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Topics: Risk and Uncertainty Insurance Life Insurance Life Insurance companies General Insurance General Insurance Companies Various insurance products Licensing procedure Regulation of Insurance Industry Role of IRDA

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Risk and Uncertainty: There is nothing certain in this world Except the Death and the Tax yet the death and tax are uncertain as nobody knows when will he die or when tax will change

- Benjamin Franklin

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Risk and Uncertainty: Risk has different definitions Insurance authors define risk as Uncertainty concerning the occurrence of Loss

Risk implies uncertainty of outcome Negative outcome may worsen the situation
Level of Risk is relative term Quantifiable loss or damage

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Basic categories of Risk: A. Subjective and Objective Risk Subjective risk relates to perception Depends on mental status of the person No two persons may perceive in similar way Example: Drunken driving risk of being caught Objective risk relates to reasoning This can be technical Measured basing on number of exposures History and probability theory Example: Life risk of a 10 year old can be estimated from past mortality

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Basic categories of Risk: B. Pure and Speculative Risk Pure risk is the one where there is no gain Happening of an event may result in either loss or no loss Example: risk of illness Speculative risk may result in loss or gain Example: Investment in Stock Market gambling, betting etc. Insurance is available for Pure risk only

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Concept of Insurance: Risk is perceived by individuals Seek protection or security against risk Pool up resources to secure themselves Hence, the risk is secured collectively By contributing small quantities A Large fund is formed That may be used to comfort the loser The fund is managed by professionals Hence, an Insurance company Insured enter a contract with the insurer

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LIFE Insurance: Insurance does not ensure long life It only compensates loss of life In monetary value Insured value of the life depends on: individuals earning capacity choice of individual premium paying capacity no. of dependents general health condition Age of the individual average life period in the family medical case history

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LIFE Insurance: Policy has a maturity period Premium paid gets accumulated For the insured period Paid pack to the insured At the end of maturity period May include premium on maturity or May be paid in full in case of death

Examples: All policies of LIC

Human life value = annual worth X active life

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LIFE Insurance: Essentials of Insurable Interest: Relationship between the insured And the subject matter of insurance Examples: Own life Spouses life Minor children Can the children have insurable interest In the life of the parents ? Case study: Griffiths Vs. Flemming and others

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Key Man Insurance: An insurance affected by the Company To compensate the life of a key man Either executive or staff of the company Generally permissible for CEOs Object of the insurance is to protect The company against the financial loss That may occur due to premature demise Of the key man of the Company

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Life Insurance Companies: Birla Sun Life Insurance Company Ltd HDFC Standard Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd ING VYSYA Life Insurance Co. Pvt. Ltd Life Insurance Corporation of India Kotak Mahindra Old Mutual Life Insurance Co. ltd Reliance Life Insurance Co. ltd. Tata AIG Life Insurance Co. Ltd Met Life India Insurance Co. Pvt. Ltd Bajaj Allianz Life Insurance Company Ltd SBI Life Insurance Co. Ltd

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General Insurance: Commercial Line of Insurance for:

Small and tiny industries (fire, burglary, cash, motor and miscellaneous)
Traders (shopkeepers policy, dukan mitra policy, burglary etc) Professional (aviation, marine,, banker, stock exchange, doctors, accountants, architects, sports etc)

Operation covers (fire, marine, workman, burglary, motor, neon sign, third party lift, public liability, industrial all risk)

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General Insurance: Personal Line of Insurance for:

Property Insurance (House, Television etc)

Accident insurance (personal accident, passenger flight etc.) Health Insurance (Mediclaim Insurance, cancer insurance, videsh yatra mitra policy) Liability Insurance (Professional indemnity, doctors indemnity, directors and officers legal liability)

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General Insurance Companies: IFFCO TOKIO General Insurance Co. Ltd National Insurance Co. Ltd New India Assurance Co. Ltd Oriental Insurance Co. ltd Reliance General Insurance Co. Ltd Tata AIG General Insurance Co. ltd United India Insurance Co. Ltd Bajaj Allianz General Insurance Co. ltd ICICI Lombard General Insurance Co. Ltd HDFC Chubb General Insurance Co. Ltd

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Regulation of Insurance Industry Formation: 1. Capital Requirement: Paid up Cap of Rs. 100 Crores for Insurance Paid up Cap of Rs. 200 Crores for Re-insurance Foreign equity maximum 26% 2. Eligibility: Public Company or Society Registered under Co-op Societies Registration Act.

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Regulation of Insurance Industry Registration with IRDA Annual renewal of the registration Restriction on the name of the insurer Maximum holding by single investor upto 26% Deposits with RBI Life Insurance 1% of the total gross premium General Insurance 3%

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Regulation of Insurance Industry Submission of returns

Within 6 months from the end of Financial year

No investments outside India Investment of specified in amounts in specified securities Tariff advisory committee and control Of tariff rates

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Role of Insurance Regulatory and Development Authority (IRDA)

Constituted under IRDA Act, 1999 Consists of 10 members Chair person 5 whole time members 4 part time members Background of members: Insurance Actuary Finance Economics Law and administration

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Role of Insurance Regulatory and Development Authority (IRDA)

Monitor Registration and renewal process Protect the interest of the policy holders Regulation of intermediaries Specify code of conduct for surveyors Levying fees and other charges under the Act Control and regulation of the rates and terms and conditions of the policies Except those controlled by Tariff advisory Committee Regulating investment of funds by insurer Adjudication of disputes Supervising Tariff Advisory Committee

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Distribution channel in insurance Insurance Agent Composite Insurance Agent (Life + General) Corporate Insurance Agent Firm Company Banking Company Co-operative Society Panchayat or local authority Broker Direct Broker Composite Re-Insurance Broker