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What is Insurance

1)A promise of compensation for specific potential future losses in exchange for a periodic payment.
2)Insurance is designed to protect the financial well-being of an individual, company or other entity in
the case of unexpected loss.
3)Insurance basically involves a group of people agreeing to share risks. When you buy insurance, you
join many others who pay money to an insurance company.
It is a very old idea which started back when sailing ships got destroyed or lost their cargoes. Merchants
found that by dividing their cargoes among several boats, they protected themselves from total financial
ruin. That way, if one of the boats was destroyed, no merchant lost everything. Each stood to lose only
a small portion.

Life insurance is an insurance coverage that pays out a certain amount of money to the insured or their
specified beneficiaries upon a certain event such as death of the individual who is insured. This
protection is also offered in a Family takaful plan, a Shariah-based approach to protecting you and your
The coverage period for life insurance is usually more than a year. So this requires periodic premium
payments, either monthly, quarterly or annually.
The main products of life insurance include:
Term insurance
This offers insurance protection for a limited period only whereby the money is paid up if you pass away
or if you suffer total and permanent disability.
Whole life insurance
Life-long protection and premiums are paid throughout your life and the money including any bonuses
will be paid when you pass away or suffer total and permanent disability.
A combination of protection and savings whereby the money will be paid at the end of a specific period
upon your demise or if you suffer total and permanent disability.
For investment-linked insurance, your premium is used to buy life insurance protection and units in a
fund managed by the life insurance company. The benefits paid to you or your nominee will depend on
the price of the units at the time you surrender your policy or when you pass away.
General insurance is basically an insurance policy that protects you against losses and damages other
than those covered by life insurance. For more comprehensive coverage, it is vital for you to know about
the risks covered to ensure that you and your family are protected from unforeseen losses.
The coverage period for most general insurance policies and plans is usually one year, whereby
premiums are normally paid on a one-time basis.
The main products of general insurance includes:
Motor insurance
You need motor insurance when you buy a motor vehicle. Motor insurance covers your vehicle, be it a
motorcycle, a car or a lorry, in case of accidents or theft.
Fire/ Houseowners/ Householders insurance
Home Insurance, or Houseowner / Householder Insurance as it is also known, is one of the most
important insurance policies you can buy in your adult life. Your home is one of the largest financial
investment youve made, and thats why its so important to protect it.
Medical and health insurance
Medical and Health Insurance (MHI), is an insurance policy which is designed to cover the cost of private
medical treatment, which can be very expensive, especially with hospitalisation and surgery. MHI also
ensures that you won't have to worry about the cost of seeking treatment during emergencies. In
addition, MHI also provides you with an income stream while you undergo treatment.
Travel insurance
A travel insurance can be purchased for you and/or your family to insure against travel-related
accidents, losses or interruptions. Travel insurance coverage is usually limited to the period of your
1) Insurance Regulatory and Development Authority (IRDA) is an autonomous apex statutory body which
regulates and develops the insurance industry in India. It was constituted by a Parliament of India act
called Insurance Regulatory and Development Authority Act, 1999 [2][3] and duly passed by the
Government of India

FDI in Insurance Sector in India
After increasing the FDI cap in the Multi-brand Retail sector, Aviation sector, Power Trading, and
Broadcasting sector, the Indian Cabinet Committee on Economic Affairs (CCEA) is strongly expected to
raise the FDI ceiling in the Insurance and Pension sectors and the Pharmaceutical sector of India. A
robust proposal for raising FDI threshold to 49% in the Insurance sector from the existing limit of 26%,
has been submitted to the cabinet for proper approval in the quickest possible period. Such an
increment in the FDI ceiling in the insurance sector of India, will certainly be highly and greatly
appreciated by domestic and foreign insurance companies, for the purpose of expanding and enriching
their insurance and re-insurance businesses under diverse insurance categories. More information
regarding the insurance sector of India, is separately offered in the following section in details. Here, it
may be noted that, the existing limit of foreign direct investment in the insurance sector of India, which
is just 26%, is permitted to be made through the Automatic Route with proper license from the
Insurance Regulatory and Development Authority (IRDA) of India. It means that a foreign investor
cannot acquire more that 26% stake in the private insurance companies anywhere in India. As in all
other economic sectors of India, ours prestigious and globally reputed law firm well-based in India, has
been providing perfect and swift legal services for secure and profitable foreign direct investment in the
insurance sector of India or abroad, for a long successful period.
3) Growth-
The future of the Indian insurance sector looks bright. The sector which stood at a strong US$ 72 billion
in 2012 has the potential to grow to US$ 280 billion by 2020. This growth is driven by Indias favourable
regulatory environment which guarantees stability and fair play. This environment has given rise to an
insurance market which encourages foreign investors to tap into the sectors massive potential.
Key Statistics
Indian insurance companies collected a combined Rs 107,010.7 crore (US$ 16.85 billion) worth of new
premiums for FY 201213, according to data released by IRDA.
Road Ahead
Life Insurance Council, the industry body of life insurers in the country, has projected a compounded
annual growth rate (CAGR) of 1215 per cent over the next five years for the segment. Indias insurable
population is expected to grow to 750 million by 2020, with life expectancy projected to reach 74 years
around the same period. The council believes that this favourable Indian demography would result in
more people seeking out life insurance. Also, the council predicts life insurance penetration
percentage of insurance premium to GDP to reach 5 per cent by 2020 from its current 3.2 per cent.
Confederation of Indian Industry (CII) projects the growth rate for Indias insurance industry in FY 2013
14 to be around 5 per cent. It also anticipates 60 per cent of non-life insurance companies to record an
average growth of more than 10 per cent. The raising of the foreign direct investment (FDI) limit from 26
per cent to 49 per cent in the sector is viewed as a key element to promote the insurance industry in
The total insurance market stood at US$ 72 billion in FY12 and is expected to touch US$ 139 billion by
2015. Over FY03-12, life insurance premiums increased at a compound annual growth rate (CAGR) of
20.1 per cent. Private players have increased their market share in the life insurance market to 29.3 per
cent in FY12 from 2 per cent in FY03.
The rapid development in Tier II and Tier III cities and growth in new bankable households have led to
the emergence of a large insurable class with an appetite for sophisticated life insurance products. LIC is
still the market leader, with 70.7 per cent share in FY12, followed by ICICI Prudential, with 4.9 per cent
The Insurance Regulatory and Development Authority (IRDA) has recently allowed life insurance
companies that have completed 10 years of operations to raise capital through initial public offerings
(IPOs). Insurance products are also covered under the exempt, exempt, exempt (EEE) method of
taxation, which translates to an effective tax benefit of approximately 30 per cent on select investments.
Crop insurance market in India is the largest in the world, covering around 30 million farmers. The
Government of India plans to increase the coverage to 50 million during the 12th Five-Year Plan. Health
insurance continues to be one of the most rapidly growing sectors in the Indian insurance industry.
Penetration of health insurance is expected to more than double by 2020.

Major companies

A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that unlike a pure
insurance policy gives investors the benefits of both insurance and investment under a single integrated
Working Principle
A Unit Link Insurance Plan is basically a combination of insurance as well as investment. A part of the
premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is
invested in various equity and debt schemes. The money collected by the insurance provider is utilized
to form a pool of fund that is used to invest in various markets instruments (debt and equity) in varying
proportions just the way it is done for mutual funds. Policy holders have the option of selecting the type
of funds (debt or equity) or a mix of both based on their investment need and appetite. Just the way it is
for mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value (NAV)
that is declared on a daily basis. The NAV is the value based on which the net rate of returns on ULIPs
are determined. The NAV varies from one ULIP to another based on market conditions and the funds