INSURANCE

M K Bhan

Insurance ???
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

Parties to Insurance
INSURER The party bearing the risk is known as the 'insurer' or 'assurer

INSURED -

The party whose risk is covered is known as the 'insured' or 'assured'

Concept of Insurance POOLING

A group of people exposed to similar kind of risk come together and make contributions towards formation of a pool of funds In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. This contribution is known as PREMIUM

History of Insurance
Way back in Babylonian times, around 2100 B.C., the Code of Hammurabi was the first basic insurance policy. This policy was paid by the traders in the form of a loan to guarantee the safe arrival of their goods by caravan. Of course, caravans faced the same kind of perils our transportation industry faces today like robbery, bad weather and breakdowns

History Continued....
The Babylonians developed a system which was recorded in the famous Code of Hammurabi, 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.

History Continued....
In ancient times, farmers of China sent their crops to market on boats. Inevitably, on occasion a boat sank along the way. The farmers began spreading their crops among numerous boats, so that if one boat sank, any one family would only lose a small portion of their crops, thus avoiding financial devastation. The loss was spread among many families, and was therefore manageable for each one

History Continued....
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.

History Continued....
In 1688, the first insurance company was formed.
It got its start at Lloyds Coffee House, a place where merchants, ship-owners, and underwriters met to transact their business. Lloyds grew into one of the first modern insurance companies, Lloyds of London

History Continued....
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.

Development of Insurance in India

1818 1850
ORIENTAL LIFE INSURANCE COMPANY

First Insurance company in India to start functioning

TRITON INSURANCE First non life insurance company at Calcutta

1870-71
1874 1896 1897 1907

BOMBAY MUTUAL LIFE ASSURANCE SOCIETY

First Life Insurance Company ORIENTAL GOVERNMENT SECURITY LIFE ASSURANCE COMPANY LIMITED - Life BHARAT INSURANCE COMPANY EMPIRE OF INDIA ASSURANCE COMPANY INDIAN MERCANTILE INSURANCE LTD

Development of Insurance Act

1912 Life Insurance Act(1912) was enacted to regulate the life Insurance business.
1928 The Indian Insurance Companies Act enacted to enable the Government to collect statistical data's about both life and non-life insurance business. 1938 Earlier legislation consolidated amended to by the Insurance Act(1938) with the objective of protecting the interest of the insuring public.

Development of Life Insurance

1956

245 Indian and foreign insurers and provident fund societies were nationalized and LIFE INSURANCE CORPORATION OF INDIA was formed by an act of Parliament,viz LIC ACT 1956 with a capital of Rs. 5 crores from Govt. Of India.

Development of General Insurance

1972
The General Insurance Business (Nationalization) Act,1972 nationalized the general Insurance business in India 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.,

The United India Insurance Company Ltd.

Thus the GENERAL INSURANCE CORPORATION OF INDIA came in to the existence as an apex body

History of IRDA
1993 Malhotra Committee setup to explore and to recommend means to reintroduce an element of competition by with drawing the exclusivity of LIC and GIC. Malhotra Committee submits report Insurance Regulatory Authority (IRA restyled as IRDA) established

1994 1997

1999

Insurance Regulatory & Development Act (IRDA) passed

Insurance Sector as in Today

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

Life Insurance Companies

Birla Sun Life Insurance Co. Ltd HDFC Standard Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd ING Vysya Life Insurance Company Ltd. Life Insurance Corporation of India Max Life Insurance Company Ltd. Bajaj Allianz Life Insurance Company Ltd. Met Life India Insurance Company Ltd. Kotak Mahindra Old Mutual Life Insurance Ltd SBI Life Insurance Co. Ltd Tata AIA Life Insurance Company Ltd Reliance Life Insurance Company Ltd.

Life Insurance Companies

Aviva Life Insurance Company India Ltd Sahara India Life Insurance Co, Ltd. Shriram Life Insurance Co, Ltd. Bharti AXA Life Insurance Company Ltd. Future Generali India Life Insurance Company Ltd IDBI Federal Life Insurance Company Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. AEGON Religare Life Insurance Company Ltd. DLF Pramerica Life Insurance Co. Ltd. Star Union Dai-ichi Life Insurance Co. Ltd. IndiaFirst Life Insurance Company Ltd. Edelweiss Tokio Life Insurance Co. Ltd.

Non-Life Insurance Companies

Bajaj Allianz General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. IFFCO Tokio General Insurance Co. Ltd. National Insurance Co.Ltd. The New India Assurance Co. Ltd. The Oriental Insurance Co. Ltd. Reliance General Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd Tata AIG General Insurance Co. Ltd. United India Insurance Co. Ltd. Cholamandalam MS General Insurance Co. Ltd. HDFC ERGO General Insurance Co. Ltd. Export Credit Guarantee Corporation of India Ltd.

Non-Life Insurance Companies

Agriculture Insurance Co. of India Ltd. Star Health and Allied Insurance Company Ltd. Apollo Munich Health Insurance Company Ltd. Future Generali India Insurance Company Ltd. Universal Sompo General Insurance Co. Ltd. Shriram General Insurance Company Ltd. Bharti AXA General Insurance Company Ltd. Raheja QBE General Insurance Company Ltd. SBI General Insurance Company Ltd. Max Bupa Health Insurance Company Ltd. L&T General Insurance Company Ltd. Religare Health Insurance Company Ltd. Magma HDI General Insurance Company Ltd. Liberty Videocon General Insurance Company Ltd.

Insurance Penetration and Density

Life
Year Density (USD) 2005 2006 2007 18.30 33.20 41.20 (%age) 2.53 4.10 4.00

Non-Life
(USD) 4.40 5.20 6.20 (%age) 0.61 0.60 0.60

Industry
Density Penetration (USD) 22.70 46.60 54.30 (%age) 3.14 4.70 5.20

Penetration Density Penetration

2008
2009 2010

40.40
47.70 55.70

4.00
4.60 4.40

6.20
6.70 8.70

0.60
0.60 0.71

46.60
54.30 64.40

4.70
5.20 5.10

Premium underwritten by Life Insurers

Insurer
LIC Private Sector Total

2009-10
186077.31 79369.94 265447.25

2010 -11
203473.40 88131.60 291604.99

* All data are in crores

Premium underwritten by Non Life Insurers

Insurer
Public Sector Private Sector Total

2009-10
20643.45 13977.00 34620.45

2010 -11
25151.83 17424.63 42576.45

* All data are in crores

Investments by the Insurance Sector

Insurer
2010

Life
2011 1148589 281528

Non Life
2010 51687 14685 2011 61235 21285 2010 1044018 234811

Total
2011 1209824 302813

Public Private

992331 220127

Total

1212458

1430118

66372

82520

1278830

1512638

* All data are in crores

Career in Insurance Sector

An Insurance Company will have opening in:

Marketing & Distribution

Actuarial Survey & Fraud Detection Underwriting Operations

Investment Department
Third Party Administrator

Job Prospects in Insurance Sector

A plain Graduate in the area of marketing and sales can expect anything above 20000/- pm plus good incentives Management entry level (AAO) can expect above 25000/- pm with periodical promotions Highly qualified professionals in the field of Actuarial Science can expect starting salary of 50,000/- pm (Minimum)

We have an Actuarial Society of India in Mumbai which conducts these professional examinations. Mathematics and Stats graduates can try for these courses. Eligibility requirement is higher secondary education

Wish you all a very Bright Future in your Respective Careers

THANK YOU