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General Insurance Corporation of India
INTRODUCTION
The General Insurance Corporation of India (GIC), a public sector enterprise was also the largest non-life insurance company and one of the largest financial institutions in India. GIC used to sell non-life insurance products and related services. In 2001, GIC reported a gross direct premium income of Rs.107.72 billion. By April 2002, GIC had a net worth of Rs.23 billion. GIC had been operating through its four subsidiaries National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited and United India Insurance Company Limited till December 2000. GIC and its subsidiaries had a network of more than 4,208 offices in India and their customer interface included agents, development officers and employees at its branch, divisional and regional offices of its four subsidiaries. The company had a workforce of 85,000. GIC also operated in the international markets in more than 30 countries, either through branches or subsidiaries. GIC offered a variety of non-life insurance policies in the fire, marine, theft and other miscellaneous segments. It also offered health insurance
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through its Mediclaim policy. While some of the policies offered by GIC, like motor insurance, were mandatory, others were designed exclusively for specific segments for instance the rural insurance, which included insurance cover for huts, cattle and livestock, hens and crops. In November 2000, with the liberalization of the insurance industry, GIC became a national reinsurer the official body for undertaking reinsurance business for all private and government organizations in the insurance industry. Many private players had entered the general insurance market, which led to a significant increase in competition. Competition was expected to be more intense in the non-life segment than the life segment, as the term of the non-life policies was very short, and customers could switch between companies. Based on the recommendation of the consultants Price Waterhouse Coopers and MP Chitale all the subsidiaries of GIC were restructured in December 2000, as independent insurance companies. At the same time, the General Insurance Public Sector Association was formed to deal with the common issues related to the four subsidiaries. After the restructuring New India Assurance Company, one of the four subsidiaries of GIC, became Indias largest non-life insurer.
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Mission and Values of GIC

Mission To provide need-based and low cost general insurance covers to the rural population keeping in mind their low premium paying capacity To administer a crop insurance scheme for the benefit of farmers. To develop and introduce covers with social security benefits. To develop marketing network throughout the country including areas with low premium potential promote balanced regional development irrespective of cost considerations and make the benefits of insurance available to the masses. To develop general insurance in the best interest of the community. To provide financial security to individuals, trade and commerce by offering insurance products and service of high quality at affordable cost. Values Highest priority to customer needs High standards of public conduct Transparency in operations
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HISTORY OF GENERAL INSURANCE IN INDIA

The history of general insurance dates back to the industrial revolution in the western countries and the growth of sea-faring trade and commerce during the 17th century. The concept of general insurance came to India during the British rule. General insurers from Britain and other countries carry out the general insurance business. In 1928, the Indian Insurance Companies Act was passed to enable the government to collect statistical information about both life and non-life insurance business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, the Indian Insurance Companies Act was consolidated and amended by the Insurance Act 1938 to protect the interests of the public. The Insurance Act of 1938 was amended in 1950, which resulted in farreaching changes in the insurance sector. These included a statutory requirement of equity capital for companies carrying on insurance business, ceiling on share holdings in such companies, stricter control on investments, submission of periodical returns relating to investments and such other information to the controller. The controller could also call for appointment of administrators and put a ceiling on expenses of management and agency commission for mismanaged companies. By early 1970s, there were about 100 Indian insurers carrying on the general insurance business in India. Malpractice and mismanagement had crept into the management of these companies. Some insurance companies either liquidated, or cheated the policyholders. There were complaints of
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falsification and denial of claims, interlocking of funds and other malpractices by many insurance companies. To protect public funds, the government started considering nationalization of the insurance industry. In 1971, as a prelude to the nationalization of the general insurance industry, the GOI took over the management of all private general insurance companies. The main objective of this nationalization was to channelize the insurance funds for the benefit of the community at large.
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ORGANIZATIONAL STRUCTURE
GIC was a holding company, separate from its subsidiary companies. It was responsible for broad policy matters that could affect the general insurance industry in India. The company did not offer any direct insurance policies except the aviation insurance policies of Air India, Indian Airlines, Hindustan Aeronautics and Crop insurance. From the reinsurance business, GIC received 20% of all direct business written in India by its subsidiaries. Apart from the four subsidiaries, GIC set up the GIC Asset Management Company to manage the GIC Mutual Fund, GIC Housing Finance, and Export Credit Guarantee Corporation. The four subsidiaries underwrote all types of general insurance directly as well as through reinsurance in India. They also operated in the international market. All the companies were autonomous, and had their own Boards of Directors and management teams. Figure I: Organizational Structure of GICs Subsidiaries Head Office Regional Office Divisional Office Branch Office
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The head offices of the subsidiaries were responsible for the planning direction and control of Indian and foreign business. They also took care of final accounts, investment, reinsurance and other specialist functions. Their regional offices were located in the metros and controlled the divisional and branch offices in their jurisdiction. Divisional offices were responsible for the developmental operation of the divisional offices included appointment of inspectors and agents, marketing, planning and procurement of business. The administrative operations of these offices included issue of policies, settlement of claims, maintenance of accounts and general administration. The functions of the branch offices were the same functions as those of divisional offices. However, they were not empowered to appoint inspectors and settle claims except claims regarding the motor damage, cattle claims and other claims with certain limits. In addition, the branch offices were responsible for the development of issuing of receipts, cover notes and policies.
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ROLE & FUNCTIONS OF GIC

The role and functions of General Insurance Corporation can be divided into two parts for the convenience of study. I. II Statutory Roles and Functions. Roles and Functions relating to Business
I. Statutory Roles and Functions: Statutory Functions are stated under Section 18 of the General Insurance (Nationalisation) Act, 1972; under which the Corporation can undertake any activity in the field of general insurance like personal accident insurance, crop insurance, aviation insurance etc. The Corporation provides for:
(1) Consultancy in the operation of the insurance business and
determination of high standards; (2) Necessary advice to subsidiary companies to provide efficient services to policy holders; (3)Necessary advice in the matters of controlling the expenses of the subsidiaries (4) Advice the subsidiaries in the matters of investments of funds; and (5) Issues directions for effective conduct of business of the subsidiaries.
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II. Business related roles and functions: The functions of the GIC in the matters relating to insurance business and its expansion are as follows: 1. The development and regulation of general insurance business 2. To bring uniformity in the functioning of subsidiaries. 3. Developing new policies keeping in view of the needs of Agriculture, trade and industry 4. Geographical expansion of insurance business. 5. To do publicity among the people about the uses and advantages of general insurance. 6. To manage the insurance business on high business principles. 7. To make available and insurance services to lower and backward categories of people. 8. To develop and encourage non-traditional insurances like agricultural crops, livestock, etc. 9. To determine and implement reasonable rate of premium. 10.To develop better relationship between the GIC and its subsidiary companies. 11.To reconsider the existing rate of premiums. 12.To settle the claims of policies efficiently and with full satisfaction. 13.To increase the employment opportunity in the area of general insurance.
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ROLE AND FUNCTIONS OF SUBSIDIARY COMPANIES

All the four subsidiary companies functions under the management, leadership and control of the GIC, as follows: (1) To carry on the general insurance business on the basis of the provisions laid down in the memorandum of association, articles of association and the rules prescribed by the Central Government (2) To operate of the basis of set business principles and the directions issued by the GIC. (3) Development and expansion of general insurance business on public interest. (4) To enter into the re-insurance contracts to protect their interest under the rules of the GIC and the central government. (5) Maximum expansion of business in foreign countries. (6) To achieve new opportunities in insurance business by creating healthy competition among subsidiaries. Apart from offering general insurance through its four subsidiaries, GIC also entered mutual fund and housing finance businesses. GIC, its subsidiaries and banks/financial institutions promoted these businesses jointly. The businesses included: -
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GICs four subsidiaries in India were: NATIONAL INSURANCE COMPANY LIMITED

NICL, established in 1906, was involved in the general insurance business. A private body managed the company until 1972, when it was nationalized under the General Insurance Act. In the same year, 33 companies 22 foreign and 11 Indian were amalgamated with NIC. The new entity became a subsidiary of GIC. NICL was headquartered in Kolkata and had about 965 branch offices with more than 20,000-trained workforce. It also operated in countries like Nepal and Hong Kong. In 2000-01, NIC reported a total volume of business worth Rs.19.0648 billion.
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NEW INDIA ASSURANCE COMPANY LIMITED

Set up by Sir Dorab Tata in October 1919 in Mumbai, NIACL was the largest non-life insurer in India and also in the Afro-Asian region excluding Japan. Within ten years of establishment, NIACL became leader in the Indian insurance industry. It offered a wide range of insurance products ranging from bullock cart insurance to satellite insurance. From the very beginning, the company offered comprehensive policies like cashin-transit. All Risks insurance, Accountants indemnity and Profit insurance. As a part of the nationalization drive in 1972, 23 other companies were amalgamated with NIACL and made a subsidiary of GIC. In 2001-02, the company recorded a business volume of Rs.26.68 billion. According to the companys website, NIACL was the first to Set up an Aviation Insurance Dept. in 1946 Handle the Hull Insurance requirements of the Indian Shipping Fleet Establish its own Training School Introduce the concept of Model Offices training Create technical departments in Engineering insurance Offer Satellite insurance NIACLs network was comprised of 26 regional offices, 397 divisional offices and 688 branch offices. It had a 32% market share in the Indian general insurance market in 2001. Eventually, NIACL expanded globally and operated in about 20 countries.
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ORIENTAL INSURANCE COMPANY LIMITED

OICL WAS ESTABLISHED IN 1947 IN New Delhi. It operated through a network of 21 regional offices, 311 divisional offices and 635 branch offices set us across the country. Its overseas branches were located in Nepal, Kuwait and Dubai. The company was into general insurance business including rural insurance covers. It specialized in special insurance covers for large projects including power, steel, chemical and petrochemical plants. In 2000-01, OICL reported a total volume of business worth Rs.18.4923 billion. According to the company website, OICL was the first to: Have underwritten the biggest Grass Root Refinery Project. Reliance Jamnagar refinery. Have issued a Package Policy under mega risk to PSU Oil giants. Have issued Advance Loss of Profits policy in India. Have issued Directors & Officers liability policy in India. Introduce Kidnap & Ransom cover in India. Have issued Stock Brokers and Stock Exchange custodial services policy in India Have issued tailor-made cover for Cellular Communication systems. Have front office computerization drive in India.
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The companys policies were popular. Some of its popular policies included electronic equipment insurance policy, group Mediclaim policy, householders insurance policy, individual Mediclaim, Janata Personal Accident, Kissan Package Insurance, motor cycle policy B, Nagrik Suraksha, Office Umbrella, Overseas Mediclaim Business and Holiday, Overseas Mediclaim Employment and Study, personal accident policies (like individual, private car policy B) and shopkeepers insurance.
UNITED INDIA INSURANCE COMPANY LIMITED

UIICL was the second largest non-life insurance company in India. It focused on Fire, Marine, Motor and Miscellaneous insurance segments. It operated in India through 723 branches, 368 divisional offices, 24 regional offices and had employed more than 21,000 employees. The companys total volume of business stood at Rs.20.4332 billion.
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Nationalization of General Insurance

After the independence, the government of India decided to establish a Socialistic Pattern of Society, by all round development of the economy. It was then felt the need of nationalization of public utility services. As a first step in this process, the government nationalized the Life Insurance business in the country in 1956. After the nationalization of life insurance, the question of nationalization of general insurance was raised by the public. However, in the early years of independence, nationalization of general insurance was not felt necessary by the government due to certain reasons.
At that time (in 1960s) the total insurance fund with the Indian
insurance companies engaged in general insurance was limited to a tune of Rs.60 crore only. Out of which Rs.10 crore were invested in the government securities. The government, therefore, did not find the need for nationalization of general insurance business. In 1968, major amendments have been made in the Life Insurance Act, under which the Controller of Insurance was given wider powers for control and regulation of insurance business in the country. The government wanted to secure the interest of the investors adequately. Therefore, on May 13, 1971, through an Ordinance insured by President of India, the government decided to nationalize the 112 general insurance companies operating in the country at that time. Out of these companies, 67 were Indian companies and the remaining 45 were foreign companies. All these companies were
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engaged in fire, marine and miscellaneous insurance business in the country. The General Insurance (Nationalization) Act, 1972 came into force with effect from January 1, 1973.This Act contains 7 chapters and 39 sections. This Act is applicable to the whole of India. The General Insurance Corporation was established under the provisions of the General Insurance (Nationalization) Act 1972. This Corporation is incorporated under the provisions of Companies Act, 1956 with an authorized capital of Rs.75 crore. Its registered office is situated in Mumbai. It is a Holding Company, which has four Subsidiary Companies, namely:1. The National Insurance Company Ltd., Kolkata. 2. The New India Insurance Company Ltd., Mumbai. 3. The Orient Insurance Company Ltd., New Delhi. 4. United India Insurance Company Ltd., Chennai.
The network of offices of the four subsidiary companies as on 31 st
March, 1999, stood at 83 Regional Offices, 1,241 Divisional Offices and 2,842 Branch Offices. The company-wise position of network of offices is given in the Table below:-
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Organizational set up of Subsidiaries as on March 31, 2010 Company Regional National Offices 20 Divisional Branch Offices 263 (254) 366 (352) 278 (274) 334 (322) 1241 (1202) Offices 673 (681) 738 (788) 675 (680) 756 (777) 2842 (2926)
(19) New India 23 Oriental United India Total (21) 18 (18) 22 (22) 83 (80)
(Figures in parentheses indicate the number as on March 31,1998) Source: Annual Report of GIC for the year 1998-99.
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ASSETS OF GIC
Particulars Investments Loans Fixed Assets Cash and Bank Balances Advances and Other Assets Deferred Tax Asset Total Assets 2010 82,41 ,797 33,736 10,084 10,68,420 17,15,561 341 49,72,85, 635 2011 36,69,24 ,795 59,53,935 4,48,945 4,75,66,041 7,63,76,758 15,160 1,11,69,938
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THE PRE-LIBERALIZATION ERA

GIC was set up as a holding company in 1972 as per the General Insurance Act 1972, under which the general insurance industry in India was nationalized. Before nationalization, the general insurance business in India was more urban-centric and served only organized trade and industry. Therefore, GIC was established with a mission to offer need-based insurance to the rural population (Refer Table 1) At the time of nationalization, there were 107 Indian and foreign insurers offering general insurance products. These companies were merged and grouped into four companies including National Insurance Company Limited (NICL), New India Assurance Company Limited (NIACL), Oriental Insurance Company Limited (OICL), and United India Insurance Company Limited (UIICL). The companies were subsidiaries of GIC.
GIC was set up and registered as a holding company with the four subsidiaries, under the Insurance Act 1938, in accordance with the provisions of the General Insurance Business (Nationalization) Act, 1972. GIC was fully owned by the government of India (GOI), that is, its entire paid-up capital was subscribed by the GOI. GIC, in turn, fully owned the paid-up capital of its four subsidiaries. The four subsidiaries operated all over the country, competed with each other, and offered all types of general insurance.
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THE POST LIBERALIZATION YEARS

In 1999, the IRDA Bill was passed by the Parliament, and the insurance industry was opened for private players with equity participation of foreign companies limited to 26%. By 2000, a numbers of private players entered the general insurance market through joint ventures with leading foreign players. This resulted in increased competition and GIC was forced to make several changes in its organizational structure and business strategies. In January 2000, GIC took initiatives to deal with competition that had resulted from the deregulation of the insurance industry. The global consultancy firm Price Waterhouse Coopers (PWC) and a chartered accountancy firm, MP Chitale, were appointed to restructure the GIC and its subsidiaries. The restructuring plan was focused on customer satisfaction; cost control, optimum utilization of manpower and business growth. As a part of the move, GIC also planned to offer employee incentives if the pre-determined level of customer satisfaction was achieved. GIC also focused on new areas in health and crop insurance segments apart from return-linked insurance products. It appointed management consultant KPMG Peat Marwick to conduct a survey to study whether the setting up a management service company (MSC) for health insurance would be worthwhile.
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The consultant was also responsible for managing the health care products and selection of third party administrators for coordination between the doctors, clinics, hospitals and medical shops. Another important step in the restructuring plan was the companys entry into savings linked insurance product (SLIP) segment. The MSC was supposed to handle the marketing and processing of SLIPs. The new product offered medium-term cover for personal accidents and also returned an assured sum on its maturity.
In November 2000, the government made GIC the national
reinsurer. As per this regulation, all the insurance companies in India, including the new private players, had to reinsure at least 20% of their business with GIC. Following this change, the aviation and crop insurance businesses of GIC were transferred to its subsidiaries. The Indian Airlines account was transferred to Oriental Insurance and the Air India account was transferred to New India Assurance. The government decided to set up a new company to handle the crop insurance business.
After GIC became the national reinsurer, the Finance Ministry
ordered the four subsidiaries to form an association and jointly deal with functions like personnel, investment and reinsurance. The lead to the formation of GIPSA.
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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY (IRDA)

Composition of Authority under IRDA Act, 1999 Section 4 of the IRDA Act 1999: - Insurance Regulatory and Development Authority (IRDA), which was constituted by an Act of the Parliament, specifies the Authoritys composition. The Authority is a tenmember team consisting of a Chairman, five whole-time members and four part-time members, all appointed by the government of India. Duties, Powers and Functions of IRDA Section 14 of the 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 reinsurance business. 2. Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include: Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policyholders,
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insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; Specifying the code of conduct for surveyors and loss assessors; Promoting efficiency in the conducting insurance business; Promoting and regulating professional organizations connected with the insurance and re-insurance business; Levying fees and other charges for carrying out the purposes of this Act; Calling for information from, undertaking inspection of, conducting inquiries and investigations; Including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business; 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 (4 of 1938); Specifying the form and manner in which nooks of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries; Regulating investment of funds by insurance companies; Regulating maintenance of margin of solvency;
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Adjudication of disputes between insurers and intermediaries or insurance intermediaries;
Supervising the functioning of the Tariff Advisory Committee;
Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations referred to in clause (f); Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural sector and Exercising such other powers as may be prescribed.
GIC ASSEST MANAGEMENT COMPANY LIMITED

GIC Asset Management Company Limited (GICAMC) was set up by GIC and its subsidiaries in 1993. The company was established with the primary objective of managing the operations and investments of GICMF. While GIC and its subsidiaries held 49.5% equity stakes in GICAMC. SC Management Company, an affiliate of Soros Fund Management. GIC Housing Finance held US, held 40% stakes and the remaining 10.5%.
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GIC MUTUAL FUND

Set up in 1990, GIC Mutual Fund (GICMF) was sponsored by GIC and its four subsidiaries. It was formed as a Trust in accordance with the provisions of the Indian Trusts Act 1882. The trust had launched 15 domestic schemes. Some of its products included GIC Balanced Fund. DMAT, Growth + Plus II, Fortune, GIC Liquid Fund. GIC Debt Fund, and GIC Gilt Fund (Refer Table II and Table III) Table II: GICMF Open-Ended Funds Name of Mutual Fund Schemes GIC Balanced Fund DMAT 7.15 NAV on 14.10.2002 9.19 as Launch Date Face Value of Units December 1992. Converted to 10 open-ended from 31st March 2000. 26th March 1999. Ongoing sales 10 and Growth Plus 9.64 II Fortune 6.20 GIC Liquid 10.48 Fund GIC Fund
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repurchases
from
1st
September 1999 27th January 1994. Converted to 10 open-ended from 23rd April, 1998 2nd December, 1994 10 th 8 January 2002. Re-opened for 10 transactions from 21st January, 2002 ---
Debt 10.27
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GIC Fund
Gilt 10.21
---
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Table III: GICMF Closed-Ended Funds Particulars GIC Growth Plus GIC Plan March Tax GIC Tax
savers Growth saver95 Date of March 31 , 1993

st
31st, March
31st,
Allotment Repurchased April 1st, 1996 on Redemption March 31st, 2003
1994 April 1st, 1997 April 1st, 2004
1995 April 1st, 1998 April 1st, 2005
GIC HOUSING FINANCE

GIC Housing Finance (GICHF) was set up in 1989 as GIC Griha Vitta, jointly by GIC, GICs subsidiaries, Unit Trust of India (UTI), Industrial Finance Corporation of India (IFCL) and State Bank of India (SBI). The company was involved in giving loans to individuals as well as to builders and developers for construction of houses or flats for residential purposes. Some of its popular schemes included GIC Apna Ghar Yojna (Our Home Scheme) and Construction Finance Schemes. Upto 2001, GICHF operated through 10 branches in India and reported sales worth Rs.917.20 million (Refer Table IV and V Table IV: GICHF: Income Statement Particulars Year End-Mar
2001 (in Rs. in

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Sales Other Income Operating Profit Interest Depreciation Net Profit
million) 917.20 0.90 756.40 684.90 7.20 43.30
Table V: GICHF: Other Financial Information Particulars Year End. Mar 2001 million) Equity Capital 179.70 Reserves & 648.60 Surplus Long Debt Short Debt Cash Term 1330.20 Term 4612.90 126.90 (Rs. in
RECONSTRUCTION OF GIC
The management consultants appointed by GIC laid down four options for its organizational restructuring: Merge all the four companies or form two companies, with one exclusively conducting corporate business.
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Follow the Malhotra Committee recommendations by delinking the four subsidiaries from GIC and give them operational independence. Allow equity crossholdings among the four subsidiaries and Entrust one geographical region to each of the four outfits. The government also planned to raise GICs share capital from Rs.1.07 billion to Rs.2 billion and also raised the capital base of each subsidiary Rs.1 billion. It also wanted to divest 50% of the equity stakes of GIC and its subsidiaries to the public including the employees and the subsidiaries. In September 2001, GOI finalized the restructuring plan for GIC. Instead of merging all the subsidiaries, GOI decided to delink GIC and its subsidiaries. Originally, the management consultants had favoured the merger of all the companies in view of increasing competition. However, the GOI felt that merger would take a long time to reap the desired benefits due to which the companies might lose their business. Therefore, GOI decided that the subsidiaries should operate as independent public sector insurance companies. In November 2001, the Finance Ministry decided to introduce a Bill in the Parliament for restructuring the nationalized insurance company. The Bill proposed amendments in the General Insurance Business (Nationalization) Act.1972, to delink GIC and its subsidiaries. In December 2001, the subsidiaries were delinked from GIC through a government notification. The Bill was formally passed by the Parliament in March 2002; Consequently, the four subsidiaries functioned as independent entities,
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which place them in a level playing field with the private insurance companies. In June 2002, GIC proposed to transfer its equity stake in the four subsidiaries to the government at book value. In June 2002, GIC also bought back its 40% stake in GIC Mutual Fund from the US- based Soros Chattarjee Management (SCM) at Re 1 per share. A top official of GIC said, The Re 1 offered to SCM for the buy back was just a token amount. While the total cost of SCMs investment in GIC Mutual Fund was estimated at Rs.80 million the buy back was priced at Rs 8 million.
PRIVATE PLAYERS IN THE INDIAN GENERAL INSURANCE MARKET

1. Tata AIG: - The Tata Group began its activities in 1878, with
trading and manufacturing of textiles. Later on, the group forayed into businesses like steel, electricity, locomotives, automobiles, financial services, hotels and information technology. By 2002, it emerged as Indias largest conglomerate with over 80 diversified companies. By 2000-01, its total turnover was Rs.4, 12,906 million
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and the value of its assets under it was Rs.4, 47,341 million. The American International Group is a leading US-based international and financial services organization and the largest underwriter of commercial and industrial insurance in the US. It operated in more than 130 countries of the world. AIGs global businesses also included financial services and asset management, real estate investment management, and retirement savings products.
2. Bajaj Allianz General Insurance: - The Bajaj Group was founded
in 1926, with Bajaj Auto being the flagship of the group. It is the largest two-and three-wheeler manufacturer in India and the fourth largest in the world. The group has also entered into various businesses such as herbal healthcare, automobiles, electrical, auto finance, and engineering. By 2002, it had a turnover of Rs.80 billion. Allinaz AG is one of the largest global insurers, operating in more than 70 countries and has about 700 subsidiaries. The group was present in over 18markets in Asia Pacific region.
3. IFFCO-Tokio General Insurance: - The Indian Farmers Fertilizer
Co-operative Ltd. (IFFCO) was formed in 1967 as a multi-unit cooperative society involved in the production and distribution of fertilizers. Japan-based Tokyo Marine and Fire Insurance was the countrys leading property and casualty insurer. It was also the second largest P&C company and fifth largest insurance company in the world. Other promoters of the company included Krishak Bharti Co-operative Ltd. (KRIBHCO) and Indian Potash. The equity capital for this joint venture was Rs.1 billion, with IFFCO holding 49%, Tokyo 26%, KRIBHCO 20% and Indian Potash 5%. IFFCO
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Tokyo was headquartered in New Delhi with branch offices in about 20 cities.
4. Reliance General Insurance: - Reliance Group was Indias largest
business house with a net worth of US $ 4,889 million as in the year 2000, and with an investor base of more than 5 million. Reliance Group was also present in the textile, LPG, cellular phones and other retail and commercial businesses. Reliance Industries Ltd. was the countrys largest private sector player and a major player in the Indian petrochemical industry. It planned to enter the insurance market with Rs.3 billion through its financial arm. Reliance Capital Ltd. With Reliance Group as the lead investor. The company planned to consult international insurance consultants to bring in the best practices in the insurance business.
5. Royal Sundaram General Insurance: - Established in 1954 with a
paid-up capital of Rs.0.02 million, Sundarm Finance Ltd. Was primarily involved in financially assisting road transport operators for acquiring commercial vehicles under hire purchase schemes. The company had become a leader in the industry and then it also got involved in equipment leasing in 1981. Royal & Sun Alliance of UK was one of the worlds largest leading insurance companies. The Sun was established in 1710, Alliance in 1824 and Royal in 1845. The groups international expansion began in the 18th century when it into Europe and in the US and Canada in the 19th century. The
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joint venture, Royal Sundaram General Insurance was established in March 2001 in Chennai with two regional offices in Mumbai and New Delhi.
6. ICICI-Lombard: - ICICI bank was the largest private sector bank
in India with an asset base worth more than Rs.1000 billion. It offered various financial services to individuals and companies, which included deposits accounts, commercial banking, mortgages, car loans, personal loans and other banking services. It had a customer base of more than 5 million and 5 million bondholders across the country. It had around 400 branches, 120 retail centers, 1005 ATMs and by March 2002 it posted profit worth Rs. 2.5 billion. The Canada based company Lombard Canada Ltd; a subsidiary of Fairfax Financial Holdings Ltd. was a leading insurance management company offering insurance management services to Lombard Groups commercial, personal and specialized insurance companies. The joint venture ICICI-Lombard General Insurance Co. was established with a start up capital of Rs.1 billion. ICICI held 74% stake and Lombard 26% stake in the joint venture. The company planned to sell policies to the corporate clients of ICICI. It also planned to sell property insurance for ICICI home loan seekers and auto insurance for ICICI car loan seekers.
7. Cholamandalam General Insurance Company: - This was set up
by the Chennai based Murugappa Group with a total equity base of Rs.1.05 billion. Tube Investments of India Ltd. the flagship company of Murugappa Group held 74% stake with the remaining 26% held by Cholamandalam investments and other group concerns.
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Cholamandalam General Insurance was the second private player in India to start operating individually without a foreign partner. Reliance being the first one.
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PRODUCTS & SERVICES

General insurance may be described as a way to reduce or eliminate risk of loss to property. The risks covered by general insurance included fire, the perils of the sea, death and accidents and burglary. Any risk arising from these may be insured against at a premium that commensurate with the risk involved. Thus, insurance is collective bearing of risk; GIC offered a variety of general insurance products. General insurance was categorized as:
1) Fire Insurance
Fire insurance was designed to provide financial protection against loss or damage of property due to fire and other perils specified in the policy. It was offered for building or a flat: furniture fixtures and other contents, and loss of profit that is consequential loss, GICs fire insurance policy was a comprehensive one, called Standard Fire and Special Perils Policy, which covered many risks apart from those pertaining to fire accidents. The policy covered loss due to lightning, aircraft damage, and losses due to terrorist attacks, earthquake, riots, strikes, malicious damage, floods and landslides. Fire insurance could be taken only by the owner of the A tenant was not eligible to insure rented premises to be insured.
premises. However, the tenant had the option of insuring the contents of the premises. The premium was based on the value of property being insured.
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The rate of premium for fire insurance was categorized as non-hazardous and categories I, II and III. Non-hazardous goods had the lowest rate of premium, which is followed by category I, II and III type of goods.
2) Marine Insurance
Marine insurance included cargo and hull insurance. Cargo insurance
offered coverage for loss of damage of goods in transit by rail, sea or air and articles sent by post: export and import shipments by ocean-going vessel of all types: and coastal shipments by inland vessels or country craft. Hull insurance covered ships including hull, machinery, etc. This policy covered the cargo in transit against marine perils. Marine perils, also known as perils of the sea, mean the perils consequent from or incidental to the navigation of the sea or the perils of the seas, such as fire, war perils, troubles caused by pirates, rovers, thieves, jettisons8, barratry9 and any other perils.
3) Motor Insurance
Motor insurance was offered for different types of cars, trucks, twowheelers, three-wheelers, motor rickshaws, taxis and buses. Two types of motor insurance-Third party and Comprehensive-were compulsory for all vehicles in India as per the Motor Vehicles Act 1988. The third party insurance insured only the party/parties other than the owner, in case of an accident. The comprehensive policy covered the owner as well as the third party involved.
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The pricing of premium for motor vehicles depended on the value of the vehicle and the place where a vehicle was registered. For instance, in Mumbai, where claim rate was higher than other cities, the policy premium was higher. The pricing of premium for Heavy Commercial Vehicles (HCV) depended on the value of the vehicle and the gross laden weight10. In this category, the driver was insured along with the vehicle. A premium of Rs.15 was charged for the driver. For all sorts of vehicles insured, the policy was not valid if the insured vehicle was given for hire, as a reward given to winners in vehicles racing, speed reliability trails and speed testing.
4) Personal Accident Insurance

Personal accident policy covered life of an individual in the case of an accident. This comprehensive policy comprehensively covered death, permanent disability and loss of limbs and eyesight. In addition, the policy also offered a stipulated amount to the policyholder depending upon the principal amount that the policyholder was insured for, in case of his inability to live a normal life.
5) Health Insurance
Health insurance policies reimbursed hospitalization expenses because incurred of due to for
hospitalization/domiciliary
some
illness/disease suffered or accidental injury during the term of the policy. There were also policies offered for periods of overseas travel and employment.
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6) Liability Insurance
The Compulsory Public Liability policy was designed under the Public Liability Insurance Act, 1991, that imposed no-fault liability11 on the policyholder. The amount payable as relief was Rs.25, 000 per person for a fatal accident, Rs.25, 000 per person for permanent total disability, appropriate amount based on the percentage of disablement in case of permanent partial disability, and Rs.12, 500 as medical expenses and Rs.6, 000 for damage of property.
7) Engineering Insurance
Under the category, Contractors All Risks (CAR) policy was offered, which was designed to protect the interest of civil engineering contractors, constructing building, bridges, tunnels and others. The policy covered losses caused by fire, lightening, explosion, flood inundation, windstorms (of any kind), earthquakes, landslides, theft and burglary, accidental damage, bad workmanship and other perils. GIC also offered the Erection All Risks policy that insured the erection of electrical plants and machinery, equipment and structures that did not involve any civil engineering work, with the same coverage options as the CAR policy. Also called the Storage-cum-Erection policy, it covered third party liability too. There were many other polices in the engineering insurance category including marine-cum-erection policy, machinery breakdown policy, boiler and pressure plant policy, machinery loss or profits policy, advance loss of profits policy, deterioration or stock policy, and electronic equipment policy.
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8) Miscellaneous Insurance
This category of insurance included burglary theft, workmens
compensation, fidelity guarantee, cancer, Comprehensive Package Policy for jewelry, television sets, Video Cassette Recorders (VCR), furniture, bankers blanket policies, blood stock (horse) insurance, pet dog insurance, sports insurance, special contingency policy, oil and energy risk insurance, satellite insurance, etc. Property insurance covered land buildings and the contents of the building. Though there were several types of property insurance packages, property was usually insured against fire and burglary. Burglary insurance covered all losses caused by a raised from burglary committed within a premise. However, a policyholder could claim insurance only if there was a forced entry12 into the premises. In this case, too, the policy had no limitations and it was the prerogative of the insured to decide upon the value of the insurance cover.
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NON-TRADITIONAL / RURAL
The policies for rural areas included insurance covers for crops, water pumps for agriculture, huts, cattle and other livestock. In the kharif season of 1985, the central government introduced the Crop Insurance Scheme through the GIC. The scheme was offered in 15 states and two union territories. The central and state governments, the ration of which was 2:1, shared the premium and claims. The policies were sold through 11 Crop Insurance Cells at state governments and monitored the implementation of the scheme.
Crop Insurance Comprehensive Crop Insurance Scheme
The GIC is implementing the Comprehensive Crop Insurance Scheme on behalf of the Govt. of India since Kharif 1985.In the States where the scheme is implemented, those State Govts. Are also acting as co-insurers under the scheme. The premium and claims are shared between Govt. of India and the State Govts. In the ratio of 2:1. The Scheme is based on an area approach covering farmers availing crop loans in selected areas for selected crops. During the year 52.90 lakh farmers and 9.05 lakh farmers were covered for a sum insured of Rs.2,444.15 crore and Rs.467.08 crore in Kharif 1998 season and Rabbi 1998-99 season, respectively. The premium income for the above period was Rs.38.29 crore and Rs.8.06 crore for Kharif and Rabbi seasons, respectively.
The Government of India introduced Experimental Crop Insurance Scheme (ECIS) during Rabbi 1997-98 season in 14 Districts and 5 States. The
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Scheme was withdrawn after implementation for one season. The performance of the Scheme during Rabbi 1997-98 season was as under: Farmers covered 4,78,175 sum insured Rs.16,893.71 lac. Insurance Premium Rs.285.72 lac and claims reported Rs.3,978.26 lac.
Further, the Government of India has introduced National Agricultural Insurance Scheme (NAIS) w.e.f. Rabbi 1999-2000 season and the existing Comprehensive Crop Insurance Scheme stands withdrawn from Rabbi 1999-2000 season. Some of the main features of the Scheme are as under:-
1 2
The Scheme covers all farmers (both loanee and non-loanee) In addition to crops covered under the existing CCIS (Food crops & Oil Seeds). Annual Commercial/Annual Horticulture Crops (Sugarcane, Potato and Cotton) are also covered.
The premium rates are rationalized for food crops and oilseeds. For Annual Commercial/Annual Horticultural Crops, actuarial premium rates would be charged.
The sum-insured limit is increased from Rs.10,000 per farmer (as under the existing CCIS) to the Value of 150 percent of average yield of the crop.
5
6
In case of localized calamities, loss assessment shall be on individual basis. Non-loan farmers can submit their proposals directly to GIC for insurance cover. To begin with, it will be experimented in limited areas.
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Rural Insurance:The Rural and Non-Traditional Insurance Business has registered an impressive growth during the year 1998-99. As against premium of Rs.338.16 crore in 1997-98, premium written has arisen to Rs.457.98 crore with the growth rate at 34.43 per cent. The performance of Cattle/Livestock and Poultry Insurance Business was satisfactory with a growth rate of 15.04 per cent and 29.97 per cent respectively, whereas growth under Janta Personal Accident was 73.28 per cent. The following new policies and review of existing policies were undertaken during the year:
1. The JPA/GAP Insurance and Farmers Package Insurance policies are
brought under the Market Agreement w.e.f. 15th January, and 1st Feb. respectively.
2. Major changes have been made in the JPA policy viz. (a) sum
assured is restricted to Rs.1,00,000, (b) Long Term and Group Discounts taken together are not to exceed 60 per cent, Long Term Policy can be issued for a maximum period of 5 years, and (d) Group discount is available only to the listed groups.
3. A new Central Sector Scheme on Cattle insurance has been devised
for poor people living below Poverty Line, who are not covered under any Governmental Scheme on subsidized premium rate. The scheme will be implemented in 8 selected districts by the New India Assurance Company Ltd.
4. A new Aquaculture Insurance Policy has been devised and it is
Brought under Market Agreement with effect from 1st January

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SOME OF THE POPULAR PRODUCTS OF GIC Mediclaim

The Mediclaim policy covered people for medical expenses for a minimum policy amount of Rs. 15,000 and a maximum amount of Rs. 0.3 million. Mediclaim policy was of two types including the individual policy and the corporate policy. The individual policy was offered to either individuals or to a family as a whole. The corporate policy was offered to corporates to insure all their employees less than one scheme.
Overseas Mediclaim Insurance

This policy offered medical reimbursement in foreign currency. Many countries across the world had made it mandatory to have medical cover before entering their territories and therefore, this policy gained popularity. It covered expenses relating to the physicians fees, hospital expenses, local emergency, medical transportation and medical services; dental treatment for immediate relief (limited expenses); emergency medical evacuation expenses, as ordered by a physician, in case of critical illness or injury, up to nearest suitable Medicare center, medical evacuation including transportation and medical care en route, to insured persons place of residence in India. In case of the insured persons death, the policy reimbursed the expenses incurred in preparing and transporting his remains to India or for burial or cremation in the local area. GIC also launched some new products in the late 1990s. It offered
personal insurance products with a savings feature, which were exclusively

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offered by the Life Insurance Corporation of India (LIC). The products were launched in consultation with foreign insurance companies like Mitsui Marine and Fire Insurance Company and Tokyo Marine of Japan. These products were offered with a medium maturity of ten years, unlike the LIC products offered with a maturity period of twenty years.
Videsh Yatra Mitra policy

Launched in January 1998, Videsh Yatra Mitra policy was another special policy in the miscellaneous insurance category. It offered indemnity for medical expenses during the period of overseas travel. There were two types of Videsh Yatra Mitra policy one that offered benefits up to US$2,50,000 for worldwide travel excluding the US and Canada and the other offering benefits up to US $ 5,00,000 for worldwide travel including the US and Canada. Apart from medical coverage, the policy also offered coverage for personal accident up to US $ 25,000; loss of personal baggage up to US $ 1,000; delayed baggage up to US $ 100 and personal liability up to US$2,00,000. The advantage of the policy was that the premium amount was only 14% more than that of the overseas Mediclaim policy, and the medical benefits increased by about five times along with some supplementary benefits.
Bhagyashree Child Welfare Policy

In October 1998, GIC launched the Bhagyashree Child Welfare Policy, which offered coverage to a girl child in the age group of 0-18 years, whose parents were not aged above 60 years. The scheme aimed at
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offering cover to one girl child in a family who had lost either the father or the mother or both in an accident. An amount of Rs. 25,000 was deposited by GIC in the name of the girl child with a financial institution. The financial institution made annual disbursements (Refer Table VII) from the deposit amount for the benefit of the girl child to the living parent or to the nominated guardian, till she reached the age of 18 years. The balance amount to her credit was disbursed on her attaining the age of 18 years.
Bhagyashree Child Welfare Policy: Annual Disbursements by the Financial Institution

Age of the Amount Child 1-5 years 6-11 years of Payable to
Compensation Rs. 1200 per Surviving parent or guardian looking annum -doafter the child. Surviving parent or guardian provided the child is admitted to school and expenditure is incurred on her education. per Surviving parent or guardian provided the child is admitted to school and expenditure is incurred on her education. To the girl child
12-17
Rs.
2400
annum
18 years
Balance amount
Raj Rajeshwari Mahila Kalyan Yojana
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In October 1998, the Raj Rajeshwari Mahila Kalyan Yojana was introduced, that offered security to women in the age group of 10 to 75 years irrespective of their occupation. For a premium of Rs. 15 per annum, the policy offered a cover of Rs. 25,000 for permanent total disablement of the insured women. The policy also offered a cover of Rs. 25,000 for the death of her husband. In case of the death of an unmarried woman, the policy offered a cover of Rs. 25,000 payable to her nominee/legal heir.
Jald Rahat Yojana

GICs subsidiaries introduced the Jald Rahat Yojana quick payment of compensation to road accident victims. Under the scheme, a claimant was not required to go to the Motor Accident Claims Tribunal for claiming compensation; he could directly approach concerned insurance company. Non-fatal injury claims involving accident victims of 18 years and above were taken up. The scheme was initially introduced in Ahmedabad, Mumbai, Bangalore, Calcutta, Delhi, Kochi, Chennai and Pune. GIC sold intangible products, whose delivery was contingent in nature. Therefore, the pricing of the products also had some unique features, as the actual claims cost was known only later and not at the time of sale. The premium was fixed on the basis of past experiences that were reviewed periodically. Pricing of general insurance products was based on claims cost, business acquisition cost, management expenses and margins for fluctuations in claims experience and reasonable profit.
The Farmers Package Insurance
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Property/Contingency Risks Sum Insured Dwelling hut/house Fire, lighting, natural perils, Rs. 5000 and contents impact damage, riot, strike (dwelling) malicious damage Cattle (indigenous Death Rs. 1000 (contents) (accident/disease) 2 cattle heads @
permanent total disablement, Rs. 2000 each breeding/calving risk Agricultural pump set Fire, theft, machinery 100% of market (up to 5 HP) Bullock cart breakdown Death/permanent value disability Rs. 2000 (2
of animal due to accident, bullocks) damage to cart, third party Rs. 1000 (cart) liability, personal accident Gramin spouse) to the driver. personal Death/permanent total Rs. 6000 each
accident (insured and disablement
The Tribal Package Insurance

Property/Contingency Huts/Dwelling/cottage industry sheds Risks Sum Insured Fire, lighting, riot, strike, Rs. 2000 malicious damage, natural
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Contents Personal accident
perils, aircraft damage, etc. -doRs. 1000 Death/permanent total Rs. 10,000 disablement/partial
disablement/loss of limbs Hospitalization/domiciliary Accidents and major disease, Maximum hospitalization renal cerebral/vascular coronary etc. hearts diseases, Rs. 4000 per strokes, person diseases, period per of
bypass surgery, TB, tumors cover
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Reinsurance Programme for Indian Business:

The main thrust of the Reinsurance Programme of the Industry has been to maximize retention of premiums within the country consistent with securing the best protection with good securities at optimum cost. Considering the increase in net worth and growth in premium volume, the Indian market retention has been increased for all classes. To protect this increased retention, additional excess of loss protection has been arranged for property and marine classes. The overall cost of the excess of loss protection has been arranged at a reduced cost as compared to 1997-98.
Swift Division:
Way back in 1991, Foreign Inward Facultative and Non-Reciprocal treaty acceptances were centralized at GIC through Swift Division on behalf of the four companies and GIC with the objective of ensuring reasonable limits of acceptances. During the year under review, treaty business of the Division generated accounted premium net of retrocession of Rs.203.31 crore as against Rs.183.92 crore in the previous year. After accounting for paid claims and other deductions, the Division has produced a surplus of Rs.13.3 crore. Outstanding loss provision for the year has increased form Rs.174.3 crore to Rs.225.7 crore due to losses like Hurricane Georges, Indonesian Riots, Bangladesh Floods and other risk losses. This has led to a deficit of Rs.37.3 crore for the market. Facultative business has resulted in premium income of Rs.1.99 crore during the year as against Rs.2.05 crore in the previous year. Net profit after all deductions and provision for outstanding losses amounted to Rs.1.49 crore. Both treaty and facultative business accepted by SWIFT are being equally shared between GIC and subsidiaries.
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Foreign Operations:
Corporation and subsidiary companies operate through branches or agencies or associate/subsidiary companies in 31 countries as listed below: List of Foreign Countries in which the Corporation or a Subsidiary company is operating A. Directly 1. 2. 3. 4. 5. 6. 7. 8. 9. Australia Bahrain Canada Fiji France Hong Kong Japan Kuwait Mauritius 10. 11. 12. 13. 14. 15. 16. 17. Nepal Netherlands Antilles Oman Philippines Saudi Arabia Thailand United Arab Emirates United Kingdom
B. Through Subsidiary Companies and Associated Companies 1. 2. 3. 4. 5. 6. 7. Antigua Barbados Dominica Guyana Ghana Jordan Kenya 8. 9. 10 11 12 13 14. Liberia Malaysia Nigeria Sierra Leone St. Lucia Singapore Trinidad & Tobago
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During the year ended 31st March 1999, direct overseas operations of the four subsidiary companies produced a gross premium of Rs. 427.49 crore as against Rs.382.95 crore in the previous year. Branch net premium income was Rs.383.89 crore as compared to Rs.343.04 crore in the previous year. The branch net claims during the year amounted to Rs.293.28 crore (76.4% of net premium)
Grievance Cell
Customer Grievance Cells in the Regional Offices/Field Offices of the four companies are working well and as per reports received, 81.43 % of the grievances have been cleared. The Grievance Cell at GIC monitors the grievance cases received directly by GIC and also those pending with companies. The GIC Grievance Cell also monitors the complaints received from the Ministry of Finance, Members of Parliament, Cabinet Secretariat, Directorate of Public Grievances as also from Consumer Guidance Society and/or Registered Organisations, Consumer Disputes Redressal Forums/Commissions and sees to it that complaints are dealt with expeditiously.
Customer Services: Lok Adalat:

The movement of Lok Adalat for settlement of Motor Third Party Claims has been institutionalized and the same has been in existence for almost 14 years. The General Insurance Industry puts in alround efforts to ensure maximum settlement of claims in this forum. During the year of report, industry participated in 1,287 Lok Adalats, settled 48,016 claims disbursed Rs.286.55 crore by way of compensation.
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THE INDIAN GENERAL INSURANCE INDUSTRY PRIVATE SECTOR
IN
In the 1970s, the general insurance industry was nationalized in order to increase the penetration of insurance in the country and make it available to the lower segments of the society, particularly the rural population. However, even after 40 years of nationalization, only 25% of the insurable population was covered by insurance. This was one of major reasons that lead the GOI to liberate this sector, so that private players could work towards extending the reach and coverage of insurance across the country. In the early 1990s, there was a major shift in the governments macro economic policy due to two developments the end of the Cold War and collapse of Communism. The concept that market dynamics should be the decisive factor in economic matters was gaining wide acceptance. The government controlled price regimes were increasingly being perceived negatively, which resulted in liberalization of the governments economic policies. Organization (WTO), which resulted in increased Another foreign major development was Indias entry in to the World Trade commitments of the country. This led to the opening up of sectors like telecom, insurance and power for private participation.
The governments decision to allow private players to enter into the
insurance market in India faced stiff opposition from both political parties and employees of state insurance companies. Finally, after
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prolonged debates and discussions, the insurance sector was liberalized in 1999, with the passing of Insurance Regulatory and Development Authority (IRDA) Bill. IRDA was the regulatory authority for the insurance sector in India. It had the powers to grant licenses to foreign players to operate in India, and formulated operational rules and regulations for the functioning of insurance companies. According to IRDA guidelines, foreign players were permitted to enter India in partnership ventures with an equity stake restricted to 26%. In spite of the regulation, many foreign players entered into partnership with Indian companies to start operations in India. According to IRDA regulations, banks were allowed to enter the insurance sector on the condition that their capital adequacy ratio should be around 9%. Many analysts felt that, due to this rule, none of the public sector banks, except SBI, could enter insurance sector.
From early 2000 onwards, IRDA started granting licenses to the
private players for offering general insurance services.
Royal
Sundaram, a joint venture of Sundaram Finance and Royal & Sun Alliance, was the first company to enter the liberalized Indian insurance industry. By July 2002, there were seven private players in the industry; most of them formed as joint ventures with foreign players.
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Marketing
GIC did not seem to have formulated any concrete marketing strategies until the government of India had announced the liberalization of the Indian insurance industry. Since the company enjoyed a monopoly status in the market, it did not focus on marketing. Moreover, as some of the general insurance policies were mandatory, the company did not need to market them. GIC did not seem to focus on providing better service to the policyholder also. In the pre-liberalization era most of the agents and development officers were more interested in getting more customers and there were many complaints about poor customer service. The primary reason was that therein incentives depended only one new business generated and not on customer satisfaction. However, after the liberalization of the insurance industry, competition in the sector intensified, forcing GIC and its subsidiaries to focus more on marketing initiative and improving customer satisfaction. The Insurance Advertisements and Disclosure Regulations Act, 2000, governed the advertisements of GIC and its subsidiaries. As per the regulation, an insurance advertisement is any communication related to a policy that would intend to result in the sale of a policy or its solicitation by the public. It included all forms of printed and published materials, or any material using the print and/or electronic media. The companies could advertise through newspapers,
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magazines and sales talk; billboards, hoarding, panels; radio, television, website, e-mail, portals; representations by intermediaries; leaflets; descriptive literature/circular; sales aid flyers; telephone solicitations; business cards; videos; and faxes. NIACL, the largest non-life insurer, was the first company to come up with advertising campaigns in the print and other media. The company also introduced innovative insurance policies at frequent intervals, particularly for the weaker sections of the society. The company introduced these policies after analyzing peoples requirements through carefully designed market surveys, and through prolonged discussions with marketing team, the Chamber of Commerce, all the state governments and also the customers. NIACL also took some steps to improve the quality of service. It installed touch screen computers for easy accessibility of policy particulars, conducted market surveys to identify customer needs and also added services like risk management and risk inspection. UIICL also took some major marketing initiatives with many private players entering the market. It allocated Rs.100 million for brand promotion. The company also planned an aggressive marketing drive for penetrating into the rural and personal line of insurance segments. V. Jagannathan, chairman, UIICL, said the campaign is aimed at settling all non-suit claims instantly in any of our offices. The idea is to drive home the point that customer is the be al and et al for us. However, claims which are disputed in the courts of law will not come under the purview of the campaign.
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In February 2002, in a move to further penetrate smaller towns and rural markets, UHCL announced plans to set up single-man offices in semi-urban areas. It also announced plans to set up andagents grievance cell to solve its agents problems. In August 2002, UHCL appointed five companies as Third party Administrators (TPAs) 13 for its Mediclaim policies. This enabled Mediclaim policyholders to avail the benefits of cashless settlements in hospitals from September 1,2002 onwards. Prior to the introduction of this facility, the policyholders had to settle their hospital bills first and claim it from the insurance company later. The five TPAs selected by the UHCL included Med Save Health Care of New Delhi, Family Health Plan promoted by the Apollo Group, Hyderabad. Medicare TPA Services (India) Pvt. Ltd. of Collate, ICAN Health Services Pvt. Ltd. Pune and Paramount Health Services (Pvt.) Ltd., Mumbai. In July 2002, UHCL came up with an ad campaign on a hoarding. The hoarding read, UI the cover fielder in Lagaan. Our role in Asmirs14 hit film was to back it up with insurance, UHCL had offered different types of covers at all stages of the production of the film like losses due to the death of artists, increase in artists expenses due to the postponement of schedules, and losses caused by fire etc. The company announced new types of covers in this line of insurance to deal with the increasing competition. GIC also aimed at improving customer relationships by taking steps to quicken reinsurance acceptances and settlement of claims. It also
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concentrated on major customer center parameters like promptness in issuing of documents and settlement of claims. It also entered into collaboration with the India Institute of Technology, Guwahati, to re-orient and re-design its computerized network. In October 2002, NICL announced its plans to enter into agreements with banks in order to sell its insurance products. It entered into an agreement with the Indian Overseas Bank and had talks with other commercial banks to sell personal line of insurance products. With a focused marketing approach, the company expected to garner a premium income of Rs.27 billion in the next financial year. It launched a new personal line product called Sampoorna Surakshaa (complete protection), including cover for personal accident, damage caused to residential building, personal damages, a modified Mediclaim, personal computer and a private car/motorized twowheeler package and professional indemnity. It was initially aimed at employees in various state departments.
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HUMAN RESOURCES
GICs employees were grouped as Class I, II, III and IV. The officers were the Class I employees, development officers were the Class II employees and supervisory staff were the Class III employees, and subordinate staff were the Class IV employees. In 1997, a new wage revision policy was proposed and two new practices were introduced 12% wage hike for all and concept of Productivity Linked Lump sum Incentive (PLLI). Prior to the implementation of this wage revision policy, the wages for the employees were revised in accordance with the wage revision for the banking industry. GIC, being a public sector company, analysts felt that its officials were not free to take decisions and to function freely. The employee unions were also reported to be strong Over-staffing was reportedly a major problem faced by GIC and its subsidiaries. At the same time, there was a shortage of qualified risk assessors. The lack of technically qualified assessors led to underwriting losses. It was also reported that entrusting responsibility to people was not done rationally with high and unrealistic targets set for obtaining business. Which led to low accountability of employees.
With competition in the market increasing, the premium income of
public insurance companies was expected to reduce by 30%.In November 2001, the GOI announced that about 14,000 development officers of GIC and its subsidiaries across the country might be retrenched, based on the recommendations of GIPSA. In NIAC
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alone, about 4000 development officers were to be retrenched. The company planned a VRS. Which was initially meant for Class II officers. The scheme was planned to be extended to Class III employees, if it was successful with the Class II employees. GIC felt that Class II officers (Development Officers) should be laid off, as their services were not needed in the liberalized insurance industry. Prior to privatization, these officers were responsible for increasing the companies business by acting as intermediaries. The private insurance companies, did not have any development officers, instead, they were making use of insurance agents, who secured business for different insurance com companies and received commissions or brokerage in return. The public insurance companies decided to follow this course of private players. In February 2002, all the clerical unions of the general insurance companies rejected the proposal for the VRS. Commenting on the proposed VRS, M. Karthikeyan, the General Secretary of the GIC Employees Union said, GIPSAs move is suicidal and repressive and it disregards the long-term financial implications on the industry. In addition, excluding one segment of employees from the purview of the scheme is discriminatory.
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FINANCE
In 2010, GIC and its subsidiaries reported a total loss of Rs. 17.22
billion as compared to the loss of Rs. 12.14 billion in 2000 and Rs. 6.87 billion in 2009. The net premium from fire insurance business stood at Rs. 21.50 billion compared to Rs. 24.04 billion in 2000. The net premium from the marine insurance business stood at Rs. 8.28 billion as against Rs. 8.46 billion in 2000.
The motor insurance business reaped a total premium amounting to
Rs. 33.62 billion in 2001 and Rs. 23.17 billion in 2000. The theft insurance business earned a premium amounting to Rs. 6.88 billion in 2001 as against Rs. 6.49 billion in 2000. Premium from other miscellaneous insurance business stood at Rs. 38.62 billion in 2010 as compared to Rs. 37.33 billion in 2009. In 2001, GICs profit from its fire, marine and theft insurance business of GIC stood at Rs. 4.93 billion. However, the motor and other miscellaneous insurance operations of the company suffered huge losses at Rs. 22.15 billion. This resulted in the losses for all the insurance companies, as it happened in the previous two years.
This huge loss was attributed to losses in third-party claims relating
to motor insurance business and miscellaneous insurance business. The loss suffered by these businesses was attributed to the substantially low premiums collected, as compared to the claims paid out. In 2009-2010, the total income from motor insurance stood at Rs. 35.53 billion Rs. 33.62 billion of net premiums from motor insurance and Rs. 1.91 billion of commission earned through
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its insurance business.
In comparison, the total expenditure,
including claims paid and other expenses, stood at Rs. 52.39 billion. This resulted in a total loss of Rs. 16.85 billion in the motor insurance business.
GICs investments in foreign operations, as on March 31, 2010,
amounted to Rs. 757.9 billion in the form of total paid-up capital in three wholly owned subsidiaries including Indian International Insurance Pte. Ltd. In Singapore. The New India Assurance Company (Sierra Leone) Limited and the New India Assurance Company (Trinidad and Tobago) Limited. In addition, GIC also operated in 17 other countries through 45 branches.
GIC had reported losses from its international operations for three
consecutive years. In 2008-09, GIC reported a loss of Rs. 618.2 million and Rs. 452.25 million during 1999-2000. increased sharply to Rs. 1188.5 million during 2009-2010.
The losses incurred by GIC in the insurance related business were
The loss
counterbalanced by the income derived by GIC and its subsidiaries through investment GIC derided Rs. 22.78 billion in 2008-09, Rs. 24.92 billion in 2009-2010 and Rs. 26.96 billion in 2010-11. GIC also received dividends of Rs. 650 million from three of its subsidiaries at the rate of 20-25%.
GICs investible funds had come down from 23.32 billion in 1998-
99 Rs. 18.43 billion in 2010-11. The decrease in investible funds was attributed to the reduction in fire insurance premium, increased claims payments, week economic conditions, fall in interest rates and higher incidence of non-performing assets.
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SOCIAL RESPONSIBILITY
The provision of social security was a responsibility of the State, as per the Schedule 7 of the Constitution of India. The laws passed by the State to serve the purpose included the use of insurance compulsory or voluntary as a security tool. The Employees State Insurance was one such scheme, which took care of the expenses incurred due to sickness, disablement, maternity and death, for the benefit of industrial employees and their families, insurers played an important role in the social security schemes sponsored by the GOI. The Insurance Act, 1938, made it mandatory for insurance companies to offer a percentage of business to the people in the rural sector. They had to offer insurance to workers in the unorganized sectors, economically backward classes of the society and other categories listed by the IRDA. To pursue the above rules, the IRDA, issued the Obligations of Insurance to Rural or Social Sectors Regulations 2000 in 2000. All the rural insurance schemes operated on a commercial basis and were designed to offer social security to the rural population. GIC started special insurance schemes at subsidized premium rates to offer covers for livestock like cattle, sheet, goad and animals like silkworms and honeybees. It also offered covers for plantation and horticultural crops like rubber and grapes, property like agricultural pump sets; poultry; and offered aquaculture insurance for shrimp/prawns. It also offered insurance for failed wells, salt works, cycle rickshaws, animal driven carts etc.
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GIC also offered the personal accident policy in rural areas with a premium of Rs.5 per policy. Known as the Gramin Personal Accident Policy, the sum insured was fixed at Rs.10, 000 for death, loss of two eyes/two limbs and/or permanent total disablement. GIC also offered insurance for dwelling huts that were constructed with financial aid from banks or co-operatives or government institutions. Under the Insurance Act, GIC was also obliged to offer insurance to the social sector. However, GIC and its subsidiaries offered services without the statutory obligations, in collaboration with the government of India. In 1985, the GOI introduced the Personal Accident Social Security Scheme (PASS) for the benefit of poor families. GIC and its subsidiaries were responsible for the regulation of the scheme. In 1989, the government of India launched the Solatium Fund-1989, to provide compensation to the victims of hit and run motor accidents. The general insurance industry and the central and state governments jointly contributed to the fund. The scheme required GIC to nominate offices of its subsidiaries in each district for settlement of claims within six months from the date of accident and it was also responsible for the functioning of these offices. In June 1999, GIC launched the Rashtriya Krishi Bima Yojana (National Agricultural Insurance Scheme) to offer insurance coverage and financial support to farmers when the crops failed due to some natural calamity, pests or diseases.
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General insurance industry records 24.1% growth

The general insurance industry has recorded a 24.1% increase in premium collection at Rs 16,577.7 crore in the first eight months of the fiscal against Rs 13,350.1 crore during same period previous year, according to data compiled by Insurance Regulatory and Development Authority (IRDA).
The market share of new players continued to stay at 35% in the current fiscal, up from 26% last year. While 35% was contributed by the eight private players and remaining 65% came from the four public sector players New India, Oriental Insurance, National Insurance and United India.
ICICI Lombard grew premium collection by over 90% to Rs 2,078.6 crore in the April-November period followed by Bajaj Allianz General Insurance, which saw 35.3% increase in premium income at Rs 1,158.8 crore.
Market leader New India grew business by 10% to Rs 3,337.1 crore in AprilNovember, the highest premium collection by any company during the period. Clocking 13.6% growth, Oriental Insurance collected Rs 2,647.8 crore in premium, while National Insurance witnessed a mere 5.06% growth in business at Rs 2,311.6 crore during the period.
United India increased premium collection by 12.3% to Rs 2,093 crore. Among the private players, Reliance General posted a record growth in premium of 419.53% at Rs 100.25 crore during the period under review
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FUTURE OUTLOOK
Analysts felt that GICs future looked bleaker after the deregulation of the insurance industry in India. Competition was tougher in the general insurance segment, as compared to the life insurance segment. In life insurance, customers were locked in for life or at least for a minimum of 10 years. In general insurance, most of the policies were mandatory and had to be renewed annually. With the entry of private players and increasing competition, customers now had more choices and they had become highly price sensitive. They were not loyal to any specific company. Moreover, switching from one company to another did not involve any cost or inconvenience. In addition, building trust was not considered very important in this segment. The general insurance policy was not devised as an investment vehicle and the risk covered was limited to the term of the policy. There were no long-term benefits involved in the policy. Therefore, private companies could attract customers mostly by offering lower premiums and some extra riders. Some analysts felt that GIC certainly was in an advantageous position, the most significant fact about it being its well-established extensive infrastructure across the country. Its distribution network was well developed, resulting in lower distribution costs in a highly competitive industry. GIC was in the general insurance market for more than 25 years and seemed to have built strong relationship with its customers, which could be leveraged to maintain its sales. GICs
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subsidiaries were familiar with the dynamics of competition. Though the subsidiaries were not competing on price, they were competing for customers and revenues. In addition, after the four subsidiaries expanded across the country irrespective of the regions they were established in, they started competing for market shares too. Analysts felt that GIC would retain at least 50% of the market during 2000-10. The public sector company would need to plan carefully to retain its penetration and expand its market. It might prove to be difficult for the new entrants to plan the entry strategies and market positioning to take away market share from the public sector companies. In April 2002, GIC and other public insurance companies announced that they would form a pool to provide insurance cover to damages caused due to terrorist attacks. The pool was started with a fund of Rs.2 billion to which all insurance companies had contributed, the major contributor being GIC and four public insurance companies. GIC was responsible for the management of the pool. As GIC was made the national reinsurer after GICs restructuring, the company started focusing more on the reinsurance business. In July 2002, GIC planned to reinsure a part of high-value risk of celebrity insurance policies of LIC. LIC could underwrite risks for any life policy up to a limit of Rs.4 million. For any life policies higher than Rs.4 million, GIC planned to reinsure. Analysts said that, though this move of GIC may start on a moderate scale, the
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business might translate into a large one. For this purpose, GIC set up a life insurance department. Three middle level executives from LIC were appointed to develop the systems and procedures of the new department. In September 2002, GIC announced that it has chalked out a fiveyear plan to achieve a net premium of about Rs.25 billion from overseas markets. Currently, the company reported Rs.2 billion of net premium earned from overseas markets. The high expectation of overseas premium resulted from the terrorist attacks on the WTC in the US and exit of some of the major insurers from the reinsurance market like Royal and Sun Alliance. Copenhagen Re and Assicurazioni Generali. To earn a higher premium GIC was targeting the markets of Africa, the SAARC countries, West Asia, the Far East, Europe, Russia, Australia and New Zealand. It is planned to set up representative offices in the Middle East (Dubai) and South East Asia (Singapore or Labuan). As a part of the growth plan, GIC also aimed at forming marketing, technical and R & D divisions. Need for Accuracy in Pricing of Risks The continual entry of new private players coupled with the intense
competition owing to the de-tariffication of the general insurance sector has also resulted in strengthening the bargaining power of the customers and development of customer centric insurance products. While the customer has benefited on account of the detariffing, the impact on the insurers has been less promising so far on account of the price wars and the resultant underwriting losses. Thus, it is apparent that without an
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accompanying development of systems to ensure accurate pricing of risks, the profitability and the solvency levels of the general insurance players would increasingly come under pressure. Insurers will have to improve and consolidate their processes for data mining and MIS for undertaking informed underwriting risks. Adequate training of underwriters and the sales staff for equipping them with the ability to respond to these new changes in the market would also have to be initiated by the insurance companies. Challenges to Face in the Future The current free pricing regime has set the backdrop for risk-based
pricing over the longer term. Gradually, the industry players are expected to focus on franchise building (via improved client servicing), cost competitiveness and product differentiation, which in turn is likely to help them to face increased competition if and when the industry is opened up further to foreign direct investment. Most private players in the domestic general insurance business would require capital infusion for future growth. With most of the private entities being joint ventures, balancing the shareholding and business objectives of the partners while infusing capital to sustain growth is a challenge. This is further compounded by the weak underwriting environment at present. Despite these challenges, the long term outlook for the domestic general insurance industry remains positive because the current low levels of insurance penetration and the countrys long term economic growth potential.
Outlook Remains Positive
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The general insurance industry has witnessed radical changes since
the opening of the market to private players in the year FY00. The entry of private players invigorated the insurance industry, resulting in strong premium growth; improved marketing focus along with product innovations. The general insurance industry has been growing at a little over 16% CAGR over the past three years. In a growing economy, low insurance penetration in terms of premium percentage to GDP, as well as increasing affordability on account of higher disposable incomes and savings, increasing urbanisation and increasing awareness, are some of the factors that would continue to fuel growth of the general insurance sector in India
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BIBLIOGRAPHY:-
WEBLIOGRAPHY www.google.com www.wikipedia.com www.scribd.com www.yahoo.com
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General Insurance Corporation of India

General Insurance Corporation of India

General Insurance Corporation of India

Mission and Values of GIC

General Insurance Corporation of India

HISTORY OF GENERAL INSURANCE IN INDIA

General Insurance Corporation of India

General Insurance Corporation of India

General Insurance Corporation of India

General Insurance Corporation of India

ROLE & FUNCTIONS OF GIC

General Insurance Corporation of India

General Insurance Corporation of India

ROLE AND FUNCTIONS OF SUBSIDIARY COMPANIES

General Insurance Corporation of India

GICs four subsidiaries in India were: NATIONAL INSURANCE COMPANY LIMITED

General Insurance Corporation of India

NEW INDIA ASSURANCE COMPANY LIMITED

General Insurance Corporation of India

ORIENTAL INSURANCE COMPANY LIMITED

General Insurance Corporation of India

UNITED INDIA INSURANCE COMPANY LIMITED

General Insurance Corporation of India

Nationalization of General Insurance

General Insurance Corporation of India

General Insurance Corporation of India

General Insurance Corporation of India

General Insurance Corporation of India

THE PRE-LIBERALIZATION ERA

General Insurance Corporation of India

THE POST LIBERALIZATION YEARS

General Insurance Corporation of India

General Insurance Corporation of India

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY (IRDA)

General Insurance Corporation of India

General Insurance Corporation of India

Adjudication of disputes between insurers and intermediaries or insurance intermediaries;

Supervising the functioning of the Tariff Advisory Committee;

GIC ASSEST MANAGEMENT COMPANY LIMITED

General Insurance Corporation of India

GIC MUTUAL FUND

General Insurance Corporation of India

savers Growth saver95 Date of March 31 , 1993

Allotment Repurchased April 1st, 1996 on Redemption March 31st, 2003

1994 April 1st, 1997 April 1st, 2004

1995 April 1st, 1998 April 1st, 2005

GIC HOUSING FINANCE

2001 (in Rs. in

General Insurance Corporation of India

Sales Other Income Operating Profit Interest Depreciation Net Profit

million) 917.20 0.90 756.40 684.90 7.20 43.30

General Insurance Corporation of India

General Insurance Corporation of India

PRIVATE PLAYERS IN THE INDIAN GENERAL INSURANCE MARKET

General Insurance Corporation of India

General Insurance Corporation of India

5. Royal Sundaram General Insurance: - Established in 1954 with a

General Insurance Corporation of India

General Insurance Corporation of India

General Insurance Corporation of India

PRODUCTS & SERVICES