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Practice of General Insurance

• Insurance in India is considered mainly under life insurance and general insurance.

Introduction

• We derive material value from our homes and possessions as they fulfil our needs, providing comfort and satisfaction and enabling us to earn income.
• These possessions can be devastated by unforeseen events or life can be affected by disease or death.
• Properties could be destroyed by fires or earthquakes or taken by burglars causing uncertainty about the future making it difficult to plan or conduct enterprise.
• Predicting the future is possible to a reasonable extent.
• Loss affects only a few, and occurrence can be predicted using past experience, hence mankind may have to create insurance.
• Insurance provides economic losses that one would suffer as a result of an event, thus can be shared by a group.
• Just as small streams create mighty oceans, small contributions of numerous individuals in a group get collected and pooled into a common fund.
• Insured suffers a loss but gets compensated from the fund created by the contributions of individuals.
• Markets, both domestic and international, the documentation and processes, individual classes of business, underwriting, rating, claims and insurance accounting will be studied.

Origin of Insurance

• Insurance, as conceived as a method of sharing of losses, embodying the principle of cooperation existed in the early civilization.
• There is evidence during the Aryan civilization loss of profits in crafts industry was insured against by the village co-operatives in India safeguarding transportation by sea or land.
• Insurance as protection against events had origins as "bottomry bonds", issued by Mediterranean merchants around the fourth century BC.
• A bottomry loan involved advancing money for a voyage and was repayable with interest on arrival of a ship at destination.
• Obligation to repay extinguished if the ship was lost, interest payment considered a premium for total loss risk.
• Similar loans on cargo security were known as "respondentia bonds."
• The Manab Dharma Shastra (Code of Manu) contains "sea-form contracts" used by traders from Broach and Surat sailing to Lanka, Egypt, and Greece.
• Marine practice of general average where losses to save a venture were shared is another forerunner of insurance.
• Practice dates to 916 BC, practiced by Rhodians in Mediterranean trade transporting goods in human powered rowing boats.
• Insurance as practiced today traces to fourteenth-century Northern Italy among Italian merchants involved in Mediterranean trade with India.
• Merchants divided bottomry bonds into advance of money repaid on safe arrival and assurance policy covering loss at sea was the start of marine insurance.

Historical Milestones of Indian General Insurance Market

• 1938: The Insurance Act introduced.
• 1939: Insurance Rules were framed.
• 1956: Government takes over life insurance companies.
• 1968: Insurance Act amended for social control and solvency margins and Tariff Advisory Committee set-up.
• 1971: General Insurance Act passed and Government takes over pending nationalisation.
• 1972: General Insurance Business (Nationalisation) Act passed.
• 1973: General Insurance Corporation of India (GIC) established as Government Company.
• 1974: 107 general insurers merged into four GIC subsidiaries: National Insurance Company Ltd, The New India Assurance Company Ltd, The Oriental Fire & General Insurance Company Ltd, and United India Fire & General Insurance Company Ltd.
• 1991: Public Liability Insurance Act and Rules introduced.
• 1994: Malhotra Committee recommends strong regulatory authority.
• 1998: Insurance Ombudsman Rules issued for public grievance redressal.
• 1999: IRDA Act passed establishing regulatory authority to promote insurance growth.
• 2001: Private sector companies licensed to conduct general insurance business.
• 2002: GIC subsidiaries restructured and GIC became national reinsurer.
• 2003: Broker introduction in Indian insurance market.

Similarities Between Insurance & Commercial Market

• The Insurance market is very similar to any other commercial market.
• Products: Consumer Goods, Insurance Products & Services
• Makers/Sellers: Manufacturers, Insurers
• Suppliers/Distributors: Retailers, Insurance Agents and Brokers
• Buyers: Customers, People seeking protection
• Insured: Any person buying an insurance policy by paying premuims.
• Intermediaries: They sell insurance for insurers and bringing them together to those want to buy it.
• Insurer*: They offer and provide the capital for insurance protection.

Structure of Indian Insurance

• Insurance Regulatory & Development Authority (IRDA): Regulatory body under the IRDA Act of 1999, reporting to Ministry of Finance.
• Government Insurance Companies: Public Sector Insurers, 100% owned by Gov. Department of Banking and Insurance, under Ministry of Finance. Association known as General Insurers' (Public Sector) Association of India (GIPSA) in Delhi.
• Private Insurance Companies: They can be 100% India/joint venture, foreign partner stake restricted to maximum 26%.
• Brokers: They can be Direct, Reinsurance, or Composite Brokers, licensed by IRDA as per broking regulations.
• Agents: Appointed by Insurers, based on IRDA training/certification.
• Loss Assessors: All losses >INR 20,000 surveyed by licensed surveyors issued by IRDA with Insurance Companies handling empanelment.

Training

• IRDA: Accrediteded for Training of Agents.
• Insurance Institute of India: Previously Federation of Institutes, it conducts diploma examinations and conducts various programmes.
• National Insurance Academy: Founded in 1980, objectives are training/research is governed by LIC/GIC of India.

Classification of General Insurance Companies

• Companies Conducting all Lines of Business: Under Public and Private Sector.
• Health insurance companies: Specialization initiatives undertaken by private sector. Companies include Max Bupa, Apollo Munich, Star Health.
• Agriculture insurance company: It is Agriculture Insurance Company of India Ltd. (AICL) opened for business in 2003/ established in 2002 to protect farmers and their crop business against crop losses.
• Credit insurance company: (Export Credit Guarantee Corporation of India Limited (ECGC)) commenced business in July 1957 and provides export credit insurance support to Indian exporters. It is the fifth largest credit insurer in the world.
• Reinsurance Company: (General Insurance Corporation of India (brand name GIC Re)) in 2000, was approved as an Indian reinsurer with retention in India and adequate reinsurance capacity. Manages Indian insurance pools: Marine Hull, Terrorism, Indian Motor Third-Party Insurance Pool.

State Government Departments/Funds

• These are the insurance departments of some of the Indian States. Insure the property and other interests of their state governments.

Indian General Insurance Market - Salient Features

• IRDA: Sole authority on aspects of insurance-both Life & Non-Life.
• "Composite” Insurance Company: Conducting Life & Non-Life insurance company.
• "Non-Admitted Insurance” not permitted: Any property situated/to be situated in India has to be necessarily insured with an Indian Insurance Company.
• "Cash and Carry" market: Cover commences only on payment of premuim. Retail is allowed
• Brokers: Must be licensed by IRDA.
• Agents: Must be appointed & trained by Insurers in conformity with IRDA Regulations.
• Surveyors: Loss Adjusters with qualification or experience must be licensed by IRDA.
• Survey of losses: Must be obtained of all losses >Rs 20000.
• Reinsurance regulation: Maximizes retention and developing adequate capacity with IRDA required approval of programme of each insurer at every anniversary.
• Insurance premium: Collected installment only on long term policies.
• Administrators (TPA): Must be in conformity with IRDA Regulations.
• "Ombudsman" Rules: Provides redressal mechanism for complaints of policy holders settlements.

Development of Insurance in the U.K.

• The practice of marine insurance gradually spread northwards to the Netherlands and then to London
• In 1575, London established a Chamber of Assurance to register policies, settle disputes and devised policy form.
• Early marine insurance history connects Shipowners, sea captains and merchants congregated in coffee houses to deal with mercantile transactions. Edward Lloyd started Coffee hose with a practice to help build individual underwriting.
• 1871 the Lloyd's Act was framed to set up the Corporation of Lloyd's, with Lloyd's empowerment to transact other classes of non-marine business.
• Today Lloyd's with it's underwriters is a great international insurance center working together with mutual cooporation.
• The Association of English and Scottish Fire Offices formed in 1858 became the Fire Offices Committee known as a central tariff institution for fire insurance.
• Industrial Revolution in the 19th century caused begining of miscellaneous insurance.
• 1880: The Employers' Liability Act, Made employers liable to compensate workers injured at work, creating a need for liability assurance protection of employeers.
• Explosions of boilers causing damage and bodily injury, formed Manchester Steam Users Association in 1854 to provided a system of combining insurance protection with inspection service by Steam Boiler Assurance Co. in 1858.
• Emphisis with employers' liability insurances lead to need for third party Claims for death/bodily injures and lead to introduction of products liability insurance.
• Accident Insurance Society LTD, began motor insurance business from the year 1898 once first motor vehicle entered U.K.
• Aviation insurance had small begining in 1909 stimulated with aeronautics by World War1.
• UK has highly developed insurance market for intl requirements with domestic, foreign and Lloyd's Underwriters companies. State regulated and controled stringent legislation.

The Market shares

• The global market had a modest increase (3.4%) in 2008.
• The total value of the insurance market had $4.3 trillion constituting around 40%.
• North America is ..........$1,346 Billion, Europe..........$1,753 Billion and Asia........$933 Billion

London Market

• It is synonymous with Lloyd's, with a strong non-Lloyd operating, known as major port of call for complex Indian risk in Energy and Aviation.
• Provides capacity and technical experience, however high minimum policy premium requirement leads to smaller risks.
• Singapore market provides indian company incentive for Asian mindset at Lower premium and home to London/Europe reinsurers.
• European market is strong reinsurance market, with no convenient spot as London, for Indian assurer, has convenient central.

The American insurance market

• It does not have a global presence and is reluctant to compete on intl risks, and uses reinsurers in London and Singapore. American assurers are involved if India risk component is large in state component.
• In the 1970s large corpoates bega handling the economic method with portfolio was to operate a "captive" insurance, Bermuda became home for many corporates.
• 1990's and the 1980'S. Insurance and early excess create to companies are catastophe. Hurricane and capatal came to the terrorist following Sept, 11.

Major non-life insurers and reinsurers

• Munich Re and Swiss Re are the two top reinsurance companies that support insurered indian market, with a list including Allianz, Zurich, Partner Re, Frankona Re, Liberty.
• There American insurance group (AIG) was founded in Shangai, with a little-known fact to the majority of of people.

Insurance Penetration & Density

• Measure helps to gauge growth and development for insurance markets.

Understand the Roles in Insured

• The roles will be Regulator insurer, reinsurer, retrocessionairre Insured intermediary & ancillary*
• Underwriter claim, technician risk Risk engineer surveyor, Business developer, Corporate sector, Retail agents, broker, reinsurance broker, TPA, Lloyd broker, Valuer Actuary, insurance lawyer, technical consultant insurance, Software specialist Educator

Regulator - Insurance Regulatory and Development Authority (IRDA)

• Established by parliament act in 1999, it administers and ensures growth for theinsurance industry. Is the corporate body in appointed members of IRDA.
• Grants licenses to insurers and intermediates like other brokers it also has authority regulations like adequacy of premium etc the authority can issue and directions.
• Protects the interests of policy holders fair such as relating wording in pricing in proper.

Insurers

• Has several roles with ability to manage and provide capital underwriters skills to get high value and claim with technical people failure may result

Underwriter Examples

• The health insurers underwriter may consider to proposal history lifestyle or current health. Properties to ensure underwriter, look after case occupation, safeguards the applicant.

Risk Engineer

• A risk engineers know is to that risk surveyors, consultants, Risk control, surveyor advisers general insurance or companies, professional broker, and vise about quality of risk

Internal Claims Technician

• The marketers to taking a glory and increasing the premium now with much greater or emphasize in Quality Risk. With underline controlling the pricing.

Salient Activities for Claims Techs

• acceptance , validity, review of claim and communicating settlement and or advise the internal.

Loss adjusters

• The claims are are claims ,techinical role , usually external, this can go under assessours, , they support the insurance in investigating technical claims they are know.

Structure of Insurance Policy

• These policy provide for detailed risk surveys of property , engineers help underwriters know the acceptably particularity of risks.

The role of the loss adjuster

• Inculdes insurance claims to to pay or not conditions from insurance on affecting companies e.g , advice thru expert reclamation services.
• Reporting on commentions after a day and recommend agreement present, an assessment on statements which help a payout
• Testment of any, in or time product, service for the the setlmete.

Structure of Insurance Market- Salient Points Summary

• Establishments : The insurance regular tory and development authority constituted by parliamentary and Act 1999
• Insurance regular Tally : DRDA is the authority to minister the Insurance actor in regular promote in ensure orderly, growth of the insurance business, of corporate are Body, the chairman and other member of the IR di are oppointed by the government of india licenscing act.

Reinsurer

• It's next line of defence for the insurance company who wants to protect its balance sheet through reinsurance. The insurer becomes an insurance know contractural relationship is between between insurer and reinsurer.

Introduction to Policy Documents and Forms

• It's important to note that our insurance document is a legal document. And that policy wordings have changed to be more simplified so that's easier to understand.
• Understanding an agreement has the following and parties and exchange money so as to ensure a policy can be covered, failure occurs because policy can turn ineffectual

Conditions

• They help guide what insured must due, must not, some of them , include.

Summary Points

• The origin of insurance can be traced back to the fourth century.
• in India, rationalisation of life insurance companies look peace in 1971.
• the insurance marked comprises a non role players like insurer, and etc
• the reinsurance companies purchase their cells is. Also purchase reinsurance of practices know as retrocession.
• Insured segment can be segment in individual retail, as is in the IR that is in the insurance sectors as we can this .
• The establishment : The insurance regulator Tally and Development , in act Parliament

The major non-life Insurers

• The main insurance by market in Japan in U.S. both markets difference by Europe taking places in the top 10.

Understand the Role Of insurance

• Insurance , Regulatory Involve Is the Authority To Minister , Growth Of The Insurance , The Chair Man And There Members Are Appointed By The Government In That IR . ==End of summary==