- IRDA
- Insurance Ombudsman
- Insurance Policies: Types
- Nationalization of Insurance business
- Foreign Direct Investment in Insurance
- Reform in Insurance sector
- LIC
- GIC- Reinsurer
- Mock Questions
Who can make laws on Insurance?
- Insurance is a subject listed in the Union list in the Seventh Schedule to the Constitution of India.
- That means only Union Government can make laws on insurance (a state Government cannot make law on this subject)
- Insurance Regulatory and Development Authority (IRDA)
- Created on the recommendations of the Malhotra Committee report
- Started in 2000, it is a statutory body (i.e. made through an Act of parliament).
What are the functions of IRDA?
- To run insurance businesss, a company has to register itself with IRDA.
- IRDA regulates the insurance industry and protects the customers.
- IRDA has the power to frame regulations regarding Insurance market (just like SEBI for Capital market)
- promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums. (for example IRDA allowed Health Insurance Portability)
- IRDA has a ten member team consisting of
- 1 Chairman
- 5 whole-time members
- 4 part-time members
All of them, appointed by the Government of India.
Insurance Ombudsman
- was created by a Government of India in 1998
Functions of Insurance Ombudsman
- Receive and consider complaints in respect of insurance from any person who has any problem against an insurer.
- pass an award within 3 months after receiving complaint.
- Insurance companies are required to honour the awards passed by an Insurance Ombudsman within three months.
- If the policy holder [customer] is not satisfied with the award of the Ombudsman he can approach other venues like Consumer Forums and Courts of law for redressal of his grievances.
- Ombudsman are drawn from Insurance Industry, Civil Services and Judicial Services.
- A committee comprising of Chairman, IRDA, Chairman, LIC, Chairman, GIC and a representative of the Central Government select the Insurance Ombudsman.
- There are twelve Ombudsman across the country allotting them different geographical areas as their areas of jurisdiction.
- An insurance Ombudsman is appointed for a term of three years or till the incumbent attains the age of sixty five years, whichever is earlier.
- Re-appointment is not permitted.
What is premium?
- To enjoy SAB TV, Zee TV, Star Movies, AXN, HBO etc. you’ve to make regular payment to Dish TV/Tata Sky etc., we call it “subscription”.
- Similarly to get insurance protection, you’ve to make regular payment to the insurance company, we call it “premium”.
Insurance Policies: Types
Two main types: General and Life
General Insurance
- General Insurance = Every Insurance plan EXCEPT life insurance plan
Name | Sub categories |
---|---|
Personal Insurance policies | medical insurance, accident, property and vehicle insurance |
Rural Insurance policies | protection against natural and climatic disasters for agriculture and rural businesses |
Industrial Insurance policies | coverage for project, construction, contracts, fire, equipment loss, theft, etc. |
Commercial Insurance policies | protection against loss and damage of property during transportation, transactions, marine insurance etc. |
Life Insurance Types
Whole life plan |
|
Endowment |
|
Term Plan |
|
ULIP(Unit Linked Insurance Policy) |
|
Nationalization of Insurance business
- In 1972, Government of India passed of the General Insurance Business (Nationalisation) Act,
- With this Act, Government took control of all the private insurance companies of India and created 4 companies
National Insurance Company Ltd | General Insurance.HQ: Kolkata |
New India Assurance Company Ltd | General InsuranceHQ: Mumbai |
Oriental Insurance Company Ltd | General InsuranceHQ: New Delhi |
United India Insurance Company Ltd. | General InsuranceHQ: Chennai |
Foreign Direct Investment in Insurance
up to 26% is allowed.Update: 49% allowed after Mamta Left the UPA alliance.- For example “Bajaj Allianz Life Insurance Company Limited” is a joint venture between
- The Indian Company Bajaj (that scooter maker, has 74% stakes in this company.)
- The Foreign Company Allianz AG (German Company, has 26% stakes in this company)
- Similar arrangement was present in “Max New York Life Insurance Company” But the New York Life sold its stakes and left the game hence the new name of the company is Max Life Insurance Company. [You might have seen the ads on TV about its name change.]
Reform in Insurance sector
- If an Insurance company has been in business for 10 years, it can launch IPO.
- Mobility / Portability in Health Insurance= if you’re unhappy with your Health (Medical) insurance company, you can change it.
Pending Reform
PM Mohan Singh: I want to increase the FDI limit from 26% to 49%. Then more foreign companies would come up = more products = lower premiums.
Mamatha: But I’m opposed to FDI in Retail, Insurance and Aviation.
PM Mohan Singh: Ok I drop the idea sir-ji.
New PM Narendra Modi: But, I’ll get this passed with an ordinance!
LIC
- Life Insurance Corporation of India
- 100% owned by Government.
- Started in 1956
- HQ: Mumbai
- Motto: “Yogakshemam Vahamyaham” (taken from Gita, meaning “I carry what you require”.)
- Provides Life Insurance, Health Insurance
GIC- Reinsurer
- Suppose LIC sells 1000 life insurance policies, each with a 1 crore policy limit (e.g. I, the customer pay Rs.10,000 premium every year and If I die my family should get 1 crore- that type of Policy).
- Theoretically, the LIC could lose 1000 crores in a day, if every customer dies on the same day!
- So to prevent itself from such a loss, LIC itself should take some insurance from a third insurance company (GIC).
- for example “I, the LIC Manager shall continue to pay the GIC 1 lakh every month, and in return GIC insures that if my company LIC has to pay more than 100 crores in policy claims within 1 week, then GIC will cover the cost.
- So, This third party, General Insurance Corporation of India (GIC) = Reinsurer.
- GIC is the ONLY Reinsurer in India.
Mock Questions for APFC, LIC AAO
Which of the following statements are correct?
- IRDA is a statutory body.
- IRDA is made up of 1 chairman and 3 members.
- IRDA members are selected by RBI governor.
- Oriental Insurance LTD is the only Reinsurer in India.
- Government owns only 51% in LIC.
- LIC’s motto is “Nabha Sparsha Diptam“
- Health insurance is a type of Life insurance.
- In ULIP policy, customer’s money in invested in Government securities only.
- The premium of a Term plan is cheaper than Endowment plan.
- Every Insurance Company has to appoint an Insurance Ombudsman in its head office.
- Currently, a foreign company can invest upto 49% in an Indian Insurance company.
- IRDA has allowed portability in life insurance products from 2011.
Mrunal Sir
Now this is what called as interactive learning… absolutely incredible to learn everything in a nutshell… A thumbs up (yeah that symbol of once our fav cola brand)… but what are other questions that we can frame from this topic for APFC?
Really nice sir ji.. though I m working with New India Assurance but still useful for me…
owais sir
i am appearing for the interview of New india and national insurance for the post of AO
plz help me. what are the questions they would ask
my emailid ckumarforu@gmail.com
you are expected to know sm basics about General Insurance, about companies , well prepare with biodata, mostly thy may ask related to your qualifications… go with free mind. Interview wil be bit easy.. all d best. :)
What is BASEL 3 also how it is different previous basel 2,1….:)
thanks mrunal sir such a valuable treasure of knowledge for all
thanks sir, for gr88 article
thanks sir
Thanks
thanks a lot sir, it is coming on very right time as i have to appear in an interview of NICL and NIICL nex week
Wah!!! Mrunal..
Lazawaab !!!
Subhan-Allah!!!
Very pragmatic approach. Aaj bahut kuch clear hua.
“””””” Mrunal Tapovan has asked about BASEL 3, I need to ask same Coz it was also in news recently.”””””
So Waiting for Article on Basel Committee/ Norms.
Warm regards. :-)
____________Answers____________
T; F; F
F; F; F
F; F; T
F; F; F ( Not Sure coz IRDA has allowed Health Insurance Portability but not sure about this..
IRDA has allowed portability in Health Insurance only. so 12th statement is False.
Now 11 is “T”
thanks a lot mrunal..
kindly tell us the implications of basel 3 on indian banking system
and in science abt the junk dna and “ENCODE” project
thanks Mrunal sir, for your very useful and clear notes…
thanks sir
thanks sir for this artical
Mrunal, some doubts..
1. Does LIC get any interest on the money it pays GIC for reinsuring? If the preson does not die, then LIC would get back the money it hsa paid GIC and then inturn pay the customer?
2. ULIP can be regulated by SEBI and IRDA both as it is issued as an insurance policy and invests into the equity market. Who should be the regulator?
3. What policies of LIC and reinsured by GIC? I mean does GIC reinsure all the policies LIC sells?
>>1. Does LIC get any interest on the money it pays GIC for reinsuring? If the preson does not die, then LIC would get back the money it hsa paid GIC and then inturn pay the customer?
Don’t think so; When will the reinsurance guy ever make money?
>>2. ULIP can be regulated by SEBI and IRDA both as it is issued as an insurance policy and invests into the equity market. Who should be the regulator?
This was the controversy two years back when Fin Min had to intervene to calm down both IRDA and SEBI. IRDA had been regulating ULIPs till then and SEBI woke up to realize that ULIPs involved investing in Capital markets which are under its domain and asked for suspension of all ULIPs till further notice. I guess Fin Min restored status quo back then.
>>3. What policies of LIC and reinsured by GIC? I mean does GIC reinsure all the policies LIC sells?
I guess because GIC is the only reinsurance firm in the country, it is bound to insure all kinds of products. The premiums it charges of course may vary with the risk involved in the product.
Fair enough Swagat.. But are you certain?
Thank you very much for your wonderful explanation. Very simple, easy to understand. Once again thanks.
thanks
you made learning interesting.
u really dont have idea.. what u r doing..
to express my feeling i can say..
if i become a billionare in future..
i will give u millions just to “get spoiled”….hahahah
mrunal sir,
thank you for such a great artical.
1. T
2. F
3. F
4. F
5. F
6. F
7. F
8. F
9. T
10. ?
11. F
12. F
10th statement is false.
thanx
can we get pdf of your all articles in a compressed form so i can get print of them ,cant i? as i have problem to read through p.c. ,it gives me headache …….plz if possible then try i would be very graceful for you
thank you
Save all the articles as pdf and then , merge them using http://foxyutils.com/mergepdf/
Sir
Please tell when govt needs to get the bill approved by the parliament. Like, today FDI has been approved in aviation sector and multi-brand retail and for that, it needed not be approved by parliament as a bill.
Please tell when it needs to be approved by parliament and when not to be.
Thanks
Onkar Goyal
Sir
Govt has approved FDI in multi-brand retail. But to implement it in states, it will be the decision of state govts whether or not to allow it in states. Is it defined by law that state govts have the final decision on implementing in their states? FDI is in union list or concurrent list?
http://www.indianexpress.com/news/irda-proposes-greater-investment-freedom-to-insurers/984622/2 sir can you plz explain this article..?
Dear Sir,
Attention Please !!!!
Is Insurance is a subject listed in the concurrent list or in the Union list?
Please clarify sir……
Dear Sir,
Attention Please !!!!
Is Insurance is a subject listed in the concurrent list or in the Union list?
Please clarify sir……
Insurance falls under Union list.
7th Schedule ->List -I->Item #47
Sir, the tone of the article is regally explained from your side leaving no element of doubt or clarity seeking. It would be elevating experience for me to see you dropping your scholarly views on FDI proposed increase limit and competition. Your views and technique employed in explaining concepts are truly exceptional to the core.
CAN ANYONE TELL WHAT IS POLICY PARALYSIS? I HAVE TRIED EVERY SOURCE(EVERY GOOGLE!)
Policy Paralysis is an apparent or real situation that occurs when the executive branch of the government ( political executive and permanent executive ) becomes too risk –averse to take any innovative move (may be because of irresponsible fault-finding kind of oversight by auditing agencies or judiciary ) or aloof ( may be because of lack of political will or due to internal squabbling ) or when there is policy logjam ( may be due conflicting claims on policy jurisdiction e.g. IRDA vs. SEBI case ) so that it (the government ) does not seem to act ( by policy making or by executive action ) , either proactively or reactively ,especially when it is expected move for the sake of improvement in political and/or economic and/or social and/or strategic environment prevailing at that time .
Note–this is just my understanding ,not from any book so please be confirmed about it before writing anywhere .
Policy paralysis means “Government have no solution or means to solve the problem that occurs”
great works sir…. you r makin complex topics and concepts as simple as possible…great job! thank you
gr8 …tkx