Practice of General Insurance

Presentation By:
Manoj Verma

B.B.A (B & I): 306

PRACTICE OF GENERAL INSURANCE
UNIT-I
No. of Hrs:10
Different non life insurance products: Fire, Marine,
Property, Vehicle, Theft, Aviation, Finished Goods,
Goods in Transit, Technology, Political, Currency Risks,
Construction Industry, Composite Insurance,
Insurance products pertaining to Rural Market.
UNIT-II
No. of Hrs:10
Forms used in General Insurance, Appraisal of Risk,
Tariff and Non-Tariff Rates, Use of Credibility theory
for Rate Making, Experience Rating

 UNIT-III
No. Of Hrs:10
Physical and Moral Hazards Loss Prevention, Loss
Survey, Loss Assessment, Investigation and Claim
Settlement, No Claim Bonus and Renewal of Policy
UNIT-IV
No. of Hrs:10
Unexpired Risk and Assessment of Liability in respect
thereof., Periodic Valuation and
Declaration of Profit, Concept of Reinsurance

Reference Books:
General Insurance; Insurance Institute of India; 2003
General Insurance Vol.1 ; ICFAI Press; 2005
Mishra M.N.; Principles and Practices of Insurance;
S. Chand and Co. 2004
Gupta P.K.; Insurance and Risk Management;
Himlaya Publishing House; 2004
Bodla,B.S. and Garg,M.C., Insurance Environment
and Procedure, Deep & Deep Publications.
Insurance Industry: Emerging Trends by ICFAI.

For further help:

Manoj Verma
Ph. 9811735990
09034695008
E.mail: manoj5980@gmail.com

History of Insurance Business

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.

History of Insurance Business

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.

History of Insurance Business

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.

History of Insurance Business

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 24 general insurance companies
including the ECGC and Agriculture Insurance
Corporation of India and 23 life insurance companies
operating in the country.

History of Insurance Business

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 countrys
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.

Different Non-life insurance products

Non-life insurance can take a number

of different forms such as:
Marine Insurance
Fire Insurance
Automobile Insurance
Property Insurance
Liability Insurance
Miscellaneous Insurance

Marine Insurance
Marine insurance as we know it today can
be described as mother of all insurances. It
is believed to have originated in England
owing to the frequent movement of ships
over high seas for trade.
In India, insurance has been in vogue for
several centuries. History holds proof that
these people had a system of pooling their
contributions, if any one of their clan were
to meet a tragedy in their

Marine Insurance
Marine insurance is a contract under which,
the insurer undertakes to indemnify the
insured in the manner and to the extent
thereby agreed, against marine losses,
incidental to marine adventures.
It may be defined as a form of insurance
covering loss or damage to vessels or to
cargo during transportation to the high
seas.

Fire Insurance
Fire is hazardous to human life as well as property.
Fire causes enormous damage by physically reducing
the materials to ashes.
A fire insurance policy provides protection strictly
against fire.
A contract of fire insurance can be defined as a
contract under which one party ( the insurer) agrees
for consideration (premium) to indemnify the other
party (the insured) for the financial loss which the
latter may suffer due to damage to the property
insured by fire during a specified period of time and
up to an agreed amount.

Auto Insurance
There has been a sudden rise in the motor
accidents in the last few years.
Much of these are attributable to increase
in the number of vehicles. Every vehicle
before being driven on roads has to be
compulsorily insured.
The motor insurance policy represents a
combined coverage of the vehicles including
accessories, loss or damage to his property
or life and the third party coverage.

Auto Insurance
Motor insurance policy is a contract between the
insured and the insurer in which the insurer promises
to indemnify the financial liability in event of loss to
the insured.
Motor Vehicles Act in 1939 was passed to mainly
safeguard the interests of pedestrians. According to
the Act, a vehicle cannot be used in a public place
without insuring the third part liability.
According to Section 24 of Motor Vehicles Act, No
person shall use or allow any other person to use a
motor vehicle in a public place, unless the vehicle is
covered by a policy of insurance.

Property Insurance
Property insurance provides
protection against risks to property,
such as fire, theft or weather
damage.
This may include specialized forms of
insurance such as fire insurance,
flood insurance, earthquake insurance
, home insurance, inland marine
insurance or boiler insurance.

Liability Insurance

Liability insurance is a very broad superset that covers

legal claims against the insured. Many types of insurance
include an aspect of liability coverage.
For example, a homeowner's insurance policy will normally
include liability coverage which protects the insured in the
event of a claim brought by someone who slips and falls on
the property;
automobile insurance also includes an aspect of liability
insurance that indemnifies against the harm that a crashing
car can cause to others' lives, health, or property. The
protection offered by a liability insurance policy is twofold: a
legal defense in the event of a lawsuit commenced against
the policyholder and indemnification (payment on behalf of
the insured) with respect to a settlement or court verdict.
Liability policies typically cover only the negligence of the
insured, and will not apply to results of wilful or intentional
acts by the insured.

Miscellaneous Insurance
Aviation insurance protects aircraft hulls and
spares, and associated liability risks, such as
passenger and third-party liability. Airports may also
appear under this subcategory, including air traffic
control and refuelling operations for international
airports through to smaller domestic exposures.
Boiler insurance (also known as boiler and
machinery insurance, or equipment breakdown
insurance) insures against accidental physical damage
to boilers, equipment or machinery.

Builder's risk insurance insures against the risk of

physical loss or damage to property during construction.
Builder's risk insurance is typically written on an "all risk"
basis covering damage arising from any cause (including
the negligence of the insured) not otherwise expressly
excluded. Builder's risk insurance is coverage that protects
a person's or organization's insurable interest in materials,
fixtures and/or equipment being used in the construction or
renovation of a building or structure should those items
sustain physical loss or damage from an insured peril.[20]
Crop insurance may be purchased by farmers to reduce or
manage various risks associated with growing crops. Such
risks include crop loss or damage caused by weather, hail,
drought, frost damage, insects, or disease.

 Earthquake insurance is a form of property

insurance that pays the policyholder in the event of
an earthquake that causes damage to the property.
Most ordinary home insurance policies do not cover
earthquake damage. Earthquake insurance policies
generally feature a high deductible. Rates depend on
location and hence the likelihood of an earthquake, as
well as the construction of the home.
Fidelity bond is a form of casualty insurance that
covers policyholders for losses incurred as a result of
fraudulent acts by specified individuals. It usually
insures a business for losses caused by the dishonest
acts of its employees.

 Flood insurance protects against property loss due

to flooding. Many insurers in the U.S. do not provide
flood insurance in some parts of the country. In
response to this, the federal government created the
National Flood Insurance Program which serves as the
insurer of last resort.
Home insurance, also commonly called hazard
insurance, or homeowners insurance (often
abbreviated in the real estate industry as HOI), is the
type of property insurance that covers private homes,
as outlined above.
Landlord insurance covers residential and
commercial properties which are rented to others.
Most homeowners' insurance covers only owneroccupied homes.

 Credit insurance repays some or all of a loan when

certain circumstances arise to the borrower such as
unemployment, disability, or death.
Mortgage insurance insures the lender against
default by the borrower. Mortgage insurance is a form
of credit insurance, although the name "credit
insurance" more often is used to refer to policies that
cover other kinds of debt.
Many credit cards offer payment protection plans
which are a form of credit insurance.

 All-risk insurance is an insurance

that covers a wide-range of incidents
and perils, except those noted in the
policy. All-risk insurance is different
from peril-specific insurance that
cover losses from only those perils
listed in the policy.[22] In
car insurance, all-risk policy includes
also the damages caused by the own
driver.

Bloodstock insurance covers individual horses or a number of horses

under common ownership. Coverage is typically for mortality as a result of
accident, illness or disease but may extend to include infertility, in-transit
loss, veterinary fees, and prospective foal.
Business interruption insurance covers the loss of income, and the
expenses incurred, after a covered peril interrupts normal business
operations.
Collateral protection insurance (CPI) insures property (primarily
vehicles) held as collateral for loans made by lending institutions.
Defense Base Act (DBA) insurance provides coverage for civilian workers
hired by the government to perform contracts outside the U.S. and Canada.
DBA is required for all U.S. citizens, U.S. residents, U.S. Green Card holders,
and all employees or subcontractors hired on overseas government
contracts. Depending on the country, foreign nationals must also be covered
under DBA. This coverage typically includes expenses related to medical
treatment and loss of wages, as well as disability and death benefits.

Expatriate insurance provides individuals and organizations operating

outside of their home country with protection for automobiles, property,
health, liability and business pursuits.
Kidnap and ransom insurance is designed to protect individuals and
corporations operating in high-risk areas around the world against the perils
of kidnap, extortion, wrongful detention and hijacking.
Legal expenses insurance covers policyholders for the potential costs of
legal action against an institution or an individual. When something happens
which triggers the need for legal action, it is known as "the event". There
are two main types of legal expenses insurance: before the event insurance
and after the event insurance.
Locked funds insurance is a little-known hybrid insurance policy jointly
issued by governments and banks. It is used to protect public funds from
tamper by unauthorized parties. In special cases, a government may
authorize its use in protecting semi-private funds which are liable to tamper.
The terms of this type of insurance are usually very strict. Therefore it is
used only in extreme cases where maximum security of funds is required.

 Livestock insurance is a specialist

policy provided to, for example,
commercial or hobby farms,
aquariums, fish farms or any other
animal holding. Cover is available for
mortality or economic slaughter as a
result of accident, illness or disease
but can extend to include destruction
by government order.