K.E.S’s SHROFF COLLEGE OF

ARTS & COMMERCE

SUBJECT :

Business Ethics

Class : S.Y.B.F.M.

Semester : 3rd

PRESENTATION ON : Ethics in Insurance Sector

Submitted to : Prof. Rupal Jain

Academic year : 2011-12

Group membersNAME ROLL NO.

PRIYANK DARJI 06

HARDIK NATHWANI 27

SHASHANK PAI 28

SAGAR PANCHAL 29

DHARMIK PATEL 32

KUSH SHAH 39

SIDDARTH TAWDE 46

What is Ethics ?

Ethics involves learning what is right or wrong,

and then doing the right thing -- but "the right

thing" is not nearly as straightforward as

conveyed in a great deal of business ethics

literature.

Many ethicists assert there's always a right

thing to do based on moral principle, and

others believe the right thing to do depend on

the situation -- ultimately it's up to the

individual. Many philosophers consider ethics

to be the "science of conduct."

Seniors explain that ethics includes the

fundamental ground rules by which we live

our lives. Philosophers have been discussing

ethics for at least 2500 years.

Many ethicists consider emerging ethical

beliefs to be "state of the art" legal matters,

i.e., what becomes an ethical guideline today

is often translated to a law, regulation or rule

tomorrow. Values which guide how we ought

to behave are considered moral values, e.g.,

values such as respect, honesty, fairness,

responsibility, etc. Discussions around how

these values are applied are sometimes

called moral or ethical principles.

Introduction of Insurance Sector :

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra, was formed to evaluate the Indian insurance industry and recommended its figure direction.  The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector.

The reforms were aimed at “creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance in an important part of the overall financial system where it was necessary to address the need for similar reforms.

The low penetration can be explained in terms of non-emphasis on customer awareness, training issues of agents and a low tax base.

The heavy capital investments in terms of the distribution networks, hiring of agents and the long gestation periods of 7-10 years provide entry barriers for the industry.

The key industry drivers are related to lifestyle issues in terms of perceiving insurance as a savings instrument rather than for risk cover, need based selling, quality of service and customer awareness.  The future growth areas could be in term assurance, pension and health insurance.  In terms of the distribution channels, there is tremendous opportunity with banks and finance companies and by making the channel IT driven. With increased commoditization of insurance products, brand building is going to play a vital role. The provisions of the IRDA bill acknowledge a many issues related to insurance permia that will present it from seeping out of the country. The IRDA  bill provides for three levels of players – Insurance Company, Insurance brokers and Insurance agent.

Meaning Of Insurance Sector :

Insurance is a form of risk management primarily used to hedge against the risk of a

contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. 

The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.

Types of Insurance :

Life Insurance :

Life Insurance Corporation of India (LIC) was formed in September, 1956 by an Act of Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution from the Government of India. The then Finance Minister, Shri C.D. Deshmukh, while piloting the bill, outlined the objectives of LIC thus: to conduct the business with the utmost economy, in a spirit of trusteeship; to charge premium no higher than warranted by strict actuarial considerations; to invest the funds for obtaining maximum yield for the policy holders consistent with safety of the capital; to render prompt and efficient service to policy holders, thereby making insurance widely popular.

Subsidiary of Life Insurance:

1.Birla Sun Life Insurance2.SBI Life Insurance3.ICICI Prudential4.Kotak Mahindra

General Insurance :

General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a

particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance.

Prior nationalization there were 68 Indian insurers

(including LIC) and 45 non-Indian insurers did the

business.

In Nov. 1972, the general insurance business was

nationalized by the General Insurance Business

(Nationalized), Act 1972 (GIBNA) and vested in

the hand of the GIC and its four subsidiaries viz.

1. National Insurance Co. Ltd.,

2. New India Assurance Co. Ltd.,

3. Oriental Fire and General Insurance Co. Ltd.,

and

4. United India Insurance Co. Ltd.

CSR Towards Insurance

Sector :

Selling Life Insurance is like selling intangible

product. So, the marketing staff needs to

observe a set of norms in his / her

professional conduct, which make him / her

worthy of trust and faith.

The Code of Ethics for the life insurance,

marketing staff

1. To perform his / her duties in high esteem.

2. To give utmost priority to the client's

interest.

3. Not to disclose client's confidential and

personal information.

4. To ensure prompt and sincere service to

the client and his or her family.

5. To use appropriate methods in convincing

clients to protect their insurable interest.

6. To make truthful and accurate

presentations.

7. To improve his / her knowledge of life

insurance through constant study.

8. To set a plan and work accordingly.

9. To maintain fair relations with colleagues.

10. To strictly follow the concerned laws and

regulations.

Financial System Of

Insurance :

Insurance Planning is the process of providing

advice and assistance to clients to determine

whether and how clients can meet their

financial needs and life’s goal through proper

management of financial resources.

♦ Establishing and defining the client –

planner relationship: The Financial advisor

should clearly explain or document the

services to be provided and define the

responsibilities. The advisor should explain

fully how he will be paid and by whom. The

advisor should also disclose any restrictions

on his ability to give unbiased advice and

disclose any conflicts of interests.

The advisor should agree on how long the

professional Relationship should last and how

decisions will be made.

♦ Gathering client data, including goals:

The Financial advisor should ask for

information about the financial situation. The

planner should mutually define the personal

and financial goals, understand the time frame

for results and discuss, if relevant, how one

feel’s about risk. The Financial Planner should

gather all the necessary documents before

giving the advice.

♦ Analyzing and evaluating the financial

status: The Financial advisor should analyze

the information to assess the current situation

and determine what one must do to meet the

goals, depending on what services have been

asked. For this one could include analyzing

the assets, liabilities and cash flow, current

insurance coverage, investments or tax

strategies

♦ Developing and presenting Financial

Planning recommendations and/or

alternatives: The Financial Planner should

offer Financial Planning recommendations

that address the goals, based on the

information provided.

The planner should go over the

recommendations with the client to help and

understand them so that one makes informed

decisions. The planner should also listen to

the client’s concerns and revise the

recommendations as appropriate.

♦ Implementing the Financial Planning

recommendations: The planner and the

client should agree on how the

recommendations will be carried out. The

planner may carry out the recommendations

or serve as your ‘coach’, coordinating the

whole process along with professionals such

as solicitors or stockbrokers.

Accounts Of Insurance :

There are two types of Books:

1.Statutory Book:A. Register Of PoliciesB. Register Of ClaimsC. The Register Of Licensed Insurance

Agents

2. Subsidiary Book:A. Cash BookB. Premium Cash BookC. Branch Cash BookD. Petty Cash BookE. Claim Cash BookF. Commission RegisterG. Lapsed and Cancelled Policies BookH. Investment Ledger

CONCLUSION :

There is a probability of a spurt in employment opportunities. A number of web-sites are coming up on insurance, a few financial magazines exclusively devoted to insurance and also a few

training institutes being set up hurriedly. Many of the universities and management institutes have already started or are contemplating new courses in insurance. Life insurance has today become a mainstay of any market economy since it offers plenty of scope for garnering large sums of money for long periods of time. A well-regulated life insurance industry which moves with the times by offering its customers tailor-made products to satisfy their financial needs is, therefore, essential if we desire to progress towards a worry-free future.