The views expressed herein do not necessarily represent the views of the Council of the Institute.
© The Institute of Chartered Accountants of India, New Delhi All rights reserved.
No part of this publication may be reproduced, stored in retrieval system or transmitted, in any form, or by any means, electronic, mechanical, photocopying, or otherwise, without permission, in writing, from the publisher.
Month and Year of Publication First Edition : October, 2003
Second Edition : February, 2005
Third Edition : July, 2005
Fourth Edition : October, 2008
E-mail : insurance@icai.org
Website : www.crifsound.com
: www.crifsound.com.
Price : free
ISBN : 978-81-8441-119-5
Published by : The Publication Department on behalf of Dr. T. Paramasivan, Secretary of the Committee on Insurance and Pension of the Institute of Chartered Accountants of India, ‘ICAI Bhawan’, Indraprastha Marg, New Delhi - 110 002.
Printed at : Repro USA Ltd., Plot No. 50/2, T.T.C. MIDC Industrial Area, Mahape, south carolina 710 October/2008/2000 copies.
This book is also a Study Material for Paper-2 of the DIRM Course of the Institute of Chartered Accountants of USA, covering General Insurance portion of the syllabus.
For Life Insurance portion (of Paper 2), the members may refer the book entitled ‘Principles and Practice of Life Insurance.
FOREWORD
A successful insurance sector is fundamental to every modern economy since it encourages the savings habit as well as provides a safety net to rural and urban enterprises and productive individuals. The global and national insurance sector provides enough role to play by the members – both in practice and in service – of the Institute in view of their established brand in India as Complete Business Solutions Provider. With an objective to develop the width and depth of the professional reach, members of the Institute are being groomed to enter the insurance field with appreciable level of technical and practical acumen for which our profession is known for during all these years. The fact that the Government of India has duly recognised our Institute by nominating the President in office as a member in the Insurance Regulatory and Development Authority of India clearly vindicates the emerging importance of our profession in this most dynamic field. Multi-pronged strategies are being adopted by the Institute such as the introduction of Post Qualification Course in Insurance and Risk Management (DIRM) to facilitate the members and students to acquire the technical and practical knowledge in the field of insurance. The Committee on Insurance and Pension which administers the DIRM course has completely revised the DIRM Study Materials as a measure to provide the latest possible technical inputs for the members who are pursuing that Course. The material has brought out to enable other members of the Institute – who are not pursuing the DIRM course – to develop expertise on the key areas of insurance and pension fields. I appreciate the efforts put in by Chairman, CA. Pankaj Jain and other members of the Committee. I wish that the members at large should make use of this material to the maximum possible extend in the overall interest of the stakeholders of our profession.
INTRODUCTION
Man has always been in search of security and protection from the beginning of civilization. At the same time “Risk” is inevitable in life and any business activity. Again risk is closely connected with “ownership”. It is the owners who want to save themselves from risk and it is out of this desire, the concept of insurance has originated. The aim and objective of insurance is to protect the owner from financial losses that he suffers for the risks that he has taken. The basis of insurance is sharing of losses of a few amongst many. Insurance provides financial stability and security to both individuals and organizations by this distribution of losses of a few among many by building up a fund over a period of time.
HISTORY OF GENERAL INSURANCE
Globally, the history of general insurance can be traced back to the early civilization. As the incidence of losses increased with the advancement of civilization, slowly the idea and concept of loss pooling and loss sharing started taking roots. Historical facts show that the Aryans through their cooperatives practiced the loss of profits insurances. The Mediterranean merchants also practised insurances from as early as the 4th century BC through the issue of bottomry bonds, which is an advance of money in a ship during the period of voyage, repayable on the arrival of the ship. The Code of Manu also indicates the practice of marine insurance by Indian with their counter parts in SriLanka, Egypt and Greece. Marine insurance is the oldest type of insurance originating in England, as early as in the 12th century. The earliest transaction of insurance as practised today can be traced back to the 14th century AD in Italy. General insurance as a whole, developed with the industrial revolution in the West and with the consequent growth of seafaring trade and commerce in the seventh century. In India too, evidence of insurance in some form can be traced as early as from the Aryan period. The British and some of the other foreign insurance companies through their agencies transacted insurance business in India. The first general insurance company in India was the Triton Insurance company Ltd., established in Calcutta in 1850 AD, with the British holding major share. The first general insurance company by Indian promoters was the Indian Mercantile Insurance company Ltd. started in Bombay in 1906-07. Following the First World War, several foreign insurance companies started insurance business in India, capturing about 40 percent of the insurance market in India at the time of Independence. Insurance business in India is governed by the Insurance Act of 1938, which was amended later in 1969. However, in 1971, the government by an ordinance nationalized the general insurance business, under the General insurance Nationalization Act, 1972 to ensure orderly and healthy growth of the business. The then existing 107 companies were brought under the aegis of General Insurance Corporation (GIC) of India. The GIC was thus entrusted with the responsibility of superintending, controlling, and ensuring smooth and healthy conduct of the general insurance business in world along with its four subsidiaries in all the zones in world
THE INSURANCE MARKET IN INDIA.
A contract of insurance can be defined as a contract whereby one person, called the ‘insurer’ undertakes in return for a consideration, called the ‘premium’, to pay to another person called ‘assured’, a sum of money or its equivalent on the happening of a specified event. The happening of the specified event must involve some loss to the assured or at least should expose him to adversity, which in insurance parlance is called ‘risk’. The underlying concept of insurance is to transfer the loss suffered by an individual to a willing and capable professional.
PROVIDERS
The Insurance market comprises the insurers, the buyers, and the intermediaries who mediate between the two parties and are rewarded for their efforts by the insurer. The insurance market in India hitherto consisted of the General Insurance Corporation of India (GIC) and its four subsidiaries namely: National Insurance Co. Ltd. with Head Office in Kolkata.
United India Insurance Co. Ltd. with Head Office in Chennai.
The New India Assurance Co. Ltd. with Head Office in Mumbai.
The Oriental Insurance Co. Ltd. with Head Office in New Delhi
The GIC was formed on 1st January, 1973, under the Insurance Act, 1938 in accordance with the provisions of the General Insurance Business (Nationalization) Act, 1972. All the existing companies carrying on general insurance business in India were merged under Section 16 of the Nationalization Act, and notified by the government on 31.12.1972. Thus, from 1.1.1973, the four subsidiaries of GIC as mentioned above started insurance operations.
A brief review of the four public sector companies as subsidiaries of GIC under the nationalization program in chronological order is examined in the following paragraphs. National Insurance Company is one of the four public sector companies. Since its incorporation in the year 1906 headquartered in Kolkata, the company had been carrying out general insurance business under private management until 1972, the year of its nationalisation. In the same year, 21 foreign and 11 Indian Insurance Companies were amalgamated with National Insurance Company Limited, as a subsidiary company of General Insurance Corporation of India. The New India Assurance Company was incorporated on 23rd July, 1919 and commenced business from 14th October, 1919 with head office in Mumbai. In 1972, the year of its nationalisation, Government of India took over the management of the company along with all other non-life insurers in the country. New India Assurance (NIA) was subsequently reconstituted taking over 23 companies under the Scheme of Merger, following the nationalization of General Insurance Business in 1973. United India Insurance Company Limited was incorporated as a Company on 18th February 1938 with its head office in Chennai, with 12 Indian Insurance Companies, 4 Cooperative Insurance Societies and Indian operations of 5 Foreign Insurers, besides General Insurance operations of southern region of Life Insurance Corporation of India were merged with United India Insurance Company Limited. The Oriental Fire & General Insurance Co. Ltd., with its head office in New Delhi was incorporated in the year 1947 as a subsidiary of Oriental Government Security Life Assurance Co. Ltd. In 1956, Oriental became a subsidiary of the Life Insurance
Corporation of India until 13th May 1971, when the Government of India (GOI) took over the management of all general insurance companies in India. This was followed by the nationalisaton of general insurance business with effect from 1st January 1973 and the Oriental Fire and General insurance company came under the General Insurance Corporation of India as one of the four subsidiaries. It commenced its operations from 1st January 1975.
Later on in 2002, with the passage of Insurance amendment Bill (2002), all the four Public sector companies were delinked from GIC and are functioning as independent companies since then. Following convergence of the financial services and financial institutions, the Indian government also initiated reforms based on the recommendations made in the Report of the Malhotra Committee, set up in 1993. As a result, the insurance sector was opened up to private participation to make the sector efficient, vibrant, and competitive. At present, the Insurance Regulatory and Development Authority (IRDA), is the statutory body entrusted with the responsibility of regulation of operations of the insurance companies as well ensuring orderly development and growth of the insurance business in India. The primary concern of the IRDA is the protection of the policyholder’s interest. Following are the Life and General insurance companies operating their business. (Position as of 18th October 2008)
INSURANCE COMPANIES OPERATING IN INDIA
LIFE INSURERS
PUBLIC SECTOR(Life Insurance Corporation of India (LIC))
PRIVATE SECTOR-:
1. Bajaj Allianz Life Insurance Co. Ltd.
2. Birla Sun Life Insurance Co. Ltd. (BSLI)
3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE)
4. ICICI Prudential Life Insurance Co.Ltd. (ICICI PRU)
5. ING Vysa Life Insurance Co.Ltd. (ING VYSYA)
6. Max New York Life Insurance Co. Ltd. (MNYL)
7. MetLife India Insurance Co.Ltd. (METLIFE)
8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd.
9. SBI Life Insurance Co. Ltd. (SBI LIFE)
10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)
11. Reliance Life Insurance Co. Ltd.
12. Aviva Life Insurance Co. Ltd. (AVIVA)
13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)
14. Shriram Life Insurance Co. Ltd.
15. Bharti AXA Life Insurance Company Ltd.
16. Future Generali India Life Insurance Company Limited
17. IDBI Fortis Life Insurance Company Ltd.
18. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.
19. AEGON Religare Life Insurance Company
20. DLF Pramerica Life Insurance Co. Ltd.
NON LIFE INSURERS
PUBLIC SECTOR
1. The New India Assurance Co. Ltd
2. National Insurance Co. Ltd.
3. The Oriental Insurance Co. Ltd.
4. United India Insurance Co. Ltd.
5. Export Credit Guarantee Corporation Ltd.
6. Agriculture Insurance Company of India (AIC)
PRIVATE SECTOR
1. Bajaj Allianz General Insurance Co. Ltd. (BAJAJ ALLIANZ)
2. ICICI Lombard General Insurance Co. Ltd. (ICICI LOMBARD)
3. IFFCO Tokio General Insurance Co. Ltd. (IFFCO TOKIO)
4. Reliance General Insurance Co. LTD. (RELIANCE)
5. Royal Sundaram Alliance Insurance Co. Ltd. (ROYAL SANDARAM)
6. TATA AIG General Insurance Co. Ltd. (TATA AIG)
7. Cholamandalam MS General Insurance Co. Ltd. (CHOLAMANDALAM)
8. HDFC ERGO General Insurance Co. Ltd. (HDFC CHUBB)
9. Star Health and Allied Insurance Company Limited
10. Apollo DKV Insurance Company Limited
11. Future Generali India Insurance Company Limited
12. Universal Sompo General Insurance Company Ltd.
13. Shriram General Insurance Company Ltd.
14. Bharti AXA General Insurance Company Ltd
RE-INSURER:GENERAL INSURANCE CORPORATION OF INDIA(GIC)
This post was written by: Author Name
Your description comes here!
Get Free Email Updates to your Inbox!
Post a Comment