Indian Insurance business can be divided into two categories:
(A) Life Insurance
(B) General Insurance: which includes
(a) Fire Insurance
(b) Marine Insurance
(c) Miscellaneous Insurance
(A) Life Insurance:
Life insurance is a contract in which insurer, in consideration of a premium, undertakes to pay a certain sum of money either on the death of the insured to his/her nominees or on the expiry of fixed period to him/her.
Suppose A gets the life insurance policy on 10 Jan. 1996 for 10 years for Rs. 1,00,000. If he dies before the expiry of policy then his claimant will get the claim and if he survives up to the expiry of policy then he himself will get the maturity value of the policy.
So it is an important device to provide family security on voluntary basis through individual initiative. Life is full of uncertainties and the death is certain. Insurance manages to stop the sufferings of financial losses caused by the death, of the insured. It undertakes to protect the loss out of the death of the insured.
Life insurance involves both the elements of protection and investment. As in this case, if the insured lives up to the maturity of the policy, the investment made by the insured in the form of periodical premium along with fixed bonus is paid back to the insured on the maturity of the policy. Otherwise the full amount of policy is paid to the nominee after the death of insured.
The Government of India after independence took many constructive steps to regulate the business of life insurance and ultimately nationalised the business of life insurance in 1956 and set up Life Insurance Corporation (LIC) of India.
But since April, 2000, the Government has permitted the private operators sector to enter in the field of life insurance. A number of private companies have entered life insurance business in India. Most of the Indian companies have entered into a joint venture with the foreign companies to do jointly the business of life insurance.
Some of which are:
(i) HDFC Standard Life Insurance Co. Ltd.
(ii) Max-New York Life Insurance Co. Ltd.
(iii) ICICI Prudential Life Insurance Co. Ltd.
(iv) OM Kotak Mahindra Life Insurance Co. Ltd.
(v) SBI Life Insurance Co. Ltd.
(vi) ING Vysya Life Insurance Co. (Pvt.) Ltd,
(vii) Bajaj Allianz Life Insurance Co. Ltd.
(viii) The Metilife India Insurance Co. Pvt. Ltd.
(ix) AMP SANMAR Assurance Co. Pvt. Ltd.
(x) Aviva Life Insurance Co. India Pvt. Ltd.
(B) General Insurance:
All the contracts of insurance except life insurance, are the contracts of indemnity. Indemnity means to make good the loss and nothing more than the actual loss. In accordance with the principle of indemnity, the insured’s actual loss in indemnified on the occurrence of certain event. The basis objective of the insurance is, in fact, to transfer the loss of an individual over to the insurer who in turn very easily spreads it over a larger number of persons (insured’s).
All insurances other than life, are regarded as general insurance. Under this type of insurance, the insurer undertakes to indemnify the loss suffered by the insured on the happening of a certain event in consideration for a fixed premium.
The following insurances are included in it:
(a) Fire Insurance:
Under this insurance, the insurance company undertakes to compensate loss which is caused by fire, but this compensation never exceeds the amount insured.
(b) Marine Insurance:
The insurance protects from the hazards of sea-transport to cargo (goods), hull (body of the ship) and freight.
(c) Accident Insurance:
This insurance covers the loss caused to men or vehicles due to mishap.
(d) Other Insurance:
In addition to above insurance, there are other insurances such as burglary insurance which covers the loss by theft. Third party insurance meets the claim of third parties as a result of negligence and fidelity insurance covers the loss of embezzlement by the dishonesty of the employees.
Since the insurance sector has now been opened for the private and foreign players. The private and foreign insurance companies are now-a-days allowed to engage themselves in life and general insurance business in India.
Except Life Insurance all other insurances come under General Insurance. For this General Insurance Corporation of India formed under the General Insurance Corporation of India Act, 1972.
In this four companies are formed such as:
(i) New India Insurance Companies Ltd.
(ii) Oriental Fire and General Insurance Companies Ltd.
(iii) National Insurance Companies Ltd.
(iv) United India Fire and General Insurance Companies Ltd.
These Companies are the subsidiaries of the General Insurance Corporation but these work separately and independently but under the control and guidance of the General Insurance Corporation of India. These are to suffer and gain their own losses and profits.
Since April 2000, government has permitted the private sector players to enter in this field. Most of the Indian Companies have entered into a joint venture with foreign companies to do jointly the General Insurance business in India.
Some of these are:
(1) Royal Sundram Alliance Insurance Company Ltd. (Joint Venture with Fiat Autos).
(2) Reliance General Insurance Company
(3) IFFCO Tokio General Insurance Company Ltd.
(4) Tata AIG General Insurance Company Ltd.
(5) Bajaj Allianz General Insurance Company Ltd.
(6) ICICI Lombard General Insurance Company Ltd.
(7) Cholamandalam General Insurance Co. Ltd.
(8) Export Credit Guarantee Corporation Ltd.
(9) HDFC-Chubb General Insurance Co. Ltd.
Such type of insurance includes property insurance, liability insurance and other types of insurance. Fire and marine insurance come under property insurance. Theft, fidelity, motor and machine insurances are included under liability insurance.
Insurance Regulatory and Development Authority:
In order to regulate the insurance business, the Government of India setup in 1996, the Insurance Regulatory Authority which is known as IRA. Under the continuous liberalisation process, the insurance business now has also been opened to the private sector players and to the multinational companies.
The Insurance Regulatory and Development Authority (IRDA) has been constituted under IRDA Act, 1999 passed by Parliament to regulate the total insurance business in India. As a corollary, the Insurance Act, 1938 has also been amended by the enactment of Insurance (Amendment) Act, 2000.
In 2002, the IRDA came with the regulations for the preparation of financial statements of Insurance Companies. According to the Insurance (Amendment) Act, 2002, the First, Second and Third Schedules as prescribed for Balance Sheet, Profit and Loss Account and Revenue Account respectively as given in the Insurance Act, 1938 have been omitted. Now, Revenue Account, Profit and Loss Account and Balance Sheet are to be prepared as per formats prescribed by Insurance Regulatory and Development Authority (IRDA).