History of insurance

History of insurance

The history of insurance in India is deep-rooted. Since the earliest times insurance has been carried out in some form or other. Insurance in India has developed over time and has taken ideas from other countries – England in particular.

The history of insurance in India can be divided into three phases as follows:

Phase I – Pre-liberalisation

1818–1829 First insurance company: in 1818 the Oriental Life Insurance Company in Kolkata (then Calcutta) was the first company to start a life insurance business in India. However, the company failed in 1834. In 1829 the Madras Equitable had begun transacting life insurance business in the Madras Presidency.

1870 Following the enactment of the British Insurance Act 1870, the last three decades of the nineteenth century saw the creation of the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) in the Bombay Residency.

1912 The Indian Life Assurance Companies Act 1912 was the first statutory measure to regulate life business.

1928 The Indian Insurance Companies Act 1928 gave the Government the power to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers, including provident insurance societies.

1938 To protect the interest of the insuring public, the earlier legislation was consolidated and amended by the Insurance Act 1938 which gave the Government effective control over the activities of insurers.

1950s In the 1950s, competition in the insurance business was very high and there were allegations of unfair trade practices. The Government of India therefore decided to nationalize insurance business.

1957 Formation of the General Insurance Council (GI Council): the GI Council represents the collective interests of the non-life insurance companies in India. The Council speaks out on issues of common interest, participates in discussions related to policy formation, and acts as an advocate for high standards of customer service in the insurance industry.

1972 The General Insurance Business (Nationalisation) Act 1972 (GIBNA) was passed. The General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA. It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares.

Phase II – Liberalisation

The start of reform

The international payment crisis of the 1990s forced the Government to re-think its industrial policies and regulations. The Government only had enough foreign currency reserves to finance a few days of imports.

1993 Malhotra Committee: in 1993 the Government set up a committee under the chairmanship of R N Malhotra, the former Governor of RBI, to make recommendations for the reform of the insurance sector. In its report in 1994, the committee recommended, among other things, that the private sector and foreign companies (but only through a joint venture with an Indian partner) be permitted to enter the insurance industry.

1999 Formation of the IRDA: following the recommendations of the Malhotra Committee report, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body in 1999 to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April 2000.

Phase III – Post-liberalisation

As we have seen, following the recommendations of the Malhotra Committee, the insurance sector was opened to private companies. Foreign companies were also allowed to participate in the Indian insurance market through joint ventures (JVs) with Indian companies. Under current regulations the foreign partner cannot hold more than a 26% stake in the joint venture.

The key objectives of the IRDA include the promotion of competition with a view to increasing customer satisfaction through more consumer choice and lower premiums, while ensuring the financial security of the insurance market. The IRDA has the power to make regulations under section 114A of the Insurance Act 1938. Since 2000 it has introduced various regulations ranging from the registration of companies for carrying on insurance business to the protection of policyholders’ interests.

The Insurance Act 1938 and GIBNA were amended which removed the exclusive privilege of GIC and its four subsidiaries to write general insurance in India. As a result, general insurance business was opened up to the private sector.

With the General Insurance Business (Nationalisation) Amendment Act 2002, effective from 21 March 2003, GIC ceased to be a holding company of its four subsidiaries. Their ownership was vested with the Government of India. GIC was notified as a reinsurance company.

Recent developments in the insurance industry

By 2010 India was the fifth largest insurance market in the world and it is still growing rapidly.

There has been a lot of change in the decade since the market was opened up to the private sector. In this section we will look at some of the important developments of the last few years.

Growing importance of IT

All insurance companies now use information technology (IT) to benefit their business and to improve convenience for their customers. Today, customers can pay their premiums and check the status and other details of their policy using the company’s website. Updates relating to the receipt of premiums or changes to their policy are sent to the customer through mobile SMS.

Bancassurance

Many banks have joined with insurance companies to cross-sell insurance products to their customers. Insurance companies benefit from the wide network and loyal customer base of banks, and the contribution that bancassurance makes to insurance sales has steadily grown over the last few years. The banks benefit through being able to provide value-added products to their customers and from the fee income they receive in return from the insurance companies. Many banks have started their own life insurance subsidiaries.

Online sales

Most of the insurance companies have now started selling insurance products online. This eliminates the need for an intermediary and reduces costs. This saving can be passed to customers in the form of reduced premiums.

Micro-insurance

Micro-insurance guidelines were issued by the IRDA in 2005. Micro-insurance products provide insurance protection to people in lower income groups, such as self-help group (SHG) members, farmers, rickshaw pullers and others against the risks that they and their assets are exposed to. The premiums for these products may be as low as Rs. 15 and are collected on a weekly basis. The minimum life insurance cover specified by the Regulator for this category is Rs. 5,000 and the maximum cover that can be provided is Rs. 50,000. People who work in agriculture and allied activities are exposed to the hazards of nature so they need protection against risks like monsoon failure, floods etc. This is where micro-insurance can come to their rescue.

Grievance redressal

• Whenever any industry is experiencing fast growth there are bound to be concerns, and the insurance industry is no different. There has been an increase in complaints from customers about the settlement of their claims and customer service in general. As we saw earlier, the IRDA has taken steps to protect the interest of the policyholders. It has asked insurance companies to set up internal customer grievance redressal cells/departments, and an Insurance Ombudsman has been established.

• The latest initiative from the IRDA is the setting up of a call centre which an insured can contact to seek the resolution of a grievance they have against their insurer. The unhappy customer can either call a toll-free number (155255) or email complaints@irda.gov.in to register their complaint.

Anand Khemka
+91-9910936925
+91-8287041341

What is insurance?

What is insurance?

We can define insurance as follows: 

Insurance is a contract between the insurance company (insurer) and the policyholder (insured). In return for a consideration (the premium), the insurance company promises to pay a specified amount to the insured on the happening of a specific event.

That is all very well. But what does it mean? The first step in being able to answer this question is to understand why insurance is needed.

The need for insurance 

Consider the following case study to understand the need for insurance.

Case study

Ajay is 35 years old and works for a multinational corporation (MNC). He has a ten-year-old son, Vijay, whom he dreams will one day become a doctor. Ajay’s spouse is a housewife, and his parents are retired and dependent on him. Ajay has a home loan and is making monthly investments for Vijay’s higher studies and marriage and his own retirement. Ajay wants to ensure that Vijay gets the best of everything and that he himself is not dependent on Vijay during his retirement in the way that Ajay’s parents are on him. So far everything is going well with Ajay’s plans. But imagine what will happen in the following scenario.

One day while returning home from the office Ajay has an accident and dies. What will happen? Who will take care of the family, Vijay’s education and marriage, the home loan etc.? What are the options available to Ajay so that his family can be taken care of in his absence?

Now put yourself in Ajay’s shoes and imagine you are the family income provider and have to face the above scenario. What will you do? Relax! Our intention is not to panic or scare you. We are using this case study to try to help you realise the importance of insurance which is the solution to all the problems Ajay faces should the above scenario happen. So, let’s look at the scenario again and see how insurance can provide a solution.

Life insurance provides protection to a family on the untimely death of the income provider. If Ajay has adequate life insurance cover, then should he die, the money received from the life insurance company can help to support his family. The insurance money will help to take care of the family’s living expenses, Vijay’s education and marriage, and the cost of the home loan etc.

Now that we have looked at the above scenario, we can see how insurance, in this case life insurance, can safeguard a person against unexpected events.

Consider this…

As the income provider for your family, what risks are you exposed to? Do you have any financial goals that you would like to protect?

How does insurance work?

Now that you understand the need for insurance, we can move on to understanding how insurance works exactly.

Let us continue with our case study of Ajay. The risk of premature death described above is only one of the risks that Ajay faces. He faces many other risks – that he will need medical care at some point, that his home may burn down, for instance. Ajay can handle these risks in different ways.

Risk retention: One, not very wise way, of handling these risks is to retain them, i.e. for Ajay to bear the risk that he will have to provide for these situations himself, and so do nothing about them. While times are good and none of these events happen, Ajay need not be worried. But the moment any one of them does happen, Ajay will be in trouble. So it is definitely not wise for Ajay to retain, or handle, these risks himself. 

Risk transfer: The other way of handling these risks is to transfer them to someone who can handle them properly. In simple words, the process of transferring risks from one person who does not have the capacity to bear them to someone who does have the capacity for them, is known as insurance.

At this point, it may be useful to return to our definition of insurance:

Insurance is a contract between the insurance company (insurer) and the policyholder (insured). In return for a consideration (the premium), the insurance company promises to pay a specified amount to the insured on the happening of a specific event.

Insurance, then, is nothing but a risk transfer mechanism wherein the person taking out insurance transfers their risk to the insurance company in return for a payment (known as the premium). So in Ajay’s case he can take out insurance, pay the premium and transfer his risks to the insurance company.

Insurance companies collect premiums from people like Ajay – from all those who are exposed to the same risks – and put the money into a risk pool. Not everyone will experience the happening of an insured event at the same time, but those who do are compensated from this risk pool.

So, from the above explanation we can see that insurance is:

• the process of transferring the risk from the owner (insured person);

• to another party (insurer) who can bear that risk;

• in return for a consideration (premium).

The business of insurance relates to the protection of the economic value of assets. An asset is valuable to its owner because they expect some benefits from it. The benefit can be in the form of income generated from the asset (giving a car on rent) or convenience (using the car for their own travel).

Human beings are also assets in the sense that they have the capacity to generate income themselves. Every human being has a finite life span, and death is certain. But the timing of death is uncertain. If a person dies unexpectedly early in their working life, then their family will lose the income that person would have generated in future, had they survived for their entire working life. This is where life insurance acts to fill the financial gap left behind by the early death of a person. The timing of death is uncertain for everyone, so potentially every human being needs life insurance from an early age, to protect future income.

Life insurance can protect the family from financial hardship in the event that the untimely death of an individual leads to a loss of income.

So now we know, in the simplest of terms, how insurance works. We have seen how it can benefit the individual by providing protection against the losses that arise from life’s most unhappy events. However, insurance and the insurance industry also have benefits beyond the individual, and we will look at these in the following sections.


Anand Khemka
+91-9910936925
+91-8287041341

THE INSURANCE INSTITUTE OF INDIA

THE INSURANCE INSTITUTE OF INDIA

The Insurance Institute of India was established in 1955 for the purpose of imparting insurance education to persons engaged or interested in insurance. The main objectives of Insurance Institute of India are:

1. To run College and conduct Examinations, oral and written, in insurance theory and practice and related subjects for awarding certificates, diplomas and degrees to those interested in insurance.
2. To give oral and postal tuition's, prepare and supply reading materials and similar other educative methods for encouraging and assisting the study of any subject bearing on any branch of insurance.
3. To form and maintain a library.
4. To offer scholarships, grants and prizes for research or any other educational work bearing on insurance.

 Membership: There are at present 91 Associated Insurance Institutes spread all over the country. The Sri Lanka Insurance Academy, Insurance Institute of Sri Lanka and the Royal Insurance Corporation of Bhutan Insurance Institute are affiliated to III. The members of the Associated Institutes and the Affiliated Institutes automatically become the members of III. Please refer to List of Associated Institutes and Affiliated Institutes.

Governing Body: The Governing Body of III is its Council which functions through its Committee, the Administration Committee and the Board of Education. The Board of Education is the supreme body in all matters relating to education and examinations.

Secretariat: III is headed by the Secretary-General. He is assisted by Director, Secretaries, Dy. Secretaries, Asst. Secretaries, Officers and Staff.

College of Insurance is situated in the same premises as of Insurance Institute of India. College is an institution of Higher learning in Insurance. Training on Life insurance Subjects, General Insurance subjects and various Management subjects are provided to insurance personnel at different levels. Training to Insurance Brokers and Insurance Surveyors are also provided in College of insurance.

 Accredited Learning Centers are formed to fulfill the Institute objectives in providing study materials, training and tuition facilities and other learning aids to the candidates who prepare for the Institute’s examination. 

Examinations: 

Certificates and diplomas issued by III to candidates passing its examinations are recognized by the Insurance Regulatory and Development Authority and the insurers in India and abroad. These qualifications are also recognized by similar Institutes e.g. Chartered Insurance Institute (CII) in U.K., Life Office Management Association (LOMA), American Institute of Chartered Property and Casualty Underwriters (CPCU) (The Institutes) in U.S.A. and Insurance Institute of Canada. (Please refer to “Cross Recognition of III Qualifications” 

The IRDA has recognized the Institute as the examining body to conduct pre-recruitment examinations for insurance agents as well as Pre-licensing test for Insurance Surveyors.

III conducts examination for the award of Certificates / Diplomas as under:

1. Licentiate, Associateship & Fellowship of III.
2. Certificate in Insurance Salesmanship (CIS)
3. Certificate in Foundation of Casualty Actuarial Science(Non-Life) 
4. Specialized Diploma (Marine) 
5. Specialized Diploma (Fire) 
6. Specialized Diploma in Casualty Actuarial Science (Non-Life) 
7. Pre-licensing test for Insurance Surveyors on behalf of IRDA

Tuition Facilities: Oral tuition classes are organized by the Associated Institutes and Accredited Learning Centers for preparing candidates for the examinations conducted by III. (Please refer to Lists of Associated Institutes and Accredited Learning Centers for contact details)

e-Learning: Institute has also introduced e-learning Modules providing as an additional tool of learning at Licentiate level.

Online Examinations for Licentiate Level Papers:

Online examinations are being introduced for Licentiate level. The 1st examination will be held in August 2011 only for candidates who have registered prior to 30th April 2011. Candidates intending to take up Paper number 01, 02, 11 & 14 can appear for examinations on online mode at Centers in Bangalore, Chennai, Delhi, Kolkata and Mumbai from 21st August 2011 to 26th August 2011. Candidates will be allowed to appear for any 2 papers a day. Candidates interested in taking up Online examinations should indicate their option on III website up to 20/7/2011. They will be contacted by email and allowed to book their examination slots during July 2011. 

The examination fees will be the same as off-line. On-line examinations will be available only in English as of now. The pass marks also will be 60%, same as off-line examinations. Any correspondence in this matter should be addressed to sant@iii.org.in.

Study Materials: The III publishes Study Materials for all the subjects prescribed for its examinations. In addition e-Learning (English) is available for Licentiate subjects

Research: The III encourages research and advanced studies in the area of insurance and related subjects.

Knowledge Management Centre: Institute has formed Knowledge Management Centre to arrange seminars on insurance and related subjects, to arrange research work on various technical subjects of Insurance and to publish news letters and Journals etc.

• The S.K. Desai Memorial Medal and Prize is awarded to the best essay or work of research on any area of insurance or related subjects.

• The D. Subrahmaniam Award is given to the best essay or work of research submitted by members who are not more than 45 years of age. 

• The III invites original technical papers on specified insurance related topics. The author / authors of papers of high quality are invited to attend the annual conference of the Institute.

• III encourages Associated Institutes to organize research / advanced studies in Insurance on a project basis. The reports of approved projects are published and released at the annual conference.

Prizes: Different prizes are awarded for outstanding performance in different Examinations. (Please refer to Prize Scheme for details)

Anand Khemka
+91-9910936925
+91-8287041341

How Much Term Life Insurance Cover Do You Need?

How Much Term Life Insurance Cover Do You Need?

   Now that you decided that you want to be covered with life insurance (in this case, term life insurance), the next thing you must decide on would be how much coverage you want. Would you want to have 

level term insurance (where the coverage remains the same all throughout), 

decreasing term insurance (where coverage decreases over time) or 

increasing or indexed term insurance (where coverage increases based on a specified rate)? 

    Your ideal coverage amount will be based on several factors: 

• Who is dependent on your income?

    Who will suffer financial loss in the event of your death (and the eventual loss of your income)? The more dependents you have, the more cover you should get. Please note that “income” is not just only applicable for those who are working. You should also take into consideration the “income” of stay-at-home parents. This income is roughly equal to what the family will have to spend if the stay-at-home parent were to pass away – this will include fees paid for a housekeeper or for child care, if that parent is taking care of children at home. 

• How much does your family need per year to live a reasonable lifestyle?

   You should take into consideration food expenses, utilities, communications and transportation expenses. The coverage amount should be sufficient to cover for your lost income. 

• How long will your family need this cover?

     When your children are grown up and financially independent, insurance is not that necessary so if your children are young at the time you purchase this policy, you need to be prepared for a considerable amount since their financial independence is still a long way off. 

• How much do you have in debt?

    How much do you have to pay in credit card debts and your mortgage? You should allot for these amounts in your coverage. 

    As a general rule, you should get at least eight to ten times of your annual salary as your coverage. This will allow a sufficient amount to pay for a portion or all of your mortgage debt and still have room left over for the family’s monthly household expenses.

     If you are looking to buy a term life insurance policy through the internet, there are also online calculators to help you compute just how much cover you will need.

Anand Khemka
+91-9910936925
+91-82870413411

What Is Endowment Life Insurance

Endowment Life Insurance

    Life insurance protection and savings – these are the benefits provided by an endowment life insurance policy. Basically, an endowment life insurance policy is an insurance product that lasts for a specified number of years and then when these years have passed the policy is considered matured, the insured receives a lump sum. If the insured dies within the policy coverage period, the beneficiaries will receive the guaranteed minimum benefit plus any dividends or cash value accumulations.

Possible Uses of an Endowment Life Insurance Policy

    An endowment can serve as a sort of a savings fund with life insurance protection. An endowment product can be used for a variety of purposes:

• Retirement
• A child’s college education fund
• Travel
• Any big-ticket expense

    This is the reason why endowment policies have high premiums. It has shorter payment periods than whole life policy and is also expected to provide a substantial amount upon its maturity. The advantage of an endowment vs. a straight savings account is that there may be tax benefits in having a life insurance policy. The cash accumulation/dividends are usually allowed to grow without taxes as long as they stay within the policy.

Kinds of Endowment Policies

    There are different kinds of endowment policies.

• Low cost endowment.
  This is primarily for mortgage payments.

• Unit-linked endowment.
  This is product where a portion of the premiums are invested as units. If you want to surrender the policy, it will also depend on how much the units are priced.

• With profit endowment.
  This is a traditional product where there is a guaranteed sum assured and bonuses or dividends paid out annually. When the insured dies within the policy coverage period, the beneficiaries receive the minimum death benefit plus any cash values/accumulated dividends. There may also be terminal bonuses.

    It is advisable to ask the help of your life insurance agent so that you can decide on the right endowment policy for you.

Surrender of an Endowment Policy

    Before the policy’s maturity date, if worse comes to worst and you can’t pay for the premiums anymore, you can surrender the policy. This means cancelling the policy and receiving the accumulated cash values at the time of the surrender.


Anand Khemka
+91-9910936925
+91-8287041341

?? Want to buy Life, Health or any other General Insurance ??

Dear Friends,

If you want to buy any kind of Life, Health or any other general Insurance from any company or you have required Suggestion, Help or Assistance about any Insurance Plan or Company. you can contact to us or write your query in comment section.



Anand Khemka
+91-9910936925
+91-8287041341

What is the Whole Life Insurance

A Look at Whole Life Insurance

Whole life Insurance provides life insurance coverage for the entirety of one’s life. In most cases, it is a life insurance policy with a savings component. The life Insurance policy has cash values that are tax deferred, have fixed premiums that are usually payable throughout the life of the policy and provides minimum guaranteed death benefits. As long as premiums are paid and the policy is not surrendered, the whole life Insurance policy will continue to provide life coverage for the insured.

Who Needs Whole Life Insurance?

Whole life Insurance is ideal for those who want to provide for loved ones during their lifetime. This may mean the need to provide insurance protection due to an aged spouse or to disabled dependents who cannot fend for themselves financially.

Whole life Insurance is also useful as part of one’s estate planning program, since it can help provide for end of life expenses and to enable heirs to pay substantial inheritance taxes if your estate is large enough. In addition, whole life Insurance has a built-in savings component that you can withdraw or take out a loan on when you are in need of cash.

Whole Life Insurance Premiums

For premiums, whole life Insurance is more expensive than term insurance at the onset. However, in the long term, if you keep renewing your term life insurance policy, the premiums for the whole life policy will come out smaller. Whole life Insurance is cheaper than endowment policies.

Types of Whole Life Insurance Products

Non-participating whole life Insurance.

• The sum insured and the premiums are level for the entire duration of the policy. There are no dividends that are paid out to this policy. 

Participating whole life Insurance.

• This is similar to the product above except that these pay out dividends. The dividends are based on how well the company has performed investments-wise. The dividends may be left to grow within the policy, may be used to pay for premiums or to buy additional paid-up coverage so that you will have a higher sum insured. Dividends are not guaranteed. Only the death benefit will be guaranteed.

Indeterminate Premium Whole Life Insurance.

• Instead of level premiums, these charge varying premiums based on the “current” premium rating (Factors that determine this will be investment earnings, occupation, health conditions, etc.). This means that premiums will be low at the start and will increase through the years but the increases will be limited as there is a maximum guaranteed premium. 

Other variations of the whole life involve how premiums are paid. 

• There are limited payment whole life Insurance products that only require premium payments up to a specified number of years.

• There are also single premium whole life Insurance products where you get whole life coverage just by making one premium payment. 

Anand Khemka
+91-9910936925
+91-8287041341