of Indian Insurance Industry

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General Insurance is also known as Non-Life Insurance in India. There are totally 16General Insurance (Non-Life) Companies in India. These 16 General Insurance companieshave been classified into two broad categories namely:

1. PSUs (Public Sector Undertakings)

These insurance companies are wholly owned by the Government of

India. There are totally 4 plus in India namely:-

National Insurance Company Ltd

Oriental Insurance Company Ltd

The New India Assurance Put Ltd

United India Insurance Company Ltd

2. Private Insurance Companies:-

There are totally 12privateGeneral Insurance companies in India namely:-

o Apollo DKV Health Insurance

o Bajaj Allianz General Insurance Co. Ltd

o Cholamandalam MS General Insurance Co. Ltd

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o HDFC Ergo General Insurance Co Ltd.

o ICICI Lombard General Insurance Ltd

o Iffco Tokio General Insurance Pvt Ltd.***Some Facts in Insuarance Sector

Insurance Act, 1938In 1938, with a view to protect the interest of insuring public, earlie legislation(1928) wasconsolidated and amended by the Insurance Act, 1938 with comprehensive provisions fordetailed and effective control over the activities of insurer. For the first time in the historyof insurance in India, the whole business was brought under a unified system of controland its structure strengthened by statutory regulations. Weaker elements were weeded out;indiscriminate promotion was checked and speculative insurance was eliminated. The bestproof the soundness of the law was the effective check on large scale liquidations which

had marred the name of insurance in the thirties. In due course, various amendments weremade in the Indian Insurance Act 1938 in subsequent years to improve the regulatorymechanism. The Act of 1938, which in many respects codified and modernized the lawsrelating to insurance in the country, suggest the same noteworthy changes in regulation andorganization of business. It was considerable step forward in the direction to envelopall forms of insurance.

Malhotra Committee

In 1993, the first step towards insurance sector reforms was initiated with the formation ofMalhotra Committee, headed by former Finance Secretary and RBI Governor R.N.

Malhotra. The committee was formed to evaluate the Indian insurance industry andrecommend its future direction with the objective of complementing the reforms initiated inthe financial sector.Key Recommendations of Malhotra Committee Structure

Government stake in the insurance Companies to be brought down to 50%.

Government should take over the holdings of GIC and its subsidiaries so that thesesubsidiaries can act as independent corporations.

All the insurance companies should be given greater freedom tooperate.Competition

Private Companies with a minimum paid up capital of Rs.1billion should beallowed to enter the industry.

No Company should deal in both Life and General Insurance through asingle Entity.

Foreign companies may be allowed to enter the industry in collaborationwith the domestic companies.

Postal Life Insurance should be allowed to operate in the rural market.

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Only one State Level Life Insurance Company should be allowed to operatein each state. Regulatory Body

The Insurance Act should be changed.

An Insurance Regulatory body should be set up.

Controller of Insurance should be made independent.

Investments Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%.

GIC and its subsidiaries are not to hold more than 5% in any company.Customer Service

LIC should pay interest on delays in payments beyond 30 days

Insurance companies must be encouraged to set up unit linked pensionplans.

Computerisation of operations and updating of technology to be carried outin the insurance industry.

Malhotra Committee also proposed setting up an independent regulatory body TheInsurance Regulatory and Development Authority (IRDA) to provide greater autonomy toinsurance companies in order to improve their performance and enable them to act asindependent companies with economic motives. Insurance sector in India was liberalized inMarch 2000 with the passage of the Insurance Regulatory and Development Authority(IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players toenter the market with some limits on directforeign ownership. There is a 26 percent equity cap for foreign partners in an insurancecompany. There is a proposal to increase this limit to 49 percent. The opening up of theinsurance sector has led to rapid growth of the sector. Presently, there are 16 life insurancecompanies and 15 non-life insurance companies in the market. The potential for growth ofinsurance industry in India is immense as nearly 80 per cent of Indian population is withoutlife insurance cover while health insurance and non-life insurance continues to be wellbelow international standards.

Regulator Of Insurance Industry In India : IRDA

The Insurance Regulatory and Development Act of 1999 were set out as follows.To provide for the establishment of an Authority to protect the interests of holdersof insurance policies, to regulate, promote and ensure orderly growth of theinsurance industry and for matters connected therewith or incidental thereto andfurther to amend the Insurance Act,

1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business(Nationalization) Act, 1972. The Act effectively reinstituted the Insurance Act of1938 with (marginal) modifications.

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Whatever was not explicitly mentioned in the 1999 Act referred back to the 1938Act?

(1) It specified the creation and functioning of an Insurance Advisory Committeethat sets out rules and regulation.

(2) It stipulates the role of the Appointed Actuary. He/she has to be a Fellow ofthe Actuarial Society of India. For life insurers the Appointed Actuary has to be aninternal company employee, but he or she may be an external consultant if thecompany happens to be a non-life insurance company. The Appointed Actuarywould be responsible for reporting to the Insurance Regulatory and DevelopmentAuthority a detailed account of

the company.

(3) Under the Actuarial Report and Abstract, pricing of products have to be givenin detail. It also requires details of the basic assumptions for valuation. There areprescribed forms that have to be filled out by the Appointed Actuary includingspecific formulas for calculating solvency ratios.

(4) It stipulates the requirements for an agent. For example, insurance agents shouldhave at least a high school diploma along with training of 100 hours from arecognized institution.

(5) Under Assets, Liabilities, and Solvency Margin of Insurers, the InsuranceRegulatory and Development Authority has set up strict guidelines on asset andliability management of the insurance companies along with solvency marginrequirements. Initial margins are set high (compared with developed countries). Themargins vary with the lines of business.

Life insurers have to observe the solvency ratio, defined as the ratio of the amountof available solvency margin to the amount of required solvency margin: (a) therequired solvency margin is based on mathematical reserves and sum at risk, andthe assets of the policyholders fund; (b) the available solvency margin is the excessof the value of assets over the value of life insurance liabilities and other liabilitiesof policyholders and

Shareholders funds.

(6) It sets the reinsurance requirement for (general) insurance business. For allgeneral insurance, a compulsory cession of 20% regardless of line of business to theGeneral Insurance Corporation, the designated national reinsurer was stipulated.

(7) Under the Registration of Indian Insurance Companies, it sets out details of

registration of an insurance company along with renewal requirements. Forrenewal, it stipulates a fee of one-fifth of one percent of total gross premium writtendirect by an insurer in India during the financial year preceding the year. It seeks togive detailed background for each of the following key personnel: Chief Executive,Chief Marketing Officer, Appointed Actuary, Chief Investment Officer, Chief ofInternal Audit and Chief Finance Officer. Details of sales force, activities in ruralbusiness and projected values of each line of business are also required.

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(8) Under Insurance Advertisements and Disclosure, details of insuranceadvertisement in physical and electronic media has to be detailed with the InsuranceRegulatory and Development Authority. The advertisements have to comply withthe regulation prescribed in section 41 of the Insurance Act, 1938. The Act of 1938says, No person shall allow or offer to allow, either directly or indirectly, as an

inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or

property in India, any rebate of the whole or part of the commission payable or anyrebate of the premium shown on the policy, nor shall any person taking out orrenewing or continuing a policy accept any rebate, except such rebate as may beallowed in accordance with the published prospectus or tables of the insurer.

(9) All insurers are required to provide some coverage for the rural sector. It iscalled the Obligations of Insurers to Rural Social Sectors

GOVT COMPANY

LIC (LIFE INSURANCE Corporation)

Introduction

LIC insurance corporation of India was formed by September 1956 by an act of parliamentof lic corporation 1956 with capital contribution from the government of India the themfinance minister shirk c.d. deshmukh while pelting the bill out timed the objectives of lic

thus with the country lic has built up vast network of 2048 branches 100 divisions 7 zoneofficers spread of the country

Most people have a basic understanding of insurance. You receive financial compensationwhen an insured event occurs. Consider auto insurance, for example. If your car is in anaccident or stolen, your insurance company provides compensation according to the termsoutlined in your insurance policy.

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On the surface, life insurance is pretty straightforward. When the insured person dies, thepolicy pays a prearranged amount to the designated beneficiary. The following parties aregenerally involved in a life insurance policy:

The Insured. The person on whose life the policy is based.The Beneficiary. The person who receives the payment.

The Owner. The person responsible for payment of premiums.

.The insurance company that issues the policy promising payment.

Types of life insurance

There are two basic forms of life insurance term life and permanent life, thelatter of which comes in several flavors. Heres a quick breakdown of the basic policytypes:

1. Team life

2. whole life

3. universal life

TEAM LIFE

Term life is the simplest and (typically) cheapest form of life insurance. Term lifeis designed to provide coverage for a fixed period of time, such as 5, 10, or 20 years. The

premium for the term policy is guaranteed for the duration of the term; if it is a renewablepolicy, the premium will increase with each renewal. The premiums for renewals aregenerally guaranteed when the original policy is issued. Because term life policy is for aspecific period of time and the payout does not increase, the overall cost of term lifeinsurance is usually very low.

http://www.lifehappens.org/pdf/printable-consumer-guide/life-insurance-pcg.pdfhttp://www.insurance.com/life-insurance/coverage/term-life-insurance.aspxhttp://www.insurance.com/life-insurance/coverage/term-life-insurance.aspxhttp://www.lifehappens.org/pdf/printable-consumer-guide/life-insurance-pcg.pdfhttp://www.insurance.com/life-insurance/coverage/term-life-insurance.aspxhttp://www.insurance.com/life-insurance/coverage/term-life-insurance.aspx

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Whole life

policies, for example, are designed to provide you and your lovedone with coverage until your death. Unlike term life, there are no fixed periods for wholelife coverage. Whole life is sometimes referred to as cash value insurance because itbuilds cash value over your lifetime. Whole life coverage contains both investment andinsurance components. The investment portion invests your premiums, earns interest, andaccumulates a cash value. On the other hand, the policy also has a stated insurancecoverage amount that is paid upon the death of the insured.

Universal life

is a popular option that acts like whole life. It is a renewable policy the investment component, premiums, and death benefits can be renewed and changedbased upon the policy owners needs. The policy owner has flexibility over the policy money can be moved between the insurance and investment components of the policy. Thepremiums, unlike whole life policies, can be paid out of interest from the accumulatedsavings.

Products line Life Insurance Corporation

Insurance Plan Pension Plans Unit Plan Special Plan Group Scheme

Insurance Plans:

LIC understands that each individual is different from others and also their needs andrequirements are not the same. This applies even to their insurance and other financialneeds. LIC as such has designed various products which can be customized according to

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individual's needs and helps the policy holders to choose the best product for themselves.Under individual plans further sub categories have been created.

A-Children Plans:

LIC- Jeevan Anurag

LIC- CDA Endowment Vesting At 21

LIC- CDA Endowment Vesting At 18

LIC- Jeevan Kishore

LIC- Child Career Plan

B-Plans For handicapped Dependents

LICJeevan Aadhar

LICJeevan Vishwas

C-Endowment Assurance Plans:

LIC-The Endowment Assurance Policy

LIC-The Endowment Assurance Policy-Limited Payment

LIC-Jeevan Mira(Double Cover Endowment Plan)

LIC-Jeevan Mitra(Triple Cover Endowment Plan)

LIC-Jeevan Anand

LIC-New Janaraksha Plan

LIC-Jeevan Amrit

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Pension Plans:

Pension Plans helps in providing financial security to an individual after his retirement sothat they are able to lead the same standard of life and that too without any tension.

LIC-Jeevan Nidhi

LIC-Jeevan Akshay-V

LIC-New Jeevan Dhara-I

LIC-New Jeevan Suraksha-I

Unit Plans:

Unit plans are meant for those people who aim to earn a good return on their investmentsand also reap the benefits of an insurance cover. It also helps in getting tax benefit on theinvested sum.

LIC-Market Plus (Closed for Sale)

LIC-Profit Plus

LIC-Fortune Plus

LIC RISKS AND GAINS

RISKS

1. The traditional model has changed

2. Concern for out living retirement assets is becoming agreater concern than premature death.

3. This has caused growth in assets accumulation products

4 investment risks and competition with banks and securitiesfirms is significant for insures

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GAINs

1. The life insurance industry recorded 68 per cent increase to Rs25,399 core in new business premium collected in March 2010 compared to Rs15,090 cores in the corresponding month in 2009.

2.Insurers witnessed a spurt in business during the last month ofthe financial year with contributions over 23 per cent of the total collection in 2009-10 as individuals opted to purchase covers to avail tax benefits.

3. Private players registered a whopping 47 per cent growth in thenew business premium while state-owned Life Insurance Corporation of India (LIC)posted 83 per cent increase in new business income in March.

4. Last quarter contribute to 40 per cent of sales. But Marchexperienced the maximum inflow, said a senior executive of a life insurance company.

PRIAVATE COMPANY

ICICI PRUDENTIAL

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Introduction

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, oneof the foremost financial services companies of India and Prudential plc, one of the leadinginternational financial services group headquartered in the United Kingdom. ICICIPrudential was amongst the first private sector life insurance companies to begin operationsin December 2000 after receiving approval from Insurance Regulatory Development

Authority (IRDA).

ICICI Prudential Life's capital stands at Rs. 4,780 corers (as of September 30, 2010) with

ICICI Bank and Prudential plc holding 74% and 26% stake respectively. For the periodApril 1, 2010 to September 30, 2010, the company garnered Rs 7,267 cores of totalpremiums and has underwritten over 10 million policies since inception. The company hasa network of over 1,500 offices and over 1, 60,000 advisors, as on September 30, 2010.The company has assets held over Rs. 65,000 cores as on September 30, 2010.Since the liberalization of Indian Insurance sector, ICICI Prudential Life Insurance hasbeen one of the earliest private players. Since the time, ICICI Pru Life has been the leaderin terms of market share as indicated by the IRDA (Insurance Regulatory and DevelopmentAuthority, the regulator for Indian Insurance Industry) In June, 2009 ICICI Prudential LifeInsurance has decided to snap its tie up with TTK Healthcare to settle insurance claims ofits users.

ICICI Prudential's life insurance products may be loosely categorized under four forms- Life Plans

(further categorized into Term Plans and Wealth Plans), Child Plans, Retirement Plans and Health

Plans.

PRODUCTS OF ICICI PRUDENTIAL LIFE INSURANCE

ICICI has grouped its various products into two main categories. Under these:

Categories there are further sub-categories. They are

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1. Individual plans

2. group plan

Individual Plans:

ICICI Prudential Life Insurance has designed various customized and innovative insuranceproducts to meet the various needs of the customer which keeps on changing with thechanging phases of life. Theirs are various riders available which can be adding to productsto make them utmost customized.

A-Savings & Wealth Creation Solutions

1. ICICI Prudential Life Insurance-Save'n'Protect

2. ICICI Prudential Life Insurance-CashBakLifeTime Gold & Lifetime Plus

3. ICICI Prudential Life Insurance-Life Link Super.

4. ICICI Prudential Life Insurance-Premier Life GoldInvestShield Life New

5. ICICI Prudential Life Insurance-Invest Shield Cashbook

6. ICICI Prudential Life Insurance-Life Stage RP

B-Protection Solutions

1. ICICI Prudential Life Insurance-Lifeguard

2. ICICI Prudential Life Insurance-Home Assure

C-Education insurance plans

1. ICICI Prudential Life Insurance-Smart Kid

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D-Retirement Solutions

1. ICICI Prudential Life Insurance-Forever Life

2. ICICI Prudential Life Insurance-Lifetime Super Pension

3. ICICI Prudential Life Insurance-Life Link Super Pension

4. ICICI Prudential Life Insurance-Immediate Annuity

5. ICICI Prudential Life Insurance-Premier Life Pension

E-Health Solutions

1. ICICI Prudential Life Insurance-Health Assure Plus

2. ICICI Prudential Life Insurance-Cancer Care.

3. ICICI Prudential Life Insurance-Cancer Care Plus.

4. ICICI Prudential Life Insurance-Diabetes Care.

,5. ICICI Prudential Life Insurance-Diabetes Care Plus

Group Plans:

ICICI Prudential Life also offers Group Insurance Solutions for companieswhich aim to provide tension free working environment for their employees.

1. ICICI Prudential Life Insurance-Group Gratuity Plan

2. ICICI Prudential Life Insurance-Group Superannuation Plan

3. ICICI Prudential Life Insurance-Group Immediate Annuities

4. ICICI Prudential Life Insurance-Group Term Plan

ICICI PRUDENTIAL INSURANCE RISKS AND ANALAYSIS

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RISKS

1. The past performance of other funds of the Company is not necessarily

Indicative of the future performance of any of these funds.

2. The investments in the funds are subject to market and other risks and

There can be no assurance that the objectives of any of the Funds will be achieved.

3. The premium paid in Unit Linked Life Insurance policies are subject to

Investment risks associated with capital markets and debt markets and the NAVs of the

units may go up or down based on the performance of fund and factors influencing the

Capital market and the insured is responsible for his/her decisions

Gains

1. ICICI Pru Lifetime Maxima with Trigger Portfolio Strategy allows investors toprotect gains made through their equity market investments from any future marketvolatility. In addition, you are also provided with an insurance cover.

2.More than 100% allocation to funds on premium payment from the 6th policyyear onwards

3.There will be additional allocation of units @ 2% of annual premium every yearstarting from the 6th year.

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COMPERATIVE OF ANALAYSIS OF LIC &ICICI PRUDENTI

Insurance is an upcoming sector in India the year2000 was a landmark year of the insurance industry in this year the life insurance industry

was liberalized after more than fifty years insurance sector was a monopoly with l;ic as theonly company a public sector enterprise but onwards the market opened up and there aremany private players competing the market the market shall of lice have been considerablereduced in the last five years industry in terms of products market channels andadvertisement of products agent training and customers services etc

The various life insurance enteredIndia

1.

HDFC standard life insurance company ltd

Max new York life insurance ltd

Icici prudential life insurance company ltd

Kotak Mahindra and mutual life insurance company ltd

Birlasunlife insurance company

\Sbi life insurance Company

Life insurance corporation of India 7ICICI Prudential LifeInsurance OBJECTIVES The entry of foreign MNCs and the conductive businessenvironment fostered by the government, it is no wonder that the re-entry of privateinsurance has marked a second coming for the sector. In just five years, the sector hasundergone a makeover, offering more choice, better services, quicker settlement, tighterregulation and greater awareness s the environment become more and more competitiveand services and products become alike, creating a differentiation is becoming extremelytough.

.Understanding the needs of customers and offering them superior products andservice

Leveraging technology to service customers quickly, efficiently and conveniently

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Developing and implementing superior risk management and investment

Strategies to offer sustainable and stable returns to our policyholder

CONCLUSION

The financial markets have continued to witness

Unprecedented liberalization, growth and reforms over the last decade prompted by

Regulatory compulsions and rapid integration between domestic and global markets. And

As a result, one has seen substantial growth in the number of financial firms (insurance

Companies, mutual funds, brokerages, banks etc.) And in the numberand variety of

Financial products and services offered by them. As the need of the people is changing so

Is changing the investment habits of the people and this has brought in a spate of new

Products and schemes where people can invest. The concept of insurance as an

Investment option has arrived wherepeople first identify the varying needs ofmoney

Then converts the needs into specific amount of money and time required to achieve the

Objective of investments plans.

In addition to the above, companies should also innovate to come

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Up with better products that would suit the Indian population and should also try to

Market and sell their products through new channels of distribution that can be effective

Selling their products to the masses. People should identify their needs and then decide

On the type of policy they want to invest in. insurance is a good investment option for

Those people who do not know where to invest and who do not want to the risk of capital

Erosion But, people who are financially savvy can opt for term insurance and invest the

Rest other options that may give them higher return