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Introduction to insurance

Meaning Insurance provides financial protection against a loss arising out of happening of an uncertain event. A person can avail this protection by paying premium to an insurance company. A pool is created through contributions made by persons seeking to protect themselves from common risk. Premium is collected by insurance companies which also act as trustee to the pool. Any loss to the insured in case of happening of an uncertain event is paid out of this pool. Definition Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance. The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'.

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Concept of insurance / how insurance works The concept behind insurance is that a group of people exposed to si ilar risk come together and make contributions towards formation of a pool of funds. In case a person actuall suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums. Lets take some examples to understand how insurance actually works: Example 1 SUPPOSE
y y y y y

Example 2 SUPPOSE
y y y y

Houses in a village = 1000 Value of 1 House = Rs. 40,000/Houses burning in a yr = 5 Total annual loss due to fire = Rs. 2,00,000/Contribution of each house owner = Rs. 300/-

y y

Number of Persons = 5000 Age and Physical condition = 50 years & Healthy Number of persons dying in a yr = 50 Economic value of loss suffered by family of each dying person = Rs. 1,00,000/Total annual loss due to deaths = Rs. 50,00,000/Contribution per person = Rs. 1,200/-

UNDERLYING ASSUMPTION All 1000 house owners are exposed to a common risk, i.e. fire PROCEDURE All owners contribute Rs. 300/- each as premium to the pool of funds Total value of the fund = Rs. 3,00,000 (i.e. 1000 houses * Rs. 300) 5 houses get burnt during the year Insurance company pays Rs. 40,000/- out of the pool to all 5 house owners whose house got burnt EFFECT OF INSURANCE Risk of 5 house owners is spread over 1000 house owners in the village, thus reducing the burden on any one of the owners.

UNDERLYING ASSUMPTION All 5000 persons are exposed to common risk, i.e. death PROCEDURE Everybody contributes Rs. 1200/- each as premium to the pool of funds Total value of the fund = Rs. 60,00,000 (i.e. 5000 persons * Rs. 1,200) 50 persons die in a year on an average Insurance company pays Rs. 1,00,000/- out of the pool to the family members of all 50 persons dying in a year EFFECT OF INSURANCE Risk of 50 persons is spread over 5000 people, thus reducing the burden on any one person.

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History of Insurance
In some sense one can say that insurance appears simultaneously with the appearance of human society. There are two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread.

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early 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 or lost at sea.

Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices.

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The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year).

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Insurance can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667." A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England's first fire insurance company, the 'Insurance Office for Houses', at the back of the Royal Exchange. Initially, 5,000 homes were insured by Barbon's Insurance Office.

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Principles of insurance
Insurance involves pooling funds from many insured entities (known as exposures) in order to pay for relatively uncommon but severely devastating losses which can occur to these entities. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring. In order to be insurable, the risk insured against must meet certain characteristics in order to be an insurable risk. Insurance is a commercial enterprise and a major part of the financial services industry, but individual entities can also self-insure through saving money for possible future losses. When a company insures an individual entity, there are basic legal requirements. Several commonly cited legal principles of insurance include.

1. Indemnity All insurance contracts of fire and marine insurance are contracts of indemnity. According to it the insurer undertakes to put the insured, in the event of loss, in the same position that he occupied immediately before the happening of the event insured against. In the other words insurer undertakes to compensate the insured for the loss caused to him/her due to damage or destruction of property insured. The compensation payable and the loss suffered are to be measured in terms of money. The principle of indemnity is not applicable to life insurance. 2. Insurable interest.- The insurable must have an insurable interest in the subject matter of insurance. One fundamental fact of this principle is that it is not the house, ship, machinery, potential liability of life that that is insured, but it is the pecuniary interest of the insured in them, which is insured. Insurable interest means some pecuniary interest in the subject matter of the

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insurance contract. The insured must have an interest in the preservation of the thing or the life insured. In case of insurance of property, insurable interest of the insured in the subject matter of the insurance must exist at the time of happening of the event. In order to name insurable interest however, it s not necessary that one should be the owner of the property. For example, a trustee holding the property on behalf of others has an insurable interest in the property. 3. Utmost good faith A contract of insurance is a contract of uberrimae fidei i.e. a contract found on utmost good faith-. Both the insurer and insured must display the good faith towards each other with the regard of the contract. It is the duty of the insured to voluntarily make full, accurate disclosure of all facts, materials to the risk bearing proposed and the insurer to make clear all the terms and conditions in the insurance contract. Thus it is binding on the proposer to disclose all material facts about the subject matter of the proposed insurance. Any fact which is likely to affect the mind of a prudent insurer in deciding to accept the insurance or in fixing the rate of premium is material for this purpose. Failure to make disclosure of material facts by the insured makes the contract of insurance voidable at the discretion of the insurer. 4. Contribution As per this principle it is the right of an insurer who has paid claim under insurance, to call upon other liable insurers to contribute for the loss of payment. It implies that in case of double insurance, the insurers are to share the losses in proportion to the amount assured by each of them. In case there is a loss when there is more than one policy on the same property, the insured will have no right to recover more than the full amount of his actual

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loss. If the full amount is recovered from the one insurer the right to obtain further payment from the other insurer will cease. 5. Subrogation It refers to the right of the insurer to stand up in the place of the insured, after settlement of a claim, as far as the right of insured in respect of recovery from an alternative source is involved. After the insured is compensated for the loss or damage to the property insured by him/her the right of ownership of such property passes on to the insurer. This is because the insured should not be allowed to make any profit, by selling the damaged property or in the case of lost property being recovered.

6. Cause Proxima or Proximate Cause According to this principle the

insurance policy is designed to provide compensation only for such losses as are caused by the perils which are stated in the policy. When the loss is the result for two or more causes, the proximate cause means the direct , the most dominant and most effective cause of which the loss is the natural consequence. In case of loss arising out of any mishaps should be taken into consideration.

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Development of insurance sector in India
The Indian Insurance Industry India insurance is a flourishing industry, with several national and international players competing and growing at rapid rates. Thanks to reforms and the easing of policy regulations, the Indian insurance sector been allowed to flourish, and as Indians become more familiar with different insurance products, this growth can only increase, with the period from 2010 - 2015 projected to be the 'Golden Age' for the Indian insurance industry.

India Insurance Policies at a Glance Indian insurance companies offer a comprehensive range of insurance plans, a range that is growing as the economy matures and the wealth of the middle classes increases. The most common types include: term life policies, endowment policies, joint life policies, whole life policies, loan cover term assurance policies, unit-linked insurance plans, group insurance policies, pension plans, and annuities. General insurance plans are also available to cover motor insurance, home insurance, travel insurance and health insurance. Due to the growing demand for insurance, more and more insurance companies are now emerging in the Indian insurance sector. With the opening up of the economy, several international leaders in the insurance sector are trying to venture into the India insurance industry.

India Insurance: History The history of the Indian insurance sector dates back to 1818, when the Oriental Life Insurance Company was formed in Kolkata. A new era began in the India insurance sector, with the passing of the Life Insurance Act of 1912. The Indian Insurance Companies Act was passed in 1928. This act empowered the government of India to

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gather necessary information about the life insurance and non-life insurance organizations operating in the Indian financial markets. The Triton Insurance Company Ltd formed in 1850 and was the first of its kind in the general insurance sector in India. Established in 1907, Indian Mercantile Insurance Limited was the first company to handle all forms of India insurance.

Indian Insurance: Sector Reform The formation of the Malhotra Committee in 1993 initiated reforms in the Indian insurance sector. The aim of the Malhotra Committee was to assess the functionality of the Indian insurance sector. This committee was also in charge of recommending the future path of insurance in India.

The Malhotra Committee attempted to improve various aspects of the insurance sector, making them more appropriate and effective for the Indian market.

The recommendations of the committee put stress on offering operational autonomy to the insurance service providers and also suggested forming an independent regulatory body. The Insurance Regulatory and Development Authority Act of 1999 brought about several crucial policy changes in the insurance sector of India. It led to the formation of the Insurance Regulatory and Development Authority (IRDA) in 2000.

The goals of the IRDA are to safeguard the interests of insurance policyholders, as well as to initiate different policy measures to help sustain growth in the Indian insurance sector. The Authority has notified 27 Regulations on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of Insurers to Rural and Social sector, Investment and

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Accounting Procedure, Protection of policy holders' interest etc. Applications were invited by the Authority with effect from 15th August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The Authority has its Head Quarter at Hyderabad. Detailed information on IRDA is available at their website www.irdaindia.org

Indian Insurance Industry

Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:

Life Insurers:

Life Insurance Corporation of India (LIC)

General Insurers: General Insurance Corporation of India (GIC) (with effect from Dec'2000, a National Reinsurer) GIC had four subsidiary companies, namely (with effect from Dec'2000, these subsidiaries have been de-linked from the parent company and made as independent insurance companies.

1. The Oriental Insurance Company Limited 2. The New India Assurance Company Limited 3. National Insurance Company Limited 4. United India Insurance Company Limited.

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OTHER LIFE INSURERS

y y y y y y y y y y y y y y y y y y y y

HDFC Standard Life Insurance Company Ltd. Max New York Life Insurance Co. Ltd. ICICI Prudential Life Insurance Company Ltd. Kotak Mahindra Old Mutual Life Insurance Limited Birla Sun Life Insurance Company Ltd. Tata AIG Life Insurance Company Ltd. ING Vysya Life Insurance Company Private Limited Bajaj Allianz Life Insurance Company Limited Metlife India Insurance Company Ltd. IDBI Fortis Life Insurance Reliance Life Insurance Company Limited. Aviva Life Insurance Co. India Pvt. Ltd. Sahara India Insurance Company Ltd. Shriram Life Insurance Company Ltd. Bharti AXA Life Insurance Company Ltd. Future General India Life Insurance Company Limited Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. Aegon Religare Life Insurance Company Ltd. DLF Pramerica Life Insurance Company Ltd. Star Union Dai-ichi Life Insurance Co. Ltd.,

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Insurance Regulatory and Development Authority
The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto."

Expectations from IRDA

(A) The law of India has following expectations from IRDA:-

1. To protect the interest of and secure fair treatment to policyholders.

2. To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term funds for accelerating growth of the economy.

3. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates.

4. To ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard. 5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery.

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6. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players.

7. To take action where such standards are inadequate or ineffectively enforced.

8. To bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation.

(B) Duties, Powers and Functions of IRDA:Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA (1) Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.

(2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include,

(a) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;

(b) protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;

(c) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;

(d) Specifying the code of conduct for surveyors and loss assessors;

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(e) Promoting efficiency in the conduct of insurance business;

(f) Promoting and regulating professional organisations connected with the insurance and re-insurance business;

(g) Levying fees and other charges for carrying out the purposes of this Act;

(h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance business;

(i) Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938. (j) Specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;

(k) Regulating investment of funds by insurance companies;

(l) Regulating maintenance of margin of solvency; (m) Adjudication of disputes between insurers and intermediaries or insurance intermediaries;

(n) Supervising the functioning of the Tariff Advisory Committee;

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(o) Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f);

(p) Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and

(q) Exercising such other powers as may be prescribed

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Types of insurance
(I). AUTO INSURANCE

In the event of a car accident or damage, auto insurance will protect the owner from the expensive costs involved in fixing the car, other property or another driver's car. Car and auto insurance is essential for all drivers and is required by the law in m any states and countries. It is wise to have full coverage automobile insurance, but some drivers can get by on third-party or liability insurance.

(A) Types of Auto Insurance

There are two main types of auto insurance. They are:

(1) Full Coverage Auto Insurance In the event of an accident, full coverage auto insurance will protect the car and any other cars or property damaged. Normally, finance companies stipulate that any of their clients that have car loans must insure their cars fully. This protects the bank, as the car is theirs until the loan is paid off by the owner.

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(2) Third Party Auto Insurance Third party or liability auto insurance will only protect another party in the event of an accident. So if a car with third party auto insurance hits another car, the other car's damages, and perhaps even the expenses incurred from loss of use, would be paid by the offender's third party insurance. However, any damage to his/her own car would have to be borne by the car owner. Naturally, this is less expensive than full coverage, as it carries far less risk.

(II) HEALTH INSURANCE Health insurance is an agreement made between a person and an insurance company. The person, or the insured, must pay a regular fee (called a premium) to the insurance company. In return, the insurance company will pay all or (usually) some medical expenses needed when the insured becomes injured, ill, or otherwise hospitalized Health insurance is critical, especially to those living in areas where the costs of hospitalization are high. Most developed nations offer government subsidized medical care, which makes it less critical to have health insurance. In the US, however, medical care is extremely expensive, and is not paid for by the government. Therefore, it is wise for all Americans living in the US to have good health insurance policies.

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Healthcare Policies in India

An insurance industry survey in 2008 points out that only 3% of the total Indian population enjoys coverage under healthcare policies. This small number constitutes both public-funded and private medical insurance. So, there is an urgent need to energize the health insurance sector. This would also help to avert financial expenses on medical treatment. In India, public funded healthcare is available only to a small section of low income group people and to government employees only. The Employee State Insurance Scheme (ESIS) focuses on the public healthcare policy for low income groups. The Central Government Health Scheme (CGHS) offers medical treatment to government employees. However, people can opt for free medical treatment which is offered by any of the government-run hospitals and dispensaries. In the private domain, three types of Indian health insurance policies are available. These are grouped as follows:

(1) Individual medical insurance:-

An individual health insurance plan is intended for those persons who are not covered under a group healthcare policy. Unemployed or self-employed people usually opt for a personal health insurance policy. People covered under the public healthcare policy can also choose to buy an individual medical insurance plan for extended cover. A short-term individual health insurance plan is ideal for those who have just ended a group insurance policy due to termination of employment.

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Personal medical health insurance cover is expensive and lacks the benefits of a group health insurance plan. On the other hand, the lack of insurance cover can mean the financial burden of paying huge medical bills in the event of an illness or accident.

(2) Group Health Insurance Plans

Group health insurance plans, or the health insurance cover provided by employers are the most cost-effective insurance plans to consider. As the risk is divided in the group, insurers provide these plans at very economical rates and offer wider coverage. Though adding your family members to these plans might turn out to be a little expensive, there are, nevertheless, other ways to decrease expenses.

One can consider individual insurance plans for the family members and continue with the group health insurance plan.

(3) Global Health Insurance Got a promotion along with a passport stamped with multiple-entry Visa? The time is right to buy a global health insurance

Aimed at delivering health insurance coverage across the globe, a chink left by general health insurances and exposed with the increasing number of travelers medical needs, global health insurance covers you for any medical condition while traveling or living overseas.

However, as with any product, study the details to know exactly what you are buying. Know the coverage extent and the exceptions that rule the policy.

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(III) Property Insurance

Property insurance provides coverage for insured property and compensates for loss associated with fire, theft, vandalism or natural calamities. The contents within the property are also covered by property insurance. Property insurance includes many forms of insurance, including:

Fire Insurance Flood Insurance Earthquake Insurance Boiler Insurance Home Insurance

Methods to Acquire Property Insurance.

Property insurance can be acquired in two main ways: (1) Open Perils: This type of insurance covers all the losses that are not specifically excluded in the policy. The insurance company compensates for damage to property due to flood, earthquake, war or terrorism, as well as nuclear incidents.

(2) Named Perils: This type of policy provides coverage for damage-causing events that are specifically listed in the policy documents. This means that if the mentioned causes of loss are fire and burglary, one cannot claim for damage caused by an earthquake.

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Need of Property Insurance.

Property insurance safeguards the financial future of a person if certain damages occur to his property or a third party files a negligence suit for damages suffered on his property. Property insurance will reimburse him for damages due to fire, theft and unforeseen calamities, as well as situations that are specified in his policy. This policy will also compensate for accommodation and restaurant meals while his home is being repaired. Property insurance also includes protection for personal liability in situations where someone, such as tenant or neighbor, is injured while visiting that person s home or property. This kind of situation is extremely perilous because the visitor might sue him for negligence and the person could end up paying a hefty sum in compensation. Property insurance also provides cover for unintentional damage to someone else s property.

Types of property insurance

(1). Fire insurance Fire insurance business in India is governed by the All India Fire Tariff that lays down the terms of coverage, the premium rates and the conditions of the Fire Policy. The fire insurance policy has been renamed as Standard Fire and Special Perils Policy. The risks covered are as follows:

Dwellings, Offices, Shops, Hospitals (Located outside the compounds of industrial/manufacturing risks) Industrial / Manufacturing Risks Utilities located outside industrial/manufacturing risks Machinery and Accessories Storage Risks

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outside the compound of industrial risks Tank farms / Gas holders located outside the compound of industrial risks

(2) Flood Insurance

An Indian flood insurance policy entails the insurer taking the responsibility of indemnifying the policyholder for property losses faced due to flooding. India flood insurance is, however, not a very common policy among homeowners in the country. Most home insurance contracts provide protection against loss caused by overflowing of water within the house. To cover oneself against the natural disaster of flooding, however, one needs to opt for a separate policy.

The Major Flood Prone Areas in India:-The major four zones in India that are comparatively more susceptible to floods include:

1. The Brahmaputra River Basin

2.The Ganga River Basin

4.Central India and the Deccan River Basins

3.The North-West River Basins

(3). Home Insurance

Home insurance (or home owner's insurance) is a type of property insurance. One's residence or home, including all its contents, is within the category of home insurance. The cost an insurer pays for a homeowner s insurance policy is determined by taking into account the replacement cost of the home along with all of the home's contents. These values are normally determined by the value of the home as dictated

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by the property market and what amount similar homes sell for in that area. Different cities or countries will determine this value differently.

A home insurance policy generally remains active over a specific time period, during which the insured has to pay premiums, i.e. money paid towards insurance costs every term, to the insurer (usually the insurance company).However, home insurance that is not contracted over a fixed time period may also be obtained by the insured and is called perpetual insurance.

(4)Earthquake Insurance

Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary home owner s insurance policies do not cover earthquake loss. Most earthquake insurance policies feature a high deductible, which makes this type of insurance useful if the entire home is destroyed, but not useful if the home is merely damaged. Rates depend on location and the probability of an earthquake. Rates may be cheaper for homes made of wood, which withstand earthquakes better than homes made of brick.

(IV) Life Insurance Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form

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simply specifies a lump sum to be paid on the insured's demise. As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy. The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.

Types of life insurance policies and plans: The document containing the written contract between the insurers and insured along with the terms and conditions of insurance is called the policy. After the proposal form is filled by the insured and the insurer accepts the form and the premium, a policy is issued to the insurer. (1). Whole life policy:-in this kind of policy the amount payable to the insured will not be paid before the death of the insured. The sum then becomes payable only to the beneficiaries or heir of the deceased. The premium will be payable for a fixed period (20 to 30 years) or for the whole life of the assured. If the premium is payable for a fixed period, the policy will continue till the death of the assured. (2).Endowment life assurance policy:-The insurer (insurance company) undertakes to pay a specified sum when the insured attains a particular age or on his death whichever is earlier. The sum is payable to his legal heir/s or nominee named therein in case of death of the assured. Otherwise the sum will be paid to the assured after a fixed period i.e., tills he /she attains a particular age. Thus the endowment policy matures after a limited no of years.

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(3). Joint life policy:-This policy is taken up by two or more persons. The premium is paid jointly or by either of them in installments or lump sum. The assured sum or the policy money is payable upon the death of any one person to the other survivor or survivors. Usually this policy is taken up by husband and wife jointly or by two partners in a partnership firm where the amount is payable to the survivor on the death of either of the two.

(4). Annuity policy:-Under this policy the assured sum or policy money is payable after the assured attains a certain age in monthly, quarterly, and half yearly or annual installments. The premium is paid in installments over a certain period or single premium may be paid by the assured. This is useful to those who prefer a regular income after a certain age.

(5). Childrens endowment policy:-This policy is taken up by a person for his or her children to meet the expenses of their education or marriage. The agreement states that a certain sum will be paid by the insurer when the children attain a particular age. The premium is paid by the person after entering the contract. However no premium will be paid, if he dies before the maturity of the policy.

(6). Term Insurance plan:-Term insurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else. There are three key factors to be considered in term insurance:

1. Face amount (protection or death benefit), 2. Premium to be paid (cost to the insured), and

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3. Length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. Common types of term insurance include Level, Annual Renewable and Mortgage insurance.

(7). Permanent Life Insurance:-Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.

(V) Miscellaneous types of insurance: (1) A fidelity bond: - is a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

While called bonds, these obligations to protect an employer from employeedishonesty losses are really insurance policies. These insurance policies protect from losses of company monies, securities, and other property from employees who have a manifest intent to cause the company loss. There are also many other forms of crime-

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insurance policies (burglary, fire, general theft, computer theft, disappearance, fraud, forgery, etc.) to protect company assets.

(2) Marine Insurance: - covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.

Cargo insurance is a sub-branch of marine insurance, though Marine also includes Onshore and Offshore exposed property (container terminals, ports, oil platforms, pipelines); Hull; Marine Casualty; and Marine Liability.

(3) Liability insurance- is a part of the general insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event he or she is sued for claims that come within the coverage of the insurance policy. Originally, individuals or companies that faced a common peril formed a group and created a self-help fund out of which to pay compensation should any member incur loss (in other words, a mutual insurance arrangement). The modern system relies on dedicated carriers, usually for-profit; to offer protection against specified perils in consideration of a premium. Liability insurance is designed to offer specific protection against third party claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. In general, damage caused intentionally as well as contractual liability is not covered under liability insurance policies. When a claim is made, the insurance carrier has the duty (and right) to defend the insured. The legal costs of a defense normally do not affect policy limits unless the policy expressly states otherwise; this default rule is useful because defense costs tend to soar when cases go to trial.

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Company profiles

Life Insurance Corporation of India

Type Industry Founded

Government-owned corporation Insurance 1 September 1956

Headquarters Mumbai, India Key people T. S. Vijayan (Chairman) D. K. Mehrotra, Thomas Mathew and A. Dasgupta (Managing Directors) Life insurance Pensions Mutual funds Rs. 8 trillion (US$ 178.4 billion) Government of India 112,184 (2008) LIC Housing Finance Limited LIC(Nepal)Ltd LIC(Lanka)Ltd LIC(International)BSC(C) LICindia.com

Products Total assets Owner(s) Employees

Subsidiaries

Website

The Life Insurance Corporation of India (LIC) (Hindi: ) is the largest life insurance company in India, and also the country's largest investor; it is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses. It has assets estimated of Rs. 8 trillion (US$ 178.4 billion). It was founded in 1956.

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Headquartered in Mumbai, which is considered the financial capital of India, the Life Insurance Corporation of India currently has 8 zonal Offices and 101 divisional offices located in different parts of India, at least 2048 branches located in different cities and towns of India along with satellite Offices attached to about some 50 Branches, and has a network of around 1.2 million agents for soliciting life insurance business from the public.

Nationalization In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by owners of private insurance companies. In the ensuing investigations, one of India's wealthiest businessmen, Ram Kishan Dalmia, owner of the Times of India newspaper, was sent to prison for two years. Eventually, the Parliament of India passed the Life Insurance of India Act on 1956-06-19, and the Life Insurance Corporation of India was created on 1956-09-01, by consolidating the life insurance business of 245 private life insurers and other entities offering life insurance services. Nationalization of the life insurance business in India was a result of the Industrial Policy Resolution of 1956, which had created a policy framework for extending state con trol over at least seventeen sectors of the economy, including the life insurance. The company began operations with 5 zonal offices, 33 divisional offices and 212 branch offices. LIC received another setback with Mundra fraud but it escaped with least damage from Harshad Mehta scam. There are intermittent rumors in media but LIC has largely escaped large scale scandals of the type encountered by erstwhile UTI largely because of its immunity from being transparent in the name of confidentiality in the era of RTI. Often there is consumer demand to open the investment portfolio of LIC but nobody knows if it will be good for the corporation. But there is a great and undue

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reliance on the management environment of this great corporation. People are scared after what has happened to Goldman Sachs or Lehman Brothers in USA and elsewhere, which were equally or more big and great.

Current status Over its existence of around 50 years, Life Insurance Corporation of India, which commanded a monopoly of soliciting and selling life insurance in India, created huge surpluses, and contributed around 7 % of India's GDP in 2006.The Corporation, which started its business with around 300 offices, 5.6 million policies and a corpus of INR 459 million (US$ 92 million as per the 1959 exchange rate of roughly Rs. 5 for a US $ has grown to 25000 servicing around 180 million policies and a corpus of over Rs. 8 trillion (US$ 178.4 billion).The organization now comprises 2048 branches, 109 divisional offices and 8 zonal offices, and employs over 1,002,149 agents. The corporate Office of LIC is in Mumbai. It also operates in 12 other countries, primarily to cater to the needs of Non Resident Indians. With the change in the India's economic philosophy from the early 1990s, and the subsequent relaxation of state control over several sectors of the economy, the monopolistic position of the Life Insurance Corporation of India was diluted, and it has had to compete with a number of other corporate entities, Indian as well as transnational Life Insurance brands. However, it still manages to be the largest player in the Indian market, with the lion's share of 55%.The recent Economic Times Brand Equity Survey rated LIC as the No. 1 Service Brand of the Country. In the financial year 2006-07 Life Insurance Corporation of India's number of policy holders are said to have crossed a whopping 200 million (fourth in terms of population of the countries of the world)

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Subsidiaries: LIC owns the following subsidiaries:

1) Life Insurance Corporation of India International

2) LIC Nepal.

3) LIC Lanka

4) LIC Housing Finance.

Objectives of LIC of India

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To spread and provide life insurance to the masses at a reasonable cost. To spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost.

To maximize mobilization of people's savings by making insurance-linked savings adequately attractive.

To conduct business with utmost economy and with the full realization that the moneys belong to the policyholders.

To act as trustees of the insured public in their individual and collective capacities.

To meet the various life insurance needs of the community that would arise in the changing social and economic environment.

To involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.

To promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective.

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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.

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.

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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.

Mission "Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development."

Vision "A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."

BOARD OF DIRECTORS Members On The Board Of The Corporation Shri. T.S. Vijayan (Chairman) Shri. D.K. Mehrotra (Managing Director - LIC) Shri. Thomas Mathew T. (Managing Director - LIC) Shri. A.K. Dasgupta (Managing Director - LIC) Shri. Ashok Chawla (Finance Secretary, Ministry of Finance, Govt. of India) Shri. R. Gopalan (Secretary, Department of Financial Services, Ministry of Finance, Govt. of India.)

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Shri. Yogesh Lohiya (Chairman cum Managing Director, GIC of India) Shri D.L. Rawal (Chairman & Managing Director , Dena Bank) Dr. Sooranad Rajashekhran Shri. Monis R. Kidwai Lt. General Arvind Mahajan ( Retd.)

FRONT END OPERATIONS With a view to enhancing customer responsiveness and services, in July 1995, LIC started a drive of On Line Service to Policyholders and Agents through Computer. This on line service enabled policyholders to receive immediate policy status report , prompt acceptance of their premium and get Revival Quotation, Loan Quotation on demand. Incorporating change of address can be done on line. Quicker completion of proposals and dispatch of policy documents have become a reality. All our 2048 branches across the country have been covered under front-end operations. Thus all our 100 divisional offices have achieved the distinction of 100% branch computerisation. New payment related Modules pertaining to both ordinary & SSS policies have been added to the Front End Package catering to Loan, Claims and Development Officers Appraisal. All these modules help to reduce time-lag and ensure accuracy.

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Awards & Achievements

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INDY's Silver Award for Best In-house Magazine Pitch Award -" Rank 1 India's Top 50 Service Brands Golden Peacock Innovative Product / Service Award 2009 Loyalty Award - 2009 Readers Digest Trusted Brand Award 2008 in the Platinum category CNBC Awaaz Consumer Awards 2008 NDTV Profit Business Leadership Award 2008 Golden Peacock Award for Excellence in Corporate Governance Web 18 Genius of the web awards 2007 NASCOM IT USER Award 2008 Selected Business Super brand India 2008 ASIA BRAND CONGRESS BRAND LEADERSHIP AWARD, 2008 Loyalty Awards 2008 - Insurance Sector SKOCH Challengers Award 2008 for Jeevan Madhur

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THE ICICI PRUDENTIAL

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank one of India's foremost financial services companies-and Prudential plc - a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%. Company began its operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide reach includes over 1,900 branches (inclusive of 1,074 micro-offices), over 210,000 advisors; and 7 bancassurance partners. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. The ICICI Prudential Edge The ICICI Prudential edge comes from its commitment to its customers, in all that it do - be it product development, distribution, the sales process or servicing. Here's a peek into what makes it leaders. 1. Its products have been developed after a clear and thorough understanding of customers' needs. It is this research that helps it to develop Education plans that offer the ideal way to truly guarantee your child's education, Retirement solutions that are a hedge against inflation and yet promise a fixed income after you retire, or Health insurance that arms you with the funds you might need to recover from a dreaded disease.

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2. Having the right products is the first step, but it's equally important to ensure that its customers can access them easily and quickly. To this end, ICICI Prudential has an advisor base across the length and breadth of the country, and also partners with leading banks, corporate agents and brokers to distribute our products . 3. Robust risk management and underwriting practices form the core of our business. With clear guidelines in place, company ensure equitable costing of risks, and thereby ensure a smooth and hassle-free claims process. 4. Entrusted with helping the customers meet their long-term goals, ICICI Prudential adopt an investment philosophy that aims to achieve risk adjusted returns over the long-term. 5. Last but definitely not the least, the team is given the opportunity to learn and grow, every day in a multitude of ways. The company believe this keeps it engaged and enthusiastic, so that it can deliver on its promise to cover its customers, at every step in life. VISION To be the dominant Life, Health and Pensions player built on trust by world-class people and service.

Understanding the needs of customers and offering them superior products and service

Leveraging technology to service customers quickly, efficiently and conveniently

Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to policyholders

Providing an enabling environment to foster growth and learning for employees

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And above all, building transparency in all dealings.

The success of the company will be founded in its unflinching commitment to 5 core values -- Integrity, Customer First, Boundaryless, Ownership and Passion. Each of the values describe what the company stands for, the qualities of people and the way it work. Company believes that it is on the threshold of an exciting new opportunity, where it can play a significant role in redefining and reshaping the sector. Given the quality of parentage and the commitment of team, there are no limits to its growth. VALUES Every member of the ICICI Prudential team is committed to 5 core values: Integrity, Customer First, Boundary less, Ownership, and Passion. These values shine forth in all they do, and have become the keystones of success. Promoters ICICI Bank Limited (NYSE:IBN) About ICICI Bank: ICICI Bank Ltd (NYSE:IBN) is India's largest private sector bank and the second largest bank in the country with consolidated total assets of over US$ 100 billion as of March 31, 2010. ICICI Bank s subsidiaries include India s leading private sector insurance companies and among its largest securities brokerage firms, mutual funds and private equity firms. ICICI Bank s presence currently spans 19 countries, including India. Prudential plc Established in London in 1848, Prudential plc is an international retail financial services group with significant operations in Asia, the US and the UK serving around 25 million customers, policyholder and unit holders worldwide. The company has 290 billion of assets under management and it is one of the best capitalised insurers in the world with an Insurance Groups Directive (IGD) capital surplus

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estimated at 3.4 billion (at 31 December 2009). Prudential is a leading life insurer in Asia with a presence in 12 markets and have the top three positions in seven key locations of Hong Kong, India, Indonesia, Malaysia, Singapore, the Philippines and Vietnam SCENARIO OF THE COMPANY ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector 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 March 31, 2010) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. For the period April 1, 2009 to March 31, 2010, the company has garnered total premium of Rs 16,532 crores and has underwritten over 10 million policies since inception. The company has assets held over Rs. 57,000 crores as on March 31, 2010. For the past nine years, ICICI Prudential Life has retained its leadership position in the life insurance industry with a wide range of flexible products that meet the needs of the Indian customer at every step in life. Distribution ICICI Prudential Life has one of the largest distribution networks amongst private life insurers in India. It has a strong presence across India with over 1,900 branches (including 1,074 micro-offices) and an advisor base of over 210,000 (as on March 31, 2010). The company has 7 bancassurance partners having tie-ups with ICICI Bank, Ratanagiri District Central Co-op Bank, Ballia Kshetriya Co-operative Bank, Renuka

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Nagrik Sahakari Bank, Bhandara Urban Co-operative Bank, Balasinor Nagarik Sahakari Bank Limited, Arvind Co-op Bank. Products Insurance solutions ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its products can be enhanced with up to 4 riders, to create a customized solution for each policyholder. Savings & Wealth Creation Solutions ICICI Pru Save 'n' Protect. ICICI Pru CashBak ICICI Pru LifeTime ICICI Pru Assure Wealth ICICI Pru Premier Wealth ICICI Pru ACE

Protection Solutions ICICI Pru Pure Protect ICICI Pru LifeGuard ICICI Pru HomeAssure Child Plans ICICI Pru SmartKid Maxima ICICI Pru SmartKid Assure Retirement Solutions ICICI Pru ForeverLife ICICI Pru LifeTime Pension Maxima ICICI Pru LifeStage Pension Advantage ICICI Pru Immediate Annuity ICICI Pru Assure Pension ICICI Pru Elite Pension II Health Solutions ICICI Pru Hospital Care ICICI Pru Crisis Cover ICICI Pru MediAssure ICICI Pru Health

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MANAGEMENT PROFILE Board of Directors The ICICI Prudential Life Insurance Company Limited Board comprises reputed people from the finance industry both from India and abroad. Ms. Chanda D. Kochhar, Chairperson Mr. N. S. Kannan, Director Mr. K. Ramkumar, Director Mr. Barry Stowe, Director Mr. Adrian OConnor, Director Mr. Keki Dadiseth, Independent Director Prof. Marti G. Subrahmanyam, Independent Director Ms. Rama Bijapurkar, Independent Director Mr. Vinod Kumar Dhall, Independent Direct Mr. V. Vaidyanathan, Managing Director & CEO

MANAGEMENT TEAM The ICICI Prudential Life Insurance Company Limited Management team comprises reputed people from the finance industry both from India and abroad. Mr.V.Vaidyanathan, Managing Director & CEO Dr. Avijit Chatterjee, Appointed Actuary Mr. Puneet Nanda, Executive Vice President

Awards & Recognitions

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India's Most Customer Responsive Insurance Company. AGC Networks Economic Times, Customer Responsiveness Awards, 2010.

The International Council of Customer Service Organizations (ICCSO) recently awarded ICICI Prudential Life the International Service Excellence Awards 2009 in the categories of Customer Charter Winner, Service Excellence in Large Business Highly Commended and Customer Service Leader awarded to Ms. Priya Nayak, VP-Service Quality.

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ICICI Prudential Life Insurance has won the first runner up award for the Best Defect Elimination in Service & Transaction category at Asian Six Sigma Excellence Summit 2009.

ICICI Pru Life ranked as the Most Trusted Pvt Life Insurance brand in the Brand Equity "Most Trusted Brands 2009" survey

ICICI Prudential Life won a Gold award for AboutULIPS.com and Health Saver campaign, innovation award for www.taxguru08-09.com and a silver award for its Insurance yoga campaign at the ICICI Group Marketing Excellence award.

Confederation of Indian Industry (CII) - Western Region recently awarded ICICI Prudential Life a 'Commendation for Strong Commitment to HR Excellence 2008' at the CII HR Summit 2008.

ICICI Prudential Life Insurance was awarded with the coveted 'ICAI Award for Excellence in Financial Reporting' by the Institute of Chartered Accountants of India (ICAI) for the financial year ended March 31, 2008.

ICICI Prudential Life was awarded the Life Insurance Company of the Year at the12th Asia Insurance Industry Awards 2008.

ICICI Prudential Life was awarded with two Bronze Effie's in the services category for its corporate campaign and Retirement Number campaign

ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runner up at the Outlook Money & NDTV Profit Awards 2008

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BIBILOGRAPHY

http://www.economywatch.com/insurance/auto/ http://en.wikipedia.org/wiki/History_of_insurance http://en.wikipedia.org/wiki/Insurance_Regulatory_and_Development_Authority http://en.wikipedia.org/wiki/Life_Insurance_Corporation_of_India