Recent innovation in insurance industry


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I also extent my thanks to Miss Swati Mehta, faculty guide who has given me moral support to do my project work. It also extend my thankfulness to my beloved parents and friends for their continuous encouragement at every moment


The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the country's GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India. It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation "Malhotra Committee" was constituted by the government in 1993 to examine the various aspects of the industry. The key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more efficient and competitive financial system suitable for the requirements of the economy was the main idea behind this reform.

Since then the insurance industry has gone through many sea changes .The competition LIC started facing from these companies were threatening to the existence of LIC .since the liberalization of the industry the insurance industry has never looked back and today stand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run.


The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are given in the table

Milestone's in the life insurance business in India

Year Milestones in the life insurance business in India

  • 1912 The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business
  • 1928 The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses
  • 1938 Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
  • 1956 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are given in the table.

Milestone's in the general insurance business in India

Year Milestones in the general insurance business in India

  • 1907 The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business
  • 1957 General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices
  • 1968 The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
    The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973.
  • 1972 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

Indian Insurance Market - History

Insurance has a long history in India. Life Insurance in its current form was introduced in 1818 when Oriental Life Insurance Company began its operations in India. General Insurance was however a comparatively late entrant in 1850 when Triton Insurance company set up its base in Kolkata. History of Insurance in India can be broadly bifurcated into three eras: a) Pre Nationalisation b) Nationalisation and c) Post Nationalisation. Life Insurance was the first to be nationalized in 1956. Life Insurance Corporation of India was formed by consolidating the operations of various insurance companies. General Insurance followed suit and was nationalized in 1973. General Insurance Corporation of India was set up as the controlling body with New India, United India, National and Oriental as its subsidiaries. The process of opening up the insurance sector was initiated against the background of Economic Reform process which commenced from 1991. For this purpose Malhotra Committee was formed during this year who submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was passed in 1999. Resultantly Indian Insurance was opened for private companies and Private Insurance Company effectively started operations from 2001.

Insurance Market- Present:

The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and non-life segment. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe.

There are now 29 insurance companies operating in the Indian market - 14 private life insurers, nine private non-life insurers and six public sector companies. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario.

There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion.

There are opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60 receive pensions. The IRDA has issued the first licence for a standalone health company in the country as many more players wait to enter. The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase. The deepening of the health database over time will also allow players to develop and price products for larger segments of society.

State Insurers Continue To Dominate There may be room for many more players in a large underinsured market like India with a population of over one billion. But the reality is that the intense competition in the last five years has made it difficult for new entrants to keep pace with the leaders and thereby failing to make any impact in the market.

Also as the private sector controls over 26.18% of the life insurance market and over 26.53% of the non-life market, the public sector companies still call the shots.

The country's largest life insurer, Life Insurance Corporation of India (LIC), had a share of 74.82% in new business premium income in November 2005.

Similarly, the four public-sector non-life insurers - New India Assurance, National Insurance, Oriental Insurance and United India Insurance - had a combined market share of 73.47% as of October 2005. ICICI Prudential Life Insurance Company continues to lead the private sector with a 7.26% market share in terms of fresh premium, whereas ICICI Lombard General Insurance Company is the leader among the private non-life players with a 8.11% market share. ICICI Lombard has focused on growing the market for general insurance products and increasing penetration within existing customers through product innovation and distribution.

Reaching Out To Customers No doubt, the customer profile in the insurance industry is changing with the introduction of large number of divergent intermediaries such as brokers, corporate agents, and bancassurance.

The industry now deals with customers who know what they want and when, and are more demanding in terms of better service and speedier responses. With the industry all set to move to a detariffed regime by 2007, there will be considerable improvement in customer service levels, product innovation and newer standards of underwriting.

Intense Competition In a de-tariffed environment, competition will manifest itself in prices, products, underwriting criteria, innovative sales methods and creditworthiness. Insurance companies will vie with each other to capture market share through better pricing and client segmentation.

The battle has so far been fought in the big urban cities, but in the next few years, increased competition will drive insurers to rural and semi-urban markets.

Global Standards While the world is eyeing India for growth and expansion, Indian companies are becoming increasingly world class. Take the case of LIC, which has set its sight on becoming a major global player following a Rs280-crore investment from the Indian government. The company now operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal and will soon start operations in Saudi Arabia. It also plans to venture into the African and Asia-Pacific regions in 2006.

The year 2005 was a testing phase for the general insurance industry with a series of catastrophes hitting the Indian sub-continent.

However, with robust reinsurance programmes in place, insurers have successfully managed to tide over the crisis without any adverse impact on their balance sheets.

With life insurance premiums being just 2.5% of GDP and general insurance premiums being 0.65% of GDP, the opportunities in the Indian market place is immense. The next five years will be challenging but those that can build scale and market share will survive and prosper.


Life Insurance Corporation of India (LIC) was formed in September, 1956 by an Act of Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution from the Government of India. The then Finance Minister, Shri C.D. Deshmukh, while piloting the bill, outlined the objectives of LIC thus: to conduct the business with the utmost economy, in a spirit of trusteeship; to charge premium no higher than warranted by strict actuarial considerations; to invest the funds for obtaining maximum yield for the policy holders consistent with safety of the capital; to render prompt and efficient service to policy holders, thereby making insurance widely popular.

Since nationalisation, LIC has built up a vast network of 2,048 branches, 100 divisions and 7 zonal offices spread over the country. The Life Insurance Corporation of India also transacts business abroad and has offices in Fiji, Mauritius and United Kingdom. LIC is associated with joint ventures abroad in the field of insurance, namely, Ken-India Assurance Company Limited, Nairobi; United Oriental Assurance Company Limited, Kuala Lumpur and Life Insurance Corporation (International) E.C. Bahrain. The Corporation has registered a joint venture company in 26th December, 2000 in Kathmandu, Nepal by the name of Life Insurance Corporation (Nepal) Limited in collaboration with Vishal Group Limited, a local industrial Group. An off-shore company L.I.C. (Mauritius) Off-shore Limited has also been set up in 2001 to tap the African insurance market.

Some Areas of Future Growth

Life Insurance

The traditional life insurance business for the LIC has been a little more than a savings policy. Term life (where the insurance company pays a predetermined amount if the policyholder dies within a given time but it pays nothing if the policyholder does not die) has accounted for less than 2% of the insurance premium of the LIC (Mitra and Nayak, 2001). For the new life insurance companies, term life policies would be the main line of business.

Health Insurance

Health insurance expenditure in India is roughly 6% of GDP, much higher than most other countries with the same level of economic development. Of that, 4.7% is private and the rest is public. What is even more striking is that 4.5% are out of pocket expenditure (Berman, 1996). There has been an almost total failure of the public health care system in India. This creates an opportunity for the new insurance companies.

Thus, private insurance companies will be able to sell health insurance to a vast number of families who would like to have health care cover but do not have it.


The pension system in India is in its infancy. There are generally three forms of plans: provident funds, gratuities and pension funds. Most of the pension schemes are confined to government employees (and some large companies). The vast majority of workers are in the informal sector. As a result, most workers do not have any retirement benefits to fall back on after retirement. Total assets of all the pension plans in India amount to less than USD 40 billion.

Therefore, there is a huge scope for the development of pension funds in India. The finance minister of India has repeatedly asserted that a Latin American style reform of the privatized pension system in India would be welcome (Roy, 1997). Given all the pros and cons, it is not clear whether such a wholesale privatization would really benefit India or not (Sinha, 2000).


The introduction of private players in the industry has added value to the industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in this sector. The new players have improved the service quality of the insurance. As a result LIC down the years have seen the declining phase in its career. The market share was distributed among the private players. Though LIC still holds the 75% of the insurance sector but the upcoming natures of these private players are enough to give more competition to LIC in the near future. LIC market share has decreased from 95% (2002-03) to 81 %( 2004-05).The following companies has the rest of the market share of the insurance industry.


There are a total of 13 life insurance companies operating in India, of which one is a Public Sector Undertaking and the balance 12 are Private Sector Enterprises.


India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice.

Consumers remain the most important centre of the insurance sector. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. Computerisation of operations and updating of technology has become imperative in the current scenario. Foreign players are bringing in international best practices in service through use of latest technologies

The insurance agents still remain the main source through which insurance products are sold. The concept is very well established in the country like India but still the increasing use of other sources is imperative. At present the distribution channels that are available in the market are listed below.

  • Direct selling
  • Corporate agents
  • Group selling
  • Brokers and cooperative societies
  • Bancassurance

Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not just traditional moneyback policies, which is not considered very appropriate for long-term protection and savings. There is lots of saving and investment plans in the market. However, there are still some key new products yet to be introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity for insurance products. A research conducted exhibited that the rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In the insurance the awareness level for life insurance is the highest in rural India, but the consumers are also aware about motor, accidents and cattle insurance. In a study conducted by MART the results showed that nearly one third said that they had purchased some kind of insurance with the maximum penetration skewed in favor of life insurance. The study also pointed out the private companies have huge task to play in creating awareness and credibility among the rural populace. The perceived benefits of buying a life policy range from security of income bulk return in future, daughter's marriage, children's education and good return on savings, in that order, the study adds.


Public Sector: Life Insurance Corporation of India

Private Sector: Allianz Bajaj Life Insurance Company Limited, Birla Sun-Life Insurance Company Limited, HDFC Standard Life Insurance Co. Limited, ICICI Prudential Life Insurance Co. Limited, ING Vysya Life Insurance Company Limited, Max New York Life Insurance Co. Limited, MetLife Insurance Company Limited, Om Kotak Mahindra Life Insurance Co. Ltd., SBI Life Insurance Company Limited, TATA AIG Life Insurance Company Limited, AMP Sanmar Assurance Company Limited, Dabur CGU Life Insurance Co. Pvt. Limited


Public Sector: National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited, United India Insurance Company Limited

Private Sector: Bajaj Allianz General Insurance Co. Limited, ICICI Lombard General Insurance Co. Ltd., IFFCO-Tokio General Insurance Co. Ltd., Reliance General Insurance Co. Limited, Royal Sundaram Alliance Insurance Co. Ltd., TATA AIG General Insurance Co. Limited, Cholamandalam General Insurance Co. Ltd., Export Credit Guarantee Corporation, HDFC Chubb General Insurance Co. Ltd.

Recent Innovation In Insurance Industry

Technological Changes

Historically, insurers were slow in adoption of the cutting-edge technology; be internet technologies of the past or mobile computing of the present. Only 25% to 30% of insurers adopt technology innovation early and they clearly emerge as leaders. The slower rate in adoption of technology was partly due to adequacy of old systems to manage lower transactions and mostly due to the basic conservative instincts of the insurers. Insurers, though initially started using information technology to save costs, are now moving beyond by embracing technology as an enabler. With more business from tech-savvy younger generations (Generation 'X', 'Y' and younger) in the radar insurers across the globe are gearing-up to take innovation through communication technology in their strides. This article gives glimpses of some of the technology tools that can be embraced to provide effective communication between insurers, customers, producers, employees and suppliers.

Self-service Portals

Self-service portals are built by consolidating disparate systems through web-service and enabling different set of functionalities to different types of users such as customers agents and employees (based on their profile) through single sign-on. Due to the increased appetite for quicker and quality service, coupled with the expectations on transparency from customers, sales force and employees, insurers are striving to provide access to information on demand round the clock through self-service portals.

Primary benefits of self-service portal are:

  • It increases satisfaction of stakeholder (customers, agents and employees) due to empowerment ,instant access to accurate information and request tracking capabilities.
  • Increases operational efficiency, productivity and retention of agents and employees - efficiency and productivity in terms of information consolidation and Just-In-Time information and retention through empowerment.
  • Single sign-on that reduces security risk and multisystem hassles such as different user name and password for different systems
  • Increases revenue and profitability through crossselling and up-selling and retention through customer's willingness to maintain single portfolio.
  • Enables green offices through paperless processing

Unified Communication and Collaboration

Insurers need to extend the above concept of self-service portals and move to web unified communication and collaboration by providing more dynamic and interactive online contents to the customers, producers and employees. Also, availability and cost effectiveness of tools such as VOIP (Voice-Over Internet Protocol), instant messaging, and remote desktop connect tools and VPN (Virtual Private Network) have increased ease in implementing unified communication.

  • E-mail facilities that are exclusive for the customers / producers / employees and are used to propagate reply / response-enabled general and customized messages.
  • Online instant messaging supported by live sales / service representatives for online query resolution.
  • Wikis, Blogs and Forums promoted by the companies to bring together the users with similar profiles or who share similar interest that can be used for purposes that include knowledge sharing, training and creating awareness about products and services.
  • Virtual worlds like Second Life can also be used by the insurers to create cost effective virtual organizations and leverage on the market places.
  • Linking remote sales offices, global administrative canters and wide-spread tech-savvy customers are made possible through web collaboration.
  • Virtual offices lead to green organizations by reducing commutation related carbon footprints and eventually decreasing commutation expenses.
  • Serves as networking tool for people with similar interest and organizational affiliation which promotes knowledge sharing and organizing consumer groups.
  • By creating a habit of regularly visiting the websites, capturing the interests of the users and communicating based on user interest, sales can be increased through loyalty.
  • The participants will get more benefits including real-time service and query resolution due to the interactive nature of the concept.

Mobile Computing

Globalization has increased the number of trans-national organizations that incidentally operate through considerable number of globe trotters. Due to the very nature of mobility, time zone logistics and tight work schedule of the workforce and customers, mobile computing is one of the most sought over technology nowa- days in many domains of business. In the insurance industry, the ever-mobile sales force is the flowing blood that sustains the life of the company through new business. Also, the current generation customers, who are always on the move, want access to the service points while mobile. Also, from a philanthropic perspective, insurers want to reach-out to the disaster areas, where they do not have office, for settling claims so that it showcases the insurers' social responsibility. These necessities will drive the insurance industry towards implementing mobile computing solutions that can provide self-service portal capabilities, unified communication and collaboration tools accessible through mobile devices. High-speed wireless internet access, recent improvements in devices such as tablet PCs and PDAs, and an industry-wide shift in focus toward customer satisfaction have all but forced insurers to develop mobile claims capabilities. In response, insurers large and small have started equipping their claims adjusters with mobile capabilities around everything from estimating to catastrophe response to cutting checks. And yet, while mobile technology in claims has become a must-have and implemented in silos, it is still largely uncharted waters in many other areas of the insurance enterprise -- most significantly, sales. But the affordability, accessibility and necessity will accelerate the implementation of integrated mobile computing by the insurers in the following business areas:

Sales: Producers can prepare quick quotes and illustrations, download, forward and print forms through their mobile devices. Producers will get alerts and updates from the insurers in their mobile devices.

Customer Service: Producers and policyholders can access forms, forward, download and prints forms through their mobile devices. They can submit requests / complaints and receive acknowledgement and status update in the mobile devices.

Claims: Apart from retrofitting the functional components of customer service to claims, some of the insurers have already implemented the concept of mobile claims bus / van, which house the full fledged systems / resources for settling claims that include remote connectivity to the policy administration system, requirements systems, accounting systems and banking systems that enable quick processing and payment of claims on the- spot when it is much needed to claimants.

Insurers can increase quality and efficiency and reduce turnaround- time in all the above areas by implementing integrated systems that can enhance the above functionality further. The enhanced functionality can offer:

  • Enabling seamless integration of enterprise-wide systems to achieve Straight-through processing.
  • Enabling producers, customers, assessors and administrators to seamlessly connect through all the available mode of communication based on preference, availability and priority. For example, ordering forms through options available in IVRS (Integrated Voice Response System) can send the forms through fax or email.
  • Enabling multi-media communications including MMS,using which, the spot-reports, photos etc. can be submitted by the agent / assessors / customers themselves.

"Insurance companies tend to deploy new technologies to reduce costs first, and the biggest reduction area they have is claims," explains Bill Hartnett, general manager of Redmond, Wash.-based Microsoft's insurance solutions group. "If they cut down on claims and claims settlement expenses, they can really make a big impact on the bottom line."

Revised Guidelines for opening of representative/ liaison offices overseas by an Indian insurance company registered with the IRDA

According to IRDA circular of 21st January, 2009, They advise having reviewed the IRDA guidelines for opening of representative/ liaison office overseas by an Indian issuance company registered with the IRDA ,in the light of views expressed by the insurers. The following revised guidelines are accordingly issued in super cession thereof:


  1. A "Representative/ Liaison Office" would mean a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial/ trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.
  2. All Indian insurance companies registered with IRDA shall seek prior approval of the Authority for opening representative/ liaison offices abroad.
  3. The Indian insurance company should have obtained approval or an in-principle clearance from the host country regulator.
  4. IRDA may consider permitting Indian insurance companies to set-up representative/ liaison offices overseas so long as
    1. Insurer has a good financial strength and maintains the prescribed solvency requirement of 1.5.
    2. Track record on market conduct, regulatory compliances, redressal of complaints, etc. indicates that there are no serious adverse features on the functioning of the company on the record of IRDA.
  5. Eligible Indian insurance companies desirous of opening representative/ liaison offices overseas shall apply to the Insurance Regulatory and Development Authority in Form IRDA-FO-1 attached as Annexure

Determination of Required Solvency Margin under Life Insurance Business

In this year in month of January IRDA sent a circular toCEOs of Life Insurance Companies. Given the macroeconomic environment and risk parameters there is a need to utilize the capital optimally with affordable cost so that insurance penetration increases.The Authority has reviewed the solvency margin requirement for the linked business and proposes the following first factor and second factor with respect to linked business in working out the required solvency margin. These factors shall come into effect for the business as on December 31, 2008 and onwards.

Corporate Governance for Insurance Companies

Corporate Governance is understood as a system of financial and other controls in a corporate entity and broadly defines the relationship between the Board of Directors, Senior Management and Shareholders. The Corporate Governance framework clearly defines the roles and responsibilities and accountability within an organization with in-built checks and balances. In case of listed companies, the stipulations in this regard are contained in Clause 49 of the Listing Agreement.

In case of Insurance Companies, IRDA has been entrusted with the regulatory responsibility to protect the interests of the policyholders and accordingly would like to ensure that appropriate governance practices are in place in the insurance companies for maintenance of solvency, sound long-term investment policy and assumption of underwriting risks on a prudential basis, particularly as the insurance companies are yet to be listed. The IRDA has outlined in general terms, governance responsibilities of the Board in the management of the insurance functions under various Regulations notified by it covering different operational areas. It has now been decided to put them together and to issue comprehensive guidelines on Corporate Governance for adoption by Indian insurance companies.

Disclosures forming part of Financial Statements

  1. Part II of Schedules A and B of IRDA (Preparation of Financial Statements and Auditor's Report of Insurance Companies) Regulations, 2002, stipulates the disclosure requirements which are required to form part of the financial statements.
  2. Apart from the disclosures prescribed under the said Regulation, all insurers are required to provide details of various penal actions taken by various Government Authorities from the financial year 2008-09 onwards as per the format given below. The said information is required to be duly certified by the Statutory Auditor of the insurer. In view of the advanced stage of finalization of accounts by the insurers, the said disclosures for 2008-09 may be made to the Authority through a separate filing. It may, however, be ensured that the said information is incorporated in Annual Report w.e.f. 2009-10 onwards.

Pension Fund Managers (PFMs)/Points of Presence (PoP)

As We know that, the Pension Fund Regulatory and Development Authority (PFRDA) had recently called for expression of interest from various entities to set-up operations as the Pension Fund Managers (PFMs) and for acting as Points of Presence (PoP) under the New Pension Scheme (NPS) announced by the Government of India. Some of the insurance companies which fulfill the criteria for filing of expression of interest with the PFRDA, had sought our approval for entry into pension fund management. The Authority had examined the various legal and regulatory issues relating to insurance companies (a) setting-up subsidiaries to take up operations as PFMs and (b) acting as PoP, and it has been decided that presently

  • Life Insurance Companies may set-up fully owned subsidiaries to act as PFMs;
  • No Non-Life Insurance Company would be permitted to act as PFMs;
  • N0 Insurer may act as PoP.

Requirement of PAN for Insurance Products

It was mandated vide Circular No.021/IRDA/LIFE/PAN/Jul-2009 dated 22.07.2009 that insurers shall collect PAN from all persons purchasing insurance policies with annualized premiums exceeding Rs. one lakh per policy.

  1. Many insurers have expressed difficulty in meeting with the deadline of 1st August, 2009 for implementing the above Circular and requested for an extension. Taking the representation of the insurers into consideration, the deadline for complying with the Circular is now extended to 01.09.2009.
  2. Representations have also been made that since certain categories of persons such as persons with only agricultural income, NRIs with no assessed income under the IT Act, 1961 etc are exempted from the requirement of PAN, the requirement of submitting PAN be waived in case of such persons. This request has been considered and it is now decided that insurers shall insist on PAN from all persons who are required to obtain the same under the provisions of IT Act, 1961. Insurers shall however collect a signed declaration from persons exempted from the requirement of PAN, stating the provisions of the IT Act under which they have been exempted.

It has also been decided that in cases where a proposer has applied for PAN but has still not received the same, a copy of form 49A (application for PAN), duly acknowledged by the agency authorized to collect applications for PAN, can be accepted by insurers in lieu of PAN, with an undertaking from the proposer that the PAN shall be submitted as soon as it is received.

Anti Money Laundering (AML) guidelines

A review of the extant guidelines on Anti Money Laundering for Insurers vis-à-vis the 40+9 recommendations of Financial Action Task Force (FATF) was carried out in view of the scheduled Evaluation of AML regimen of India by FATF during November-December 2009.It is observed that though the guidelines are largely in accordance with the said recommendations, some of the extant stipulations need to be further elaborated/specified to be in consonance with the FATF norms.

Exposure Draft on the Public Disclosures by Insurers

The Insurance Regulatory and Development Authority (IRDA) is entrusted with the regulation, promotion and orderly growth of insurance business in India . Maintaining efficient, fair and stable insurance market is necessary for the growth of the industry as well as for the protection of the policyholders. Public disclosure of risks faced by the insurers is critical for ensuring fair and orderly insurance sector. The disclosures shall be reliable and timely to ensure efficiency of the markets. The markets have to provide necessary feedback to the insurance regulator to ensure safety of the investors as well as the policyholders.

Design and Development of Vehicle Insurance Status SMS System (VISSS)

This program has implemented on 25th September 2009.It is related on motor insurance.Motor Insurance is one of the port-folio of insurance business. In Motor mainly two types of policies are issued, 'Package' Policy and 'Liability only' policy. Package policy covers 'Own Damage' and 'Third Party Liability' where as 'Liability only' policy covers 'Third-party liability' only. Under the provisions of Motor Vehicles Act all the vehicles which are plying in public places shall have an insurance policy at least to cover third party liability as specified under the Act. The Certificate of Insurance issued by the insurers in relation to every vehicle is the only evidence acceptable to the police authorities to show that valid insurance exists. This document has to be produced when demanded by an authorized police officer.

  • This VISSS will provide an additional facility to the police authorities to verify insurance status of the vehicle.
  • As per provisions of the Motor Vehicle Act, all 'hit and run' death cases are paid from a 'Solatium fund'. To this extent insurers are already paying for some of the losses caused by uninsured vehicles.

  • As part of developing the market, VISSS will provide insurers with a facility to locate uninsured vehicles and bring them into the insurance net.
  • Transaction level insurance data is already collected by IRDA for all lines of business including Motor Insurance. The periodicity of data collection is one year. The time lag between the issuance of policy to insured and data received by IRDA on an average is one year. Around 5 crores of motor policies are issued every year by the 17 general insurance companies operating on different systems having around 5000 operating offices.

  • VISSS will collect up-to-date information from all these offices to one central place and disseminate information to all stakeholders instantly.


The objectives of the proposed system are briefly stated below:

  • Instant and easy availability of insurance status of the vehicle.
  • Providing the authorities with additional proof of non-insurance for taking action against uninsured vehicles.
  • Discourage use of forged policy documents.
  • Bringing more vehicles into the insurance net.
  • Real time availability of micro figures of motor insurance with the Regulator which can be used for other regulatory purposes.


India is among the important emerging insurance markets in the world. Life insurance will grow very rapidly over the next decades in India. The major drivers include sound economic fundamentals, a rising middle-income class, an improving regulatory framework and rising risk awareness. The fundamental regulatory changes in the insurance sector in 1999 will be critical for future growth. Despite the restriction of 26% on foreign ownership, large foreign insurers have entered the Indian market. State-owned insurance companies still have dominant market positions. But, this would probably change over the next decade. In the life sector, new private insurers are bringing in new products to the market. They also have used innovative distribution channels to reach a broader range of the population. There is huge in the largely undeveloped private pension market. The same is true for the health insurance business. The Indian general insurance segment is still heavily regulated. Three quarters of premiums are generated under the tariff system. Reinsurance in India is mainly provided by the General Insurance Corporation of India, which receives 20% compulsory cessions from other general insurers. Finally, the rural sector has potential for both life and general insurance. To realize this potential, designing suitable products is important. Insurers will need to pay special attention to the characteristics of the rural labor force, like the prevalence of irregular income streams and preference for simple products.



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