New Insurance Products
1. Policies under LIC mutual Fund
LIC launched its mutual fund with promise to the investors to provide high returns along with safety and security of investments. LIC mutual fund came up with 5 schemes which provide distinct benefits to various cross sections of investors. The names of scheme are:-
- Dhanashree 1989
- Dhan 80 cc (1)
- Dhanvarsha
- Dhanvarsha 1989
- Dhanvridhi 1989
2. Jeevan Akshay –V
This can be purchased immediately through lump sum payment as single premium. The plan provides for annuity payments, which are available throughout the lifetime of and annuitant. Annuity may be paid either at monthly, quarterly, half yearly or yearly intervals. Premium is paid as lump sum. Minimum purchase price of the policy is Rs. 50,000 or such amount which may secure a minimum annuity of Rs. 3000 per annum and maximum no limit. Medical examination is not required. The minimum age of the proposer should be 40 year & maximum should not exceed 79 years.
3. Jeevan Dhara
The payment of annuities in respect of policies under Jeevan Dhara has to start one month after the completion of the deferment period.
4. Jeevan Kishore
This is an endowment assurance plan available for children of less than 12 years of age. The policy may be purchased by any of the parents/ grand parents. Premiums are payable yearly, half yearly, quarterly or monthly throughout the term of the policy or till earlier death of child. This is a with profit plan i.e; get share of the profit in the form of bonus.
5. Jeevan Chhaya
This is an endowment assurance plan that provides financial protection against death throughout the term of the plan.
6. New Jeevan Suraksha – I
These are deferred annuity plans that allow the policyholder to make provisions for regular income after the selected terms. Premiums are payable yearly, half yearly, quarterly, monthly or through deduction opted by the policyholder, throughout the term of the policy or till earlier death. Premium can be paid in lump sum also.
Insurance in India – Historical Background
In India, the concept of insurance was prevalent even during ancient times. The reference of insurance is found in ‘Rigveda’ with the name ‘yogakshema’ more or less related to the well being and security of the people. Hammurabi in 2100BC, formalized the concept of the civic responsibilities, bottomry and respondentia. Bottomry and respondentia loans refer to marine contracts covering vessels and cargo. However, there is no evidence that insurance in its present form was practiced prior to the twelfth century.
1. Marine Insurance – Insurance in the oldest form existed in the form if marine insurance. there was a contract of Bottomry bond, under this, the system of credit and the law of interest were well developed and were based on a appreciation of the hazards involved and the means of safeguarding against it. If the ship was lost, the loan and interest were forfeited. The contract of insurance was made a part of the contract of carriage. Freight was fixed according to seasons and was very reasonable. Various risks were involved with marine transport like heavy winds, highway robbery, capturing by king’s enemies. So to safeguard that, the marine traders developed a method of spreading that financial loss.
2. Fire Insurance -Marine insurance was followed by fire insurance. it had been originated in Germany in the beginning if the sixteen century. In England in 1666 there was great fire in which about 85 percent of the houses were burnt and property worth of sterling ten crores were completely burnt off. Fire insurance office was established in 1681 in England. After this, fire insurance spread all over the world.
In India, the general insurance started working with the establishment of the Triton Insurance Calcutta in 1850. However general insurance could not progress much in India.
3. Life Insurance - Life insurance first started in England in the sixteen century. The first life insurance policy was of Willam Gybbons on June 18,1653. The first registered life office in England was the Hand – in – Hand Society established in 1696. The life insurance did not progress much in the United States during the eighteenth century.
In India, some European started the first life insurance company in Bengal Presidency, viz, the Oriental Life Assurance Company in 1818. Then in 1871, ‘ Bombay Mutual Life Assurance Society was established. In 1874 another important life insurance office was started ‘ Oriental Government Security Life Assurance Co. Ltd’ sooner than several offices developed in India.
4. Miscellaneous Insurance - Miscellaneous Insurance take place at the later part of the nineteenth century with the industrial revolution in England. Various insurance were developed like accident insurance, fidelity insurance, liability insurance. The main institution was Lloyd’s association. Now, various insurance are taking place like cattle insurance, crop insurance, project insurance etc.
Reforms in the Indian Insurance Sector
After the nationalization of the life insurance industry in 1956 and general insurance industry in 1972, the insurance industry confined only to the operations of Life Insurance Corporation of India and General Insurance Corporation of India and its four subsidiaries viz; The National Insurance Company Limited, New India Assurance Company Limited, Oriental Fire & General Insurance Company Limited and United India Fire & General Insurance Company Limited. There was state monopoly, inefficient customer services, outdated technologies. So in 1993, Malhotra Committee, led by former secretary and RBI Governor, R.N. Malhotra, was formed to evaluate the Indian Insurance Industry and for recommending its future directions.
Objectives of Malhotra Committe
1. To suggest the structure of the insurance industry, to assess strength and weaknesses, to offer wide variety of insurance products with a high quality of service to the public.
2. To make recommendations for modifying structure of insurance industry for changing general policy framework, etc.
3. To make specific suggestions for improving the functioning of Life Insurance Corporation of India and General Insurance Corporation of India.
4. To make suggestions on regulation and supervision of the insurance sector in India
5. To give advice on role and working if surveyors, intermediaries like agents,etc. in the insurance sector
6. To make recommendations on any other matter which is relevant for development of the insurance industry in India.
Recommendations of Malhotra Committee
Malhotra committee submitted its report in 1994 and gave the following major recommendations in respect of :-
(I) Structure
- Government stake in the Insurance companies to be brought down to 50%
- Government should take over the holding of General Insurance Corporation of India & its subsidiaries so that these subsidiaries can act as independent corporations
- All the Insurance companies should be given freedom to operate
(II) Competition
- Private companies with minimum paid up capital of Rs. 1 billion should be allowed to enter in industry.
- No company should deal in both life and general insurance through a single entity
- Foreign companies may be allowed to enter the industry in collaboration with the domestic companies
- Postal life insurance should be allowed to operate in the rural market
- Only one state level life insurance company should be allowed to operate in each state.
- The insurance act should be changed
- The insurance regulatory body should be set up.
- Controller of insurance should be made independent
(III) Investment
- Mandatory investment of LIC life fund in Government Securities to be reduced from 75 percent to 50 percent
- GIC and its subsidiaries are not to hold more than 5% in any company
(IV) Customer Service
- LIC should pay interest on delays in payment beyond 30 days
- Insurance companies must be encouraged to set up unit linked pension plans
- Computerisation of operations and updating of technology to be carried out in the insurance industry.
So the main emphasis was to improve the customer service and to opened up insurance sector for the competition. But at the same time, the committee felt that new players could ruin the public confidence in the industry. The recommendations of the committee were discussed at different forum.
In 1999, keeping in view of the recommendations of Malhotra Committee, Insurance Regulatory and Development Authority (IRDA) Bill was drafted. The Government has ruled out privatization of public sector insurance companies, LIC and GIC. There will be dilution of 100 percent Government equity in LIC and GIC.
IRDA bill was formed by amending the Insurance Act, 1938, the Life Insurance Corporation Act,1956 and General Insurance Business (Nationalisation Act,1972). This bill was enacted to open up the insurance sector.
IRDA provides for a nine member regulatory body with statutory powers. It fixed minimum capital requirement for Life and General Insurance at Rs. 100 Crores and for reinsurance firms at Rs. 200 Crores.
There was some oppositions so Government reintroduced the bill with some changes. In 1999, the bill was finally passed and IRDA was formed to regulate and promote insurance business in India.
Liberalisation of Insurance markets in India
Liberalisation are of two types :-
- Domestic Liberalisation
- External sector Liberalisation
Domestic Liberalisation consists of general curbs and guides on production, investment, price, the role of market and resources allocation etc.
External sector Liberalisation consists of liberalization in term of international flow of goods, services, technology and Capital
Liberalisation of insurance involves transformation of the industry from a government monopoly to a competitive environment. Indian companies too should have chance to carry out its business in a foreign country without much limitation.
Liberalisation of the insurance sector has contributed towards the economic development of the country in the following ways :-
(i) Employment Generations as more demand for marketing experts, finance specialists, human resources professionals, statisticians etc.
(ii) Allowing of foreign players in Indian Insurance Sector bring more funds in the economy.
(iii) Liberalisation helps in promoting industry ancillary to insurance industry, like, advertising etc. New policy cover have been developed. Customer friendly pricing structure was developed that would foster healthy competition throughout the insurance industry. Various distribution channels were developed.
(iv) Modern techniques were developed like bancassurance to sell insurance products to customers. Banks too have involved in the task of distributing insurance products. Insurance companies are entering into tie ups with manufactures of consumers goods in order to speed up the process of reaching the customer at their door steps.
(v) IT sector boost up. The need for quicker delivery of insurance products has provoked the competing insurance players to follow more sophisticated, automated systems
Author Name
Author Description!
Get Free Email Updates to your Inbox!
Post a Comment