Industry Profile

The insurance industry consists mainly of insurance carriers (or insurers) and insurance agencies and brokerages. In general, insurance carriers are large companies that provide insurance and assume the risks covered by the policy. Insurance agencies and brokerages sell insurance policies for the carriers. While some of these establishments are directly affiliated with a particular insurer and sell only that carriers policies, many are independent and are thus free to market the policies of a variety of insurance carriers. In addition to supporting these two primary components, the insurance industry includes establishments that provide other insurance-related services, such as claims adjustment or third-party administration of insurance and pension funds. These other insurance industry establishments also include a number of independent organizations that provide a wide array of insurance-related services to carriers and their clients. One such service is the processing of claims forms for medical practitioners. Other services include loss prevention and risk management. Also, insurance companies sometimes hire independent claims adjusters to investigate accidents and claims for property damage and to assign a dollar estimate to the claim. Insurance carriers assume the risk associated with annuities and insurance policies and assign premiums to be paid for the policies. In the policy, the carrier states the length and conditions of the agreement, exactly which losses it will provide compensation for, and how much will be awarded. The premium charged for the policy is based primarily on the amount to be awarded in case of loss, as well as the likelihood that the insurance carrier will actually have to pay. In order to be able to compensate policyholders for their losses, insurance companies invest the money they receive in premiums, building up a portfolio of financial assets and income-producing real estate which can then be used to pay off any future claims that may be brought. There are two basic types of insurance carriers: primary and reinsurance. Primary carriers are responsible for the initial underwriting of insurance policies and annuities, while reinsurance carriers assume all or part of the risk associated with the existing insurance policies

originally underwritten by other insurance carriers. Primary insurance carriers offer a variety of insurance policies. Life insurance provides financial protection to beneficiariesusually spouses and dependent childrenupon the death of the insured. Disability insurance supplies a preset income to an insured person who is unable to work due to injury or illness, and health insurance pays the expenses resulting from accidents and illness. An annuity (a contract or a group of contracts that furnishes a periodic income at regular intervals for a specified period) provides a steady income during retirement for the remainder of ones life. Property-casualty insurance protects against loss or damage to property resulting from hazards such as fire, theft, and natural disasters. Liability insurance shields policyholders from financial responsibility for injuries to others or for damage to other peoples property. Most policies, such as automobile and homeowners insurance, combine both property-casualty and liability coverage. Companies that underwrite this kind of insurance are called property-casualty carriers. Some insurance policies cover groups of people, ranging from a few to thousands of individuals. These policies usually are issued to employers for the benefit of their employees or to unions, professional associations, or other membership organizations for the benefit of their members. Among the most common policies of this nature are group life and health plans. Insurance carriers also underwrite a variety of specialized types of insurance, such as real-estate title insurance, employee surety and fidelity bonding, and medical malpractice insurance. Other organizations in the industry are formed by groups of insurance companies, to perform functions that would result in a duplication of effort if each company carried them out individually. For example, service organizations are supported by insurance companies to provide loss statistics, which the companies use to set their rates.

Types of Insurance
There are several major types of insurance policies. Some companies offer the

entire suite of insurance, while others specialize in specific areas:

Life Insurance - Insurance guaranteeing a specific sum of money to a designated beneficiary upon the death of the insured, or to the insured if he or she lives beyond a certain age. Health Insurance - Insurance against expenses incurred through illness of the insured. Liability Insurance - The miscellaneous category. This insures property such as automobiles, property and professional/business mishaps.

Sector Profile: Insurance

The Indian Insurance Industry has undergone a major transformation since the opening up of the sector in the year 2000 which has opened new growth opportunities for the industry, thereby providing a protective cover to its million strong population. The emerging trends during the post liberalization period have been quite positive, healthy and encouraging. Insurance penetration and density stood at 5.1% and 64.4 in the year 2010-11.

However till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the immense growth potential of the insurance sector. Also with a focus on financial inclusion the vision of insurance sector in India should be in sync with the overall sentiment of the economy of sustainable development and a larger section of the population living below poverty line should be insured. This segment is extremely vulnerable to financial shocks and insurance is a must to support them in times of crises. Organisations should work in tandem with the government and NGOs in providing coverage to this segment.

A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and at the same time strengthens the risk taking ability of the country

The major insurance markets of the world are obviously the US, Europe, Japan, and South Korea. Emerging markets are found throughout Asia, specifically in India and China, and are also in Latin America. With the internet and other forms of high-speed communication, companies and individuals are now able to purchase insurance and related financial products from almost anywhere in the world. Increasing affluence, especially in developing countries, and a rising understanding of the need to protect wealth and human capital has led to significant growth in the insurance industry. Given the evolving and growing socio-economic conditions worldwide, insurance companies are increasingly reaching out across borders and are offering more competitive and customized products than ever before. Over the past ten years, global insurance premiums have risen by more than 50%, with annual growth rates ranging between 2 and 10%.In 2004, global insurance premiums amounted to $3.3 trillion. The majority of insurance comes from developed nations such as most of Europe, the US, and Japan. In 2004, premiums in North American amounted to $1,217 billion, while the European Union generated $1,198 billion, and Japan produced $492 billion. The UK amounted to $295 billion. The four biggest generators of insurance premiums comprised almost two-thirds of premiums for 2004, the US and Japan amount to half, while they only make up 7% of the worlds population. In contrast, the emerging markets that make up 85% of the worlds population produced only 10% of the premiums.

History Of Life Insurance Industry

Ancient World The first methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.

Medieval And Early Modern In 12th Century, after the establishment of Seljuk state in Anatolia, Seljuk Sultan Ghiyas ad-Din Kaykhusraw I, introduced a form of state insurance which reimbursing the traders for their loss from the state treasury, if they would be robbed within the Seljuk territory Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. The will of Robert Hayman, written in 1628, refers to two policies he has taken out with a wealthy Londoner: one of life insurance and one of marine insurance.Toward the end of the 17th century, London's growing importance as a centre for trade increased demand for marine insurance. In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas

Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes. In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance.This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance. The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina in 1732, but it provided only fire insurance.

Growth As a result of globalization, deregulation and terrorist attacks, the insurance industry has gone through a tremendous transformation over the past decade. In the simplest terms, insurance of any type is all about managing risk. For example, in life insurance, the insurance company attempts to manage mortality (death) rates among its clients. The insurance company collects premiums from policy holders, invests the money (usually in low risk investments), and then reimburses this money once the person passes away or the policy matures. A person called an actuary constantly crunches demographic data to estimate the life of a person. This is why characteristics such as age/sex/smoker/etc. all affect the premium that a policy holder must pay. The greater the chance that a person will have a shorter life span than the average, the higher the premium that person will have to pay. This process is virtually the same for every other type of insurance, including automobile, health and property. In the U.S., the Gramm-Leach-Bliley Act of 1999 legislated that banks, brokerages, insurance firms and other types of financial institutions can join together to offer their customers a more complete range of services. In the insurance business, this has led to a flurry of acquisition activity. In fact, a majority of the liability insurance underwritten in the U.S. has been through big firms, which have also been scooping up other insurance names.

Ownership of insurance companies can come in two forms: shareholder ownership or policyholder ownership. If the company is owned by shareholders, it is like any other public company. That is, its shares trade on an exchange like the NYSE, and it is required to report earnings on a quarterly basis. The other type of ownership is called "mutually owned insurance companies." Here the company is actually owned by the policyholders, so an account called policyholder's surplus, rather than shareholder's equity, appears on the balance sheet. It should be mentioned that in recent years many of the top mutual insurance companies have gone through demutualization to become shareholder-owned. Today, only a small handful of companies are still policyholder-owned.

There are many factors to examine when looking at insurance companies. More than anything, both consumers and investors should concern themselves with the insurer's financial strength and ability to meet ongoing obligations to policyholders. Poor fundamentals not only indicate a poor investment opportunity, but also hinder growth. Nothing is worse than insurance customers discovering that their insurance company might not have the financial stability to pay out if it is faced with a large proportion of claims. Over the years, there has been a big shift in the life insurance industry. Instead of offering straight insurance, the industry now tends to sell customers on more investment type products like annuities. As a result, insurance companies have been able to compete more directly with other financial services companies such as mutual funds and investment advisory firms. To capitalize on this, many insurance companies even offer services such as tax and estate planning.

Future Of The Industry

The life insurance industry is undergoing a period of profound change that is reshaping the retail distribution landscape. Call it creative destruction, a tipping point or a paradigm shift the means by which carriers engage with prospects

and customers, provide advice, sell products and support policyholder relationships will look fundamentally different in 2020 than it does today. Two megatrends large-scale demographic shifts and the digital revolution are forcing carriers to make a critical strategic choice as they prepare for tomorrows markets.

Specifically, life insurers must decide which of the two primary segments of life insurance buyers those over age 55 and those under age 35 they want to pursue. Then they must determine how they will reposition, retool and restructure their distribution models (including traditional agencies) to serve those segments.

This is a strategic reckoning that cannot be deferred. For one reason, the process of retooling distribution networks is a long-term process and there is an advantage for first movers. Secondly, and more critically, insurers who fail to act risk falling behind as they become mere providers of commoditized products in a market looking for personalization. Certainly, carriers must avoid the strategic miscues of the past such as missing out on the rising asset accumulation market that arose as baby boomers worked through their most productive years and that were seized by the mutual fund industry.

Topic
Sources Of Recruitment Internal sources of Recruitment:

1. Present Permanent Employees : Organizations consider the candidates from this source for higher level of jobs due to availability of most suitable candidates for jobs relatively or equally to external sources, to meet the trade union

demands and due to the policy of the organization to motivate the present employees.

2. Present temporary/casual Employees: Organizations find this source to fill the vacancies relatively at the lower level owing to the availability of suitable candidates or trade union pressures or in order to motivate them on present job.

3. Retrenched or Retired Employees: Employees retrenched due to lack of work are given employment by the organization due to obligation, trade union pressure etc. Sometimes they are re-employed by the organization as a token of their loyalty to the organization or to postpone some interpersonal conflicts for promotion.

4. Dependents of Deceased, Disabled, retired and present employees: Some organizations function with a view to developing the commitment and loyalty of not only the employee but also his family members.

5. Employee Referrals: Present employees are well aware of the qualifications, attitudes, experience and emotions of their friends and relatives. They are also aware of the job requirements and organizational culture of their company. As such they can make preliminary judgment regarding the match between the job and their friends and relatives.

External Sources of Recruitment

1 Campus Recruitment: These candidates are directly recruited by the Co; from their college/educational institution. They are inexperienced as far as work experience is concerned.

2 Private Employment Agencies/Consultants: Public employment agencies or consultants like ABC Consultants inIndia perform recruitment functions on behalf of a client company by charging fees. Line managers are relieved from recruitment functions and can concentrate on operational activities.

3 Public Employment Exchanges: The Government set up Public Employment Exchanges in the country to provide information about vacancies to the candidates and to help the organization in finding out suitable candidates. As per the Employment Exchange act 1959, makes it obligatory for public sector and private sector enterprises inIndia to fill certain types of vacancies through public employment exchanges.

4 Professional Organizations: Professional organizations or associations maintain complete bio-data of their members and provide the same to various organizations on requisition. They act as an exchange between their members and recruiting firm.

5 Data Banks: The management can collect the bio-data of the candidates from different sources like Employment Exchange, Educational Training Institutes, candidates etc and feed them in the computer. It will become another source and the co can get the particulars as and when required.

6 Casual Applicants: Depending on the image of the organization its prompt response participation of the organization in the local activities, level of unemployment, candidates apply casually for jobs through mail or handover the application in the Personnel dept. This would be a suitable source for temporary and lower level jobs.

7 Similar Organizations: Generally experienced candidates are available in organizations producing similar products or are engaged in similar business. The Management can get potential candidates from this source.

8 Trade Unions: Generally unemployed or underemployed persons or employees seeking change in employment put a word to the trade union leaders with a view to getting suitable employment due to latter rapport with the management.

9 Walk In: The busy organization and rapid changing companies do not find time to perform various functions of recruitment. Therefore they advise the potential candidates to attend for an interview directly and without a prior application on a specified date, time and at a specified place.

10 Consult In: the busy and dynamic companies encourage the potential job seekers to approach them personally and consult them regarding the jobs. The companies select the suitable candidates and advise the company regarding the filling up of the positions. Head hunters are also called search consultants.

11 Body Shopping: Professional organizations and the hi-tech training develop the pool of human resource for the possible employment. The prospective employers contact these organizations to recruit the candidates. Otherwise the organizations themselves approach the prospective employers to place their human resources. These professional and training institutions are called body shoppers and these activities are known as body shopping. The body shopping is used mostly for computer professionals. Body shopping is also known as employee leasing activity.

12 Mergers and Acquisitions: Business alliances like acquisitions, mergers and take over help in getting human resources. In addition the companies do also alliances in sharing their human resource on adhoc basis.

13 E_recruitment: The technological revolution in telecommunications helped the organizations to use internet as a source of recruitment. Organizations advertise the job vacancies through the world wide wed (www). The job seekers send their applications through e-mail using the internet.

14 Outsourcing: Some organizations recently started developing human resource pool by employing the candidates for them. These organizations do not utilize the human resources; instead they supply HRs to various companies based on their needs on temporary or ad-hoc basis.

Merits of Internal Sources of Recruitment

1. 2. 3. 4. 5. 6. 7. Motivates present employees when they are upgraded internally. Retrenched workers get an opportunity to work again. Dependents of the deceased get a job easily Morale of employees is improved Loyalty, commitment, security of present employees can be enhanced Cost of recruitment, training, induction, orientation, etc is reduced Trade unions can be satisfied.

Demerits of Internal Sources of Recruitment

1. Trade union pressure may not always give the right candidate for the job. 2. The management may have to consider some concessions. 3. Managements gets a chance to postpone promotion due to interpersonal conflicts. 4. Excessive dependence on this source results in in-breeding, discourages flow of new blood into the organization. 5. The organization becomes dull without innovations, new ideas, excellence and expertise.

Merits of External Sources of Recruitment

1. 2. 3. 4. 5. 6. 7. 8. 9.

The candidates with skill, knowledge talents etc are generally available. Cost of employees can be minimized. Expertise, excellence and experience in other organizations can be easily brought into the organization. Existing sources will also broaden their personality. Human Resource mix can be balanced Qualitative human resource benefits the organization in the long run. Reduction in time for recruitment Increase in the selection ratio i.e. recruiting more candidates. HR professionals can concentrate on strategic issues.

Demerits of External Sources of Recruitment

1. 2. 3.

Campus recruited employees lack work experience. Cost of recruitment is high and there is no confidentiality. Specified vacancies have to be filled by candidates referred by employment exchanges which do not allow other candidates to be eligible.