Indian Insurance

The Life Insurance Corporation (LIC) of India founded in 1956 is the largest life insurance company in India owned solely by the Government of India. Headquartered in Mumbai, which is considered the financial capital of India, LIC presently has 7 Zonal Offices and 100 Divisional Offices situated all around the country. In addition to an even distribution of 2048 branches located in different towns and cities of India, LIC also has a network of around one million agents who solicit life insurance policies to the public.

History of LIC of India

The first 150 years of the British Rule in India were characterized by turbulent economic conditions. The first war of independence in 1857, the World Wars 1 and 2 (1914-1918 and 1939-45) and India’s national struggle for freedom in between had adverse effect on the economy. In addition to this the period of world wide economic crisis in between the two World Wars termed as the period of Great Depression led to the high rate of bankruptcies and liquidation of most Life Insurance Companies in India that existed during that time. These occurrences led to loss of faith in insurance of the people of India.

The Life Insurance Companies Act and Provident Fund Act both passed in 1912 provided regulatory mechanisms to the Life Insurance Industry in India for the first time. After undergoing several other such reforms in the following decades and nearly a decade after India achieved independence, the Parliament of India passed the Life Insurance of India Act on 19 th June, 1956 following which the Life Insurance Corporation (LIC) of India on 1 st September of the same year. The Company began its operations with 5 Zonal Offices , 33 Divisional Offices and 212 Branch Offices .

Present Status of LIC of India

Existing as a towering insurance company for over 50 years, LIC has acquired almost monopoly power in the solicitation and sale of life insurance policies in India. In addition to the summary regarding the present stature provided at the beginning, LIC has extended its activities in 12 countries other than India with the objective of catering to the insurance needs of Non Resident Indians.

The enforcement of New Economic Reforms in 1991 coupled with the formation of Insurance Regulatory and Development Authority Act (IRDA) of 2000 (which started issuing licenses to private life insurers ) has diluted the monopolistic attitude commanded by LIC. The only insurance company belonging to the public sector now has to compete with several other corporate entities of its kind which often are heavyweight Indian as well as Multinational Life Insurance Brands in themselves.

The other subsidiary companies under LIC are:

* Life Insurance Corporation (LIC) of India International - A joint venture offshore company promoted by LIC which commenced its operations in July, 1989 with the objective of offering policies denominated in US $ to NRIs residing in the Gulf.
* LIC Nepal - Formed in 2001 in joint venture with Vishal Group of Industries, Nepal.
* LIC Lanka - Formed in 2003 in joint venture with Bartleet Group of Companies, Sri Lanka
* LIC Housing Finance - Established in 19 th June,1989 in Dubai with the objective of providing long term finance for construction of houses or apartments.
* LIC Housing Finance Limited Care Homes - A wholly owned subsidiary of LIC Housing Finance which builds “Assisted Community Living Centers” for senior citizens.

With its ever-expanding operations, LIC has set an example for other Public Sector Undertakings of India to follow.

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Is motor insurance compulsory in India?
Under the provisions of Motor Vehicles Act all the vehicles, which are runnng in public places shall have at Car insurance policy at least to cover third party liability as specified under the Act.

What is insured ?
Any light motor insurance used for social, domestic and pleasure purposes and for the insurer’s business.

What types of policies are available for motor vehicles?
There are two types of policies available for motor insurance
•  Third party Car insurance -policy A and
•  comprehensive insurance policy- policy B.

What is the difference between these two policies?
Third party Car insurance policy covers only the inter-alia accountability of the vehicle owner for loss or damage to life or property of the third parties. Whereas comprehensive Car insurance policy covers in addition to third party accountability, loss or damage to the vehicle itself by way of accident, theft, etc. and specified dangers.

Are the insurance premiums same or different amongst four Indian companies?
The premium rates for motor vehicle insurance in India are governed by Tariffs, which is same for all the companies operating in India.

For what value the car is to be insured - Depreciated value or reinstatement value?
The car is neither to be insured for reinstatement value nor for depreciated value. It is to be insured for second-hand value in the local market for a similar type of car for a similar model. In the event of loss, the liability of insurance company is the maximum compared to the market value or the amount of insurance whichever is less.

What factors determine the premium for car insurance?
The cubic capacity, use of car, normal area of operation and the value of car proposed for insurance decide the premium payable and also various extensions opted for.

How much would the insurance company pay in the event of an accident?
In case of an accident, the insurance company pays for cost of damaged parts which are replace and the labor cost to repair the vehicle. As per the revised regulations, depreciation is not deducted from the cost of the parts except for the tyres and tubes for which 50 percent depreciation is deducted.

What is Bonus/ Malus system?
In case of any accident occurring in a year for which a claim is lodged on insurance company, in the very next year, the insurance company loads the premium by way of charging a malus- a percentage of extra premium. Whereas when there is no claim lodged during the year the Car insurance company grants a discount in the premium by way of bonus.

What are the minimum/ maximum percentages of the Bonus/Malus?
The minimum Bonus is 20 percent, maximum is 65 percent whereas minimum Malus is 105 percent and maximum is 50 percent.

On sale and transfer of vehicle, what happens to the Bonus/Malus?
The Bonus/Malus goes with the original owner since he can claim bonus on his next purchased vehicle. However, the purchaser enjoys the bonus under seller’s policy till the renewal date. On date of renewal, the bonus/malus has to start afresh.

What is voluntary excess?
Voluntary excess is client’s option to opt for bearing a certain amount of loss from every claim. For this option,Car insurance company allows a discount in premium.

How is voluntary excess different from compulsory excess?
In case of voluntary excess, it is the client’s option for which he gets discount in premium whereas compulsory excess is imposed by the Car insurance company in addition to Malus to take care of a bad claim experience for a particular car. For compulsory excess, no discount in the premium is allowed.

Max New York Life Insurance has introduced the ‘Lifeline Healthy Family’ - a health insurance plan, the most comprehensive long-term insurance coverage for hospitalisation, surgeries and critical illness for the entire family under one single policy.

With the launch of ‘Health Family’ Max New York Life also became the first and the only company to offer benefits for congenital disorder. It also introduces some other significant firsts and bests to the industry:

* Highest number of Hospitalisation Days and Daily Cash limit.
* Highest number of critical illness covere.
* Health insurance coverage for the longest duration - 10 year.
* No upper limit on the family siz.
* Yearly increases on surgical benefits, even after claim.
* Guaranteed renewability till the age of 75 year.
* Relevant and segmented benefit for parent.

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“We are excited to offer this comprehensive health insurance solution for the entire family that responds realistically to their needs which are far from being met. With the growing incidence of diseases due to lifestyle changes, health insurance is recognized as one of the primary protection needs for all the members of the family,” said the Max New York Life Insurance Senior Vice-President and Head-Health and Retirement, Sumit Rai.

Announcing the launch of ‘Healthy Family’, Sumit Rai added: “With a complete and comprehensive portfolio of Health Insurance solutions backed by best in class services we have emerged as a leader in setting quality benchmarks. Max New York Life works on the principle of trust and imparts the same values to its Agent advisors. We work closely with our customers and the process of aiming to provide relevant solutions for their needs begins with understanding them better and recognising their needs.”

The new health insurance plan not only takes care of ones health insurance, but also takes care of his family. Its key benefits are Comprehensive health cover - Covers hospital cash, surgery and critical illness for the whole family under one plan.

The Home insurance sector in India is at a nascent stage as compared to other insurance sectors in the country. With the real estate boom at its prime in India, home finance has become an indispensable part of real estate functioning. Moreover, the housing finance companies (HFCs) are also playing an important role in the evolvement of the home insurance company in India.

Due to the new regulations by the finance companies making home insurance mandatory for seeking home loans in India, the home insurance sector has recently seen massive revival in business. Industry analyst say that, if the home loans and insurance sector continue to facilitate each others growth, then the insurance segment is soon set to achieve a 100% growth. The latest growth curve shows the home insurance premium touching the Rs 150 crore-mark, registering a growth of 25% in the last financial year; and if the situation prevails, the trend is predicted to continue.

As the growth curve of investments in Indian real estate sector escalates, more and more insurance companies are making their foray into the home insurance sector. This has also initiated a trend of insurance companies from across the globe making their foray into Indian market either as individual entity or in joint ventures with the local existing insurance companies.

Home insurance and real estate has of late become conspicuous of the buzz it has created in the realty industry in India. Adding to the list of leading and existing public sector companies in the home insurance business like New India Assurance, Life Insurance Company of India, United India Insurance, Oriental Insurance and National Insurance Company; is a list of private insurance companies which are set to play a pivotal role in the growth of the sector.

The most thriving amongst those are mostly joint venture companies like ICICI Lombard General Insurance, Bajaj Allianz General Insurance, Tata AIG General Insurance Company Ltd, IFFCO-TOKIO and Royal Sundaram Alliance to name a few. Considering the feasibility of a largely huge and growing market, the home insurance sectors has lately expanded its business beyond the metros to the Tier I and II cities where real estate development is expected to flare up in the years to come.

The booming real estate sector in India is considered to be one of the most encouraging factors in the resurgence of the home insurance sector. However, apart from the real estate factor, the recent spate of calamities that has hit the country like the earthquakes, tsunami, the consistent flood every year in most parts of the country and the exceptional cases of ‘deluge’ in Mumbai in 2005 has made people opt for home insurance like never before. Besides that, the home insurance companies are also providing their customers with attractive policy plans to suit their needs and budget.