Insurance & Bancassurance
History of Indian Insurance Industry
1st company to offer Life Insurance was Amicable Society
- Location – London
- Year of Establishment – 1706
- Founder – William Talbot and Sir Thomas Allen
Following types of Insurance:
- Self Insurance– Where risk is not transferred to insurance companies and alone retained by the entities or individuals themselves
- Co-insurance – Risk shared between insurers
- Dual – Insurance – where risks having two or more policies with same coverage
- Reinsurance – Situations when insurer passes some part of or all risk to another insurer
- In 1818 Oriental Life Insurance company was started
- Founder – Anita Bhavsar
- 1st Indian Insurer was Bombay Mutual Life Assurance Society
- Year Of Establishment – 1870
In 1912 ,The Life Insurance companies act and Provident Fund act were passed
4. The oldest existing insurance company in india is NIC (National Insurance Company)
Year of Establishment – 1906
5. In 1972 GIB act (General Insurance Business) was passed by parliament
- In 1973 GIB was nationalised
- At the time of nationalisation of GIB 107 insurer were amalgamated and grouped into four companies namely:
- NICL (National insurance company ltd.)
- NIA (New India Assurance company ltd.)
- OICL (Orientel insurance company ltd.)
- UIICL(United India insurance company ltd.)
IRDA (Insurance Regulatory and Developement Authority of India):
- In 1999 IRDA act was passed on recommendation of malhotra committee
- Older name – Insurance Regulatory and Developement Authority
- Chainman – T.S Vijayan
- Headquarters – Hyderabad,Telangana
IR (Insurance Repository) :
- Insurance Repository is a company registered under companies act, 1956.
- IR has been granted a certificate of registeration by IRDA.
- Its function is to maintain data of insurance policies in Electronic form
There are 5- Insurance Repositories:
- NSDL database management ltd.(National Securities Depository Ltd.)
- Centeral Insurance repository ltd.
- SHCIL projects ltd. (Stock holding corporation of India)
- Karvy Insurance repository ltd.
- CAMS repository services ltd.
The Insurance (Amendment) Bill, 2015 – Summary
Finally the long awaited Insurance Bill was passed in the Rajya Sabha on 12th March, 2015 – thereby bringing us one step closer to the Amendment Act.
Introduced in Lok Sabha on 4th March, 2015 the Amendment Bill started its journey as an ordinance in December 2014.
The Insurance Ordinance, now the Insurance Bill sought to primarily amend the three major Insurance Acts – giving effect to various new provisions and propositions.
The three Acts to be amended as per the new Bill are:
- The Insurance Act, 1938
2. The Insurance Regulatory and Development Authority Act, 1999 – popularly known as the IRDA Act.
- The General Insurance Business (Nationalisation) Act, 1972.
The amendments or the salient features of the Insurance Bill are as follows:-
- Most important and trending topic – The Bill increases the FDI cap in Insurance Sector to 49% (from the earlier 26%).
Of the 49% – 26% shall be under the Automatic Route and the remaining 23% shall have the need of FIPB’s approval.
FIPB is Foreign Investment Promotion Board.
- And that Foreign Re-insurers will be able to enter the Indian re-insurance sector which only had the Government owned GIC.
Recent news has it that UK’s Lloyd’s is in talks with the IRDA to open business in India; and many others are making beeline to the Indian shores too.
- Another measure for the insurance companies in respect of raising capital is the opening of capital market to the public sector general insurance companies.
- And the start up capital (initial capital – required at the time of registration of the company and start of business subsequently) for a health insurance business will be Rs. 100 crore.
- Insurance Agents will be fined Rs. 1 crore for mis-selling insurance products. Now that’s a relief to the insureds (us the customers) who most of the time have no idea which insurance product is actually the right one for them.
Also, unauthorized agents – whose only job is to dupe unsuspecting customers – will be fines Rs. 10 lakhs for their scams.
And the customers (insureds) can utilize legal course for the redressal of their grievances.
- Agents are now prohibited from acting as agents of more than one company for the same business segment. That is – one agent cannot be a life insurance agent of more than one life insurance company.
He can a life insurance agent and a general insurance agent of the same company – as life and general insurances are two separate line/business segments.
- Life Insurance Companies too have been prohibited from challenging any life insurance policy on any ground after three years of having sold such policy.
- Life Insurance Council and the General Insurance Council will be empowered to act as self-regulating bodies for their respective segment of insurance businesses and the companies operating in the particular line of business.
- For the customers (insureds) – faster premium payment and processing, faster claims processing and faster and just redressal has been envisaged and provided for.
- IRDA has been given more regulatory powers to control any misuse of this sector to dupe the masses; non-compliance of IRDA rule and regulations can result in Rs. 25 crores in fines for companies!
So customer protection has been given a clear priority.
There you have it 10 important features of the Insurance Laws Amendment Bill, 2015; all of these bulleted points will have effect when the earlier mentioned three Acts are amended.
Insurance Companies in India:
In India we have both the Government and the public sector participating in the Insurance sector.
It is important to know the names of the PSU companies, as they are not many – so, here’s a list:
Public Sector – Life Insurance Company:-
- Life Insurance Corporation of India ( the one and only PSU life insurance company)
Public Sector – General Insurance Companies:-
- Agriculture Insurance Company of India Ltd.
- National Insurance Company Ltd.
- New India Assurance Company Ltd.
- Oriental Insurance Company Ltd.
- United India Insurance Company Ltd.
- General Insurance Corporation Of India – India’s sole re-insurer
Trivia: NIC. NIA, OIC & UIIC (as above) were fully owned subsidiaries of GIC until March 2003 – after amendment the four subsidiaries and GIC itself became Government undertakings. They are now wholly owned Government companies.
Private Sector – Life Insurance Companies are many, here are some worth noting:
- Bajaj- Allianz Life Insurance Company
- HDFC Standard Life Insurance Company
- ICICI Prudential Life Insurance Company
- SBI Life Insurance Company
- Max New York Life Insurance Company
Private Sector – General Insurance Companies:
- Tata AIG General Insurance Co. Ltd.
- IFFCO- Tokio General Insurance Company Ltd.
- SBI General Insurance Co. Ltd.
- Reliance General Insurance CO. Ltd.
- ICICI Lombard General Insurance Company and etc.
As per the Department of Finance’s statistics, here are some noteworthy figures:
- Total number of Insurance Companies in India – including both public and private companies = 52
- There is 1 PSU life insurance company (LIC) – and 23 private sector life insurance companies.
- 1 PSU re-insurance company (GIC) and none in private sector.
- 6 PSU general insurance companies and 21 private sector general insurance companies.
Regulatory authority(ies) in India:
Insurance Regulatory & Development Authority (IRDA); functioning under the Insurance Regulatory & Development Authority Act, 1999.
Important points of the IRDA Act, 1999 and what the IRDA is about are:
- First of all – IRDA provides license and permission for carrying out insurance business in India – and monitors the licensees.
- And most importantly – IRDA is responsible for the regulation, promotion and growth and development of the insurance and re-insurance business in India.
- IRDA also functions to protect the interests of the policy holders in many maters – such as redressal of grievances, protection against frauds, settlement of claims etc. among others.
- It prescribes the code of conduct, duties and procedural compliances for surveyors and loss assessors.
- Also regulates how the insurance companies invest their funds! Look at the picture – all the premiums that an insurance company, like LIC, collects – all that fund needs to be invested properly!
- It is also instrumental in controlling and regulating the rates of insurance premiums.
- Making the interest and protection of the policy holders a priority IRDA hosts a ‘Consumer Education Website’ – http://www.policyholder.gov.in/(Check it out!)
Other relevant Acts governing insurance sector are:
Actuaries Act, 2006 – governs the actuarial profession in India.
- General Insurance Business (Nationalization) Act, 1972
– It is called ‘nationalization’ act, as the general insurance business was nationalized in 1972, with the government taking over 55 insurance companies.
- Insurance Act, 1938
– provides the meanings and definitions of words and terms unique to the insurance sector, provisions regarding accounting and audit of insurance companies, compliance procedures and penalties on non-compliance etc.
- Life Insurance Corporation Act, 1956
– it provides for the nationalization of life insurance business in India, and the formation of the Life Insurance Corporation of India. It also provides for the meanings of terms and phrases, and rules and regulations specifically pertaining to the life insurance business.
Trivia and some latest news:
- LIC is the largest life insurance company in India – having the maximum market share from the point of view of premium collected at 73%.
- And India has the largest number of life insurance policy in the world!
- IRDA Chairman is T. S. Vijayan.
- FDI in insurance sector presently is at 49% (increased from 26%)
- With the increase in the cap, new players have shown interest in entering the Indian insurance scenario as per IRDA.
- Some Government Sponsored Insurance Schemes worth noting:
- Aam Admi Bima Yojna
- Janashree Bima Yojna
- Sikhsha Sahayog Yojna
- Varistha Pension Bima Yojna
- Universal Health Insurance Scheme
- National Agriculture Insurance Scheme
- For protection of consumer interests and grievance redressal – ‘Insurance Ombudsmen’, were introduced in 1998, and are currently located in 12 cities.
Each Ombudsman is empowered to redress customer grievances in respect of insurance contracts where the insured amount is less than Rs.20 lakhs.
- Also IRDA is looking to make some 40 odd new regulations/ amendments following up on the ‘insurance ordinance’ footed by the Government in December 2014.
- With the new regulations/ amendments – global re-insurance companies can open branches in India. As of now India has only GIC as it one and only re-insurance company.
- India’s oldest (1884) insurance service ‘Postal Life Insurance’– provided by the Postal Department (for Govt. and semi Govt. employees)– will be going online soon; utilizing software developed by Infosys, known as the ‘Core Insurance Solution’ CIS – similar to the CBS!
- Insurance sector along with the Banking sector are the major contributors from the service sector towards GDP. Approximately ranging from 7-10% of GDP.
- And if you are asked – LIC very recently (few hours back) bought and increased its stake in Coal India Limited to 7.2%
Insurance Companies with Headquarters, CMDs & Tag Lines
|Insurance Company||Headquarter||CMDs||Tag Line|
|Apollo Munich Health Insurance||Gurgaon||Dr. Prathap C. Reddy||We Know Healthcare,
We Know Insurance.
|Aviva India Life Insurance||Gurgaon||Mr TR Ramachandran||Kal Par Control|
|Bajaj Allianz Life Insurance Company Limited||Pune||Mr. Anuj Agarwal||Jiyo Befiqar|
|Birla Sun Life Insurance Company Limited||Mumbai||Mr. Pankaj Razdan||Your Dreams, Out Commitment|
|Exide Life Insurance India Company||Bangalore||Mr. Rajan Raheja||Adding Life to Insurance|
|Future Generali Life Insurance||Mumbai||Mr. G.N.Bajpai||Total Insurance Solutions|
|HDFC Standard life Insurance Company Limited||Mumbai||Mr. Amitabh Chaudhry||Sar Utha Ke Jiyo|
|ICICI Prudential Life Insurance Company Limited||Mumbai||Mr. Sandeep Bakhshi||We Cover You, At Every Step in Life|
|Kotak Mahindra Old Mutual Life Insurance Limited||Mumbai||Mr. Gaurang Shah||Faidey Ka Insurance|
|Life Insurance Corporation of India||Mumbai||Shri S. K. Roy||Yogakshemam Vahamyaha (is in Sanskrit language which translates in English as “Your welfare is our responsibility”)|
|Max Life Insurance Co. Ltd.||New Delhi||Mr. Rajesh Sud||Aapke Sachche Advisor|
|National Insurance Company||Kolkata||Shri Rajesh Aggarwal||Thoda Simple Soche|
|New India Assurance Company Ltd||Mumbai||Mr. G. Srinivasan||India’s Premier General Insurance Company|
|Oriental Insurance Company Limited||New Delhi||Dr.A.K.Saxena||Prithvi, Agni, Jal, Akash, Sabki Suraksha Hamare Paas|
|PNB MetLife India Insurance Company Limited||Gurgaon||Mr. Tarun Chugh||Have You Met Life Today?|
|SBI Life Insurance Company Limited||Mumbai||Mr. Arijit Basu||With Us, You’re Sure|
|Tata AIA Life Insurance Company Limited||Mumbai||Ishaat Hussain||A New Look at Life|
|United India Insurance Company Limited||Chennai||Shri Milind A Kharat||At United India, It is Always U Before I|
Bancassurance: Everything You Need To Know
It originated in Europe in the 1980s and was successful. The bancassurance business model is a globally accepted profitable business.
Bancassurance is a good source of fee-based income to banks.Though banks deal with both life and non-life insurance schemes, the focus remains on offering life insurance schemes to individual customers in retail banking.
Types of bancassurance 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%).
Advantages of Bancassurance:
To Insurance Companies:
- Increased turnover.
- Higher market penetration ( both urban and rural) through the existing customer base of the bank.
- Cost efficient as channel and network are well established by banks
To banks :
- Enhanced product portfolio.
- The source of additional fee-based income.
- Man power efficient- as existing bank staff can be trained.
- High degree of alignment in customised product sales and support services.
To Customers :
- A Higher degree of trust.
- Easy premium payment, as it can be linked to bank account.
- Access to a wider range of products within the bank.
- Assured advice and services by the bank.