INSURANCE POOLING

For any type of insurance coverage, some people and businesses are more likely to file a claim at some
point during the policy’s term. Whether the policy covers health care, professional malpractice or loss of
any other type, there will be some insured people who are at a greater risk of needing that coverage. One
definition of risk pooling could be "a group formed by insurance companies to provide catastrophic
coverage by sharing costs and potential exposure." Risk pools help insurance companies offer coverage to
both high- and low-risk customers. They also lessen the risk borne by any single insurance company by
spreading it among many.

Insurance pooling is a practice wherein a group of small firms join together to secure better insurance rates
and coverage plans by virtue of their increased buying power as a block. This practice is primarily used for
securing health and disability insurance coverage. Those doing insurance pooling are often referred to as
insurance purchasing cooperatives.

Small business enterprises have long complained that insurers hand out discounts to big clients, who have
substantial purchasing power and large numbers of employees, and that those insurers too often try to make
up those discount losses by hiking rates for their smaller clients. Unable to buy good coverage on their own,
smaller companies were forced to rely on pooling plans created and managed by trade associations or other
affiliated business groups, or pass on providing coverage altogether. In recent years, however, another
alternative, in which private businesses band together and organize their own pools, has emerged. Distinct
entities have been created to address both health and disability coverage needs.

Risk Management for Individuals and corporations:

Over the last couple of decades, institutional risk management has become an integral process at
almost every large organization. Corporate risk managers concern themselves not only with
financial risks, but with strategic and operational risks as well, evaluating possible future
outcomes and their effect on their organizations.

The International Standards Organization has even attempted to standardize the process of
organizational risk management, defining it as "the effect of uncertainty on objectives." It defines
risk management as "the identification, assessment and prioritization of risks followed by
coordinated and economical application of resources to minimize, monitor and control the
probability and/or impact of unfortunate events."

While these definitions look good on slide presentations at corporate risk management
departments, they are probably a bit too abstract for the real world practice of managing assets
for people. Still, they offer a framework to systematically evaluate and manage client risk. By
explicitly defining what could happen, focusing in on the uncertainties and estimating costs, it's
possible for investors to minimize and control their impact.

Most individuals, too, and their advisors are already managing risk in their investment process, even if they
don't know it. Specifically, they try to curb the risk of suffering shortfalls when it comes time to cover future
liabilities. The insurance they buy protects them against certain rare but costly events. But saving and investing
is a type of insurance as well-essentially it's selfinsuring against all other future liabilities, trying to prevent
catastrophes in the future that you can't predict and whose magnitude is uncertain.
The goal of diversification is to manage liquidity and uncertainty in the asset class returns of a client's portfolio
to cover future expenditures.
There are two ways we can tweak a portfolio to meet liabilities. First, after identifying and segregating
uncertain future liabilities, we can match them to assets that are highly correlated with them. Second, we can
imagine different scenarios that help us manage those risks better by ensuring sufficient liquidity.
The interesting thing about this approach is that, besides helping us prepare for catastrophe, it also gives us a
higher overall portfolio return-because the risk profile is now better defined.

People can buy insurance in preparation for a number of horrible circumstances. They can insure against
death, disability, health problems and medical emergencies, property loss and legal trouble. They can also
partially insure things such as educational outlays (through prepaid tuition plans) and retirement income
(through annuities). Of course, there are also catastrophic risks such as war, natural disasters and the
government confiscation of property that can't be insured against-things that would hurt almost every asset
class if they came to pass. But since there is no feasible way to manage these events short of building a
survivalist compound stocked with food, weapons and gold bars, we will ignore them.
What we manage instead is the uncertainty in future asset values by putting them next to comparable future
liabilities. We take investment risk and then divide it into further components of inflation risk, market risk,
interest rate risk, credit risk, liquidity risk, etc. The historical effects of these risks on the returns of various
asset classes are quantified as annual standard deviations, which are then used to compare the "riskiness" of
expected returns

Identify and Analyze Loss Exposures

This is the process of determining the potential sources of loss, or “hazards”, that your school
board is exposed to which may result in loss or injury. This is a critical component, as it will
assist you in determining where to divert your resources.

Risk Identification:

There are several ways to identify sources of loss, but the most common approaches are:
a. Analyze past claims experience and determine categories or types of losses that you have
had (Contact OSBIE Risk Management).

b. Analyze past incident report data to determine where minor injuries that did not result in
claims were occurring. Based on the law of large numbers, large clusters of incidents from a
specific source can be predictors of where claims will eventually occur. (Contact OSBIE Risk
Management).

c. Conduct a survey of each department or operating division to determine where potential

losses can occur. Such surveys can be done professionally, or can be completed in-house using
the sample template (Figure 1). Within a department, each activity can also be assessed using
this form. Once completed, each risk factor can be ranked Low, Medium or High and
appropriate strategies can be documented to address each one (see Risk Management Steps 2 and

d. Site inspections can also be used to provide a visual perspective of where your exposures
are – e.g. proximity to nuclear facilities, manufacturing plants, transportation arteries, natural
hazards, isolated/remote location, high crime area, etc. Again, these inspections can be
conducted professionally or could be done in-house.

The types of risk identified by any of the above methods generally fall into the following categories, and can
be charted as illustrated in
Financial Risks – Also known as “Net Income Risks” (because they impact the bottom line of an
organization), these are the risks that are not paid for by insurance, whether by choice or by exclusion – e.g.
Fines, penalties, clean-up orders, losses below your insurance deductible, punitive damages, losses excluded
by insurance policy, increases in premiums due to claims experience, etc.

Liability Risks – These are the risks you face of being held legally responsible as the result of an employee’s
negligent act causing injury or damage to someone else. That includes all the activities your board approves,
organizes, directs, controls and supervises, as well as what is imposed on you by law, such as Occupier’s
Liability, Employer’s Vicarious Liability, Joint and Several Liability, etc.

Property Risks – These are the risks you face of losing your buildings or property resulting from natural
events (tornado, flood, etc.), technological events (fire, chemical, explosion, electrical, etc.) or man-made
events (arson, vandalism, terrorism, etc.)

Analyzing/Assessing Risk:
It must be recognized that all risk elements are not equal in terms of frequency (how often a loss will occur)
and severity (how serious the loss is). Since scarce resources cannot be devoted to address all risks equally, it
is necessary to rank or prioritize your risks into categories that can be dealt with based on the degree of threat
that is posed to the school board

MEANING AND DEFINITION OF INSURANCE

Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number
of persons who are exposed to it and who agree to ensure themselves against the risk. Risk is uncertainty
of a financial loss. The risk cannot be avoided but the resultant loss occurring due to the risk can be
avoided by reimbursement of the loss. The insurance contract works under this principle.
Insurance is a contract between-two parties by which one of them, called the insurer agrees to indemnify
the other, called the insured or assured against a loss, which may be caused by the happening of a
certain event.

The contract is embodied in a document known as the “Policy”. The insurer undertakes to indemnify
the insured for a consideration in the form of money called the premium. The contingency insured
against is called the “Risk”.

Everyone is exposed to various risks. Future is very uncertain, but there is way to protect one’s family
and make one’s children’s future safe. Life Insurance companies help us to ensure that our family’s
future is not just secure but also prosperous. Life Insurance is particularly important if you are the sole
breadwinner for your family. The loss of you and your income could devastate your family. Life
insurance will ensure that if anything happens to you, your loved ones will be able to manage
financially. This study titled “Study of Consumers Perception about Life Insurance Policies” enables
the Life Insurance Companies to understand how consumer’s perception differs from person to person.
How a consumer selects, organizes and interprets the service qualityand the product quality of different
Life Insurance Policies, offered by various Life
Insurance Companies

Insurance is a tool by which fatalities of a small number are compensated out of funds (premium
payment) collected from plenteous. Insurance companies pay back for financial losses arising out of
occurrence of insured events e.g. in personal accident policy death due to accident, in fire policy the
insured events are fire and other allied perils like riot and strike, explosion etc. hence insurance
safeguard against uncertainties. It provides financial recompense for losses suffered due to incident of
unanticipated events, insured with in policy of insurance. Moreover, through a number of acts of
parliament, specific types of insurance are legally enforced in our country e.g. third party insurance
under motor vehicles Act, public liability insurance for handlers of hazardous substances under
environment protection Act. Etc.

It is a commonly acknowledged phenomenon that there are countless risks in every sphere of life .for
property, there are fire risk; for shipment of goods. There are perils ofsea; for human life there are risk
of death or disability; and so on .the chances of occurrences of the events causing losses are quite
uncertain because these may or may not take place. Therefore, with this view in mind, people facing
common risks come together and make their small contribution to the common fund. While it may not
be possible to tell in advance, which person willsuffer the losses, it is possible to work out how many
persons on an average out of the group, may suffer losses. When risk occurs, the loss is made good out
of the common fund .in this way each and every one shares the risk .in fact they share the loss by
payment of premium, which is calculated on the likelihood of loss .in olden time, the contribution make
the above-stated notion of insurance

DEFINITION OF INSURANCE
Insurance has been defined to be that in, which a sum of money as a premium
is paid by the insured in consideration of the insurer’s bearings the risk of paying a larges
um upon a given contingency. The insurance thus is a contract whereby:

a.Certain sum, termed as premium, is charged in consideration,

b.Against the said consideration, a large amount is guaranteed to be paid bythe insurer
who received the premium,
c. The compensation will be made in certain definite sum, i.e., the loss or the policy
amount which ever may be, and
d. The payment is made only upon a contingency More specifically, insurance may be
defined as a contact between two parties, wherein one party (the insurer) agrees to pay to
the other party (the insured) or the beneficiary, ascertain sum upon a given contingency
(the risk) against which insurance is required.

CHARACTERISTICS OF INSURANCE
1. SHARING OF RISKS
Insurance is a device to share the financial loss, which may fall on an individual or his family on
the happening of a specified event. The nature of the risk, of course, may differ. However, the loss
arising from the risk i.e. occurrence of the specified event, is shared by all the insured in the form
of premium.
At this stage, it may occur, how all the insured share the loss of an individual. The common fund
from which the loss is met is build up from the premiums received from a number of persons.
Hence, there is nothing wrong to say that the loss of an individual is shared by all the insured.

2. CO-OPERATIVE DEVICE
Another notable feature of an insurance plan is the co-operation of large number of persons, who
agree to share financial loss arising due to a specified risk. In other words, there is no compulsion
for joining in any scheme of insurance. It is purely voluntary.

3. VALUE OF RISK
The risk should be valued before insuring. The amount of premium depends on the quantum or
value of the risk involved. If the expected loss is estimated higher, the insurance premium will also
 be higher; whatever it may be, the probable value of loss should be estimated at the time of making
the insurance contract.

4. PAYMENT AT CONTINGENCY
In a contract of insurance, the payment is made only on the happening of a certain contingency. If
the expected event i.e. contingency occurs, payment is made. In a life insurance contract, the
amount will be paid if the insured dies or the period of insurance expires.
However, in case of general insurance, the loss is uncertain i.e. the contingency may or may not
occur. So if the contingency occurs, payment will be made. Otherwise, the insurance company pays
nothing to the policyholders.

5. AMOUNT OF PAYMENT
It is already stated that the probable loss will be estimated first and the premium will be determined
on that basis. In case of life insurance the amount assured will be paid in the event of death of the
insured. But in other cases, the insurance company will reimburse only the actual loss and not the
amount insured. Further, the insured should prove his loss and then make a claim.

6. LARGE NUMBER OF INSURED PERSONS

To spread the loss – immediately, smoothly and cheaply, large number of persons should be insured.
It is stated already that insurance is a co-operative endeavor of a large number of persons. Then
only the cost of insurance will be the minimum.

7. INSURANCE IS DIFFERENT FROM GAMBLING

Insurance should not be confused with gambling. Even though there is a chance factor in both,
insurance is totally different from gambling. In gambling, the gambler is exposed to the risk of
losing whereas in insurance the insured is opposed to risk and in fact, he has to bear the loss if he
is not insured. By getting insured his life and property, the insured can protect himself against the
probable loss that may occur.

8. INSURANCE IS NOT CHARITY

Charity is given without consideration. Hence, charity is different from insurance. In the case of
insurance, the premium paid by the insured is the consideration. Without premium, it is not possible
to take out an insurance policy.

History of insurance sector

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ),
Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of
resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine.
This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest
traces of insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has evolved
over time heavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the Oriental Life
Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable
had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the
British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871),
Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however,
was dominated by foreign insurance offices which did good business in India, namely Albert Life
Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for
hard competition from the foreign companies.
In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian
Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the
Indian Insurance Companies Act was enacted to enable the Government to collect statistical information
about both life and non-life business transacted in India by Indian and foreign insurers including provident
insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier
legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for
effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large
number of insurance companies and the level of competition was high. There were also allegations of
unfair trade practices. The Government of India, therefore, decided to nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance
Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers
as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late
90s when the Insurance sector was reopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in the west and the consequent
growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British
occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company
Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up.
This was the first company to transact all classes of general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India.
The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business
practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins.
The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance
business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped
into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd.,
the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst
1973.

This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The
process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen
it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of
RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance
sector.The objective was to complement the reforms initiated in the financial sector. The committee
submitted its report in 1994 wherein , among other things, it recommended that the private sector be
permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by
floating Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory
and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the
insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of
the IRDA include promotion of competition so as to enhance customer satisfaction through increased
consumer choice and lower premiums, while ensuring the financial security of the insurance market.
 The IRDA opened up the market in August 2000 with the invitation for application for registrations.
Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame
regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various
regulations ranging from registration of companies for carrying on insurance business to protection of
policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as
independent companies and at the same time GIC was converted into a national re-insurer. Parliament
passed a bill de-linking the four subsidiaries from GIC in July, 2002.

Today there are 31 general insurance companies including the ECGC and Agriculture Insurance
Corporation of India and 24 life insurance companies operating in the country.

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with
banking services, insurance services add about 7% to the country’s GDP. A well-developed and evolved
insurance sector is a boon for economic development as it provides long- term funds for infrastructure
development at the same time strengthening the risk taking ability of the country.

Important Developments in the History of Indian Insurance Business

DEVELOPMENTS OF INSURANCE
Before deregulation in 1999, the insurance industry in India consisted of only two state insurers, namely
Life Insurance Corporation of India (LIC) for life insurance, and General Insurance Corporation of India
(GIC) with its four subsidiaries for general insurance According to the Insurance Regulatory and
Development Authority (IRDA), the insurance industry in India at present consists of 24 general insurance
companies including specialised insurers such as Export Credit Guarantee Corporation of India andthe
Agricultural Insurance Corporation of India, and 23 life insurance companies. Of the 22 insurers who set
up operations in life insurance after the industry was opened up for the private sector, 20 are joint ventures
with foreign companies. Similarly, of the 17 nonlife insurers, including health insurers operating in the
private sector, 16 are in collaboration with foreign partners. Thus, 36 insurance companies in the private
sector are operating in collaboration with well-established foreign companies. Prior to the opening up of
insurance for the were introduced and these included products’ liability, corporate cover, professional
indemnity policies, weather insurance, credit insurance and travel insurance.
TYPES OF INSURANCE

Classification from business point of view

a)Life insurance
b)General insurance

2.Classification on the basis of nature of insurance

a)Life insurance
b)Fire insurance
c)Marine insurance
d)Social insurance, and

e)Miscellaneous insurance

3.Classification from risk point of view

a)Personal insurance
b)Property insurance
c)Liability insurance
d)Fidelity general insurance

Life Insurance :

Life insurance may be defined as a contract in which the insurer, in consideration of a

certain premium, either in a lump sum or by other periodical payments, agrees to pay the
assured, or to the person for whose benefit the policy is taken, the assured sum of money,
on the happening of a specified event contingent on the human life.
A contract of life insurance, as in other forms of insurance, requires that the assured must
have at the time of the contract an insurable interest in his life upon which the insurance
is affected. In a contract of life insurance, unlike other insurance, interest has only to be
proved at the date of the contract, and not necessarily present at the time when the policy
falls due.
A person can assure in his own life and every part of it, and can insure for any sum
whatsoever, as he likes. Similarly, a wife has an insurable interest in her husband and
vice-versa. However, mere natural love and affection is not sufficient to constitute an
insurable interest. It must be shown that the person affecting an assurance on the life of
another is so related to that other person as to have a claim for support. For example, a
sister has an insurable interest in the life of a brother who supports her.
A person not related to the other can have insurable interest on that other person. For
example, a creditor has insurable interest in the life of his debtor to the extent of the debt.
A creditor can insure the life of his debtor upto the amount of the debt, at the time of issue
of the policy.
An employee has an insurable interest in the life of the employer arising out of
contractual obligation to employ him for a stipulated period at fixed salary. Similarly,
from an employer to the employee, who is bound by the contract to serve for a certain
period of time.

General insurance:

Insurance other than ‘Life Insurance’ falls under the category of General Insurance.
General Insurance comprises of insurance of property against fire, burglary etc, personal
insurance such as Accident and Health Insurance, and liability insurance which covers
legal liabilities. There are also other covers such as Errors and Omissions insurance for
professionals, credit insurance etc.
Non-life insurance companies have products that cover property against Fire and allied
perils, flood storm and inundation, earthquake and so on. There are products that cover
property against burglary, theft etc. The non-life companies also offer policies covering
machinery against breakdown,there are policies that cover the hull of ships and so on. A
Marine Cargo policy covers goods in transit including by sea, air and road. Further,
insurance of motor vehicles against damages and theft forms a major chunk of non-life
insurance business.
Personal insurance covers include policies for Accident, Health etc. Products offering
Personal Accident cover are benefit policies. Health insurance covers offered by non-life
insurers are mainly hospitalization covers either on reimbursement or cashless basis. The
cashless service is offered through Third Party Administrators who have arrangements
with various service providers, i.e., hospitals. The Third Party Administrators also
provide service for reimbursement claims. Sometimes the insurers themselves process
reimbursement claims
Marine Insurance :
A contract of marine insurance is an agreement whereby the insurer undertakes to
indemnity the assured in a manner and to the extent thereby agreed, against marine losses,
that is, the losses incidental to marine adventure. There is a marine adventure when any
insurable property is exposed to marine perils. Marine perils also known as perils of the
seas, means the perils consequent on, or incidental to, the navigation of the sea or the
perils of the seas, such as fire, war perils, pirates, robbers, thieves; captures, jettisons,
barratry and any other perils which are either of the like kind or may be designed by the
policy.
There are different types of marine policies known by different names according to the
manner of their execution or the risk they cover. They are : voyage policy, time policy,
valued policy, unvalued policy, floating policy, wager or honour policy.
Marine insurance provides protection against loss of marine perils. The
marine perils are collision with rock, or ship attacks by enemies, fire and
capture by pirates etc. These perils cause damage, destruction or
disappearance of the ship and cargo and non-payment of freight. So, marine
insurance insures ship (Hull), cargo and freight.
Types of policies are:

Voyage policies
- Time policies
- Valued policies
- Hull insurance
- Cargo insurance
- Freight insurance

y who are unable to pay the premium for adequate insurance. The following
types of insurance can be included in social insurance

(i) Sickness Insurance : In this type of insurance medical benefits, medicines and
reimbursement of pay during the sickness period, etc. are given to the insured person who
fell sick.

ii) Death Insurance : Economic assistance is provided to dependants of the assured in case
of death during employment. The employer can transfer his such liability by getting
insurance policy against employees.
iii) Disability Insurance : There is provision for compensation in case of total or partial
disability suffered by factory employees due to accident while working in factories.
According to Employees Compensation Act, the responsibility to pay compensation is
vest with the employer. But the employer transfers his liability on the insurer by taking
group insurance policy.

iv) Unemployment Insurance : In case insured person becomes unemployed due certain
specific reasons, he is given economic support till he gets employment.

v) Old-age Insurance : In this category of insurance, the insured or his dependents is

paid, after certain age, economic assistance.
For the last few years, the Indian Government has extended the scope of Social Insurance.
Under the concept of social justice, this scheme now extended to Daily-wages earners,
Rickshaw pullers, Landless labourers, Sweepers, Craftsmen, etc. through different
Insurance

(i) Vehicle insurance on buses, cars, trucks, motorcycles, etc. and made compulsory so
that the losses due to accidents can be claimed from the insurance company.

(ii) Personal accident insurance by paying an annual premium Rs.12 on policy worth
Rs.12,000. In case of accidental death or total/partial disability, a fixed amount as per
conditions of insurance, is paid to the insured.

(iii) Burglary insurance -- (against theft, decoity etc.)

(iv) Legal liability insurance (insurance whereby the assured is liable to pay the damages
to property or to compensate the loss of personal injury or death. This is in the form of
fidelity guarantee insurance, automobiles insurance and machines etc.)

(v) Crop insurance (crops are insured against losses due to heavy rains and floods,
cyclone, draughts, crop diseases, etc.)

(vi) Cattle insurance (Insurance for indemnity against the loss of cattle from various kinds
of diseases)

In addition to the above, insurance plans are available against crime, medical insurance,
bullock cart, jewellery, cycle rickshaw, radio, T.Vs., etc.

Personal Insurance
Personal insurance refers, the loss of life by accident, or sickness to individual which is
covered by the policy. The insurer undertakes to pay the sum insured on the happening of
certain event or on maturity of the period of insurance. This insurable sum is determined
at the time of affecting the policy and include life insurance, accident insurance, and
sickness insurance. Life insurance contains the element of investment and protection,
while the accidental, sickness or health insurance contain the element of indemnity only.

Property Insurance
Contract of property insurance is a contract of indemnity. Proof by the assured of loss is
an essential element of property insurance. The policies of insurance against burglary,
home-breaking or theft etc. fall under this category. The assured is required to protect the
insured property. After the loss has taken place, the assured usually required to notify the
police as to losses.

Liability Insurance
Liability insurance is the major field of general insurance whereby the insurer promises to
pay the damage of property or to compensate the losses to a third party. The amount of
compensation is paid directly to third party. The fields of liability insurance include
workmen compensation insurance, third party motor insurance, professional indemnity
insurance and third party liability insurance etc. In liability insurance, there may be
various reasons for the arising of liability; viz. accident to a worker at the workplace,
defective goods, explosion in the factory during the process of production, formation of
poisonous gas within the factory, due to the uses of chemicals and other such substances
in the manufacturing process.
Fidelity Guarantee Insurance :
In this type of insurance, the insurer undertakes to indemnify the assured (employer) in
consideration of certain premium, for losses arising out of fraud, or embezzlement on the
part of the employees. This kind of insurance is frequently adopted as a precautionary
measure in cases where new and untrained employees are given positions of trust and
confidence.

There are many Life Insurance Companies like:

LIFE INSURANCE CORPORATION OF INDIA
BAJAJ ALLIANCE LIFE INSURANCE COMPANY
ICICI PRUDENTIAL LIFE INSURANCE COMPANY
HDFC STANDARD LIFE INSURANCE COMPANY
BIRLA SUN LIFE INSURANCE COMPANY
ING VYSYA LIFE INSURANCE COMPANY
METLIFE INSURANCE COMPANY
TATA AIG LIFE INSURANCE COMPANY
MAX NEWYORK LIFE INSURANCE COMPANY
KOTAK MAHINDRA LIFE INSURANCE COMPANY

IRDA

History of IRDA:
The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous,
statutory agency tasked with regulating and promoting the insurance and re-insurance
industries in India and established in 1999. It was constituted by the Insurance Regulatory and
Development Authority(IRDA) Act, 1999.
IRDA Act was passed based on the recommendations of Malhotra Committee report (1994),
headed by Former Governor of RBI Mr R.N. Malhotra. Following the recommendations of the
Malhotra Committee, in 1999 the Insurance Regulatory and Development Authority (IRDA)
was constituted to regulate and develop the insurance industry and was incorporated in April
2000. The IRDAI’s headquartered in Hyderabad, Telangana, where it moved from Delhi in
2001.

Organisation Structure of IRDA:

The IRDA consists of ten members authority team. They are:

1. a Chairman
2. Five full-time members
3. Four part-time members
All the members are appointed by the government of India. The current chairman of the
IRDAI is T.S. Vijayan.
INTRODUCTION
The Insurance Act, 1938 had provided for setting up of the Controller of Insurance to act as a
strong and powerful supervisory and regulatory authority for insurance. Post nationalization, the
role of Controller of Insurance diminished considerably in significance since the Government
owned the insurance companies.

But the scenario changed with the private and foreign companies foraying in to the insurance
sector. This necessitated the need for a strong, independent and autonomous Insurance
Regulatory Authority was felt. As the enacting of legislation would have taken time, the then
Government constituted through a Government resolution an Interim Insurance Regulatory
Authority pending the enactment of a comprehensive legislation.

The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the
establishment of an Authority to protect the interests of holders of insurance policies, to regulate,
promote and ensure orderly growth of the insurance industry and for matters connected therewith
or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance
Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end
the monopoly of the Life Insurance Corporation of India (for life insurance business) and General
Insurance Corporation and its subsidiaries (for general insurancebusiness).

The act extends to the whole of India and will come into force on such date as the Central
Government may, by notification in the Official Gazette specify. Different dates may be
appointed for different provisions of this Act.

The Act has defined certain terms; some of the most important ones are as follows
appointed day means the date on which the Authority is established under the act. Authority
means the established under this Act.

Interim Insurance Regulatory Authority means the Insurance Regulatory Authority set up by the
Central Government through Resolution No. 17(2)/ 94-lns-V dated the 23rd January, 1996.

Words and expressions used and not defined in this Act but defined in the Insurance Act, 1938
or the Life Insurance Corporation Act, 1956 or the General Insurance Business (Nationalization)
Act, 1972 shall have the meanings respectively assigned to them in those Acts.

A new definition of "Indian Insurance Company" has been inserted. "Indian insurance
company" means any insurer being a company

1) Which is formed and registered under the Companies Act, 1956

2) In which the aggregate holdings of equity shares by a foreign company, either by itself
or through its subsidiary companies or its nominees, do not exceed twenty-six per cent.
Paid up capital in such Indian insurance company

3) Whose sole purpose is to carry on life insurance business, general insurance business or
re-insurance business?

Insurance Regulatory and Development Authority of India(IRDAI) is a statutory body set up

for protecting the interests of the policyholders and regulating, promoting and ensuring orderly
growth of the insurance industry in India.
 IRDAI has played a very important role in the growth and development of the sector by
protecting policyholders' interests; registering and regulating insurance companies; licensing
and establishing norms for insurance intermediaries, regulating and overseeing premium rates
and terms of non-life insurance covers; specifying financial reporting norms, regulating
investment of policyholders' funds and ensuring the maintenance of solvency margin by
insurance companies; ensuring insurance coverage in rural areas and of vulnerable sections of
society; promoting professional organisations connected with insurance and all other allied and
development functions.
ROLE OF IRDA (PSII-CTMAS)
==========================

1. To (protect) the interest of and secure fair treatment to policyholders.

2. To bring about (speedy) and orderly growth of the insurance industry (includi
ng annuity and superannuation payments), for the benefit of the common man, and
to provide long term funds for accelerating growth of the economy.
3. To set, promote, monitor and enforce high standards of (integrity), financial
soundness, fair dealing and competence of those it regulates.
4. To ensure that insurance customers receive precise, clear and correct (inform
ation) about products and services and make them aware of their responsibilities
and duties in this regard.
5. To ensure speedy settlement of genuine (claims), to prevent insurance frauds
and other malpractices and put in place effective grievance redressal machinery.
6. To promote fairness, (transparency) and orderly conduct in financial markets
dealing with insurance and build a reliable management information system to enf
orce high standards of financial soundness amongst market players.
7. To take (action) where such standards are inadequate or ineffectively enforce
d.
8. To bring about optimum amount of (self-regulation)in day to day working of th
e industry consistent with the requirements of prudential regulation.

Functions of IRDA
====================
Section 14 of IRDA Act, 1999 laysdown the duties,powers and functions of IRDA
(1) Subject to the provisions of this Act and any other law for the time being i
n force, the Authority shall have the duty to regulate, promote and ensure order
ly growth of the insurance business and re-insurance business.
(2) Without prejudice to the generality of the provisions contained in sub-secti
on (1), the powers and functions of the Authority shall include,
(a) issue to the applicant a certificate of registration, renew, modify, withdra
w, suspend or cancel such registration;
(b) protection of the interests of the policy holders in matters concerning assi
gning of policy, nomination by policy holders, insurable interest, settlement of
insurance claim, surrender value of policy and other terms and conditions of co
ntracts of insurance;
(c) specifying requisite qualifications, code of conduct and practical training
for intermediary or insurance intermediaries and agents;
(d) specifying the code of conduct for surveyors and loss assessors;
(e) promoting efficiency in the conduct of insurance business;
(f) promoting and regulating professional organisations connected with the insur
ance and re-insurance business;
(g) levying fees and other charges for carrying out the purposes of this Act;
(h) calling for information from, undertaking inspection of, conducting enquirie
s and investigations including audit of the insurers, intermediaries, insurance
intermediaries and other organisations connected with the insurance business;
(i) control and regulation of the rates, advantages, terms and conditions that m
ay be offered by insurers in respect of general insurance business not so contro
lled and regulated by the Tariff Advisory Committee under section 64U of the Ins
urance Act, 1938 (4 of 1938);
(j) specifying the form and manner in which books of account shall be maintained
and statement of accounts shall be rendered by insurers and other insurance int
ermediaries;
(k) regulating investment of funds by insurance companies;
(l) regulating maintenance of margin of solvency;
(m) adjudication of disputes between insurers and intermediaries or insurance in
termediaries;
(n) supervising the functioning of the Tariff Advisory Committee;
(o) specifying the percentage of premium income of the insurer to finance scheme
s for promoting and regulating professional organisations referred to in clause
(f);
(p) specifying the percentage of life insurance business and general insurance b
usiness to be undertaken by the insurer in the rural or social sector; and
(q) exercising such other powers as may be prescribed

DISTRIBUTION CHANNELS IN INSURANCE

Insurers and underwriters need to decide on the way, or channel through which, their products
are distributed. The aim of a distribution channel is to allow customers to access and purchase
products in the most efficient way for the business.
A variety of distribution channels are available, and the business's choice will be determined
by its structure, strategy and position in the market. Each channel requires different resources
to be effective and will impact the pricing structure.
Distribution channels can be divided into two categories:

 Direct channels- these give the insurer direct contact with the customer. The business
employs sales personnel with the skills to provide the product to the customer.
 Indirect channels - these contain a break in the link between the customer and the
business. The break is filled by a skilled intermediary with a customer base that is the
insurer's target audience.
 Direct channels
 Call centres
 Call centres provide insurance companies with an efficient method of transacting
insurance with customers. Their sales activities are focused on achieving specific
targets, such as defined sales volumes, call queuing times and numbers' of customers
purchasing. The popularity of call centres has grown out of the competitive market as
their efficiency reduces the transaction costs of policies.
Employees, who are often referred to as agents or operators, are guided by the software through a series
of question prompts to ask customers. Telephone calls are held in a queue until one of the agents is ready
to handle the call. The process is automated with the caller hearing an introductory message before the
agent begins the conversation.
Call centres may collate data that can be used to improve the efficiency of their operations. For example,
this could help the business to provide ways of ensuring that the centre has a sufficient number of
employees available in peak times. Another way of increasing operational efficiency is to use computer-
based, rather than paper-based, records when answering customer queries.

nsurance agents
An agent is an individual who acts on behalf of another person or group. For example, a call
centre employee. Some insurers use external sales employees to act as agents and visit
customers; they are paid a commission based on sales in addition to a basic salary. In Britain,
insurance agents were a popular method for selling home and accident insurance, and life
assurance. However, with the introduction of other channels, such as the internet, the
administration costs of using agents were too high in the competitive market and customers
began choosing other channels with lower priced offerings. This is partly because customers
are now better educated in insurance products as a result of the discussions often had across
various media, such as magazines, radio, TV and websites.
Lloyd's agents
These agents are appointed by Lloyd's as marine service providers to supply local shipping and
casualty information. They also carry out pre- and post-loss marine cargo surveys, so are
specialists in hull and machinery surveys. They perform a number of claims activities as well.
There are approximately 300 agents worldwide in major ports and commercial centres, with a
similar number of sub-agents, and they carry out around 100,000 surveys each year.
Appointed representatives
An agent can be appointed to provide advice and sell insurance products for a particular
insurance company, but be independent of that company. These agents are referred to as
appointed representatives, and may be an individual or a business which is representing
another Financial Conduct Authority (FCA) regulated business. The appointed representative is
only able to operate within the regulated activity of that insurer. If it carries out any other
activities outside of its appointed representative status, it must be registered directly with the
FCA. The insurer that grants appointed representative status is known as the 'principal' and is
responsible for the activities of the appointed representative. The principal must monitor the
appointed representative's activities to ensure that it acts in accordance with the regulations at
all times.
Mutual organisations
In the past, tradesmen grouped together to form mutual organisations which provided
protection for the risks that insurance companies were not willing to cover. For example, risks
such as liability insurance or accident and injury benefits may be too high for an insurer's
portfolio. Members own the mutual organisation and receive a variety of financial benefits, so
it is in their best interests to support the organisation that represents them. Examples include
the following:

 P&I clubs - offer marine liability cover

 National Farmers' Union - represents the agricultural and horticultural industries;
provides a variety of financial services products
 DG Mutual - originally formed to provide injury and accident benefits to dentists, now
represents most professional persons.
Indirect channels
Insurance brokers
Insurance brokers are independent of any insurance company and therefore able to provide advice and
products to the customers from a variety of companies. Brokers select a panel of insurers they would like
to represent and which meets the needs of their customers. The FCA requires brokers to have access to a
sufficient number of insurers on their panel so that customers can make an informed choice. Some markets
may be limited as a result of their specialist nature with few insurers offering cover. In these
circumstances, the broker will advise the customer on why only these insurers may be approached.

Some brokers offer additional services to customers, such as business continuity planning or risk
management advice. As no insurance product is provided with these services, the broker charges a fee for
their use so that they create an additional revenue stream. Offering such services helps the broker to
negotiate terms with the insurer, as the additional details supplied by customers can be used to help the
underwriter understand their risks.

Reinsurance brokers

An insurer may place a proportion of its risk with reinsurers in order to reduce the possibility
of it suffering a major loss or catastrophe to its own account. Spreading the risk in this way
allows the insurer to write higher limits of cover. Reinsurance brokers have specialist
knowledge of which reinsurers an insurer may share its account with or place one-off risks
with under a facultative facility.
The amount that can be reinsured depends on the account and the risk, and the cover may be
proportional or non-proportional. Proportional reinsurance can be provided on a quota share
basis where the insurer and reinsurer share an agreed quota of the premium and claims. It can
also be provided on a surplus basis where the insurer requires reinsurance above a set limit,
known as a 'line'; the reinsurance is arranged on the basis of a number of these lines which add
up to the overall limit required by the insurer.
Non-proportional risks can be covered on an excess of loss, stop loss or catastrophe excess of
loss basis:

 Excess of loss basis - the reinsurer is responsible for any claim amount above an agreed
limit
 Stop loss basis - applies across the account and stops account loss at an agreed level, so
that the reinsurer is responsible for losses above that limit
 Catastrophe excess of loss basis - provides protection when a catastrophe occurs on the
account as a result of an event which has caused an accumulation of losses, such as
storm damage.
As well as having a risk management team, major corporations often appoint a captive insurer.
Captive insurers offer a number of benefits; for example, they can provide wider cover than
that given by the risk management team and retain premiums that would normally be passed to
the insurance market. They are usually based in regions with lower tax rates, such as Bermuda.
A reinsurance broker may then help to provide the captive insurer with reinsurance cover in
order to protect it from catastrophic loss.
Independent financial advisers (IFAs)
Independent financial advisers (IFAs) provide advice to customers and businesses on life
assurance, pensions and investments, and are regulated in the UK by the FCA. IFAs may also
offer products that contain no investment element, such as personal accident insurance,
permanent health insurance and medical insurance. They may belong to an insurance broking
firm and use their specialist knowledge to provide non-life insurance products in addition to
financial advice. Broking firms can also refer their customers to IFAs for financial advice.
Financial organisations
Financial organisations, such as banks and building societies, provide insurance to their
customers in various ways. For example, a bank may have its own insurance broking firm. If a
bank has provided a loan for premises or equipment, it will have an interest in making sure that
adequate cover is arranged to protect the item. The bank's broking team will be able to assist
with arranging insurance to protect both the customer's and the bank's interests.
'Bancassurance' refers to when a bank owns an insurer or works directly with an insurer
through an affinity group. When a bank incorporates an insurance company into part of its
group, this creates a direct relationship between the customer and the insurer. Not all banks
have their own insurance company or broker; some have an affinity group, discussed later in
this fact file, which are operated by their employees or white label products provided by an
insurer for the bank.
Managing general agents (MGAs)
According to the Managing General Agents' Association, a managing general agent (MGA) is
'an agency whose primary function and focus is the provision of underwriting services and
whose primary fiduciary duty is to its insurer.' As an underwriting facility, MGAs focus on the
small medium enterprise (SME) sector of the market. They provide either a package of cover
or specific insurance such as property owners' liabilities and professional indemnity covers.
MGAs are operated by experienced underwriters with underwriting knowledge and expertise of
risks, who have the authority to write risks. This underwriting capacity may have been given
by one insurer or a panel of insurers, which wants to enter the market but does not have the
resources to do so. For example, this could be appealing to an overseas insurer which would
like to enter the SME market by using another organisation's brand and management, or to an
underwriting team which has chosen to leave an insurer and start its own underwriting agency.
MGAs also have claims authority, and act as a link in the chain between the insurer which is
providing the capacity and the customer. They seek business from insurance brokers.
Retail organisations
When a customer acquires a retailer's loyalty card, the retailer gains information about the
customer which enables it to target them with other branded products. Customers are more
likely to buy products, such as insurance policies, from brands they trust. Retailers selling
insurance policies offer white label products that are administered by an insurer through a call
centre. The call centre may either have a team which is dedicated to that insurer or answer calls
in the name of the retailer, having identified which is being used by the specific telephone
number that callers have been given. Selling insurance in this way provides the retailer with an
additional revenue stream in a short period of time, without the costs of setting up an insurance
company.
Affinity groups
An affinity group is a group of people with similar or common interests. It may use its
customer buying power to obtain insurance cover through a broker. For example, members of a
car club are likely to support its promotions, as the commission that the club receives when
they place insurance through the scheme will provide it with a revenue stream which supports
members' interests. In addition, sports organisations can use their membership volume to
arrange cover for particular risks that may not be available to individuals. This cover is then
received by members as part of their membership; it could include liability cover for injury to
another member. An affinity group can use a broker to obtain specific wording in their cover
which is underwritten by a specialist underwriter. The group handles the scheme's
administration, adding another link between the insurer and the customer.
Peer-to-peer (P2P) groups
Peer-to-peer (P2P) group insurance is a recent innovation which has created interest in the
USA, UK and Germany. It aims to save money by removing inefficiencies and the conflicts of
interest that arise between the insurer and customer at the time of a claim. A P2P group is made
up of people who share similar characteristics; its premiums are calculated by assessing a
number of factors that are common to all members. A motor insurer, for example, will consider
a driver's age, location, car and experience, and then add them to a group of similar motorists,
or peers.
Half of the premium paid by the group's members contributes to its management and the other
half is injected into the premium pool. Claims made during the year are paid from the pool; if
funds become depleted, they are topped up by the group's fees. Any premium in the pool that is
not used will be carried forward to the next year, when the group's members will pay premiums
to top up the pool again. The group's members have an interest in keeping claims low so that
they will benefit from lower premiums.
Broker networks
A broker network is made up of predominantly small, independent insurance brokers who join
to form a club. The network uses its collective buying power to obtain terms of cover,
premiums, facilities and commissions that are normally only available to larger broking
organisations. The network requires its members to commit a level of premium to a panel of
partner insurers. This enables members to demonstrate their support for the panel and network
without compromising their customer relationships.
Additional services provided by broker networks include marketing advice and business
planning support, which can help to increase brokers' incomes, and regulatory support and
advice, which helps brokers to remain compliant. Insurers may review their agency network
with the aim of reducing their overall operating costs; however, broker networks are protected
by their collective relationships with insurers. Networks charge a fee to brokers for the support
they provide, which may be based on either the volume of premium income arranged with the
insurers or an agreed fixed charge for services.
Aggregators
Aggregators are online quotation services that can calculate premiums in minutes from a
number of different insurers on to one website. Customers are prompted by selected questions
to enter the details of their insurance requirements, and the aggregator website then calculates
and displays a range of premiums and terms. Aggregators compete with each other, relying on
their technology systems to provide fast quotations from a variety of providers. The premiums
are displayed in ascending order, allowing the customer to select a quotation based on price.
Quotation terms are also shown to help the customer in their comparison. If the customer
selects a quotation, they will be transferred to the insurer's website for confirmation of the
quotation and processing of documentation. To complete the purchase, the premium is paid
online and the policy documents are sent electronically to the customer.
An advantage of aggregators is that they are available at all times, so the customer can make
their choice at a time convenient to them. The aggregator is paid a fee for each customer
purchase. Quotations are available on motor, home, personal accident, travel, van and
tradesman liability insurance, but aggregators' systems are adaptable and other financial
services, utilities and communication quotations are sometimes provided. However, not all
insurers are quoted by aggregators; some choose to promote their products directly so that they
can control the purchasing process without being compared to other insurers. These insurers
encourage customers to make decisions based on the services provided and other benefits,
rather than on price.
Bancassurance
Bancassurance means selling insurance product through banks. Banks and insurance company
come up in a partnership wherein the bank sells the tied insurance company's insurance
products to its clients.
Bancassurance arrangement benefits both the firms. On the one hand, the bank earns fee
amount (non interest income) from the insurance company apart from the interest income
whereas on the other hand, the insurance firm increases its market reach and customers. The
bank acts as an intermediary, helping insurance firm reach its target customer in order to
increase its market share.
It was developed in Europe.
In Asia, Singapore, Taiwan and Hong Kong are ahead in Bancassurance , with India and China
taking tentative steps towards it.
Bancassurance is a French term referring to the selling of insurance through a bank's established
distribution channels. In other words, we can say Bancassurance is the provision of
insurance (assurance) products by a bank. The usage of the word picked up as banks and
insurance companies merged and banks sought to provide insurance, especially in markets that
have been liberalised recently. It is a controversial idea, and many feel it gives banks too great a
control over the financial industry. In some countries, bancassurance is still largely prohibited,
but it was recently legalized in countries like USA when the Glass Steagall Act was repealed
after the passage of the Gramm Leach Bililey Act.
Bancassurance is the selling of insurance and banking products through the same channel, most
commonly through bank branches. Selling insurance.means distribution of insurance and other
financial products through Banks. Bancassurance concept originated in France and soon became
a success story even in other countries of Europe. In India a number of insurers have already tied
up with banks and some banks have already flagged off bancassurance through select products.
Bancassurance has become significant. Banks are now a major distribution channel for insurers,
and insurance sales a significant source of profits for banks. The latter partly being because banks
can often sell insurance at better prices (i.e., higher premiums) than many other channels, and
they have low costs as they use the infrastructure (branches and systems) that they use for
banking.
Bancassurance primarily rests on the relationship the customer has developed over a period of
time with the bank. And pushing risk products through banks is a much more cost-effective affair
for an insurance company compared to the agent route, while, for banks, considering the falling
interest rates, fee based income coming in at a minimum cost is more than welcome.
Advantages of Bancassurance:
The following factors have mainly led to success of bancassurance
(i) Pressure on banks' profit margins. Bancassurance offers another area of profitability to banks
with little or no capital outlay. A small capital outlay in turn means a high return on equity.
(ii) A desire to provide one-stop customer service. Today, convenience is a major issue in
managing a person's day to day activities. A bank, which is able to market insurance products,
has a competitive edge over its competitors. It can provide complete financial planning services
to its customers under one roof.
(iii) Opportunities for sophisticated product offerings.
(iv) Opportunities for greater customer lifecycle management.
(v) Diversify and grow revenue base from existing relationships.
(vi) Diversify risks by tapping another area of profitability.
(vii) The realisation that insurance is a necessary consumer need. Banks can use their large base
of existing customers to sell insurance products.
(viii) Bank aims to increase percentage of non-interest fee income
(ix) Cost effective use of premises

Types of bancassurance products:

Life insurance products:
Term insurance plans( with accident and death benefits).
Endowment plans
ULIPs( Unit Linked Insurance Plans)
Non-life Insurance products:

Health insurance
Marine insurance( for cargo shipments)
Property insurance( against natural calamities)
Key Men insurance( Top executives of companies, partnership firms,etc)

Types of Bancassurance models in India:

1. Pure distributer Model:
In pure distributer, Model bank acts as a distributer of insurance schemes of Insurance
company.
Example: Indian Overseas Bank acts as a distributer of Life Insurance Corporation of India

2. Strategic alliance Model:

In this model there would be an agreement between the bank and the insurance company to
market banca products, other insurance functions are not carried out by the bank.
Example: HDFC bank with HDFC life insurance company and HDFC ERGO general
insurance company.

3. Joint venture Model:

In a joint venture model a new joint venture company is established in which the bank(s) and
the insurance company will have shareholdings in agreed ratio.
Example: IndiaFirst Life insurance Co. Ltd is a Joint venture between Bank of Baroda (44%),
Andhra Bank (30%) and UK's financial and investment company ' Legal and General' (26%).
Key issues to the success of
Bancassurance
1. Both the bank and insurance company need to improve effectiveness of the sales channels
by identifying and gaining access to target customers, adding push to market pull, training of
sales staff, differentiating performance from competition and controlling selling cost per unit
sold.
2. Product need to be tailored to meet the need of the customer base and for new distribution
channels
3.Communication needs to be streamlined to address any cultural issues between the bank staff
and the insurance staff.
4. Traditional processes need to be redesigned not only to take advantage of the new
technology, but also to effective a streamlined system between bank and the insurance
company. Technology can be used to put effective use in sales support function, staff training
etc.
5 Information system needs to be reviewed and performed measurement parameters need to be
specially adapted to Bancassurance.
6 Skill needs to be developed an reallocation of asset and resources –financial and human may
also be required between the bank and insurance company.

BANCASSURANCE IN INDIA
In India banking and insurance sectors are regulated by two different entities.
The banking sector is governed by Reserve Bank of India (RBI) and the insurance sector is
regulated by Insurance Regulatory and Development Authority (IRDA).
Advantages for the insurance company :
Through this new distribution network, the insurance company significantly extends its
customer base and enjoys access to customers who were previously difficult to reach.
An insurance company can establish itself more quickly in a new market, using a local
bank’s existing network.
Advantages for the banks :
The bank sees bancassurance as a way of creating a new revenue flow and diversifying its
business activities.
The bank becomes a sort of “supermarket”, a “one-stop shop” for financial services, where
all customers’ needs – whether financial or insurance-related – can be met.
DEMERITS OF BANCASSURANCE
Compromising on data security.
Conflict of interest between the other products of bank and insurance policies.
Better approach and services provided by banks to customer is a hope rather than a fact.
BANCASSURANCE - TYPES
1. Leveraged Life Distribution
2. Leveraged Bank Distribution
3. Bank / Life Venture
1. Leveraged Life Distribution
This model of Life insurance company takes the lead in partnership, while several banks act
as corporate agents to provide access to middle market leads.
2. Leveraged Bank Distribution
This Leveraged Bank Distribution model, it is the bank that takes the leads as in the
partnership, while the life insurance companies supply products for its bancassurance efforts.
This models calls for a large bank with a range of effective distribution channels.
3. Bank/Life Joint Venture
The final type of partnership brings a bank with a well developed customer database
together with a large life insurer with strong product and channel experience to develop a
powerful new distribution model.
In this model of venture the bank provides the lead and its reputation and brand name, while
the insurer bring the products and underwriting and servicing expertise. The partners combine
their individual expertise to forge a best practice bancassurance operation with tailored
products, tailored distribution and lead generation mechanism.

INSURANCE MARKETING

The term insurance marketing refers to the marketing of insurance services with the aim to create
customer and generate profit through customer satisfaction. The insurance marketing focuses on
the formulation of an ideal mix for Insurance Business so that the insurance organization survives
and thrives in the right perspective. The organizations can successfully increase the market share,
maximize the profitability and keep on the process of development with the help of marketing.

In Indian perspective where rural orientation needs a prime attention, the insurance marketing
may prove to be a deice for combating regional imbalance by maintaining the sectoral balance
as an investment institution; the rural development oriented projects make ways for the
transformation of rural society. It is right to mention that the marketing concept in both bank and
insurance business is a matter of recent origin. The marketing concept in the insurance business
is concerned with the expansion of insurance business in the best interest of the society vis-à-vis
the insurance organization. The selection of risks (product planning), policy writing (customer
service) rating or actuarial (pricing) and agency management (distribution)- all marketing
activities make up an integrated marketing strategy. We can’t negate that during the yester
decades, there have been considerable developments in the perception of customer servicing
firms like banking and insurance companies. The marketing concept in the insurance business
focuses o the formulation of marketing mix or a control over the whole marketing activities that
make up an integrated marketing strategy.

In a view of the above, we observe the following facts regarding the concepts of insurance
marketing:
 It is a managerial process

 It is a conceptualization of marketing principles.

 It is a process of formulating the marketing mix.

 It is an advice to make possible customer orientation.

 It is another name of marketing professionally.

 It is even a social process that paves avenues for social transformation.

 It is to make possible product attractiveness.

 It is to energize the process of quality upgradation.

CHAPTER 11
MARKETTING STRATEGIES IN INSURANCE

In today's economy, the financial services industry is exposed to increasing performance

pressure and competitive forces. Modern media, such as the internet, have created new
challenges for this industry. New business concept, a change in client sophastication, and an
increasing number of new competitors entering into the market, such as independent financial
consultants, have changed the business models and the competitive forces that established
financial services organisations are facing today worldwide. A marketing strategy serves as the
foundation of a marketing plan. A marketing plan contains a list of specific actions required to
successfully implement a specific marketing strategy. A strategy is different than a tactic.
While it is possible to write a tactical marketing plan without a sound, well considered strategy,
it's is not recommended. Without a sound marketing strategy, a marketing plan has no
foundation. Marketing startegies serves as the fundamental underpinning of marketing plans
designed to reach marketing objectives. It's important that these objective have measurable
results. A good marketing strategy should integrate an organization's marketing goals, policies,
and action sequence into a cohesive whole. The objective of marketing strategy is to provide a
foundation form which a tactical plan is developed.
The following techniques are implemented to device the marketing strategy for the product and
services.
- segmentation
- targeting
- positioning

Segmentation
Market segmentation is widely defined as being complex process costing into two main phases
as follows
- Identification of broad, large market
- segmentation of these markets in order to select the most appropriate target market and
developed marketing mixes accordingly.

Positioning
Simply, positioning is how your target market defines you in relation to your competitors a
good positioning is
- what makes you unique
- this is considered by your target market.

Positioning is important because you are competing with all the noise out there competing for
your potential fans attention if you can stand out with unique benefits, you have changed their
getting their attention. It's important to understand your product from the customer's point of
view relative to competition.

Targeting
Targeting involves breaking a market into segament and then concentrating your marketing
efforts on one or few key segaments. Target marketing can be the key to small business's success.
The beauty of target marketing is that makes the promotion, pricing and distribution of your
product and services easier and more cost effective. Target marketing provides a focussed to all
of your marketing activities.
 4 IMPORTANT STRATEGIES

These are the 4 most important strategies for online insurance marketing. First, building links
to your website is the best thing you can do to help your website rank better. The reason links
are so important is because they count as a “vote” for your site to the search engines. When
search engines rank websites they take into account the number of links (votes) pointing at that
site and the quality of those links.
To maximize your results from link building, your marketing plan should include building links
from a number of different, yet relative, online sources. Some places you can get these links are
from forum posts, blog comments, local directories for your city, or even writing articles for
article directories. Make sure to choose to build links at websites that are also “trusted” by
Google that will be seen as “high quality” by the engines. Links from “spammy” looking sites
won’t do you a bit of good.
Article Writing
The concept here is to write 400 to 500 word articles about an insurance topic and post it at
various article directories. If you are afraid you won’t know what to write just focus on the
questions that you are most commonly asked by your clients and start writing from there. Pretend
you’re answering those questions as you write each article.
You create the link back to your website through these article directories by using the resource
or author’s box located beneath the finished article that is provided by the website. So, you’re
getting a trusted back link and sharing some of your insurance acumen.
Website Tweaks
There are a lot of bad websites out there on the Internet today and unfortunately the word “bad”
doesn’t refer to the graphic design or appearance, but something more important. In order for
your website to rank well for, lets say “Your Town Auto Insurance”, you need to have that
keyword in the right quantities on your website.
You should add the key phrase to your site’s meta description, meta keywords, the h1 headline
tag and the page’s title tag. While it’s true that only about 20% of how the search engines view
your website comes from the website itself (the rest is from those back links), it would be short
sighted to correct this easy problem. Every little bit helps, especially when your site’s rank is on
the line.
Forum Posting
Posting at online forums can be a fun way to add back links to your site. Find a forum for your
niche (maybe your town has a forum, or find an insurance forum) and contribute to that
community with your knowledge. Most of the online forums provide a space for you to add a
link in your signature line.
While this may seem pretty straight forward, some have abused this technique and just spammed
these website with junk comments and posts. You should be careful not to fall into that trap. Try
to be a trusted insurance professional (shouldn’t be a stretch) while answering peoples’
questions. Don’t just promote your site with stuff like “hey, if anyone wants a quote, visit
blahblah.com”. Not only will you probably be ignored but you’ll also very likely get banned.
There are other insurance marketing techniques to get your website to the top of the search
engines. But the four that I’ve outlined here are my personal favorites.

CHAPTER 12
LIMITATION OF INSURANCE MARKETING

Some of the difficulties and limitations faced by me during my training are as follows:

 Lack of awareness among the people–

This is the biggest limitation found in this sector. Most of the people are not aware about
the importance and the necessity of the insurance in their life. They are not aware how
useful life insurance can be for their family members if something happens to them.

 Perception of the people towards insurance sector–

People still consider insurance just as a Tax saving device. So today also there is always
a rush to buy an Insurance Policy only at the end of the financial year like January,
February and March making the other 9 months dry for this business.

 Insurance does not give good returns–

Still today people think that Insurance does not give good returns. They are not aware of
the modern Unit Linked Insurance Plans which are offered by most of the Private sector
players. They are still under the perception that if they take Insurance they will get only
5-6% returns which is not true nowadays. Nowadays most of the modern Unit Linked
Insurance Plans gives returns which are many times more than that of bank Fixed
deposits, National saving certificate, Post office deposits and Public provident fund.
 Lack of awareness about the earning opportunity in the insurance sector–

People still today are not aware about the earning opportunity that the Insurance sector
gives. After the privatization of the insurance sector many private giants have entered the
insurance sector. These private companies in order to beat the competition and to increase
their Insurance Advisors to increase their reach to the customers are giving very high
commission rates but people are not aware of that.

 Increased competition–

Today the competition in the Insurance sector has became very stiff. Currently there are
14 Life Insurance companies working in India including the LIC (life insurance
Corporation of India). Today each and every company is trying to increase their
Insurance Advisors so that they can increase their reach in the market. This situation has
created a scenario in which to recruit Life insurance Advisors and to sell life Insurance
Policy has became very very difficult.