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Insurance awareness in India

INSURANCE AWARENESS IN INDIA

UNIVERSITY OF MUMBAI

LALA LAJPATRAI COLLEGE OF COMMERCE AND ECONOMICS, MAHALAXMI MUMBAI – 34

SUBMITTED BY KHUSHBOO RAMA GOLLAR ROLL NO 1617339 T.Y.B.B.I – SEMESTER VI

PROJECT GUIDE PROF. VAIDEHI KAMATH

YEAR OF SUBMISSION 2018-2019

Insurance awareness in India

CERTIFICATE I, Prof. Vaidehi Kamath, hereby certify that Ms Khushboo Rama Gollar from T.Y.B.B.I of Lala Lajpatrai College of Commerce and Economics has successfully completed this Research. Project on Insurance titled Insurance Awareness In India in semester VI of the academic year 2018-2019

Signature of External examiner

Signature of Internal examiner

Signature of Project Guide

Signature of Principal

Date of Submission:

College seal

Insurance awareness in India

DECLARATION I, Ms Khushboo Rama Gollar from TYBBI of Lala Lajpatrai College of Commerce And Economics, hereby declare that I have completed this research project on Insurance titled Insurance Awareness In India in Semester VI of the academic year 2018-2019 The information provided by me is true and original to best of my knowledge

Date: Student’s Signature

Insurance awareness in India

EXECUTIVE SUMMARY 

Insurance occupies an important place in the complex modern world since risk, which can be insured, has increased enormously in every walk of life.

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Concept of insurance is studied in the project in which is used primarily to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of loss, from one entity to another, in exchange for payment.

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A life insurance policy which gives an annuity is a combination of protection and investment.

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The insurance industry of India consists of 55 insurance companies of which 24 are in life insurance business and 31 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company.

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Given the mandate of the development role assigned to it by the parliament, IRDA has taken several initiatives like new distribution channels, health insurance, microinsurance, and terrorism pool, etc.

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Classification of insurance have explained like fire insurance, marine insurance, health insurance, miscellaneous insurance, etc.

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Fire insurance is the insurance that offers coverage against damage or loss due to fire, flood earthquake, inundation etc.

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Life insurance is different from other insurance in the sense that, here the subject matter of insurance is life of human beings.

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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 perils.

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An insurance programme carried out or mandated by a government to provide economic assistance to the unemployment, the elderly, or the disabled is known as social welfare insurance plans.

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Miscellaneous insurance refers to contract of insurance other than those of life, fire and marine insurance.

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Classification of insurance from risk point of view which include of personal insurance, liability insurance, etc

Insurance awareness in India 

Principles of insurance like utmost good faith, insurable interest, mitigation of risk, Indemnity, causa-proxima, etc.

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Awareness is important in growing need for financial education for the families to take better financial decision and to increase their economic security has been widely recognized. It is felt that well informed and well educated customers can create economic ripples.

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The supervisory control of insurance companies in India is exercised by IRDA and and these power 1999 states : “ subject to the provision of this act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of insurance business and reinsurance business.

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Analysis is done on the survey of awareness of insurance.

Insurance awareness in India

INDEX

Insurance awareness in India

CHAPTER 1 RESEARCH METHODOLOGY Objective of study 

To understand the basic concept of insurance awareness in India

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To trace the origin and development of Insurance

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To study the present Insurance Scenario in India

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To study why Awareness is Important in Insurance

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To know the different types and role in Insurance awareness

Method of data collection The project is based on primary data, wherein the data is collected through questionnaire and analytical study has been made as well as through secondary data from various website and reference book

Sampling Size The sample size is 25

Limitation 

Money is constraint.

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Time is constraint.

 The sample size is less considering the time issues.

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Insurance awareness in India CHAPTER 2 INSURANCE Insurance is a protection against financial hammering arising on the happening of an unexpected event. Insurance policy helps in not only mitigating risks but also provides a financial militate against adverse financial loads suffered. Insurance is a contract between two parties, the insurer or the insurance company, and the insured, the person seeking the cover. Within this contract, the insurer agrees to pay the insurer for financial losses arising out of any unforeseen events or risk in return for a regular payment of premium. Therefore, these insurance plans are also called as a Risk Cover Plans, which means to financially compensate for losses that occur uncertainly through accident, illness, theft, natural disaster

INTRODUCTION Insurance occupies an important place in the complex modern world since risk, which can be insured, has increased enormously in every walk of life. This has led to growth in the insurance business and evolution of various types of insurance covers. The insurance sector acts as a mobilize of savings and a financial intermediary and is also a promoter of investment activities. It can play a significant role in the economic development of a country, while economic development itself can facilitate the growth of the insurance sector.

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Insurance awareness in India CONCEPT OF INSURANCE Insurance is a form of risk management which is used primarily to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of loss, from one entity to another, in exchange for payment. Insurance is essentially an arrangement where the losses experienced by a few are extended among many who are exposed to similar risks. It is a protection against financial loss that may occur due to an unexpected event. The transaction involves the insured assuming a guaranteed and known, relatively small, loss in the form of payment to the insurer in exchange for the insurer's promise to compensate or indemnify the insured in the case of a large, possibly devastating, loss. The insured receives a contract called an insurance policy which details the conditions and circumstances under which the insured will be compensated Insurance can be classified broadly into: (a) life insurance, and (b) general or non-life insurance. (a) Life Insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay the designated beneficiary a sum of money upon the occurrence of the insured individual’s death or other event, such as terminal or critical illness. In return, the policy owner agrees to pay a stipulated amount at regular intervals or in lump sums. Life-based contracts tend to fall into two major categories: • Protection Policies: Designed to provide a benefit in case of a specified event, typically against lump sum payment. A common form of this policy is term insurance. • Investment Policies: the main objective is to facilitate the growth of capital by single or regular premiums. The common forms in this category include whole life, universal life and variable life policies. (b) General Insurance or non-life insurance policies, including automobile and homeowners’ policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance cover that is not deemed to be life insurance. Some categories of general insurance policies are: vehicle, home, health, property, accident, sickness and unemployment, casualty, liability, and credit. The terms of insurance generally depend on the company providing the cover

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Insurance awareness in India IMPORTANCE OF INSURANCE Life insurance is generally considered a mean of protecting one’s family against the unforeseeable circumstance of the death of an earning member. However, there are a number of other benefits that are not apparent. Some benefits accrue to the individuals and their families, while others assist economic development. For instance, an insurance company takes the risk of large and uncertain losses in exchange for small premiums. This gives a sense of confidence and security to the insured individual through the protection of insurance in the event of an unfortunate incident. In large sized commercial and industrial organizations, it facilitates operations as many of the risks are transferred to the insurer. Insurance, particularly life insurance, is one of the ways of providing for the future. A life insurance policy which gives an annuity is a combination of protection and investment. It increases the creditworthiness of the assured person because it can provide funds for repayment in the event of death. It also reduces losses owing to theft, robbery, fire accidents, etc. In addition, it serves as a solution to social problems. For instance, while compensation is available to victims of industrial injuries and road accidents, financial difficulties on account of old age, disability or death is minimized. Investment of accumulated resources by the insurer facilitates the overall development of the country. Capital is usually risk averse, but if insurers provide protection against risks, then several investors would come forward to invest their funds.

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Insurance awareness in India INSURANCE SCENARIO IN INDIA The insurance industry of India consists of 55 insurance companies of which 24 are in life insurance business and 31 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national reinsurer, namely, General Insurance Corporation of India. Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims. Out of 31 non-life insurance companies, five private sector insurers are registered to underwrite policies exclusively in health, personal accident and travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more specialized insurers belonging to public sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance. India's life insurance sector is the biggest in the world with about 36 crore policies which are expected to increase at a compound annual growth rate (CAGR) of 12-15 per cent over the next five years. The insurance industry plans to hike penetration levels to five per cent by 2020, and could top the US$ 1 trillion mark in the next seven years. The total market size of India's insurance sector is projected to touch US$ 350-400 billion by 2020 from US$ 66.4 billion in FY13. The general insurance business in India is currently at Rs 77,000 crore (US$ 12.41 billion) premium per annum industry and is growing at a healthy rate of 17 per cent. The Rs 12,606 crore (US$ 2.03 billion) domestic health insurance business accounts for about a quarter of the total non-life insurance business in the country. Investment corpus in India's pension sector is anticipated to cross US$ 1 trillion by 2025, following the passage of the Pension Fund Regulatory and Development Authority (PFRDA) Act 2013, according to a joint report by CII-EY on Pensions Business in India. Indian insurance

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Insurance awareness in India companies are expected to spend Rs 117 billion (US$ 1.88 billion) on IT products and services in 2014, an increase of five per cent from 2013, as per Gartner Inc. Also, insurance companies in the country could spend Rs 4.1 billion (US$ 66.11 million) on mobile devices in 2014, a rise of 35 per cent from 2013.

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Insurance awareness in India DEVELOPMENT INITIATIVE Given the mandate of the development role assigned to it by the parliament, IRDA has taken several initiatives Notable among them may be maintaining in this direction the following 1. New distribution channels : The rest of newer limitation channels of approved by IRDA include Insurance Broker, Corporate Agent, Referral Provider and Bancassurance. These new channels have become quite successful and in the area of Life business alone about 30% share of the Private sector, business is through the new channel. In order to ensure that with the new channel and a the traditional channel of individual agents function in a most professional manner, the regulator has introduced pre-licensing training and examine and also a code of conduct for all intermediaries, as per the legislation. 2. Health insurance This continues to be one of the most focused areas of development for IRDA. Setting-up of health insurance companies on a stand- alone basis is sought to be encouraged. However, no one moved seem to have come up with a purpose to set up such an exclusive health insurance company. Some of the new companies have come out with a variety of new insurance products in the area of health care. Third party administrators offer cashless hospitalization service for the first time in India. A health insurance working group has been formed to suggest ways and means to remove the structural bottle necks in the area of development of health insurance in the country. 3. Rural and Social Sector Insurance: Though the Government has taken steps to promote rural insurance, for nearly two decades this field has not made any head way. One of the priorities for fostering expansion of rural insurance would be identifying of productive potential and specific insurance needs in areas not yet reached by insurer and enhancing cooperation between insurance and rural credit agencies / institution

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Insurance awareness in India 4. Micro Insurance:

The poorer sections of our society are always more vulnerable than others to every type of risk and the potential of insurance as a tool to reduce this vulnerability must be examined and advanced. Insurance can and ought to play a positive role in meeting the Financial services needs of the poor, and we must be prepared to answer many challenges any to offering through micro-insurance simpler hips of insurance such as property, cattle, personal accident, health and life insurance. The Regulator is in the process of bringing out a regulation which will provide an infrastructure over which Micro insurance can be developed in a proper manner. The effort will be to provide insurance cover to the rural poor at affordable premium. For the purpose of distribution of such products a new band of Micro insurance agents will be introduced. These agents, who will be working solely in the area of micro insurance, need not go through the process of procuring license from the regulator after going through the elaborate process of training and test. For such products the regulator will allow tie-up between a life and a non-life company so that a composite product is available to the rural poor through a single window. 5. Terrorism Pool: The Terrorism Pool formed jointly by the public and private insurance companies and managed by GIC remains a singular example of how the market responded to the post 9/11 events. The contributing share of each company was directly related to its premium income. Terrorism Pool offers insurance cover against terrorism for a maximum of Rs 300 crores per location. Those who seek terrorism cover for more than Rs 300 crores are free to go to foreign insurance companies, but the rates from the overseas players are much steeper.

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Insurance awareness in India

CHAPTER 3 CLASSIFICATION OF INSURANCE Insurance may be following type 

Life insurance

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Fire insurance

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Marine insurance

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Social insurance

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Miscellaneous insurance

Life Insurance Life insurance is different from other insurance in the sense that, here the subject matter of insurance is life of human beings. The insurer will pay the fixed amount of insurance at the time of death or at the expiry of certain period. Life insurance is a policy that may be brought from a life insurance company, which helps beneficiaries financially after the owner of the policy dies. It is a contract between the insured (policy holder) and the insurer (the life insurance company), which assures the payment of a sum of money in the event of the policy holder’s death, or terminal/critical illness Specific exclusion are often written in the contract to limit the liability of the insurer, for example claims arising out of suicide, frauds and war perils fall under the exclusion clause. The cost of premium of life insurance policy is decided by the type and kind of coverage chosen under a life insurance plan. Each and every person requires the insurance. A contract of life insurance as in other forms of insurance, requires that assured must have at the time of the contract an insurable interest in the life upon which the insurance is affected. And insurable interest has to be proved only at the time of the contract, and not necessarily be present at the time when the policy falls due. Life insurance can also be a form of saving in the long run, or it can be tied in with pension plan. Life insurance can provide security, protect home mortgages and facilitate other retirement saving.

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Insurance awareness in India At present, life insurance enjoys maximum scope because the life is the most important property of the society or of an individual. This insurance provides protection to the family at the premature death or gives adequate amount at the old age when earning capacities are reduced. Under personal insurance a payment is made at the happening of an accident. Life insurance covers all the potential dangers, which may endanger one’s life. A life insurance can be short-term and endowment life insurance plan protects the person for a certain period of time. An endowment life insurance policy covers the person until he pays off his premium regularly. Life insurance provides a monetary benefit to the insured or his family or other designated beneficiary. Life insurance policies often allow the opinion of having the proceeds paid to the beneficiary either in lump sum cash payment or an annuity. The business of life insurance is done by the public sector undertaking-life insurance corporation of India and 23 private sector insurance companies The Insurance Act, 1938, and Insurance Regulatory and Development Authority Act, 1999, have made life insurance in India a federal matter. Therefore, all life insurance companies in India have to comply with the strict regulation laid out by insurance regulatory and development authority of (IRDA), irrespective of whether they are state-owned (life insurance corporation of india ) or private (ICICI prudential Life insurance , Bajaj Alliance Life insurance company, Reliance Life Insurance Company, SBI Life, Max life etc).

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Insurance awareness in India

FIRE INSURANCE

Fire insurance is the insurance that offers coverage against damage or loss due to fire, flood earthquake, inundation etc. it is the insurance obtained by owner of homes and commercial properties to provide insurance is obtained in exchange for the payment of a premium. “Fire insurance is one in which the sum insured become payable on the happening of a fire” – E. R. Hardy Fire insurance means insurance against any loss caused by fire. Section 2(6A) of the Insurance Act defines fire insurance as, “fire insurance business means the business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured is liable only to the extent of the actual loss suffered. If there is no loss is no liability even if there is a fire. A fire policy is valid only if the policy holder has an insurable interest in the property covered . Such interest must exist at the time when the loss occurs.” Thus, the insured must have insurable interest in the subject matter both at the time of effecting the policy and at the time of happening of loss. In English cases it has been held that the following person have insurable interest for the purpose of fire insurance – owner, tenants, bailees, including carriers mortgages and charge holder. In case of several policies for the same property, each insurer is entitled to contribution from the others in proportion of sum insured under each policy. After a loss occurs and payment is made, the insurer is subrogated to the rights and interested of the policy holder. An insurer can reinsure a part of the risk with other insurers, if the risk assumed is beyond the retention capacity of the insurer. Fire insurance is essentially a contract of indemnity, not against accident, but against loss caused by accident. It is becoming very common in fire insurance policies to insert a condition, called the average clause, by which the insured is called upon to bear a portion of the loss himself in case the sum insured is less than the market value or value at risk the main object of this clause is to check under insurance and to encourage for full insurance. It implies upon the property owner for the need of having his property accurately valued before insurance

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Insurance awareness in India Fire Insurance is governed by All India Fir Traffic effective from March 31, 2001 issued by Tariff Advisory Committee, a statutory body. It is a commercial policy covering building, offices, machinery contents and personal belonging of the insured. It mitigates the risk of loss of customer arising from fire breakout. The insured should take all possible steps to minimize the loss. The fire insurance does not protect only losses but it provides for certain consequential losses also

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Insurance awareness in India

Marine insurance 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 perils, 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. Now, (a) ocean marine insurance, and (b) inland marine insurance have been covered under the scope of marine insurance. Marine insurance is a contract under which, the insurer undertakes to indemnity the insured in the manner and to extent thereby agreed, against marine loss, incidental to marine adventures As per Insurance Act, 1938 Section (13A), “Marine insurance business means the business of effecting contracts of insurance upon vessels of any description, including cargoes, freight, goods, wares, merchandise and properly of whatever description insured for any transit, by land or water, or both, and whether or not including warehouse risk or similar risks in addition or as incidental to such transit and includes any other risk customarily included among the risk insured against in marine insurance policies” It may be defined as a form of insurance covering loss or damage to vessel or to cargo during transportation to the high seas. The marine insurance is a contract between the insured and the insurer. The insured may be a cargo owner or a ship owner or a freight receiver. The insurer is known as the underwriter. The document in which the contract is incorporated is called “marine insurance policy”. The insured pays a particular sum, which is called premium in exchange for an undertaking from the insurer to indemnity the insured against loss or damage caused by certain specified perils. Insurable interest in the subject-matter of insurance must exist at the time of the loss. It need not exist when the insurance policy is taken Marine insurance is the indemnity for the loss of cargo or damage to ship during the shipment. The risk that marine insurance cover are fire, seizures, wars, accidents or causalities which take place over the sea. The winds and waves are not included as risk in the marine insurance. Today marine insurance has assumed a vast canvas due to the expanding trade across the globe, which

Insurance awareness in India involves large shipping companies that require protection for their fleet against the perils of the sea

SOCIAL INSURANCE An insurance programme carried out or mandated by a government to provide economic assistance to the unemployment, the elderly, or the disabled is known as social welfare insurance plan. Such insurance plan are usually paid by the government and also financed by contribution from employer and employees as well. The social insurance is to provide protection to the people belonging to the weaker section of the society, who are unable to pay the premium for adequate insurance. Pension plans, disability benefits unemployment benefits, sickness insurance and industrial insurance are the various forms of social insurance. India being a social welfare state is expected to run such plans for the welfare of the poor and under privileged Social insurance is defined as the defined as the defined as the protection given to the individual against economic hazards (such as-unemployment, old age or disability) by the government or by the employee. Social insurance may come in the form of healthcare or monetary compensation. The social insurance programmes geared towards healthcare include a network of doctors and hospital that agree to treat individual covered under this type of plan

Insurance awareness in India

MISCELLANEOUS INSURANCE To place of development in the society gave rise to a number of risk or hazards. To provide security against such hazards, many other types of insurance have been developed and are know as miscellaneous insurance. Miscellaneous insurance refers to contract of insurance other than those of life, fire and marine insurance The property, goods, machine, furniture automobile, health etc. can be insured against the damage or destruction due to accident or disappearance due to theft. The important among them are: 1. Vehicle insurance: Vehicle insurance on trucks, buses, cars, motorcycle, etc. A comprehensive insurance policy covers the damage to the vehicle as well as liabilities towards third parties, whereas an Act only covers liabilities towards third parties, whereas an Act only covers liability towards third parties under the Motor Vehicle Act. 2. Burglary insurance: Burglary insurance against theft, dacoity. This place covers the loss due to burglary or house breaking of any stocks or articles from the warehouse or from the working premises. The policy however excludes loss by larceny or theft not accompanied by force 3.

Personal accident insurance: This insurance is for individual or group of personal against any personal accident or illness. The risk insured is the bodily injury resulting solely and directly from accident caused by violent, external and visible means. In India, this type of insurance is done by the non-life (general) insurance companies

4. Legal liability insurance. Insurance whereby the assured is liable to pay the damage to property or to compensate the loss of personal injury or death. This cover is provided in the form of legal liability insurance or third party liability insurance 5. Fidelity insurance: the insurance provides cover to the insured employee against the losses suffered by them due to the dishonest act of their employee. The losses may be

Insurance awareness in India due to fraud, dishonest, and misappropriation of funds, damage to goods or property caused by the employee 6. Crop insurance: crops are insured against losses due to heavy rain and floods cyclone, draughts, crop diseases, etc. by agriculture insurance company 7. Cattle insurance: this insurance provides for indemnity against the loss of cattle’s from various kinds of diseases 8. Health insurance: this policy cover hospitalization expenses incurred due to various diseases or accident and is the fastest growing segment today. In addition to these, insurance policies are available to cover jewellery, household goods, contents lying in the shops, pet animals, baggage, etc

Insurance awareness in India

III. Classification from Risk Point of View From risk point of view, insurance can be classified into four categories Insurance 1. 2. 3. 4.

Personal Insurance Property Insurance Liability Insurance Fidelity Guarantee Insurance

Insurance Type

Details  

Personal

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Insurance 

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Property Insurance

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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 contains the element of indemnity only.

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.

There is very Complex Process When We Try to Claim Insurance For Loss or Damage

Insurance awareness in India

Insurance Type

Details 

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Liability Insurance

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Fidelity Guarantee Insurance

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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.

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.

Insurance awareness in India

CHAPTER 4 PRINCIPLES AND ROLE OF INSURANCE Principles of Insurance There are certain principles that may apply to the contracts of insurance between insurer and insured, which are as follows. i.

Utmost goods faith Insurance contracts are the contract of mutual trust and confidence. Both parties to the contract i.e., the insurer and the insured must disclose all relevant information to each other. For example, while entering into a contract of life insurance, the insured must declare to the insurance company if he is suffering from any disease that may be life threatening.

ii.

Insurable interest It means financial or pecuniary interest in the subject matter of insurance. A person has insurable interest in the property or life insured if he stands to gain from its existence or loose financially from its damage or destruction. In case of life insurance, a person taking the policy must have insurable interest at the time of taking the policy. For example, a man can take life insurance policy on the name of his wife and if later they get divorced this will not affect the insurance contract because the man had insurable interest in the life of his wife at the time of entering into the contract. In case of marine insurance insurable interest must exist at the time of loss or damage to the property. In contract of fire insurance, it must exist both at the time of taking the policy as well as at the time of loss or damage to the property.

iii.

Indemnity

Insurance awareness in India The word indemnity means to restore someone to the same position that he/she was in before the event concerned took place. This principle is applicable to the fire and marine insurance. It is not applicable to life insurance, because the loss of life cannot be restored. The purpose of this principle is that the insured is not allowed to make any profit from the insurance contract on the happening of the event that is insured against. Compensation is paid on the basis of amount of actual loss or the sum insured, whichever is less. iv.

Contribution The same subject matter may be insured with more than one insurer. In such a case, the insurance claim to be paid to the insured must be shared or contributed by all insurers.

v.

Subrogation In the contract of insurance subrogation means that after the insurer has compensated the insured, the insurer gets all the rights of the insured with regard to the subject matter of the insurance. For example, suppose goods worth Rs. 20,000/are partially destroyed by fire and the insurance company pays the compensation to the insured, then the insurance company can take even these partially destroyed goods and sell them in the market.

vi.

Mitigation In case of a mishap the insured must take all possible steps to reduce or mitigate the loss or damage to the subject matter of insurance. This principle ensures that the insured does not become negligent about the safety of the subject matter after taking an insurance policy. The insured is expected to act in a manner as if the subject matter has not been insured.

vii.

Causa-proxima (nearest cause) According to this principle the insured can claim compensation for a loss only if it caused by the risk insured against. The risk insured should be nearest cause (not a remote cause) for the loss. Then only the insurance company is liable to pay the compensation. For example a ship carrying orange was insured against losses arising from accident. The ship reached the port safely and there was a delay in unloading the oranges from the ship. As a result the oranges got spoilt. The insurer did not pay any

Insurance awareness in India compensation for the loss because the proximate cause of loss was delay in unloading and not any accident during voyage.

ROLE OF INSURANCE The following point shows the role of insurance 1. Provide safety and security: Insurance provide financial support and reduce uncertainties in business and human life. It provides safety and security against particular event. There is always a fear of sudden loss. Insurance provides a cover against any sudden loss. For example, in case of life insurance financial assistance is provided to the family of the insured on his death. In case of other insurance security is provided against the loss due to fire, marine, accidents etc. 2. Generates financial resources: Insurance generate funds by collecting premium. These funds are invested in government securities and stock. These funds are gainfully employed in industrial development of a country for generating more funds and 27tilized for the economic development of the country. Employment opportunities are increased by big investments leading to capital formation. 3. Life insurance encourages savings: Insurance does not only protect against risks and uncertainties, but also provides an investment channel too. Life insurance enables systematic savings due to payment of regular premium. Life insurance provides a mode of investment. It develops a habit of saving money by paying premium. The insured get the lump sum amount at the maturity of the contract. Thus life insurance encourages savings. 4. Promotes economic growth: Insurance generates significant impact on the economy by mobilizing domestic savings. Insurance turn accumulated capital into productive investments. Insurance enables to mitigate

Insurance awareness in India loss, financial stability and promotes trade and commerce activities those results into economic growth and development. Thus, insurance plays a crucial role in sustainable growth of an economy. 5. Medical support: A medical insurance considered essential in managing risk in health. Anyone can be a victim of critical illness unexpectedly. And rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for different type of health risks. The insured gets a medical support in case of medical insurance policy. 6. Spreading of risk: Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of insurance is to spread risk among a large number of people. A large number of persons get insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated out of funds of the insurer. 7. Source of collecting funds: Large funds are collected by the way of premium. These funds are utilized in the industrial development of a country, which accelerates the economic growth. Employment opportunities are increased by such big investments. Thus, insurance has become an important source of capital formation.

Insurance awareness in India

CHAPTER 7 Why Awareness is Important The growing need for financial education for the families to take better financial decision and to increase their economic security has been widely recognized. It is felt that well informed and well educated customers can create economic ripples. They make better financial decisions for themselves and their families, increasing their economic security and well being. Secured families are more involved in their communities as home owners and voters. They are more involved as parents with their children’s schools and teachers, enabling better educational and economic outcomes for their children. They contribute to vital, thriving communities, further fostering community economic development. Thus, being financially literate is not only important to the individual household and family, it is also important to communities and societies. (Hogarth, Jeanne M., 2006). Insurance companies can address the problem of financial illiteracy of consumers by educating them. This point was corroborated by the Max New York–NCAER survey (NCAER, 2008) which showed that even though a majority of Indian households are good savers, they do not undertake financial planning and are financially at risk. Households need to understand the risk of both ‘living too long’ and ‘dying too young’. Further, in urban India and amongst the salaried class, insurance is largely used as a tax saving tool, rather than for protection against risk. There is need to reorient the consumer about the benefits of life insurance for both financial protection as well as for long-term wealth creation. The importance of insurance is unquestionable in modern economies as it serves a broad public interest and is vital to individuals’ security. Advocacy of insurance and risk issues is an

Insurance awareness in India important tool that complements the insurance regulatory and supervisory framework. This is particularly so given: (i) households’ growing risk exposures and responsibility for covering them; (ii) increasing diversity and complexity of insurance products; and (iii) heterogeneity of insurance providers and distribution channels. Advocacy can typically: (i) heighten individuals’ awareness and responsibility towards potential risks; (ii) enhance understanding of insurance mechanisms that can cover these risks; and (iii) enable the development of consumers’ knowledge and capacity in order to make informed decisions as regards insurance matters (OECD,2006). Private insurers have introduced many innovative products and offer incentives on policies in order to woo consumers. The market share of private insurers has increased steadily on the basis of total premium from 14.25 percent in 2005–06 to 29.90 percent in 2009–10. In today’s context, though the customer has a variety of products to choose from, wise choices are possible only with requisite awareness. Besides, it is not enough for the customer to have knowledge only of the various policies available. It is possible that a customer has problems with a particular policy and should ideally be aware of organizations that look into grievances and make prompt payment of claims. The customer must also be informed about the lapse of policies, revival of policies, and the value of a policy in case of surrender. Hence, the customer must not only choose a product which is suitable, but also engage with a company in which the agents provide correct information. The results of the Max New York Life–NCAER Survey on India Financial Protection (NCAER, 2008) indicates that awareness of life insurance stands at a high of 78 per cent on an all-India level with more urban households (90%) aware of it than rural households (73%).The level of awareness has increased with education, age and income levels. However, ownership of insurance products was low at only 24 percent. Further, it was the salaried class that tended to buy insurance the most, followed by businessmen. Also, as compared to others married people are more likely to buy insurance.

Insurance awareness in India Realising the importance of enhancing the awareness regarding various aspects of insurance, the IRDA has launched an awareness campaign with the objectives of: (a) developing and promoting efficiency of the insurance sector; (b) improving policy holder protection; (c) setting up a dispute resolution mechanism; and (d) regulating the intermediaries. The National Council of Applied Economic Research (NCAER), New Delhi has been contracted by IRDA, Hyderabad as the consultant organisation to conduct nationwide pre-launch and post-launch surveys of insurance awareness. The NCAER conducted the pre-launch survey during March–August, 2010. With the primary purpose of collecting data on awareness of insurance throughout the country, the objectives of the survey were threefold: (a) To study and analyse awareness levels of the insured population regarding their rights under the Act, policy holder protection regulations, different types of insurance (life insurance including term, single, premium, endowment, ULIPs, health insurance, general insurance including householders, burglary, etc.),and levels of protection available from various types of insurance. (b) To study and analyse the awareness levels of the uninsured regarding need for insurance, types of insurance available, insurance interest, benefits of insurance, and benefits of ULIP investment. (c) To generate a socio-economic profile of the insured and uninsured population by socioeconomic parameters such as household income, type of dwelling unit, type of ration card held, occupation, literacy levels, etc.,

Insurance awareness in India

CHAPTER 8 INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA) OF INDIA The supervisory control of insurance companies in India is exercised by IRDA and and these power 1999 states : “ subject to the provision of this act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of insurance business and reinsurance business. “ Regulatory and supervisory powers of the IRDA are wide and produc pervasive. these can be summarized as under : 

Registration/ licensing: Any company proposing to enter in the insurance business has to apply to the authority for registration certificate. The authority has the power to issue the license subject to its satisfaction that the proposed company is financially sound and the managerial expertise to run the business. The authority has also got the power to renew it, modify it or even suspend and cancel such registration.

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Product and pricing : the authority shall be satisfied about the nature of the product and its pricing before it is placed for marketing amongst the consumer. The power to control the price of the product is in addition to the premium rates which are fixed by the tariff advisory committee (TAC) constituted under section 64U of insurance Act, 1938. Chairman of the authority is also ex-officio chairman of TAC. The authority should also be satisfied with the terms and condition mentioned in the policy document

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Investment of funds : the investment policy of the insurance companies is governed by the broad guidelines framed by the authority. It may direct the insurer to invest certain proportion of their fund in specified securities for instance minimum of 30 percent of their funds in government securities and 15 percent in housing projects including purchase of fire fighting equipment by state government. Only 55 percent of the funds

Insurance awareness in India may be invested in market securities and amongst market securities only in approved securities. 

Solvency margin: The authority has to ensure that insurer maintain the solvency margin requirement, the authority can initiate disciplinary action against the defaulting companies

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Appointment of accuracy: as per the directives of the authority it is mandatory for insurer to appoint an accuracy. The qualification of accuracy has been laid down. The function and duties of accuracy have been prescribed by the authority

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Appointment to chief executive / managing director : it is obligatory on the part of insurance companies to take prior approval of the authority before appointing chief executive, managing director or whole time director in the company the authority has been vested with the power to remove any managerial person and also appoint any additional director in the company if so desired.

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Power of Investigation and Inspection: The Authority can institute any inquiry against the insurer to investigate the affairs of the company and for this purpose can appoint any person as investigator. Based on the report, authority can take disciplinary action against suspension of its registration.

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Account and Balance Sheet : The insurer are required to prepare a balance sheet, a profit and loss account, a separate account of receipts and payment and a revenue account in respect of each class of business. These are to be audited by a qualified auditor

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Intermediaries: the authority shall also monitor the activities of intermediaries who are being engaged by the insurer to market their products the license to the agents is issued by the authority. The brokers are also allowed to operate after they obtain the license from the authority.

Insurance awareness in India 

Surveyors and Loss Assessors: The qualification for surveyors to be eligible to obtain a license is prescribed by the authority. Their licenses are also being issued by the authority

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Reinsurance: Reinsurance programmes of insurance companies are being monitored by the authority on a continuous basis. As per the directives of the authority, insurance companies are required to cede a part of their premium income to designated Indian reinsurer. Insurer are supposed to keep the authority apprised about their insurance programme, both outward and inward and seek authority’s approval

Insurance awareness in India

CHAPTER 9 ANALYSIS AND INTERPRETATION 1

GENDER

FEMALE

43.30%

MALE

56.70%

INTERPRETATION: The analyses is based on a sample size of 35 respondent out of which 56.7% where female i.e. 17 and 43.3% i.e. 13 where male

2 AGE? 18-21

22-25

26-30

13% 19% 68%

Insurance awareness in India INTERPRETATION : the analyses is based on a sample size 35 out of which 18-21 years there were 21 people, 22-25 years there were 6 people and 26-30 there were 4 people

3 Have you taken any insurance policy? yes

no

46%

54%

INTERPRETATION: The respondent where asked whether they have taken any insurance policy. 12 respondents they have policy and 19 respondents they do not have any insurance policy

4 Which source did you come to know about insurance? Newspaper and magazines

Television

Agents

Internet

Friend 3% 14%

9%

17%

57%

Insurance awareness in India INTERPRETATION: The respondent where asked how they get to know about the insurance. 1 respondent by Newspaper, 3 respondent by Television, 20 respondent by Agents, 6 respondent by Internet and 5 respondent by friend

5 Are you aware about the concept of insurance policy? yes

no

20%

80%

INTERPRETATION: The respondent where asked whether they know the concept of insurance policy. 28 respondents replied yes and 7 respondents replied no.

6 Name of insurance company 14 12 12

10 10 8 6 4 4 2

4

3 1

1

Jeevan Anand

jeevan Bhima

0 Bajaj Allianz HDFC Life Standard Insurance Life Insurance

Kotak Life Insurance

Life Insurance Corporation of India

not taken any insurance

INTERPRETATION: the respondent were asked name of the company which they have taken insurance. 3 of them have taken from Bajaj Allianz Life Insurance, 4 of them have from HDFC

Insurance awareness in India standard life Insurance, 4 of them taken from Kotak Life insurance, 10 of them taken from Life Insurance Corporation of India, 1 of them have taken from Jeevan Anand, 1 of them taken from Jeevan Bhima and 12 of them have not taken any insurance policy

7 what prompted you to buy the insurance policy from the company named by you

Brand image of the company

Excellent past record of performance

Friend

marking people insisted to buy

29%

31%

11% 29%

INTERPRETENTION: The respondent were asked what prompted you to buy the insurance policy from the company name by you? the respondent answered 10 of taken policy by the brand image of the company 4 of them replied that they have taken because of best performance of the company, 10 of taken by the friend suggestion and 11 of taken because marketing people insisted to buy

Insurance awareness in India

8. Why you think insurance policy is important? 18 16 14 12 10 8 6 4 2 0 Risk coverage

protection for the family

long term saving

INTERPRETENTION: The respondents were asked Why you think insurance policy is important? 12 of them think that it is a risk coverage, 16 of them said that it is protection for the family and 7 of people think that it is long term saving

Insurance awareness in India

9. Do you tend to sick to the same brand and remain loyal to a particular insurance company? yes

no

46% 54%

INTERPRETENTION: the respondent were asked do you tend to sick to the same brand ? 19 of them replied yes and 16 of them say no

10. Do you think you are satisfied with insurance company? Rate them out of 5

rate 12 10 8 6 4

rate

2 0 1

2

3

4

5

Insurance awareness in India INTERPRETATION: the respondent were asked to rate the insurance company which they have chosen 2 of them chosen 1st rate, 5 of them chosen, 2nd rate 8 of them chosen 3rd rate , 10 of them chosen 4th rate and 10 of them chosen 5th rate