INSURANCE SECTOR HISTORY 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 such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular. 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades 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 dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted 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 legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers. The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business. An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business. 1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then. In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973. This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein , among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners. Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders interests. In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002. Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country.

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the countrys GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

Acts The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. It is governed by a number of acts. The Insurance Act of 1938[1] was the first legislation governing all forms of insurance to provide strict state control over insurance business. Life insurance in India was completely nationalized on January 19, 1956, through the Life Insurance Corporation Act. All 245 insurance companies operating then in the country were merged into one entity, the Life Insurance Corporation of India. The General Insurance Business Act of 1972 was enacted to nationalise the about 100 general insurance companies then and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance and United India Insurance, which were headquartered in each of the four metropolitan cities. Until 1999, there were no private insurance companies in India. The government then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby deregulating the insurance sector and allowing private companies. Furthermore, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects and Company Secretaries. A minimum capital of US$80 million(Rs.400 Crore) is required by legislation to set up an insurance business.

WORLD SCENARIO ISSUES AND CHALLENGES 1. The first consequence of the WTC attack was the sudden stoppage of acceptance of the risk of terrorism by the industry. The risk was regarded as akin to the risk of war on land and against the Govt. of the day. Since war risks on land are invariably excluded, the risk of terrorism was abruptly withdrawn. 2. The world witnessed unprecedented rate increases for almost all risks underwritten by insurers to recoup the huge losses suffered. The policy wordings and terms and conditions were tightened and primary insurers were put under pressure to pay higher reinsurance costs. 3. The WTC attack has also brought the issue of contract certainty to the fore, as the terms stated in the insurance slips by the brokers that placed the risks had used different binders. Swiss Re, several Lloyds insurers along with Chubb and seven other insurers/reinsurers had used a binder, which the Courts have held recently that the two plane crashes should be treated as a single loss claim; whereas the binder wording used by the brokers for St. Paul Travelers, Allianz, Royal insurance, Industrial Risk Insurers and five others had a different binder wording and the Courts have decreed separately that the two plane hits were two separate recoverable losses. Consequently the insured was not fully indemnified as per his claim that both sets of binders should pay claims treating the WTC attack as two separate loss claims. This issue of contract certainty is still under a vigorous discussion in the UK market among the players. 4. Another controversial issue that suddenly came to the fore was the contingency fees that the brokers were collecting from the industry for several years, and the bid rigging allegations against the international brokers led by Marsh, Aon and Willis. The Eliot Spitzer investigation has now resolved the issue of contingency fees collection by the brokers under a new arrangement of \Management General Agency between insurers and the brokers for doing the work of insurers, with brokers being recognized as agents of insurers for the specific duties they discharged for the insurers/reinsurers. But the broking industry suffered huge setback to its reputation and had to promise Eliot Spitzer, the then New York Attorney General, that the named brokers have voluntarily decided to discontinue collecting the contingency fees that formed almost half their earnings. In the UK and even in US the issue has not been finally put to rest.

5. There is a growing demand by international insurers/reinsurers that the ageold practice of 2 collection of brokerage from insurers should shift to the insured, who actually avail the services of brokers. And while this practice is increasingly gaining acceptance of large premiumpaying insured, who insist that the premium rates should them to make the brokers work harder to negotiate only net rates from insurers. The FSA in the UK is asking for brokerage and other fee payments collected from insurers should be made known to the insured, not if asked by them, but without exception in the interests of financial transparency. If the industry does not come up with an acceptable solution, the FSA would prescribe a regulation. 6. The large number of mergers and acquisitions among brokers has led to the creation of more powerful brokers in terms of business volumes, expertise and negotiating power. Inevitably they have displayed a greater cost consciousness of taking on business subject to a guaranteed minimum fees or brokerage income, as one of the determinants to deal with a particular piece of business. Broker domination of the consumer market has led to a concentration of market power in their hands. 7. The huge losses that hurricanes like Katrina, Wilma and Rita have resulted in insurers suffering losses of about $ 83 bn; and the European storms have added another $ 4 bn. Energy losses alone amounted to $ 15 bn out of the total losses. About 50% of these hurricane losses were borne by the reinsurers; thus cushioning the primary insurers to remain financially stable. As the burden of cat. Losses, both in their severity and frequency, have risen, Swiss Re and other reinsurers have begun to raise fresh capital from the market to meet such contingencies by issuance of Cat Bonds that under circumstances they could retain the principal amounts of the bonds as well. 8. The US is unique among nations in that it is exposed virtually to all types of natural disastershurricanes, earthquakes, floods, tsunamis, and volcanic eruptions. In most disaster prone areas the size of the population growth and real estate prices are riding high. Insurers have begun to work with consumers and legislatures to improve the ability of those that are likely to suffer to prepare for, respond to, and recover from natural disasters. 9. A regulatory issue that concerns the duty of disclosure in contract law is under review by the UK Law Commission. On the issue of misrepresentation, the Commission is proposing the test for materiality for disclosure should be based on what the reasonable insured would have done rather than the prudent insurer. This proposal, if accepted, would shift the onus of 3 proof more stringently on the insurer. Also, the new remedies for breaches should include the proportionality of such lacunae. The duty of an insured to disclose is to be replaced with a duty on insurers to ask specific questions. It is not clear yet, if these applications would be applicable to reinsurance deals. These changes currently under discussion are likely to be implemented in 2010. Another issue under debate is about the legalities of warranties that are still under debate.

10. The high energy prices, the FDI and FII inflows and the outsourcing of jobs to low cost economies have changed the growth parameters of individual nations with China, India, Brazil, Russia and other East European countries leading the global changes. The shifting of incomelevels have made the emerging markets of greater appeal to the insurers of the developed markets to enter. 11. The insurance penetration levels have dropped in 2005 compared to the levels as in 2004, as the insurance premiums, both life and non-life, did not keep pace with the growth of the World GDP. The booming stock markets, the high interest rates, the rising real estate values, the debilitating taxation policies of the Govts., the high energy prices affecting the cost of living indices gave potential savers alternative sources to invest their reduced incomes. The insurers in the emerging markets seem also both unwilling and unable to influence Govt. policies. Insurance in most emerging markets is administered by Govt. directly instead of appointing Regulators to oversee the market progress and developments under new laws. 12. International credit rating Agencies have gained increased prominence and more public credibility is bestowed on the rating given to reinsurers. As everyone knows reinsurers are not subject to any national regulations. Their rating alone determines how sound a reinsurers security to the cedant is. There is also a judgmental change in the standards used by the rating agencies in evaluating the financial and operational performances of reinsurers; no longer is the current financial strength, measured as the capability of a reinsurer to meet its claim obligations considered as a single factor of importance but how the management has performed on its core insurance operations; and if the enterprise in future would continue to be attractive to the current and potential future investors; particularly as insurance operations are highly volatile with a number of imponderables and the enterprise may have to resort to raising fresh capital. 13. Bermuda is emerging as a rival reinsurance market to the London and European markets. Those 4 new reinsurers numbering 9 entities that have set up their operations as new in 2005 with a capital of about $ 7 bn now want to go public to raise additional capital but with a track record of just one or two years of relative clam on catastrophe claims. The period of going public that was about 5 or 6 years is getting shorter, due to hedge funds entering the insurance capital markets. The investors are asked to judge them on a short-term record of performance. 14. The relationships between the insurer and the reinsurer have undergone profound changes and reinsurers are now tending to become more contractwording minded and not long term based relationship-minded. Stricter terms and higher deductibles, restricted markets for proportional treaties are gaining an upper hand. MAJOR PLAYERS Life insurance corporation( LIC)

Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. Reorganization of LIC took place and large numbers of new branch offices were opened. As a result of re-organisation servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation. It may be seen that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But with re-organisation happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies. Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal offices, 992 satallite offices and the Corporate office. LICs Wide Area Network covers 109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LICs ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future. Some of the important milestones in the life insurance business in India are: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company. HDFC LIFE HDFC Life, one of India's leading private life insurance companies, offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC), India's leading housing finance institution and Standard Life plc, the leading provider of financial services in the United Kingdom. HDFC Ltd. holds 72.37% and Standard Life (Mauritius Holding) Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others. HDFC Life's product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health. Customers have the added advantage of customizing the plans, by adding optional benefits called riders, at a nominal price. The company currently has 25 retail and 9 group products in its portfolio, along with 10 optional rider benefits catering to the savings, investment, protection and retirement needs of customers. HDFC Life continues to have one of the widest reaches among new insurance companies with about 500 branches in India touching customers in over 900 cities and towns.The company has also established a liaison office in Dubai. HDFC Life has a strong presence in its existing markets with a strong base of Financial Consultants.

BAJAJ ALIANZ Bajaj Allianz Life Insurance Company Limited is a joint venture between Allianz AG, one of the world's largest Life Insurance companies and Bajaj Auto, one of the biggest twoand three-wheeler manufacturers in the world. Allianz AG is an insurance conglomerate globally and one of the largest asset managers in the world, managing assets worth worldwide with 115 years of financial experience in over 70 countries. Bajaj Auto is one of the most trusted name[peacock term] in Indian auto for over 55 years. Bajaj Allianz Fact File: Owners: Bajaj Auto (India)and Allianz AG (Germany) IRDA Reg. No. 116 Head Office: Pune CEO: Mr.V.Philip Chairman: Mr. Rahul Bajaj Bajaj Allianz is one of the fastest growing private Life Insurance Company in India. This has more than 1,200 branches across country and deals in primarily unitlinked, traditional, health, child and pension policies. At Bajaj Allianz Life Insurance, customer delight is our guiding principle. Our business philosophy is to ensure excellent insurance and investment solutions by offering customised products, supported by the best technology. Standard Chartered Bank along with CitiBank introduced many insurance cum investment policies in collaboration with Bajaj Allianz Insurance Co. with covert high allocation charges. However, it is alleged that there are several loopholes and lacking of transparencies in their products, therefore a neologism is used to depict the situation, ''de jure''"''ethical fraud'' However, empirical case studies(One policy bond[?], that infringes the right to information of the consumer is shown here as an example of extreme opacity are to be incorporated to prove this "ethical fraud" by the Bankers. Thus, it is better to call the collaboration as, following Adam Smith, collusion:"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

ICICI Prudential Life Insurance Company

It is a joint venture between ICICI Bank, one of the foremost financial services companies of India and Prudential plc, one of the leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector life insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential Life's capital stands at Rs. 4,780 crores (as of September 30, 2010) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. For the period April 1, 2010 to September 30, 2010, the company garnered Rs 7,267 crores of total premiums and has underwritten over 10 million policies since inception. The company has a 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 crores as on September 30, 2010. Since the liberalization of Indian Insurance sector, ICICI Prudential Life Insurance has been one of the earliest private players. Since the time, ICICI Pru Life has been the leader in terms of market share as indicated by the IRDA (Insurance Regulatory and Development Authority, the regulator for Indian Insurance Industry) at its website.[citation needed] In June, 2009 ICICI Prudential Life Insurance has decided to snap its tie up with TTK Healthcare to settle insurance claims of its users.[1] ICICI Prudential's life insurance products may be loosely categorized under four forms- Life Plans (further categorised into Term Plans and Wealth Plans), Child Plans, Retirement Plans and Health Plans. Under Life Insurance Plan category it offers term plans like i-Protect online term plan, ICICI Pru Pure-Protect and ICICI Pru LifeGuard, and ULIP wealth plans like ICICI Pru LifeStage Wealth II, ICICI Pru LifeLink Wealth SP, ICICI Pru Pinnacle Super etc.

Under the Child / Education Plan category it offers products like ICICI Pru SmartKid regular premium and ICICI Pru SmartKid Premier Under the Retirement Insurance Plan category it offers products like ICICI Pru Forever Life & ICICI Pru LifeLink Pension SP. Under the Health Insurance Plan category it offers products like ICICI Pru Health Saver & ICICI Pru Hospital Care II. ICICI Pru health saver is a comprehensive whole of life health insurance plan that takes care of hospitalization costs as well as all your health care needs. ICICI Pru guaranteed savings insurance plans are for child education and marriage. ICICI Pru life link wealth plan- is a unique single premium ULIP that provides you the opportunity to enjoy market linked higher returns over the long term on your investment

SBI Life Insurance It is a joint venture life insurance company between State Bank of India (SBI), the largest state-owned banking andfinancial services company in India, and BNP Paribas Assurance. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26% of the capital. SBI Life Insurance has an authorized capital of 2,000 crore (US$378 million)and a paid up capital of 1,000 crore (US$189 million).

In 2007, CRISIL Ltd, a subsidiary of global rating agency Standard & Poor's, gave the company a AAA/Stable/P1+ rating. When the government of India opened the life insurance sector to private companies, SBI started SBI Life as a joint venture with BNP Paribas in 2001. While in its initial stage its business was mainly from bancassurance channel, now it is developing its own agency team for selling its life insurance products.now

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