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SUMMER PROJECT

General Insurance Policies taken by

the Government

Introduction

Insurance in India

Brief history of the Insurance sector

The General Insurance Corporation of India

Malhotra Committee

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Mukherjee Committee

IRDA Bill

Policies prov vided by the government

Social Policies

Health policies

Rural policies

Travel insurance policies

Pravasi Bhartiya Bima Yojana

Success of the above policies

Challenges and weak points of these policies

Opportunities

Further offerings to be made

Conclusion

Introduction

Insurance may be described as a social device to

reduce or eliminate risk of life and property.Under the plan of insurance, a large number of

people associate themselves by sharing risk,attached to individual. The risk, which can be

insured against include fire, the peril of sea, death,incident, & burglary. Any risk contingent upon these

may be insured against at a premium commensurate

with the risk involved.

Insurance is actually a contract between 2 parties

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whereby one party called insurer undertakes in exchange for a fixed sum called

premium to pay the other party happening of a certain event.

Insurance is a contract whereby, in return for the payment of premium by the

insured, the insurers pay the financial losses suffered by the insured as a result of

the occurrence of unforeseen events.

With the help of insurance, large number of people exposed to a similar risk

makes contributions to a common fund out of which the losses suffered by the

unfortunate few, due to accidental events, are made good.

Insurance in India

The insurance sector in India has come a full circle from being an open

competitive market to nationalization and back to a liberalized market again.

Tracing the developments in the Indian insurance sector reveals the 360 degree

turn witnessed over a period of almost two centuries.

A brief history of the Insurance sector

The business of life insurance in India in its existing form started in India in the

year1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to

regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to

collect statistical information about both life and non-life insurance businesses.

,1938: Earlier legislation consolidated and amended to by the Insurance Act with

the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the

central government and nationalized. LIC formed by an Act of Parliament, viz.

LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Governmentof India.

The General insurance business in India, on the other hand, can trace its roots tothe Triton Insurance Company Ltd., the first general insurance company

established in the year 1850 in Calcutta by the British.

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Some of the important milestones in the general insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transactall classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India,frames a code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum

solvency margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized

the general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the National

Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental

Insurance Company Ltd. and the United India Insurance Company Ltd. GICincorporated as a company.

Source: www.tourindia.com

INDIAN INSURANCE INDUSTRY:

Insurers

Insurance industry, as on 1.4.2000, comprised mainly two players: the state

insurers:

Life Insurers:

Life Insurance Corporation of India (LIC)

General Insurers:

General Insurance Corporation of India (GIC) (with effect fromDec'2000, a National Reinsurer)

GIC had four subsidiary companies, namely (with effect from Dec'2000) these

subsidiaries have been de-linked from the parent company and made asindependent insurance companies.

1. The Oriental Insurance Company Limited

2. The New India Assurance Company Limited,

4

http://www.licindia.com/http://www.gicoi.com/http://www.orientalinsurance.nic.in/http://www.niacl.com/http://www.licindia.com/http://www.gicoi.com/http://www.orientalinsurance.nic.in/http://www.niacl.com/

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3. National Insurance Company Limited

4. United India Insurance Company Limited.

The entire general insurance business in India was nationalized by General

Insurance Business (Nationalization act), 1972(GIBNA). The Government of

India (GOI), through nationalization took over the shares of 55 Indian insurancecompanies and the undertaking of 52 insurers carrying on general insurance

business.

General Insurance Corporation of India was formed in the pursuance of Section9 (1) of GIBNA. It was incorporated on 22 November 1972 under the companies

act, 1956as a private company limited by shares.GIC was formed for the purpose

of superintending, controlling and carrying on the business of the generalinsurance.

As soon as GIC was formed, GOI transferred all the shares it held of the general

insurance companies to GIC. Simultaneously, the nationalized undertakingswere transferred to Indian insurance companies. After a process of mergersamong Indian insurance companies, four companies were left as fully owned

subsidiary companies of GIC (1) National Insurance Company limited (2) The

New India Assurance company limited (3) The Oriental Insurance Companylimited (4) United India Insurance company limited

The next landmark happened on 19 April 2000, when the insurance regulatory

and development authority act, 1999 (IRDAA) came into force. This act also

introduced amendment to GIBNA and the insurance act 1938. An amendment toGIBNA removed the exclusive privilege of GIC and its subsidiaries carrying of

general insurance in India.

In November 2000, GIC is renotified as the Indian Reinsurance and through

administrative instruction, its supervisory role over subsidiaries was ended.

With the general insurance business (nationalization) Amendment Act 2002

came into force from March 21 2002 GIC ceased to be the holding company of

its subsidiaries. There ownership was vested with Government of India.

General Insurers

Public

o National Insurance

o New India Assurance

o Oriental insurance

o United India Insurance

o Agriculture Insurance Company of India Ltd

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http://www.nationalinsuranceindia.com/http://www.uiic.co.in/http://en.wikipedia.org/wiki/National_Insurancehttp://en.wikipedia.org/wiki/New_India_Assurancehttp://en.wikipedia.org/wiki/Oriental_insurancehttp://en.wikipedia.org/w/index.php?title=United_India_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Agriculture_Insurance_Company_of_India_Ltd&action=edithttp://www.nationalinsuranceindia.com/http://www.uiic.co.in/http://en.wikipedia.org/wiki/National_Insurancehttp://en.wikipedia.org/wiki/New_India_Assurancehttp://en.wikipedia.org/wiki/Oriental_insurancehttp://en.wikipedia.org/w/index.php?title=United_India_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Agriculture_Insurance_Company_of_India_Ltd&action=edit

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Private

o Bajaj Allianz General Insurance

o ICICI Lombard General Insurance

o IFFCO-Tokio General Insurance

o

Reliance General Insuranceo Royal Sundaram Alliance Insurance

o TATA AIG General Insurance

o Cholamandalam General Insurance

o Export Credit Guarantee Corporation

o HDFC Chubb General Insurance

o Star Health and Allied Insurance Company Ltd

The General Insurance Corporation of India

Although efforts were made to maintain an open market for the general

insurance industry amending the Insurance Act of 1938 from time to time,malpractice escalated beyond control. Thus, the general insurance industry was

nationalized in 1972. The General Insurance Corporation (GIC) was set up as aholding company. It had four subsidiaries: New India, Oriental, United India and

the National Insurance companies (collectively known as the NOUN). It was

understood that these companies would compete with one another in the market.It did not happen. They were supposed to setup their own investment portfolios.

That did not happen either. It began to happen after29 years.

The GIC has a quarter of a million agents. It has more than 2,500 branches,30million individual and group insurance policies and assets of about USD

1,800 million at market value (at the end of 1999). It has been suggested that theGIC should close 20-25% of its nonviable branches (Patel, 2001). The GIC hasso far been the holding company and re-insurer for the state-run insurers. It

reinsured about 20% of their business.

Two Committee Reports: One Known, One Unknown

Although Indian markets were privatized and opened up to foreign companies in

a number of sectors in 1991, insurance remained out of boundson both counts.The government wanted to proceed with caution. With pressure from theopposition, the government (at the time, dominated by the Congress Party)

decided to set up a committee headed by Mr. R. N. Malhotra (the then Governor

of the Reserve Bank of India).

Malhotra Committee

Liberalization of the Indian insurance market was recommended in a report

released in 1994 by the Malhotra Committee, indicating that the market should

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http://en.wikipedia.org/w/index.php?title=Bajaj_Allianz_General_Insurance&action=edithttp://en.wikipedia.org/wiki/ICICI_Lombardhttp://en.wikipedia.org/w/index.php?title=IFFCO-Tokio_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Reliance_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Royal_Sundaram_Alliance_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=TATA_AIG_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Cholamandalam_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Export_Credit_Guarantee_Corporation&action=edithttp://en.wikipedia.org/w/index.php?title=HDFC_Chubb_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Star_Health_and_Allied_Insurance_Company_Ltd&action=edithttp://en.wikipedia.org/w/index.php?title=Bajaj_Allianz_General_Insurance&action=edithttp://en.wikipedia.org/wiki/ICICI_Lombardhttp://en.wikipedia.org/w/index.php?title=IFFCO-Tokio_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Reliance_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Royal_Sundaram_Alliance_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=TATA_AIG_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Cholamandalam_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Export_Credit_Guarantee_Corporation&action=edithttp://en.wikipedia.org/w/index.php?title=HDFC_Chubb_General_Insurance&action=edithttp://en.wikipedia.org/w/index.php?title=Star_Health_and_Allied_Insurance_Company_Ltd&action=edit

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be opened for private-sector competition, and ultimately, foreign private-sector

competition. It also investigated the level of satisfaction of the customers of the

LIC. Curiously, the level of customer satisfaction seemed to be high. The unionof the LIC made political capital out of this finding.

The following are the purposes of the committee. (a) To suggest the structure ofthe insurance industry, to assess the strengths and weaknesses of insurancecompanies in terms of the objectives of creating an efficient and viable insurance

industry, to have wide coverage of insurance services, to have a variety of

insurance products with a high quality service, and to develop an effectiveinstrument for mobilization of financial resources for development. (b) To make

recommendations for changing the structure of

the insurance industry, for changing the general policy framework etc. (c) Totake specific suggestions regarding LIC and GIC with a view to improve the

functioning ofLIC and GIC. (d) To make recommendations on regulation and

supervision of the insurance sector in India. (e) To make recommendations on

the role and functioning of surveyors, intermediaries like agents etc. in theinsurance sector. (f) To make recommendations on any other matter which are

relevant for development of the insurance industry in India.

The committee made a number of important and far-reaching recommendations.

(a) The LIC should be selective in the recruitment of LIC agents. Train these

people after the identification of training needs. (b) The committee suggestedthat the Federation of Insurance Institute, Mumbai should start new courses and

diploma courses for intermediaries of the insurance sector. (c) The LIC should

use an MBA specialized in Marketing (a similar suggestion for the GICsubsidiaries).(c) It suggested that settlement of claims were to be done within a

specific time frame without delay. (d) The committee has several

recommendations on product pricing, vigilance, systems and procedures,

improving customer service and use of technology.(f) It also made a number ofrecommendations to alter the existing structure of the LIC and the GIC. (g) The

committee insisted that the insurance companies should pay special attention to

the rural insurance business. (h) In the case of liberalization of the insurancesector the committee made several recommendations, including entry to new

players and the minimum capital level requirements for such new players should

be Rs. 100 crores(about USD 24 million). However, a lower capital requirementcould be considered for a co-operative sectors' entry in the insurance business.

(i) The committee suggested some norms relating to promoters equity and

equity capital by foreign companies, etc.

Mukherjee CommitteeImmediately after the publication of the Malhotra Committee Report, a new

committee (called the Mukherjee Committee) was set up to make concrete plansfor the requirements of the newly formed insurance companies.

Recommendations of the Mukherjee Committee were never made public. But,

from the information that filtered out it became clear that the committee

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recommended the inclusion of certain ratios in insurance company balance

sheets to ensure transparency in accounting. But the Finance Minister objected.

He argued (probably on the advice of some of the potential entrants) that it couldaffect the prospects of a developing insurance company.

Insurance Regulatory Act (1999)

After the report of the Malhotra Committee came out, changes in the insurance

industry appeared imminent. Unfortunately, instability in Central Government,

changes in insurance regulation could not pass through the parliament.

The dramatic climax came in 1999. On March 16, 1999, the Indian Cabinet

approved an Insurance Regulatory Authority (IRA) Bill that was designed toliberalize the insurance sector. The bill was awaiting ratification by the Indian

Parliament.

However, the BJP Government fell in April 1999. The deregulation was put onhold once again.

An election was held in late 1999. A new BJP-led government came to power.On December 7, 1999, the new government passed the Insurance Regulatory and

Development Authority (IRDA) Act. This Act repealed the monopoly conferred

to the Life Insurance Corporation in 1956 and to the General InsuranceCorporation in 1972.The authority created by the Act is now called IRDA. It has

ten members. New licenses are being given to private companies (see below).

IRDA has separated out life, non-life and reinsurance insurance businesses.Therefore, a company has to have separate licenses for each line of business.

Each license has its own capital requirements (around USD24 million for life ornon-life and USD48 million for reinsurance).

Some Details of the IRDA Bill

On July 14, 2000, the Chairman of the IRDA, Mr. N. Rangachari set forth a set

of regulations in an extraordinary issue of the Indian Gazette that detail of the

regulation.

Regulations

The first covers the Insurance Advisory Committee that sets out the rules andregulation.

The second stipulates that the "Appointed Actuary" has to be a Fellow of theActuarial Society of India. Given that there has been a dearth of actuaries in

India with the qualification of a Fellow of the Actuarial Society of India, this

becomes a requirement of tall order. As a result, some companies have not been

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able to attract a qualified Appointed Actuary (Dasgupta, 2001). The IRDA isalso in the process of replacing the Actuarial Society of India by a newly formed

institution to be called the Chartered Institute of Indian Actuaries (modeled afterthe Institute of Actuaries of London).Curiously, for life insurers

the Appointed Actuary has to be an internalcompany employee, but he or she

may be an external consultant if the company happens to be anon-life insurancecompany.

Third, the Appointed Actuary would be responsible for reporting to the IRDA a

detailed account of the company.

Fourth, insurance agents should have at least a high school diploma along with

training of 100 hours from a recognized institution. More than a dozeninstitutions have been recognized by the IRDA for training insurance agents

Fifth, the IRDA has set up strict guidelines on asset and liability management of

the insurance companies along with solvency margin requirements. Initialmargins are set high (compared with developed countries). The margins vary

with the lines of business (for example, fire insurance has a lower margin than

aviation insurance).

Sixth the disclosure requirements have been kept rather vague. This has been

done despite the recommendations to the contrary by the Mukherjee Committeerecommendations.

Seventh, all the insurers are forced to provide some coverage for the rural sector.

(1) In respect of a life insurer, (a) five percent in the first financial year; (b)

seven percent in the second financial year; (c) ten percent in the third financial

year; (d) twelve percent in the fourth financial year; (e) fifteen percent in thefifth year (of total policies written direct in that year).

(2) In respect of a general insurer, (a) two percent in the first financial year; (b)

three percent in the second financial year; (c) five percent thereafter (of totalgross premium income written direct in that year).

Three days before the deadline that the IRDA had set upon itself (October 25,2000), it issued three companies with license papers:

(1) HDFC Standard Life. This will be jointly set up by India's Housing

Development Finance Company - the largest housing finance company in Indiaand the Scotland based Standard Life.

(2) Sundaram Royal Alliance Insurance Company. It is a partnership createdby Sundaram Finance and three other companies of the TVS Group of Chennai

(Madras) and the London based Royal & Sun Alliance.

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(3) Reliance General Insurance. This company is fully owned by Mumbai

based Reliance Industries which has operations in textile, petrochemicals, power

and finance industries.

There are three other companies with "in principal" approvals:

(1) Max New York Life. It is a partnership between Delhi based pharmaceuticalcompany Max India and New York Life; the New York based Life Insurance

Company.

(2) ICICI Prudential Life Insurance Company. This is a joint venture between Mumbai based Industrial Credit & Investment Corporation and theLondon based Prudential PLC.

(3) IFFCO Tokio General Insurance Company. It is a joint venture between

Indian Farmers' Fertilizer Cooperative and Tokio Marine and Fire of Japan.

To date (end of April 2001), the following companies have thus been grantedlicenses: ICICI -Prudential, Reliance General, Reliance Life, Tata-AIG General,

HDFC Standard Life, Royal-Sundaram, Max-New York Life, IFFCO-Tokio

Marine, Birla-SunLife, Bajaj-Allianz General, Tata-AIG Life, ING-Vyasa,

Bajaj-Allianz Life, SBI Cardiff Life

INSURERMARKET SHARE (%)

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Policies provided by the government

As stated earlier government general insurance companies provide policies indifferent areas of general insurance. Before going to the policies there are some

stats provided by IRDA which show the gross premium underwritten for the

month of February and March, 2007.

In these stats there are gross premium underwritten of both private and

public general insurance companies. We can see that the gross total premium ofpublic companies is almost double of private insurance companies. In private

sector the leader is ICICI- Lombard followed by Bajaj-Allianz and Reliance

General, where in Public sector the leader is New India Insurance.

'GROSS PREMIUM UNDERWRITTEN FOR AND UPTO THE MONTH

OF FEBRUARY, 2007

INSURER

Premium 2006-07 Premium 2005-06

Growth over

the

Correspondi

ng Period of

Previous

year

For the

month

Up to the

month

For the

month

Up to the

month

Bajaj Allianz General Insurance Co. Ltd. 6.15

ICICI Lombard General Insurance Co. Ltd. 8.04

IFFCO Tokio General Insurance Co. Ltd. 4.00

National Insurance Co.Ltd. 17.11

United India Insurance Co. Ltd. 17.11

The New India Assurance Co. Ltd. 20.15The Oriental Insurance Co. Ltd. 17.02

Reliance General Insurance Co. Ltd. 0.75

Royal Sundaram Alliance Insurance Co. Ltd 2.17

Tata AIG General Insurance Co. Ltd. 2.89

Cholamandalam MS General Insurance Co. Ltd. 1.22

HDFC-Chubb General Insurance Co. Ltd. 0.89

Export Credit Guarantee Corporation Ltd. 2.50

Agriculture Insurance Co. of India Ltd. n.a.

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Royal

Sundaram

Tata-AIG

RelianceGeneral

IFFCO-Tokio

ICICI-Lombard

Bajaj Allianz

HDFC CHUBB

Cholamandala

m

New India

National

United India

Oriental

48.52

50.68

91.33

74.39

201.78

147.18

13.96

24.07

379.45

319.76

256.67

290.87

542.66

686.96

803.59

1070.28

2803.34

1621.44

170.17

282.71

4505.60

3428.21

3158.48

3595.88

33.78

49.91

14.61

67.96

113.83

97.87

17.10

14.87

377.34

269.06

229.23

265.11

407.04

540.16

144.67

779.11

1468.47

1164.91

177.18

209.14

4198.39

3201.88

2837.74

3196.32

33.32

27.18

455.46

37.37

90.90

39.19

-3.96

35.18

7.32

7.07

11.30

12.50

Private Total

Public Total

Grand Total

651.91

1246.75

1898.66

7981.15

14688.17

22669.32

409.93

1140.74

1550.67

4890.68

13434.33

18324.01

63.19

9.33

23.71

Source: IRDA

Performance in February 2007

The second month of the detariffed regime in the current calendar year shows

that the premium growth rate in February 2007 is an impressive 22.4 percent,

though it falls short of the January 2007 growth of 25.6 percent. The new playershave achieved a market share of about 35 percent in the February premium G V

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Rao volumes, though this falls a little short of the 37 percent market share they

had recorded in January 2007. The market grew its February renewal premium

from Rs.1551 crore to Rs.1899 crore. The established players have contributedRs.106 crore to the increase, while the new players have added Rs.242 crore.

National Insurance, as was seen in its January 2007 performance; is the leading

player in its group, adding Rs.51 crore to the accretion. Among the new players,ICICI-Lombard leads with an accretion of Rs.88 crore followed by Reliancewith Rs.76 crore. Other players that have made significant accretions to

February 2007 premium are:

Bajaj-Allianz with Rs.49 crore, United India with Rs.28 crore and Oriental with

Rs.26 crore. New India, as it did in January 2007, has slowed its growth

momentum, by keeping its accretion in February to Rs.2 crore; in January 2007its premium accretion was Rs.8 crore.

The premium growth trends of the first two months of the calendar year show

that among the new players the growth pursuing players are ICICI-Lombard,Reliance and Bajaj-Allianz. Among the established players the growth-hunt isled by National Insurance followed by Oriental and United India.

Performance up to February 2007

The premium achievement up to February 2007 is Rs.22, 669 crore, with theestablished players having recorded Rs.14, 688 crore and the new players

Rs.7981 crore. To put this performance in perspective, one should highlight that

for the financial year 2005/06 the premium was Rs.20, 360 crore, with theestablished players having completed Rs.14, 997 crore and the new players

Rs.5360 crore. The growth rate up to February 2007 is 23.7 percent, down by0.2 percent from the level at January 2007.

ICICILombard leads the growth list with a massive accretion of Rs.1334 crore

followed by Reliance with Rs.648 crore and Bajaj-Allianz with Rs.456 crore.

Oriental with Rs.400 crore and United India with Rs.322 crore are the others onthe growth path.

'GROSS PREMIUM UNDERWRITTEN FOR AND UPTO THE MONTHOF MARCH, 2007

INSURER

Premium 2006-07 Premium 2005-06

Growth over

the

CorrespondingFor the

month

Up to the

month

For the

month

Up to the

month

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Period of

Previous year

Royal

Sundaram

Tata-AIG

RelianceGeneral

IFFCO-Tokio

ICICI-Lombard

Bajaj Allianz

HDFC CHUBB

Cholamandalam

New India

National

United India

Oriental

57.37

54.61

108.64

80.05

200.11

183.16

19.99

34.74

515.62

382.67

349.15

344.32

600.03

741.56

912.23

1150.32

3003.45

1804.60

190.16

314.59

5024.15

3810.88

3509.95

3940.53

52.31

72.23

17.66

116.96

123.53

119.65

28.59

15.37

534.90

350.63

316.21

347.07

459.35

612.39

162.33

896.11

1592.00

1284.57

205.77

222.21

4791.51

3523.67

3154.78

3527.13

30.63

21.09

461.96

28.37

88.66

40.48

-7.59

41.57

4.86

8.15

11.26

11.72

Private Total

Public Total

Grand Total

738.67

1591.76

2330.43

8716.94

16285.51

25002.45

546.30

1548.81

2095.11

5434.73

14997.09

20431.82

60.39

8.59

22.37

Source: IRDA

Below are the policies which are provided by the government incontext of general insurance-

Rajrajeshwari Mahila Kalyan Yojana Policy

Policy called Raj Rajeshwari Mahila Kalyan Yojana offering security to women in

the age group of 10 to 75 years irrespective of their occupation was introduced

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w.e.f. 19th October, 1998. Specially designed to protect the welfare of women

mainly in rural and semi-urban areas.

Insurer:National Insurance Company

End user: Women of rural and semi-urban areas.

Scope of Cover

DEATH

1. Of Husband in case of married women Compensation Rs.25, 000/- to the

wife. (Death of married women not covered)

2. Of unmarried Women Rs.25, 000/- to the nominee, legal heir.

3. Death of married woman not covered.

PERMANENT TOTAL DISABLEMENT OF THE INSURED WOMENONLY

1. Permanent Total Disablement Rs.25, 000/-

2. Loss of one limb of one eye or loss of two limbs or both eyes Rs.25, 000/-

3. Loss of one limb/sight in one eye Rs.12, 500/-

DEATH OR DISABILITY BY ACCIDENT WOULD INCLUDE death and

P.T.D. arising out of:

1. Slipping /falling off mountainous terrain.

2. Biting by (a) Insects (b) Snakes, (c) Animals

3. Drowning/Washing away by (a) Floods, (b) Landslides, (c) Rockslides

(d) Earthquake, (e) Cyclone, (f) Other Convulsions of nature/calamities

4. Murder

5. Terrorist activities

6. Any other accidental causes

DEATH IN CASE OF WOMEN (it also includes death and or P.T.D.)

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Caused by

1. Surgical Operations such as

2. Sterilization

3. Caesarian

4. Hysterectomy

5. Cancer Operations arising from removal of breasts

6. Child Birth, not beyond a period of seven days from the date of surgicaloperations.

Age: 10 years to 75 years

Premium Rating

@ Rs.15/- per woman per annum for Basic Cover

@ Rs.23/- per woman per annum for Combined cover.

Rajrajeshwari Mahila Kalyan Policy is provided by all the subsidiarygovernment companies- Oriental Insurance, New India Assurance, United India

Insurance, National India Insurance in all the states of the country.

Bhagyashree Child Welfare Policy

Insurer:National Insurance CompanyEnd user:Schools, colleges and any other educational institutions can avail of thisscheme for the benefit of the girl students studying there.

Policy provides protection to the girl child in the event of death of either or both

the parents.

Scope of Cover

1. For child in the age group of 0 to 18 years; and age of parents below 60years.

2. Fixed sum insured of Rs.25, 000/- premium Rs.15/- p.a.

3. Insurance protection is not for the girl child but for her parents; however,benefit will accrue to the child.

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4. Death of parent/s would include death arising out of or traceable to

slipping and/or falling from mountainous terrain; biting by insects, snakes

and/or animals; drowning or washing away in floods, landslides, rockslides,earthquake, cyclone and/or natural calamities; rape, murder and terrorist

activities covered; any other accidental causes;

5. Death of mother of the child caused by surgical operations such as

a) Sterilization

b) Caesarean,

c) Removal of uterus and removal of breast/s due to cancer,

d) At the time of child birth are also covered provided that death occurs

within a period of seven days from the date of operation; Death by Rape

attempts.

6. In case of death of either or both the parents due to an accident as above,sum Insured will be deposited in the name of the insured girl child and she will

get benefit as under:

Age Benefit Payable to

1 to 5 years Rs. 1,200 p.a. surviving parents or guardian for looking after

the need of the child

6 to 11 years Rs. 1,200 p.a. surviving parent or guardian if the girl isadmitted in school and expenses are

incurred on her education

12 to 17 yrs Rs. 2,400 p.a. surviving parent or guardian if the girlchild is admitted in school and the

expenses are incurred on her education

18 years Balance in credit to the insured girl child

7. In the event of discontinuation of studies between 6 and 17 years, the

Scholarship will not be paid; instead, on completion of 18 years the Balanceamount in here credit will be paid to her as lump sum.

8. In the case of death of the girl child before attaining the age of 18 years,

Balance amount standing to the credit of the girl child would be paid to thesurviving parent or guardian.

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Claim Settlement: The Claims are to be settled by a Third Party Administrator

(TPA) mentioned in the schedule or by the Insurance Company and to be madecashless as far as possible through listed hospitals.

Rural Policies

Rural policies provide wide policies to the rural areas. They cover a vast area of

the rural areas. These policies are provided by all the four subsidiary companies

and are applicable in all the states of the country. They are as following-

CATTLE INSURANCE

Cattle Insurance was governed under Market Agreement as devised by GIC and

the rates, terms, conditions etc. all were applicable to all the four Insurance

Companies. However, w.e.f May 2003, it is no longer under Market Agreement.

This policy covers indigenous cross bred and exotic cattle owned by privateowners, various financial institutions, dairy farms, cooperatives, corporate

dairies etc. The word cattle include Milch, Cows and Buffaloes calves andheifers, stud bulls, bullocks and he-buffaloes and mithuns. Age group is

specified for all the animals. The evaluation of the animal is done by a

veterinary surgeon.

CALF HEIFER REARING INSURANCE SCHEME

The coverage under this policy is meant for calves/heifers from one day to 32months. The valuation depends upon the age of the cow and is fixed according

the age of the calf. All terms and conditions applicable to cattle are applicablehere also. Minimum coverage is taken from 12 months however this is not anannual policy.

SHEEP AND GOAT INSURANCE

This scheme is also governed under Market Agreement. Policy provides

indemnity to indigenous cross-bred and exotic sheep and goat against death dueto accident (including fire, lightening, flood, cyclone, famine, strike, riot and

civil commotion) and disease. Earthquake and landslide covers are also

provided. Standard and common exclusions apply as per Cattle Policy. Animalsare identified by means of small brass buttons ear tags. Animals under scheme

category enjoy certain benefits in premium rate and claim procedure.

CAMEL INSURANCE

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The camels are covered against death due to accident or disease as per Standard

Cattle Insurance Policy. The maximum S.I. is restricted to Rs.3000/-.

PIG INSURANCE

All indigenous, cross-bred and exotic pigs are covered however under schemecategory exotic animals are not covered. The age group is from 4 months to 3years. The coverage is against death due to accident or disease.

Exclusions as per Cattle Policy apply here also. Permanent total disablement,

breeding and furrowing risks are not covered. Vaccination in applicable diseasesis compulsory. Evaluation depends upon the age of the animal. Animals are

identified by means of small brass buttons ear tags.

HORSE, MULE, DONKEY, PONY, YAK INSURANCE

The Coverage is as per Standard Cattle Policy. However the age group is

restricted to 2 years to 8 years.

POULTRY INSURANCE

This is also governed by Market Agreement, amongst all the four subsidiary

companies. The policy shall provide indemnity against death of birds due toaccident (including fire, lightning, flood, cyclone, strike, riot and civil

commotion and terrorism) or diseases contracted or occurring during the period

of insurance. The word Poultry includes layers, broilers and hatchery birds,

which are exotic and cross-bred. Indigenous and non-descript birds will not beinsured. All

GRAMIN ACCIDENT INSURANCE APPLICABILITY

The Insurance can be granted to any person between the age group of 10 to 70

years irrespective of his occupation, income etc.

BENEFITS

(A) Death due To Accident Rs. 10,000/-(B) Total irrecoverable loss of use of 2 limbs or Rs. 10,000/- one eye and one

limb due to accident

(C) Total irrecoverable loss of one eye or one limb Rs. 5,000/-(D) Permanent total disablement due to accident Rs.10, 000/-

EXCLUSIONS

Company shall not be liable for:

i. Compensation under more than one of the sub clauses (A), (B), (C) & (D) in

respect of same injury/disablement.

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ii. Payment of compensation in respect of injury/disablement directly or

indirectly arising out of or contributed to by or traceable to any disability

existing on the date of issue of the policy.iii. Death/injury/disablement of the insured from:

(a) Intentional self injury, suicide or attempted suicide.

(b) Whilst under the influence of intoxicating liquor or drugs.(c) Directly of indirectly caused by insanity.(d) Arising or resulting from the insured committing any breach of law with

criminal intent.

iv. Compensation arising out of war and allied perils.v. Death or bodily injury arising out of ionizing radiation or contamination by

radioactivity from any source whatsoever.

Policy is available on long-term basis also and is also subject to group discountand long-term discount.

JANATA PERSONAL ACCIDENT POLICY

Brief Description:

We all in our day to day life are exposed to the risks of accidents. Despite all

possible precautions accident do occur. This may result into disablement or loss

of limbs or sometimes even death. To give relief to the insured or its family, this

scheme was devised.

Covered Risks:

This policy provides compensation in the event of death or permanent

disablement or loss of limbs or sight in eyes.

Major Exclusions:

Intentional self injury, suicide or attempted suicide, Accident while the insured

in under the influence of intoxicating liquor or drugs, loss caused by insanity,loss due to breach of law with criminal intent, War and allied perils, nuclear

radiation.

HUT INSURANCE

APPLICABILITY This insurance applies only to those huts used for

dwellings and constructed in rural areas with financial assistance from Banking/

Cooperative / Government Institutions. It can also apply to a selected area or

cluster of huts for which proposal should be referred to H.O.

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SCOPE OF COVER Against loss or damage due to fire, (including fire

resulting from explosion and short circuiting), lightning, and explosion of boiler

or gas used for domestic purpose only, earthquake, flood, inundation, storm,tempest, cyclone and other allied perils, riot and strike damage, malicious

damage, aircraft and impact damage.

SUM INSURED The maximum sum insured will be Rs.6000/-of which

Rs.5000/- can be for structure and Rs.1000/- for contents. However, it should be

noted that the sum insured on the structure should be so fixed that it is not morethan 20% of the financed or subsidy amounts or market value of structure

whichever is less, not exceeding Rs.5000/-.

PREMIUM Rs.3/- per thousand on the sum insured. However, under a policy

the premium should not be less than Rs.30/-

Above mentioned rural policies are designed by government to cover the risk ofthe rural population. These policies are specially designed to provide the risk

coverage in all the states of the country. There is a wide range of rural policies

which are offered by Oriental Insurance, New India Assurance, NationalInsurance & United India Insurance.

KISAN CREDIT CARD-PAIS

This is a Personal Accident Insurance Master Policy covering all the Kisan

Credit Card holders. This will include the holders of KCC issued by the DistrictCentral Co-op. Banks, RRBs and commercial Banks throughout India. This

scheme will cover all the KCC holders against Death or Permanent disabilityresulting from accidents caused by external, violent and visible means and

occurring within the geographical jurisdiction of India. This policy will coverthe KCC holders up to the age of 70 years and whose names are declared by the

Banks and in respect of whom the premium is paid by the Bank to the Insurance

Company for a maximum benefit of Rs.50, 000/- in case pf (i) Accidental Death,(ii) Permanent total disability (iii) Loss of two limbs or two eyes or one limb and

one eye and Rs.25, 000/- in case of loss of one limb or one eye (subject to

exclusion).

The Master Policy shall remain valid for a period of three years effective from

April 2001 and any modification/alteration shall be made at the end of threeyears after review of the premium and claims experience. If the claim experience

exceeds 70%, the premium shall be suitably loaded. The policy can be issued for

one year or three years period by charging Rs.15/- for annual policy and Rs.45/-

for three years period. Service Tax is waived for this policy. The participatingBanks will pay premium to designated Insurance Company on Flagship

Company basis.

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Health policies

Insurer: General Insurance Corporation through its four subsidiaries: Oriental

Insurance, New India Assurance, National Insurance Company, United India

Insurance.

Group Mediclaim Policy

Brief Description:

Mediclaim Insurance is a cover which takes care of medical expenses followingHospitalization/Domiciliary Hospitalization of the Insured in respect of the

following situations: (A) In case of a sudden illness (B) In case of an accident

(C) In case of any

surgery which is required in respect of any disease which has arisen during thepolicy period. The major benefit for taking a Group Mediclaim policy is that the

insured gets a Group discount; hence the premium per person is lower.

Covered Risks:

This cover is a hospitalization cover and reimburses the medical expensesincurred in respect of covered disease /surgery while the insured was admitted in

the hospital as an in patient. The cover also extends to pre- hospitalization and

post- hospitalization for periods of 30 days and 60 days respectively

Major Exclusions:

Any pre-existing disease, any expense incurred during first 30 days of coverexcept injury due to accident, all expenses incurred in respect of any treatment

relating to pregnancy and child birth. Treatment for Cataracts, Benign prostatic

hypertrophy, Hysterectomy, Menorrhagia or Fibromyoma, Hernia,Fitula ofanus,Piles, Sinusitis, Asthma, Bronchitis, All Psychiatric or Psychosomatic

disorders are excluded from the scope of the cover.

Personal Accident - Group

Brief Description:

We all in our day to day life are exposed to the risks of accidents. Despite allpossible precautions accidents do occur. This may result into disablement or loss

of limbs or sometimes even death. To cater to this need insurers has devised an

insurance cover, known as Personal Accident Insurance. This policy provides

compensation in the event of insured sustaining injuries, solely and directly froman accident caused by violence, visible and external means, resulting into death

or disablement be it temporary or permanent. This policy is also available to a

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Group of Persons and is known as Group Personal Accident Policy. This policy

can be granted for restricted hours of Duty and not for all the 24 hours of the

days and nights) at a reduced premium also. The Central Government bears theentire premium cost in respect of the scheme. During the year 1998-99, a total

number of 8,128 claims involving an amount of Rs. 1.84 crores were settled.

Covered Risks:

This policy provides compensation in the event of insured sustaining injuries,

solely and directly from an accident.

Major Exclusions:

Intentional self injury, suicide or attempted suicide, Death or disablement resultingfrom child birth and pregnancy; Accident while the insured is under the influence

of intoxicating liquor or drugs; War and allied perils.

Jan Arogya Bima Policy

Brief Description:

This policy provides for Hospitalization and Domiciliary hospitalization for apremium as low as Rs 70/- for a adult male or female and Rs 50/- for each

dependent son/daughter not exceeding 25 years of age. The benefits are up to Rs

5000/- per person per annum without any inner limits. This insurance isavailable to persons between the age of 5 years and 70 years. Children between

the age of 3 months and 5 years of age can be covered provided one or both the

parents are covered concurrently. The scheme which is primarily meant for thelarger segment of the population, who cannot afford the high cost of medical

treatment, was introduced w.e.f. 12th August, 1996.

Covered Risks:

This cover is a hospitalization cover and reimburses the medical expenses

incurred in respect of covered disease /surgery while the insured was admitted in

the hospital as an in patient. The cover also extends to pre- hospitalization andpost- hospitalization for periods of 30 days and 60 days respectively

Major Exclusions:

Any pre-existing disease, any expense incurred during first 30 days of cover

except injury due to accident, all expenses incurred in respect of any treatment

relating to pregnancy and child birth. Treatment for Cataracts, Benign prostatichypertrophy, Hysterectomy, Menorrhagia or Fibromyoma, Hernia,Fitula of

anus,Piles, Sinusitis, Asthma, Bronchitis, All Psychiatric or Psychosomatic

disorders are excluded from the scope of the cover.

Health policies are one of the most popular policies of government generalinsurance sector. These policies provide a big amount of premium to the

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insurance companies. Health insurance as it is different from othersegments of insurance business is more complex because ofserious conflicts arising out of adverse selection, moral hazard,and information gap problems. Health insurance is typicallyannual and has to be renewed yearly. Policy, which is not

renewed in time lapses and a new policy, has to be taken out.

Travel Insurance Policies

Suhana Safar (Domestic Travel policy)

Suitability

This policy is suitable for persons who go on a holiday with family. Thepolicy is also useful for employees who avail leave travel schemes provided

by their employers.

Salient Features

The policy is a Personal Accident policy covering accident benefits for acapital sum insured of Rs.1 lakh for each member of the family while in travel

within the country.

The plan covers domestic travel by Rail, Road, Waterways or Air within thecountry for a period of 60 days. The plan also covers travel by use of own

conveyance.

The policy covers loss or damage (due to fire, Storm, tempest, hurricane,flood, inundation, riot, strike, terrorism, malicious damage, accident, theft or

burglary) of accompanied baggage up to a certain limit.

The compensation provided for loss of each article is limited to Rs.500, unless

specifically declared. The policy also provides for emergency expenses up toRs.1000 incurred in connection with an accident.

Premium

No. of

persons

1 2 3 4 5 6 7 8

Premium

in Rs.

80 140 190 240 280 320 360 400

In case of more than 8 persons, an additional premium @ Rs.40 per head.

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Service tax @ 5% extra.

Requirements

Completed proposal furnishing the date of journey in particular. Value of each

piece of baggage should be declared, if same exceeds Rs.500.

Recommendations

While in travel, one is more exposed to personal accidents, and he/she can becovered for Rs.1 lakh sum insured, without reference to any other Personal

Accident policies; age or income.

Overseas Mediclaim Policy

Suitability

Any Indian resident traveling abroad can take this policy. In some countries

however, it is compulsory for visitors to have medical insurance cover. A

corporate frequent traveler can take a single policy for 1 year

Salient Features

There are two types of plans under the Overseas Mediclaim Policy:

1. Overseas Mediclaim Insurance -A(World wide travel excluding USA and

Canada)

2. Overseas Mediclaim Insurance - B (World wide travel including USA andCanada.)

3. Overseas Mediclaim Insurance - E (For corporate Frequent Traveler

providing world wide coverage)

OMP -E is an annual policy issued for one year. The insured is covered for a

maximum of 180 days abroad, irrespective of number of visits. Howevermaximum number of days under each visit is limited to 60 days.

Requirements

Completed proposal form after passport and Visa (where necessary) is

obtained in case of the proposer being hypertensive, ECG reports from

cardiologist should be filed and basing on the same, the pre-existing conditionmay be excluded from the scope of benefits

Recommendations

It is mandatory in some Western countries for a visitor to their country to be

covered by a Health Insurance Policy. In its absence, he may run the risk ofrepatriation or quarantining in the airport itself

Medical treatment is expensive overseas and can become a major financial

problem in case of any emergency/ accidentFor a small premium paid in Indian currency, payment of claim in foreign

currency of the country in which a claim arises is disbursed. Besides, the

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foreign currency allowances allowed by the host Country can be conserved as

the premium is paid in Rupees in home country

The Claim procedure is very simple. The policy document that the insured

carries with him contains full details of the claim settling agencies. The

insured has to just get in touch with the Agency and they take over theresponsibility of dealing with the respective Hospitals/Authorities who thenundertake to settle the bills directly with the hospitals.

All of the above policies are implemented in all the states of the country and are

determined by IRDA. All the four subsidiary companies of GIC- Oriental

insurance company ltd., New India Assurance company ltd., United IndiaInsurance Corporation ltd. and National Insurance Company ltd. follow the

schemes that are determined by the IRDA.

Pravasi Bharatiya Bima Yojana, 2006

Pravasi Bhartiya Bima Yojana (PBBY-2003), which was notified on November

13, 2003 as a compulsory Insurance Scheme for the emigrants going abroad for

employment, has now been upgraded as the Pravasi Bhartiya Bima Yojana, 2006(PBBY-2006) to provide broader coverage to the emigrant workers. The PBBY,

2006 has been notified on January 25, 2006, and it has come into effect from

February 1, 2006.

SALIENT FEATURES OF THE PRAVASI BHARTIYA BIMA YOJANA,

2006

o

The Pravasi Bhartiya Bima Yojana, 2006 provides for an insurance coverofa minimum sum of Rs. 5.00 lakhs payable to the nominee/legal heir in

the event of death or permanent disability of any Indian emigrant whogoes abroad for employment purpose after obtaining emigration

clearance from the concerned Protector of Emigrants (POE).

o In the case of death, besides the cost of transporting the dead body, the

cost incurred on the one-way airfare of one Attendant shall also be

reimbursed by the Insurance Company.

o If a worker is not received by the employer on his arrival to the

destination abroad or there is any substantive change in Employment

Contract to his disadvantage or if the employment is pre-maturelyterminated within the period of employment for no fault of the emigrant,

the Insurance Company shall reimburse one way economy class airfare

provided the grounds of repatriation are certified by the concerned IndianMission/Post.

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o In cases where the repatriation is arranged by the Indian Mission/Post,

the Insurance Company shall re-imburse the actual expenses to the

concerned Indian Mission/Post.

o The Insured person shall be reimbursed actual one way economy class

airfare by the Insurance Company if he falls sick or is declared medically

unfit to commence or continue working and the service contract isterminated by the Foreign Employer within twelve months of taking theinsurance.

o The Insurance Policy shall be valid for a minimum period of two years or

the actual period of contract, whichever is longer.

o The Insurance Policy shall also provide medical cover of a minimum of

Rs. 50,000/- as cash-less hospitalization and/or reimbursement of actual

medical expenses of the insured emigrant workers on grounds of

accidental injuries and/or sickness/ailments/diseases occurring during theperiod of insurance whether in India or in the country of his employment.

o An insured person shall be covered for a minimum sum of Rs. 25,000/-

in connection with the legal expenses incurred by him in any litigation

relating to his/her employment.

o The Insurance Policy shall also provide maternitybenefits, subject to a

minimum cover of Rs. 20,000/- in case of women emigrants. In case of

medical treatment in the country of employment, the maternity benefitswould be provided if the requisite documents are certified by the

concerned Indian Mission/Post.

o The family of emigrant worker in India consisting of spouse and two

dependent children up to twenty one years of age shall be entitled tohospitalization cover in the event of death or permanent disability of theinsured person for a maximum amount or Rs. 25,000/- per annum.

o The Insurance Companies shall charge fair and reasonable premium.

Service tax will be charged as applicable.

List of Approved Companies

Company Date of approval

The United India Insurance Co. Ltd. 13.02.2006

The Oriental Insurance Co. Ltd. 13.02.2006

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The New India Assurance Co. Ltd. 16.02.2006

The National Insurance Co. Ltd. 28.02.2006

Beneficiaries of Pravasi Bharatiya Bima Yojana (PBBY) 2003 can also opt for

Pravasi Bhartiya Bima Yojana, 2006

Going through the state government general insurance there are only four states

where state government is also providing the insurance policies. These states are

Maharashtra, Kerala, Gujarat and Rajasthan. In all the other states the general

insurance government policies are provided by the GIC and its four subsidiarycompanies.

Success of the above policies

In the non-life segment, the established players control 65% of the market. So it

is their monthly performance that determines how the market as a whole wouldperform.

In Accident Insurance Business, private sector players have almost 53% market

share with ICICI Lombard as the lead player. Public sector players constitute

about 47% market value with New India as the leading player followed byUnited India.

Indian general insurance companies in government sector are providing better

policies to the customers. Many of the policies are very popular among thecustomers. Policies like Raj Rajeshwari Mahila Kalyan Yojana Policy,

Bhagyashree Child welfare Policy, National swasthya bima policy are a big fundof money generation for insurance companies. These policies are fully supported

by the government. In different states of the country various type of policies arepopular and they have a different percent of share in overall income of Indian

general insurance sector. All of these policies are successfully implemented in

all the states of the country. These policies are specially designed to provide riskassurance to the policy holders. In union territories also these policies are

successfully implemented and working with a good profit.

These policies provide a helping hand to the person who faces problem due to

some unforeseen event or accident. Going through the marketing aspect the

insurance company has to prepare the product in determining its success in themarket.

General insurance industry records 24.1% growth

The general insurance industry has recorded a 24.1% increase in premiumcollection 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

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Allianz, Lombard General, AIG, AMP and Sun Life among others. Innovative

products, smart marketing and aggressive distribution have enabled fledging

private insurance companies to sign up Indian customer faster than anyoneexpected. According to estimates, private insurance companies collectively to

have a 10% share of the non-life insurance market.

Weak IT infrastructure- Many a times the insurance claims arerejected due to some small technical reasons. This leads todisputes. Most of the time the conditions and various pointsincluded in insurance policy contracts is not negotiable andthese are binding on consumers. There is no analysis on whatfair practice is and what unfair practice is. Given that insurancecompanies are large and almost monopoly setting theconsumers is treated as secondary and they do not haveopportunity to negotiate the terms and conditions of a contract.Many times insurance companies do not strictly follow the

conditions in all cases and this create confusion and disputes.

Negligence of rural sector-Rural India is a target market for many players inthe financial sector, and insurance companies are no exception. While publicsector insurance companies boast that they have already captured this area, the

extent of penetration of the insurance majors into rural India is not yet clear.

Rural market in India is neglected as most of the policies are designed to meet

the needs of the urban population and they are not properly promoted in ruralmarket. Most products being offered today to rural market are very often urban

products, offered to the rural market with some tweaking in features. There is

major challenge for insurance companies and policy makers to increase the

awareness levels among rural population, so that they may view insurance policies as a risk management tool. Traditionally rural households have

addressed their risk protection in various forms: from the joint family, investingin gold, land and other assets. Most insurance policies that rural customers are

familiar with have been sponsored or subsidized by the government, the legacy

of this past is that rural people do not fully see insurance as a risk sharing

mechanism through contributions in premium. There is need for sufficientinvestment by public institutions to bring about a change in the perception of

Insurance as a risk mitigation instrument and enhance the awareness levels on

various insurance products and how they work in principle.The field staff andthe agents of the GIC and its four wholly owned subsidiary companies have

seldom bothered to venture out into the rural hinterland to sell crop or any otherpersonal line insurance. Given the woeful lack of penetration of the rural marketby the GIC subsidiaries, it is hardly surprising that a growing number of farmers

across the country are resorting to the extreme remedy of suicide when their

usually uninsured crops fail.

High rate of premium- Most of the policies that are offered by the governmentare made for the middle class group but the premium rates are quite high which

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do not meet the affordability of the customers. Low premium rates in one area

necessitate higher premium elsewhere.

Returns are low- There are number of government policies provided in market

which are said to be designed for the welfare of the customers and often it is

claimed that these policies are made to make the life easier of the customers butmost of the time the returns is not provided to them in way they are expressed.

In most of the cases the returns are low which do not meet the expectations ofthe customers.

Insurance awareness- In this era of globalization where in other countries

insurance is a big source of financial structure, in our country there is still not

much awareness about the insurance policies specially of general insurancepolicies. In India the general public is not much aware of different general policy

and there terms. In villages and small town there is need of creating awareness

to expand the general insurance sector specially government business.

Political view- Most of the policies that are provided by the government areimplemented to gain political mileage for the party in power. These policies are

implemented but they do not provide the cover most of the time as they are

promised. There is a need for improvement here. The customers must beprovided by the policies which is really issued for there welfare and also for the

welfare of the society. Corruption is also a big obstacle in the government

insurance business.

Above are the challenges which are coming in way of the government generalinsurance business. After the liberalization there can be seen an intense decrease

in the profitability and business of the government general insurance policies.

The new private companies are providing the policies which appear to be a bigthreat to the government policies, so there is need to face the above challenges

and try to overcome them to regain its position in the insurance sector.

Cross Border Experience

Cross-country experience shows that nowhere in the world have the entries offoreign firms threatened the position of domestic companies. Whether it is

Malaysia, where the insurance sector has been open for more than 50 years and

foreign companies account for about 10 per cent of market penetration or it is

Indonesia, Thailand, China or the Philippines, where the market has been openedmore recently, the total market share of foreign companies is less than 10 per

cent except in Indonesia where it is about 20 per cent. Closer home, we have the

experience of the banking sector where despite the presence of 42 foreign banks,their share in total banking assets is less than 10 per cent.

Today hardly 20 per cent of the population in India is insured and insurancepremium (life as well as non-life) account for just 2 per cent of GDP as against

the G-7 average of 9.2 per cent. Consequently, the fear that new companies will

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displace public companies is misplaced. There is room for more for not only the

existing companies but also for any number of competitors.

In China, insurance premium accounted for just over 1 per cent of China's GDP

in 1995 but in the four years since the market has been liberalized (albeit

partially), spending on insurance has grown at a compound annual rate of 33 percent. It is not just foreign companies alone that have grown but also the nationalPICC as well. The story is no different in S Korea. There, the opening of the

sector saw the Big Six domestic players, who initially controlled the entire

market, increase their business from 7 to 37 trillion won by 1997. Meanwhileforeign companies were not able to capture more than a miniscule 0.7 per cent of

the market.

Opportunities-

Insurance sector is a major contributor to the financial savings of the household

sector in the country, which are further channelized into various investment

avenues. As per the Annual Report 2003-04 of IRDA, contribution of insurancefunds to the financial savings was 14.9 per cent in 2003-04, viz 2.2 per cent of

the GDP at current market price. The premium underwritten has grown from Rs

45,677.57 crore in 2000-01 to Rs.83, 645.11 crore in 2003-04. Afterliberalization of insurance sector, the private insurers have introduced innovative

product and tailor made products which are absolutely sit to rural population.

Efforts at increasing consumer awareness and putting the regulatory framework

for protection of policyholders interest have been made both the industry andregulatory level. Global market conditions have also resulted in driving down

premium rates/charges in respect of certain products and in improving the

quality of services offered by the insurer. Finally, insurance sector has beenpenetrating in India, thus the proposed seminar has quite relevant to the society.

Indian insurance is on the threshold of deep and fundamental changes.

Floodgates of competition opened up by the privatization of insurance industry

did throw a challenge to the well-protected nationalized sector and it seems theyhave picked up the gauntlet. GIC, both is trying to reposition them by having re-

engineering done on the structure and operations of their respective

organizations.

It must be emphasized that the opening of the insurance market is far from a bad

thing for nationalized insurers. With a strong presence, a wide network and

considerable brand equity, they are in a good position to tap the very samesegments profitably, while improving their product and service offerings. The

Indian company should Leverage information technology to service large

numbers of customers efficiently and bring down overheads. Technology cancomplement or supplement distribution channels cost-effectively. It can also

help improve customer service levels considerably.

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Besides this, other areas can be focused to grow and survive in the Indian

Market

Understanding Customer needs: Use data warehousing, management

and mining to gauge the profitability and potential of various customer and

product segments and ensure effective cross selling. Understanding thecustomer better will allow insurance companies to design appropriate and-

customized products, determine pricing correctly and increase profitability.

High-level Training and Development: Ensure high levels of trainingand development not just for staff but also for agents and distribution

organizations. Existing organizations will have to train staff for better

service and flexibility, while all companies will have to train employees tocope with new products and an intensive use of information technology.

Alliance&Tieup: The importance of alliances and tie-ups means that

companies will have to integrate related but separate providers into theirsystems to ensure seamless delivery.

Agent Relationship: Build strong relationships with intermediaries suchas agents.

Market Segmentation: They must segment the market carefully to arrive

at the appropriate products and pricing and should cater the needs of everyindividual.

Revamped Marketing Strategy: Worldwide, insurance products move

along a continuum from pure service products to pure commodity products

then they could be sold through the medical shops, groceries, noveltystores etc. Once commodization, popularity and awareness of the products

are attained then the products can move to remote channels such as the

telephone or direct mail. In the UK for example, retailer Marks & Spencernow sells insurance products. At this point, buyers look for low price.

Brand loyalty could shift from the insurer to the seller.

Trust and Faith: Being government owned subsidiary, people of India

have real faith and are confident in parting their valuable savings withNationalized Insurance Companies. So, there is a big opportunity for the

government companies to regain their goodwill and reproduce their

policies in the interest of the general public.

Further Offerings to be made-

There exists huge scope of investment in the insurance sector in India. India has

an enormous middle-class that can afford to buy life, health and disability and

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pension plan products. Further, insurance is one of the most important tax saving

instrument in the country.

The changing scenario, the strategy of the government owned four public sector

General Insurance Companies is crucial to the market as the four public players

have a major hold. For instance, the four players collected a premium of Rs1427.9 crores.

GIC has already identified the areas that need to be activated and given a shape

through the four subsidiary companies. Foremost is the area of providing healthinsurance services. A change in the GIC Act will enable the corporation to float

a joint venture company for health insurance. Other areas that the GIC is looking

at are savings-linked insurance products and use of alternate distributionchannels including bancassurance. Also in progress is the co-ordination of all

foreign operations of the group.

Banc assuranceBancasssurance has a bright future for the distribution of insurance products.So far banc assurance has grown fairly well with banks taking advantage of

their extensive branch networks that give the insurers access to a large client

base. In order to participate in banc assurance activities, a number of bankshave registered as corporate agents. This means that they may distribute

insurance products for an insurer through their extensive branch networks in

return for the payment of commission. So government has a better option to

widen its service area and product efficiency.Insurer Bank

Direct Marketing and Internet

Until recently most direct business was promoted by development officerswho were remunerated by insurers partly by salary and partly by

commission. These officers were being phased out in anticipation of brokers

and other intermediaries taking over much of their business. Out of a totalpopulation of 1.07 billion, just over 21 million people are estimated to be

Internet users in India. Most insurers do not regard the Internet as a major

distribution channel for some while. This area is one of the most demandingareas in the insurance industry, which is one of the basic reason of the

decline of government policies. So, there is a need of bringing the net based

work system in the business through which there a lot can be offered in the

general insurance sector.

Marketing strategies to compete against private players

The biggest reason for the decline of the government general insurancebusiness is the marketing strategies applied by the private players. These

companies they are working with either foreign partners or with large

corporate, so they know how to sell their products in an effective way to thecustomers. These companies produce the policies with an attractive offer, a

better market coverage, advanced use of IT, a wide nation-wide network.

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These are some of the marketing strategies that are applied by the private

insurance companies; government should work in these areas which is also

the demand of the time. In this era customers need the product which ispresented to them in an attractive way and also stands on their expectations.

Most of the policies that are provided by the government are not

implemented in a better way. But the term of effective marketing is one ofthe biggest factor and area of improvement in government business.

Capturing the scope in Health Insurance

Health insurance expenditure in India is roughly 6% of GDP, much higherthan most other countries with the same level of economic development. Of

that, 4.7% is private and the rest is public. What is even more striking is that

4.5% are out of pocket expenditure (Berman, 1996). There has been analmost total failure of the public health care system in India. This creates an

opportunity for the new insurance companies. Thus, private insurance

companies will be able to sell health insurance to a vast number of families

who would like to have health care cover but do not have it. In India,approximately 80% of the total health expenditure comes from self-paid

category as against governments contribution of 20-30 %. A majority of

private hospitals are expensive for a normal middle class family. Theopening up of the insurance sector to private players is expected to give a

shot in the arm of the healthcare industry.

Health insurance will make healthcare affordable to a large number of

people. Currently, in India only 2 million people (0.2 % of total population

of 1 billion), are covered under Mediclaim, whereas in developed nationslike USA about 75 % of the total population are covered under some

insurance scheme. General Insurance Company has never aggressively

marketed health insurance. Moreover, GIC takes up to 6 months to process a

claim and reimburses customers after they have paid for treatment out oftheir own pockets.

General insurance companies of public sector are planning 15-20% increase inthe premiums of health insurance policy. The increase in the premium will

depend on the age of the person seeking the insurance cover.

Widen the possibilities in rural policies

A major issue is that of product innovation for rural contexts. Non-life general

insurance has products to suit crop, agricultural equipment, weather risks and so

forth. However, many of these products are on an experimental basis and notpure commercial products. Rural India is a target market for many players in the

financial sector, and insurance companies are no exception. Public sector

insurance companies boast that they have already captured this area; the extentof penetration of the insurance majors into rural India is not yet clear. Most of

the policies are said to help the rural customers but there is still no improvement

in the rural situation. So, in this area there is a need of making the policies which

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are realistic in the rural conditions and are made to meet the needs of the

customers in rural area.

Conclusion-

The problem with the public sector today is that this is doing a lot of third partyinsurance, which is a loss making business. In this era of globalization there is a

basic need of products which are the most profitable and more friendly to the

customers. There are many policies which are provided by the government andvery successful among the masses. But still in India about 80% of human beings

and major natural resources have yet not been insured in globalization era.

Floodgates of competition opened up by the privatization of insurance industry

did throw a challenge to the well-protected nationalized sector and it seems theyhave picked up the gauntlet. GIC is trying to reposition itself by having re-

engineering done on the structure and operations of their respective

organizations. Over the past three years, around 40 companies have expressedinterest in entering the sector and many foreign and Indian companies havearranged anticipatory alliances. The threat of new players taking over the market

has been overplayed. As is witnessed in other countries where liberalization took

place in recent years we can safely conclude that nationalized players willcontinue to hold strong market share positions. Existing government players will

have to explore new distribution and marketing channels. Potential buyers for

most of this insurance lie in the middle class. Government insurers mustsegment the market carefully to arrive at appropriate products and pricing.

Recognizing the potential, in the past three years, the nationalized insurers have

already begun to target niches like pensions, women or children. So, this can be

said that there is a lot of scope for the government insurance policies in countrytoday and also there can be offered a lot which will help in maximizing the

profit and market share of these policies.

Bibliography:

Directorate of Insurance (Maharashtra) Mr. L.M.Khan (Director)

General Insurance Corporation of India

www.google.com

www.oicl.co.in

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www.uiicl.com

www.nicl.co.in

www.irda.com

www.bimaonline.com

www.tourindia.com

moia.gov.in

www.ciionline.org

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