•Insurance •Insurance is a contract of Indemnity– make good any financial loss suffered by Insured •
•Entry level Capital required for a new insurance company in India Rs 1 Cr. •
•1st insurance company was started in India in 1818 at Kolkata.
•Insurance Act, 1938 and IRDA Act 1999 are primary legislation that deals with insurance sector in India.
Principles governing insurance contracts. 1. Principle of upmost good faith
2. Principal of Insurable Interest: The policyholder must have a monetary interest in the property, which he has insured. In life insurance, insurable interest is deemed to exist in case of certain relationship.
3. Principle of Indemnity: However, Life insurance is not a contract of indemnity. ●
4. Principle of Subrogation: Restitution of the rights of an Insured in favour of the insurer.
5. Principle of Contribution: If Insurer indemnifies the insured in full the insurance company can claim the share of compensation from other insurance company. ●
6. Principle of Proximate Cause: nearest cause or direct cause of loss •
Types of Insurance
Life insurance and non life insurance: •
•Life insurance contract – long term ; covers human life (Death & accident) , Risk of death certain , Economic value of Life not ascertainable
•General insurance – Renewable every year ; covers any assets other than human life , Risk of loss uncertain , economic value of asset ascertainable
•Type of insurance business:
1. Life 2. Health 3. Travel 4. Motor 5. Property
Life Insurance Products 1.Term Insurance: Protection for a term, no maturity value. 2.Whole life insurance: Provides for the payment of the face amount upon the insured’s death regardless of when death occurs. ● 3.Endowment insurance: pay face amount on the death or on maturity
4. Money Back plans
Annuity (pension) Plans: It is wise to provide for old age.
Two type plans:
•Immediate Annuity: Annuity payment from insurance company starts immediately. Premium to be paid in lump sum in one instalment only. •
•Deferred Annuity: The person pays regular contribution to the insurance company, till the vesting age. Option to pay single premium also. Policy holder has the option to encash 1/3rd of this corpus fund on vesting date tax free and balance 2/3rd will be utilized for purchase of annuity (pension). •
6. Unit linked insurance policy (ULIP): Combination of investment and protection
•Health Insurance •Covers Hospitalization expenses for self or on floater(spouce, dependent children & parents) basis for the family
•Tax Benefit: U/s 80 D of Income Tax Act upto Rs 25000 (Rs 30000 for Sr. Citizens) •
Travel Insurance • Protects self and /or family against travel related accidents, •unexpected medical expenditure during travel, • losses such as baggage loss, •loss of passport etc and •interruption or delays in flights or •delayed arrival of baggage etc.
Motor Insurance •
Give protection to the vehicle owner against (i) damages to vehicle and (ii) pays for any 3rd party liability. •
Property insurance •Insurance of building, machinery, stocks etc against fire and burglary risk and so on. Marine cargo insurance, Aviation insurance , house hold , Shopkeepers policy, office package policy etc. • •
Group insurance Schemes: • life cover to a number of persons under a single policy called the ‘Master Policy’. •
Insurance intermediaries •Agent and brokers have to be licensed by IRDA for life or general insurance or both. •
Ombudsmen (upto 12 month time) is empowered to redress grievances of insurance contracts of person lives, insured amount up to Rs 20 lac. Conditions : 1.Complaint to concerned insurance company which has rejected or no reply is received within a period of one month. 2.The complaint is not made later than one year after the insurer had replied 3.Same complaint should not be pending in a court.
Social Security Scheme 1.Aam Aadmi Bima Yojana (AABY): Janshree Bima Yojana (JBY) –Life and disability cover between 18 to 59 years of BPL category. –Insurance coverage: Rs 30000 natural death and Rs 75000 on death or total disability due to accident, Rs 37500 partial permanent disability due to accident –Annual Premium Rs 200 per beneficiary, 50% by Central Govt. and 50% by state Govt. – 2.PM Jeevan Jyoti Bima Yojana (PMJJBY)- Life insurance –SB a/c holder 18- 50 years. –Premium Rs 330 per annum. Period of policy –Risk Coverage: Rs 2 lac on death. –Termination of insurance: (i) Age 55 years (ii) Closure of bank account/non renewal. No multiple coverage. –
2. PM Suraksha Bima Yojana (PMSBY): Accidental insurance –SB a/c holder age between 18 to 70 years. –Risk Coverage: Rs 2.00 Lac – 3.Atal Pension Yojana(APY): –Age between 18 to 40 years. –Pension from the age of 60 years –Monthly pension between Rs 1000 to Rs 5000 per month. –GOI will co-contribute 50% of the subscriber’s contribution or Rs 1000 per annum for a period of 5 years.
Banc assurance •Selling of insurance products through banks and •exploiting the true synergies between the bank and insurer and •optimally utilizing their respective strengths. •
Banc assurance Models: 1.Corporate agency model or distribution alliance model 2.Joint venture model 3.Merger between a bank and a insurer 4.Build or buy own insurance operation. ● In India, only the first two models have been adopted.
Insurance Regulatory and Development Authority (IRDA) ( IRDA Act, 1999)
Functions of IRDA:
•Issuing certificate of registration to the player •
•Protecting policy holders interest. •
•Specifying qualifications, code of conduct and practical training for intermediaries. •
•Specifying code of conduct for surveyors / loss assessors. •
•Promoting efficiency in conduct of insurance business. •
•Regulating investment of funds by insurance companies