Description
developments in General Insurance, present situations of General Insurance, important terms used in General Insurance, underwriting and claim procedures
Principles of General Insurance
Contents
? ? ? ? ? ? ?
?
Introduction History of growth of General Insurance in India Developments in General Insurance Present situations of General Insurance Important terms used in General Insurance Underwriting and claim procedures Changes Prospects in General Insurance
INTRODUCTION
?
Any insurance other than human lives comes under the scope of General Insurance It is preferable to call this as General Insurance instead of nonlife insurance There is vast scope and the market is trying to cope up with the demands of the market Insurance penetration is improving in India as being the second largest developing economy
?
?
?
HISTORY OF GENERAL INSURANCE
?
Marine insurance was being practiced in India from the beginning of 19th century Fire insurance followed in 1825 at Madras
?
?
Swadeshi movement also had its impact on Insurance and first Indian Company was formed in 1907 – Indian Mercantile Insurance Company
Need to control insurance business was felt by the British government which introduced the Insurance Act in 1938 and Insurance Rules in 1939
?
DEVELOPMENT IN 1970
?
Life Insurance business was nationalised in India in the year 1956 General Insurance business was being done by 106 companies including LIC (GI) On May 13th 1971, an ordinance was promulgated taking state control of general insurance business with custodians in charge In 1972 GI Nationalisation act was passed allowing the formation of GIC as the holding company and with 4 subsidiaries each having its Head Office at one metro
?
?
?
?
1st Jan 1973, GIC and 4 companies were formed taking in them 106 companies and the 4 PSUs, taking care of the general insurance business in the country till 2000 totally. GIC on its own was also writing aviation and crop business besides becoming the National & Asian Reinsurer The objective of Nationalisation was to spread insurance to nook and corner of the country and to utilise people’s money for the people’s good thus uplifting the socio economic condition of the country
?
?
LIBERALISATION
?
Following Globalisation, Malhotra committee had been formed to look into the methods of liberalisation of insurance Based on the report IRA bill was introduced but later on withdrawn without discussions from the floor of parliament Later on the bill in the modified form as IRDA bill was introduced in 1999 and the IRDA act was passed. An independent statutory authority as Regulator for insurance business came into existence in 1999
?
?
?
DEVELOPMENTS SINCE 2000
? ? ? ? ? ? ? ? ?
Surveyors and loss assessors regulations Third party administrators regulations Investment regulations Policy holder’s interests regulations Brokers’ regulations Corporate Agents regulations Manner of receipt of premium Rural sector Distribution of surplus
2000 2001 2001 2002 2002 2002 2002 2002 2002
INSURANCE COUNCILS & INSTITUTES
?
Two councils which had been reconstituted – life insurance council and General insurance council IIISLA has been formed IIBA- Brokers association IIRM- Institute of risk management Intermediaries now allowed-Agents/ corporate agents/ Brokers Institutes for educating the agents/Brokers have been formed and passing the examination has been made mandatory for carrying out insurance business
? ? ? ? ?
?
Surveyor licensing is being controlled by Regulator
GENERAL INSURANCE BUSINESS DONE
Year 1974 1975 1976 1990 2000 In Crores 219.99 253.75 286.51 2174.43 10272 crores
2006 > 20000 crores 2007 > 24000 crores
GENERAL INSURANCE
?
Insurance of property
?
Insurance of persons
?
Insurance of liability
?
Insurance of Interest
CLASSES OF GI
?
Fire –Property damage and business interruption insurance Marine- Cargo and Hull Misc - Motor/ Engineering/Liability/ Aviation/ Space/Energy/ Guarantee/ Bonds/ Rural/ Livestock/ weather/ Crop All risks/ accident/ Travel/ Baggage
?
?
GENERAL INSURERS
?
?
? ? ? ?
?
? ? ? ? ? ? ? ? ?
Bajaj Allianz ICICI Lombard Iffco-Tokio General Insurance National Insurance New India Assurance Company Oriental Insurance Reliance General Insurance Royal Sundaram Alliance TATA-AIG General United India Insurance Cholamandalam MS General HDFC Chubb General Export Credit Guarantee Agriculture Insurance Company Star Health & Allied Sompho/ Shri Ram General/AXA/ Apollo DKV
NEW COMPANIES LICENSED
General Insurance
? ? ? ? ? ? ? ?
2000 2001 2002 2003 2004 2005 2006 2007
3 3 3
TERMINOLOGY USED IN GENERAL INSURANCE
?
?
? ? ?
?
? ? ? ? ? ? ? ?
?
Proposer-Insured-Insurer Risk- Peril Proposal form Sum Insured Premium ( Consideration) Excess ( Deductible) Indemnity Cover note Policy document Endorsement-for effecting changes in the policy Warranties/ Clauses Conditions Underwriting Renewal Hazard
BASIC PRINCIPLES
?
Insurance is a legal agreement entered between Insured and Insurer Due to the consideration, the Insurer agrees to indemnify the Insured, for the loss or damage or liability created due an accident which is covered under the policy subject to the terms and conditions of the contract All insurance policies are subject to the warranties, conditions and clauses of the policy contract and claims will be settled accordingly UTMOST GOOD FAITH- which is embodied in all insurance contracts and appears in the conditions of the policy documents.
?
?
?
?
Since only the Insured who is the owner/possessing the property he/she needs to declare the details which are to be considered by the Underwriter. To obtain the requisite details the Insurer arranges all questions in order in the proposal form so that he/she knows where to look for the required details. Material fact is the detail of the risk which will influence the mind of the Underwriter to accept/reject; and if to accept the rate /terms at which the risk is to be accepted.
?
?
?
Duty of disclosure is on the proposer/Insured and if wilful concealment/ non-disclosure of facts could be established the claim if any could be denied
INSURABLE INTEREST
?
Only the person who has insurable interest can arrange insurance and seek indemnity due to loss or damage Insurable interest is defined as legal interest in another person’s life or in the protection of property from injury, loss, destruction or pecuniary damage By virtue of ownership Tenant who had leased property Employer’s interest on employees lives
?
?
?
?
PROXIMATE CAUSE
?
Insurer is liable for any loss proximately caused by a peril insured against, but he is not liable for any loss which is not proximately caused by a peril insured against-Judge Lumb
?
Proximate cause means the active, efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source
INDEMNITY
?
Insurance contracts are mostly contracts of indemnity Insured is entitled to obtain the loss amount suffered from the insurances he had effected on the property
?
?
He is not to be benefited due the loss/damage
If sum insured is on agreed value basis the loss will be settled on that basis Extent of indemnity will be based on the market value of the property at the time of occurrence of the event which caused the loss/damage or destruction
?
?
UNDERWRITING AND CLAIMS
?
Offer and acceptance- Proposal is studied by the Underwriter who then quotes the premium terms, warranties and conditions
Once accepted by the proposer and premium is paid, the cover note is issued. Later on policy document is issued. Alterations/ changes are effected by endorsements
?
?
?
Claim is being processed to take into account the salvage, under-insurance and excess under the policy and many times to deduct the additional premium for restoring the sum insured to the original level by charging the additional premium on the claim amount paid from the date of loss till the date of expiry.
?
Claim will be subject to getting the subrogation rights preserved against the third parties responsible for making good the loss and transferring the same to Insurers
CHANGES
?
Fire insurance; Reinstatement value (other than stocks Market value) Marine insurance : Agreed value Marine hull insurance: Agreed value Motor insurance: Insured declared value Engineering insurance: Present day replacement value Misc insurance: Market value
?
?
?
?
?
INSURANCES WHICH NEED TO BECOME POPULAR
?
Business Interruption insurance
?
? ? ? ?
Engineering insurance
Liability insurance- CGL Public /Product E & O ( PI) liability insurance D & O liability insurance PI for Lawyers/CAs/Doctors/ Brokers/Architects/ structural engineers Overseas travel insurance
?
?
Employees benefit policies ( GPA/GMC)
doc_325076385.ppt
developments in General Insurance, present situations of General Insurance, important terms used in General Insurance, underwriting and claim procedures
Principles of General Insurance
Contents
? ? ? ? ? ? ?
?
Introduction History of growth of General Insurance in India Developments in General Insurance Present situations of General Insurance Important terms used in General Insurance Underwriting and claim procedures Changes Prospects in General Insurance
INTRODUCTION
?
Any insurance other than human lives comes under the scope of General Insurance It is preferable to call this as General Insurance instead of nonlife insurance There is vast scope and the market is trying to cope up with the demands of the market Insurance penetration is improving in India as being the second largest developing economy
?
?
?
HISTORY OF GENERAL INSURANCE
?
Marine insurance was being practiced in India from the beginning of 19th century Fire insurance followed in 1825 at Madras
?
?
Swadeshi movement also had its impact on Insurance and first Indian Company was formed in 1907 – Indian Mercantile Insurance Company
Need to control insurance business was felt by the British government which introduced the Insurance Act in 1938 and Insurance Rules in 1939
?
DEVELOPMENT IN 1970
?
Life Insurance business was nationalised in India in the year 1956 General Insurance business was being done by 106 companies including LIC (GI) On May 13th 1971, an ordinance was promulgated taking state control of general insurance business with custodians in charge In 1972 GI Nationalisation act was passed allowing the formation of GIC as the holding company and with 4 subsidiaries each having its Head Office at one metro
?
?
?
?
1st Jan 1973, GIC and 4 companies were formed taking in them 106 companies and the 4 PSUs, taking care of the general insurance business in the country till 2000 totally. GIC on its own was also writing aviation and crop business besides becoming the National & Asian Reinsurer The objective of Nationalisation was to spread insurance to nook and corner of the country and to utilise people’s money for the people’s good thus uplifting the socio economic condition of the country
?
?
LIBERALISATION
?
Following Globalisation, Malhotra committee had been formed to look into the methods of liberalisation of insurance Based on the report IRA bill was introduced but later on withdrawn without discussions from the floor of parliament Later on the bill in the modified form as IRDA bill was introduced in 1999 and the IRDA act was passed. An independent statutory authority as Regulator for insurance business came into existence in 1999
?
?
?
DEVELOPMENTS SINCE 2000
? ? ? ? ? ? ? ? ?
Surveyors and loss assessors regulations Third party administrators regulations Investment regulations Policy holder’s interests regulations Brokers’ regulations Corporate Agents regulations Manner of receipt of premium Rural sector Distribution of surplus
2000 2001 2001 2002 2002 2002 2002 2002 2002
INSURANCE COUNCILS & INSTITUTES
?
Two councils which had been reconstituted – life insurance council and General insurance council IIISLA has been formed IIBA- Brokers association IIRM- Institute of risk management Intermediaries now allowed-Agents/ corporate agents/ Brokers Institutes for educating the agents/Brokers have been formed and passing the examination has been made mandatory for carrying out insurance business
? ? ? ? ?
?
Surveyor licensing is being controlled by Regulator
GENERAL INSURANCE BUSINESS DONE
Year 1974 1975 1976 1990 2000 In Crores 219.99 253.75 286.51 2174.43 10272 crores
2006 > 20000 crores 2007 > 24000 crores
GENERAL INSURANCE
?
Insurance of property
?
Insurance of persons
?
Insurance of liability
?
Insurance of Interest
CLASSES OF GI
?
Fire –Property damage and business interruption insurance Marine- Cargo and Hull Misc - Motor/ Engineering/Liability/ Aviation/ Space/Energy/ Guarantee/ Bonds/ Rural/ Livestock/ weather/ Crop All risks/ accident/ Travel/ Baggage
?
?
GENERAL INSURERS
?
?
? ? ? ?
?
? ? ? ? ? ? ? ? ?
Bajaj Allianz ICICI Lombard Iffco-Tokio General Insurance National Insurance New India Assurance Company Oriental Insurance Reliance General Insurance Royal Sundaram Alliance TATA-AIG General United India Insurance Cholamandalam MS General HDFC Chubb General Export Credit Guarantee Agriculture Insurance Company Star Health & Allied Sompho/ Shri Ram General/AXA/ Apollo DKV
NEW COMPANIES LICENSED
General Insurance
? ? ? ? ? ? ? ?
2000 2001 2002 2003 2004 2005 2006 2007
3 3 3
TERMINOLOGY USED IN GENERAL INSURANCE
?
?
? ? ?
?
? ? ? ? ? ? ? ?
?
Proposer-Insured-Insurer Risk- Peril Proposal form Sum Insured Premium ( Consideration) Excess ( Deductible) Indemnity Cover note Policy document Endorsement-for effecting changes in the policy Warranties/ Clauses Conditions Underwriting Renewal Hazard
BASIC PRINCIPLES
?
Insurance is a legal agreement entered between Insured and Insurer Due to the consideration, the Insurer agrees to indemnify the Insured, for the loss or damage or liability created due an accident which is covered under the policy subject to the terms and conditions of the contract All insurance policies are subject to the warranties, conditions and clauses of the policy contract and claims will be settled accordingly UTMOST GOOD FAITH- which is embodied in all insurance contracts and appears in the conditions of the policy documents.
?
?
?
?
Since only the Insured who is the owner/possessing the property he/she needs to declare the details which are to be considered by the Underwriter. To obtain the requisite details the Insurer arranges all questions in order in the proposal form so that he/she knows where to look for the required details. Material fact is the detail of the risk which will influence the mind of the Underwriter to accept/reject; and if to accept the rate /terms at which the risk is to be accepted.
?
?
?
Duty of disclosure is on the proposer/Insured and if wilful concealment/ non-disclosure of facts could be established the claim if any could be denied
INSURABLE INTEREST
?
Only the person who has insurable interest can arrange insurance and seek indemnity due to loss or damage Insurable interest is defined as legal interest in another person’s life or in the protection of property from injury, loss, destruction or pecuniary damage By virtue of ownership Tenant who had leased property Employer’s interest on employees lives
?
?
?
?
PROXIMATE CAUSE
?
Insurer is liable for any loss proximately caused by a peril insured against, but he is not liable for any loss which is not proximately caused by a peril insured against-Judge Lumb
?
Proximate cause means the active, efficient cause that sets in motion a train of events which brings about a result, without the intervention of any force started and working actively from a new and independent source
INDEMNITY
?
Insurance contracts are mostly contracts of indemnity Insured is entitled to obtain the loss amount suffered from the insurances he had effected on the property
?
?
He is not to be benefited due the loss/damage
If sum insured is on agreed value basis the loss will be settled on that basis Extent of indemnity will be based on the market value of the property at the time of occurrence of the event which caused the loss/damage or destruction
?
?
UNDERWRITING AND CLAIMS
?
Offer and acceptance- Proposal is studied by the Underwriter who then quotes the premium terms, warranties and conditions
Once accepted by the proposer and premium is paid, the cover note is issued. Later on policy document is issued. Alterations/ changes are effected by endorsements
?
?
?
Claim is being processed to take into account the salvage, under-insurance and excess under the policy and many times to deduct the additional premium for restoring the sum insured to the original level by charging the additional premium on the claim amount paid from the date of loss till the date of expiry.
?
Claim will be subject to getting the subrogation rights preserved against the third parties responsible for making good the loss and transferring the same to Insurers
CHANGES
?
Fire insurance; Reinstatement value (other than stocks Market value) Marine insurance : Agreed value Marine hull insurance: Agreed value Motor insurance: Insured declared value Engineering insurance: Present day replacement value Misc insurance: Market value
?
?
?
?
?
INSURANCES WHICH NEED TO BECOME POPULAR
?
Business Interruption insurance
?
? ? ? ?
Engineering insurance
Liability insurance- CGL Public /Product E & O ( PI) liability insurance D & O liability insurance PI for Lawyers/CAs/Doctors/ Brokers/Architects/ structural engineers Overseas travel insurance
?
?
Employees benefit policies ( GPA/GMC)
doc_325076385.ppt