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GENERAL

INSURANCEManish Lotankar

IV Semester


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Definition History of growth of General Insurance in India Growth of general insurance premium Classes of General Insurance

Prospects of further growth in India Important terms used in General Insurance Underwriting and claim procedures

Insurance and Reinsurance Impact of detariffing rates and products Role of Regulator Conclusion

General Insurance Index


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Marine insurance was being practiced in India from the

beginning of 19th century

Offices were established in Kolkatta which was the centre for

East India Company

Fire insurance followed in 1825 at Madras

Swadeshi movement also had its impact on Insurance and

first Indian Company was formed in 1907 Indian Mercantile

Insurance Company

Need to control insurance business was felt by the British

government which introduced the Insurance Act in 1938 and

Insurance Rules in 1939

General Insurance


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Insurance is classified into Life and General

Any insurance other than human lives comes under the

scope of General Insurance

It is preferable to call this as General Insurance instead of

non-life insurance

There is vast scope and the market is trying to cope up with

the demands of the market

Insurance penetration is improving in India and being the

second largest developing economy in the world the scope is

huge

Insurance In India


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Life Insurance business was nationalised in India in the year 1956

General Insurance business was being done by 106 companiesincluding LIC (GI) On May 13th 1971 an ordinance was promulgated taking state control

of general insurance business with custodians in charge In 1972 GI Nationalisation act was passed allowing the formation of

GIC as the holding company and with 4 subsidiaries each having itsHead Office at one metro 1st Jan 1973 GIC and 4 companies were formed taking in them 106

companies and the 4 PSUs were taking care of the general insurance

business in the country till 2000 totally. GIC on its own was also writing

aviation and crop business besides becoming the National & Asian

Reinsure The objective of nationalisation was to spread insurance to nook and

corner of the country and to utilise peoples money for the peoples good

thus uplifting the socio economic condition of the country

Development in 1970


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Surveyors and loss assessors regulations 2000

Third party administrators regulations 2001

Investment regulations 2001

Policy holders interests regulations 2002

Brokers regulations 2002

Corporate Agents regulations 2002

Manner of receipt of premium 2002

Rural sector 2002

Distribution of surplus 2002

Developments since 2000


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Two councils which had been reconstituted lifeinsurance council

Insurance ombudsman had been appointed General insurance council IIISLA has been formed IIBA- Brokers association IIRM- Institute of risk management Intermediaries now allowed-Agents/ corporate agents/

Brokers

Institutes for educating the agents/Brokers have beenformed and passing the examination has been made

mandatory for carrying out insurance business Surveyor licensing is being controlled by Regulator

Insurance councils & Institutes


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General Insurance business done

Sr no. Year In Crores

1 1974 219.99

2 1975 253.75

3 1976 286.51

4 1990 2174.43

5 2000 10272

6 2007 20000

7 2008 4000


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Penetration ( premium as % ofGDP)

United states 4.32

Canada 3.31 UK 3.05

Germany 3.55

Japan 2.30

South Korea 2.89

China 0.61

India 0.54

International comparison

Penetration ( premium as % ofGDP)

United states 1474.4

Canada 700.6 UK 741.5

Germany 913.5

Japan 805.5

South Korea 262.3

China 5.0

India 2.4


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General Insurance

Insurance of property

Insurance of persons

Insurance of liability

Insurance of Interest


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LIFE INSURERS

1. Bajaj Allianz2. Birla sun life

3. HDFC Std life

4. ICICI Prduential

5. ING Vysya

6. LIC

7. Max New York Life

8. Metlife

9. Kotak Mahindra OM

10. SBI Life

11. TATA-AIG Life

12. Reliance Life13. AVIVA life

14. Sahara India life

15. Shri Ram Life

16. Bharti AXA Life

Insurers now licensed by IRDA

GENERAL INSURERS

1. Bajaj Allianz2. ICICI Lombard

3. Iffco-Tokio General Insurance

4. National Insurance

5. New India Assurance Company

6. Oriental Insurance

7. Reliance General Insurance

8. Royal Sundaram Alliance

9. TATA-AIG General

10.United India Insurance

11.Cholamandalam MS General

12.HDFC Chubb General13.Export Credit Guarantee

14.Agriculture Insurance Company

15.Star Health & Allied

16.Sompho/ Shri Ram General/AXA/

Apollo DKV


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Proposer-Insured-Insurer

Risk- Peril Proposal form Sum Insured Premium ( Consideration) Excess ( Deductible) Indemnity Cover note Policy document Endorsement-for effecting changes in the policy

Warranties/ Clauses Conditions Underwriting Renewal Hazard

Terminology used in

General Insurance


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Insurance is a legal agreement entered between Insured

and Insurer due to which due to the consideration, the

Insurer agrees to indemnify the Insured, for the loss or

damage or liability created due an accident which is coveredunder the policy subject to the terms and conditions of the

contract

All insurance policies are subject to the warranties,

conditions and clauses of the policy contract and claims will

be settled accordingly

Basic Principles of

General Insurance


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UTMOST GOOD FAITH- which is embodied in all

insurance contracts and appears in the conditions of the

policy documents.

Since only the Insured who is the owner/possessing the

property he/she needs to declare the details which are to be

considered by the Underwriter. To obtain the requisite

details the Insurer arranges all questions in order in the

proposal form so that he/she knows where to look for the

required details. Material fact is the detail of the risk which

will influence the mind of the Underwriter to accept/reject;

and if to accept the rate /terms at which the risk is to be

accepted.

Duty of disclosure is on the proposer/Insured and if wilful

concealment/ non-disclosure of facts could be established the

claim if any could be denied


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Only the person who has insurable interest can arrange

insurance and seek indemnity due to loss or damage

Insurable interest is defined as legal interest in another

persons life or in the protection of property from injury,loss, destruction or pecuniary damage

By virtue of ownership

Tenant who had leased property

Employers interest on employees lives

Insurable interest


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Insurer is liable for any loss proximately caused by a peril

insured against, but he is not liable for any loss which is not

proximately caused by a peril insured against-Judge Lumb

Proximate cause means the active, efficient cause that sets

in motion a train of events which brings about a result,

without the intervention of any force started and working

actively from a new and independent source

Proximate cause


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Insurance contracts are mostly contracts of indemnity Insured is entitled to obtain the loss amount suffered from

the insurances he had effected on the property He is not to be benefited due the loss/damage

If sum insured is on agreed value basis the loss will besettled on that basis Extent of indemnity will be based on the market value of

the property at the time of occurrence of the event which

caused the loss/damage or destruction

Subrogation and contribution are the corollaries of

indemnity to ensure that the claim settlement follows the

normal indemnity

Indemnity


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Offer and acceptance- Proposal is studied by the Underwriterwho then quotes the premium terms, warranties and conditions

Once accepted by the proposer and premium is paid, the cover

note is issued. Later on policy document is issued.

Alterations/ changes are effected by endorsements Claim is being processed to take into account the salvage,

under-insurance and excess under the policy and many times to

deduct the additional premium for restoring the sum insured to

the original level by charging the additional premium on the claim

amount paid from the date of loss till the date of expiry. Claim will be subject to getting the subrogation rights

preserved against the third parties responsible for making good

the loss and transferring the same to Insurers

Underwriting and claims


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Fire insurance; Reinstatement value

(other than stocks) Market value

Marine insurance : Agreed value

Marine hull insurance: Agreed value

Motor insurance: Insured declared value

Engineering insurance: Present day replacement

value

Misc insurance: Market value

Changes


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Business Interruption insurance Engineering insurance

Liability insurance- CGL Public /Product E & O ( PI) liability insurance D & O liability insurance PI for Lawyers/CAs/Doctors/ Brokers/Architects/

structural engineers Overseas travel insurance Employees benefit policies ( GPA/GMC)

Insurances which need to

become popular


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TAC was earlier providing the rates, terms policy

wordings and regulations as to how to conduct the business Nearly 70% of the business was in the purview of the

tariff

After liberalising the market by allowing new playersTariff rates had been withdrawn wef 1-1-2007 but with some

limitations From 1-1-2008 it is expected that the policy wordings will

be withdrawn by IRDA which will allow freedom to theinsurers to come out with their policy design wordings

clauses and warranties. The beneficiary will be the customers/ insureds

Detariffing


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Thank You!

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