Principles & Practices of General

Insurance
1

MODULE 3
Prepared by: Dr. Aashish Mehra

Course Topics (PPGI)

2

General insurance
Business in India:-General
Insurance Functional set Up in
India. Organizational Structure of
General Insurance Companies, The
General Insurance Business Market
in India in the present Business
Environment. General Insurance
Corporation of India, Private
insurance companies in India.
Module 3:

MIDTERM (3)

Important milestones in the Indian

general insurance business
3

1850: Triton Insurance Company Ltd., the first company

established in Calcutta by the British.

1907: The Indian Mercantile Insurance Ltd. was set up which was
the first company of its type to transact all general insurance
business.

1957: General Insurance Council, an arm of the Insurance

Association of India, framed a code of conduct for guaranteeing
fair conduct and sound business patterns.

1968: The Insurance Act improved for regulating investments and

set minimal solvency levels and the Tariff Advisory Committee
was set up.

1972: The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India. It was with
effect from 1st January 1973.

107 insurers integrated and grouped into four companies viz. the
National Insurance Company Ltd., the New India Assurance

General Insurance Companies in

India
4

List of Non-Life Insurance Companies in India

7.

Export Credit Guarantee Corporation o

f India Ltd.

1.

Agriculture Insurance Co. of India Ltd.

8.

Future Generali India Insurance Co. L

td.

2.

Apollo Munich Health Insurance Co. Ltd.

9.

HDFC ERGO General Insurance Co. L

td.

3.

Bajaj Allianz General Insurance Co. Ltd.

10. ICICI Lombard General Insurance Co.

Ltd.

4.

Bharti Axa General Insurance Co. Ltd.

11.

IFFCO Tokio
General Insurance Co. Ltd.

5.

Cholamandalam
MS General Insurance Co. Ltd.

12.

L&T General Insurance Co. Ltd.

6.

Cigna TTK Health Insurance Co. Ltd.

13. Liberty Videocon General Insurance C

o. Ltd.

General Insurance Companies

in India

14.

Magma HDI General Insurance Co. Ltd.

15.

Max Bupa Health Insurance Co. Ltd.

16.

22. Royal Sundaram Alliance Insurance Co.

Ltd.
23.

SBI General Insurance Co. Ltd.

24.

Shriram General Insurance Co. Ltd.

Star Health and Allied Insurance Co. Lt
d
.

National Insurance Co. Ltd.

17.

The New India Assurance Co. Ltd.

25.

18.

The Oriental Insurance Co. Ltd.

26.

Tata AIG General Insurance Co. Ltd.

19.

Raheja QBE General Insurance Co. Ltd.

27.

United India Insurance Co. Ltd.

20.

Reliance General Insurance Co. Ltd.

21.

Religare Health Insurance Co. Ltd.

28. Universal Sompo General Insurance Co.

Ltd.
29. Kotak Mahindra General Insurance Co.
Ltd.

General Insurance Companies

in India

General Insurance Business

in India

The total number of general insurers registered

with IRDA has gone up to 22, with the
registration of SBI General Insurance Company
Limited, a joint venture general insurance
company promoted by State Bank of India and
Insurance Australia Group, Australia, as a
general insurer in December 2009. Presently,
we are having 29 registered general insurers
registered with IRDA.

Overall, the non-life insurance sector grew 9.95 per

cent in April-December 2009, compared to the
corresponding period in 2008.

State-owned general insurers led by New India

Assurance have outpaced their peers in private sector
in premium collection, though marginally, by
recording 12 per cent growth in the first nine months
of the fiscal year 2015. All the four state-owned non-

General Insurance Business

in India
General Insurance this sector covers almost
everything related to property, vehicle, cash,
household goods, health and also one's
liability towards others. The major segments
covered under general Insurance Policy in
India are:
a. Home Insurance
b. Health Insurance
c. Motor Insurance
d. Travel Insurance

WORLD NON-LIFE INSURANCE PREMIUM

MARKET SHARE
9

Source:- Swiss Re Sigma

10

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Module 3: General Insurance Business

in India

General Insurance Functional set Up in

India

11

12

General Insurance Functional set

Up in India
GENERAL INSURANCE PUBLIC SECTOR
ASSOCIATION OF INDIA (GIPSA)
GIPSA was formed on May 2002. Four units of
General Insurance Co. Ltd. a. New India Insurance
Co. Ltd. b. National Insurance Co. Ltd. c. United
Insurance Co. Ltd. d. Oriental Insurance Co. Ltd. e.
Above four companies are followers of general
insurance public sector association of India in terms
of administration and the matter they are
concerning to wages decided by GIPSA. Otherwise
all four units have their own board of directors and
also they are corporate units. All the above
insurance companies have their individual

General Insurance Functional set Up in

India (contd...)
13

FUNCTIONS OF GIPSA
a) The carrying of any part of the general
insurance business if it thinks it desirable to do
so.
b) Aiding, assisting and advising the companies in
the matter of setting up standards of conduct
and sound practice in general insurance
business and in rendering efficient service to
policy holder.
c) Advising the companies in the matter of
controlling their expenses and investment of
funds.
d) Issuing direction to companies in relation to the

General Insurance Functional set

Up in India (contd...)
14

The general insurance business was nationalised after the promulgation

of General Insurance Business (Nationalisation) Act, 1972. The postnationalisation general insurance business was undertaken by the
General Insurance Corporation of India (GIC) and its 4 subsidiaries:

1.
2.
3.
4.

New India Assurance Company Limited;

Oriental Insurance Company Limited;
National Insurance Company Limited; and
United India Insurance Company Limited.

Towards the end of 2000, the relation ceased to exist and the four
companies are, at present, operating as independent companies.

General Insurance Functional set Up in

India (contd...) HISTORICAL BACKGROUND
15

The entiregeneral insurancebusiness in India was

nationalized by theGovernment of India(GOI) through the
General Insurance Business (Nationalization) Act (GIBNA) of
1972. 55 Indian insurance companies and 52 other general
insurance operations of other companies were nationalized.

TheGeneral Insurance Corporation of India(GIC) was

formed in pursuance of Section 9(1) of GIBNA. It was
incorporated on 22 November 1972 under the Companies
Act, 1956 as a private company limited by shares. GIC was
formed to control and operate the business of general
insurance in India.

The GOI transferred all the assets and operations of the

nationalized general insurance companies to GIC and other
public-sector insurance companies. After a process of
mergers and consolidation, GIC was re-organized with four

General Insurance Functional set Up in

India (contd...) HISTORICAL BACKGROUND
16

Oriental Insurance Company Limited and

United India Insurance Company Limited.

GIC and its subsidiaries had a monopoly on the general

insurance business in India until the landmarkInsurance
Regulatory and Development Authority Act(IRDA Act) of
1999 came into effect on 19 April 2000. This act also
amended the GIBNA Act and Insurance Act of 1938. The
act along with the amendments ended the monopoly of
GIC and its subsidiaries and liberalized the insurance
business in India.

In November 2000, GIC was notified as India's Re insurer,

but its supervisory role over its subsidiaries was ended.
This was followed by theGeneral Insurance Business
(Nationalization) Amendment Actof 2002. Coming into
effect from 21 March 2003, this amendment ended GIC's

General Insurance Functional set Up in

India (contd...) HISTORICAL
BACKGROUND

17

As a result of these reforms, GIC became the sole ReInsurer in India, and is now calledGIC Re. Indian
insurance companies are required by law to cede 5% of
every policy value to GIC Re w.e.f. 1 April 2013, subject to
some limitations and exceptions. GIC Re has diversified its
operations and is now emerging as an important ReInsurer inSAARCcountries,Southeast Asia,Middle East
andAfrica,EuropeandAmerica. GIC Re has also
expanded its international operations through branches in
London, Moscow, Dubai and Kuala Lumpur and is further
planning to establish offices in key regions.

As of 2012 GIC Re ranked 14th largest Re insurer and 5th

largest Aviation Re insurer in the world (S&P Ratings). GIC
Re has a rating of A- (Excellent) fromA. M. Bestfor its
financial strength. As of 2014 GIC Re has been assigned

18

The top 15 global reinsurers and their

assumed reinsurance premiums in
2014 are:
1. Munich Re (Germany) $40.96bn
2. Swiss Re (Switzerland) $28.85bn
3. Hannover Re (Germany) $19.08bn
4. SCOR SE (France) $15.03bn
5. Berkshire Hathaway Inc (USA) $14.92bn
6. Lloyds of London (UK) $14bn
7. Reinsurance Group of America Inc (USA) $9.1bn
8. China Reinsurance (Group) Corp (China)
9. AXA (France) $5.92bn
10. Korean Re (Korea) $5.76bn
11. PartnerRe Ltd (Bermuda) $5.61bn
12. Zurich Insurance Group Ltd (Switzerland) $5.59bn
13. Allianz Group (Germany) $4.96bn
14. XL + Catlin (Ireland) $4.75bn
15. Everest Re Group (Bermuda) $4.52bn

General Insurance Functional set

Up in India (contd...)
19

ORGANIZATIONAL SET UP AND MANAGEMENT

OF NEW INDIA INSURANCE CO. LTD. The New India
can claim to be the largest non life insurer not only in India but
in the whole afro Asia region, excluding Japan. The New India
was incorporated on 23rd July, 1919 and commenced
transacting business on 14th October, 1919. There was hardly
any Indian insurance company of significance till that time.8
The emergence of such a major national enterprise during this
period British rule was not a coincidence. It was a product of
historical forces. The birth of New India was the result of
emergence of the Indian National movement for independence
of the country, Mahatma Gandhi had emphasized that Indian
political liberation without economic infrastructure in the
country. Thus sir Dorab Tata was inspired by this swadeshi
movement to setup a large composite company to provide
sound and efficient insurance protection to the Indians. New

20

offices, comprising 26 regional offices, 393 Divisional Offices

and 648 Branches. With approximately 21,000 employees,
New India has a largest number of specialist and technically
qualified personnel at all levels of management, who are
empowered to underwrite and settle claims of high
magnitude.(2007-08) The Gross Premium was Rs. 1143.63
Crores in 2007-08. Companys foreign operations were
affected by major claims in Muscat (Gonu Cyclone), Dubai
(Major fire claims) and curacao (Freezone Fire). The foreign
exchange earning during the year 2007-08 amounted to Rs.
6.87 Crores towards dividend and repatriation of
management fees companies Associate and subsidiary
companies. The New India Insurance Co. Ltd. has been
working in countries like Abu Dhabi, Dubai, Behrens, Kuwait,
Muscat, Saudi Arabia, Aruba, Curacao, Mauritius, Philippines,
Hong Kong, Thailand, Australia, Fiji, Auckland and Japan.

21

ORIENTAL INSURANCE CO. LTD.

The Oriental Insurance Company Ltd. was incorporated at
Bombay (Mumbai) on 12th September 1947. The company
was a wholly owned subsidiary of the Oriental Government
Security. Life Assurance Co. Ltd. and was formed to carry out
general insurance business. The company was a subsidiary of
life insurance corporation of India from 1950 to 1973 (till the
general insurance business was nationalized in the country).
In 2003 all shares of our company held by the general
Insurance Corporation of India has been transferred to central
government.9 The company is a pioneer in laying down
systems for smooth and orderly conduct of business. The
strength of the company lies in its highly trained and
motivated work force that covers various disciplines and has
vast expertise. Oriental specializes in devising special covers
for large projects like power plants, petrochemicals, steel and

22

qualified and competent team of professionals to render the

best customer service. Oriental Insurance made a modest
beginning with a first year premium of Rs. 99.46 in 1950. The
goal of the company was Service to Clients and
achievement there of was helped by the strong traditions
built up overtime.
FOREIGN BUSINESS Oriental with its head office at New Delhi
has 23 Regional Offices and nearly 900 operating offices in
various cities of the country. The company has overseas
operations in Nepal, Kuwait and Dubai. The company has a
total strength of around 16,000 employees.(2007-08) The
oriental insurance co. ltd.s foreign operations in Nepal,
Dubai, Kuwait and the Run-off account in London together
yielded a Gross Direct Premium of Rs. 92.07 Crores during the
year 2007-08 as against Rs. 92.26 Crores during the previous
year. The net premium was higher at Rs. 90.37 Crores as

23

NATIONAL INSURANCE CO. LTD.

National Insurance Company Limited was incorporated in
1906 with its registered office in Kolkata consequent to
passing of the general insurance business nationalization act
1972, 21 foreign and Indian Companies were amalgamated
with it and national became a subsidiary of general insurance
corporation of India, which is fully owned by Government
Insurance Business (Nationalization) Amendment Act, on 7th
August 2002, National has been linked from its holding
company GIC and presently operating as a Government of
India undertaking. National Insurance Company Ltd. is one of
the leading public sector insurance companies India, carrying
out non life insurance business. Headquarter in Kolkata, NICs
network of above 1,000 offices, manned by more than 16,000
skilled personal, is spread over the length and breadth the
country covering remote rural areas, townships and

24

Befittingly, the product ranges of more than 180 policies

offered by NIC cater
to the diver insurance requirements of its 10 million
policyholders. Innovative and customized policies ensured
that even specialized insurance requirements are fully taken
care of.
The company services the Indian sub continent with a
network of 1000 offices
comprising 24 Regional offices, 309 divisional offices, 561
branch offices and 71 DAB offices.(2007-08) At present, the
company has operation in Nepal only.

25

UNITED INDIA INSURANCE COMPANY LTD.

United India Insurance Company Ltd. was incorporated as a
Company on 18th
February 1938. General Insurance Business in India was
nationalized in 1972. Indian Insurance Companies, 4 cooperative insurance societies and Indian operations of
sturgeon of Life Insurance Corporation of India were merged
with United India Company limited. After nationalization
United India has grown by leaps and bounds and has 18300
work force spread across 1340 offices providing insurance
cover to more than 1 crore policy holders. The company has
variety of insurance cover to more than 1 crore policy
holders. The company has variety of insurance products to
provide insurance cover from bullock carts to satellites United
India Co. Ltd. has 25 regional offices, 1 region a cell, 3 large
corporate brokers and units, 361 divisional offices, 677

PREMIUM INCOME IN INDIA 2011-2012

PUBLIC SECTOR COMPANIES (NON LIFE)
26

Fig. in Rs. Crs.

27

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Module 3: General Insurance Business

in India

Organizational Structure of
General Insurance Companies

28

Organizational Structure of General

Insurance Companies
29

PATTERN OF ORGANIZATION
BOARD OF DIRECTORS
FUNCTIONS OF BOARD OF DIRECTORS
1. To determine the long-term policies of the
company.
2. To take decision for doing any work prescribed
under the Act.
3. Decentralization & delegation of authority at
different levels.
4. Tasks to be assigned to top level, which are not
delegated to lower levels.
5. Constitution of committees according to

Organizational Structure of
General Insurance Companies
30

(contd)
COMMITTEES OF THE COMPANY
The Board of Directors has power to appoint different
committees for the effectively discharging, directing &
control as well as advising the Board of directors in
such matters. Some of the important committees are
as below
1. Executive Committee
2. Investment Committee
3. Personal Advisory Committee
4. Building Advisory Committee
5. Development Advisory Committee
6. Budget Advisory Committee

Organizational Structure of
General Insurance Companies
31

(contd)
7. Legal Advisory Committee
8. Policy holders Service Advisory Committee
THE CHAIRMAN
The chairman of the GIC is the Chief Executive
Officer of the Company. He heads all the committee
of the Company. But he has no authority to exercise
the power of investment committee.
In the matters of investment of funds, the
Chairman has to follow the advice of Investment
Committee. But he can ask the Board of Directors
to reconsider any decision or advice given by the
committee. There are restrictions on exercise of
powers of the Chairman, but in emergencies he has

Organizational Structure of
General Insurance Companies
32

(contd)
THE MANAGING DIRECTOR
The Managing Director is the whole time officer of
the Company. He discharges all the functions
entrusted to him by the executive committee of the
Company. The Company can appoint one or more
persons as Managing Director. The Managing
Director needs not be a member of the Board. He
delegates some of his
powers to the officers working in different levels,
but before such delegation taken place, prior
approval of the Board of Directors / Chairman is
necessary.
OFFICES OF THE GIC & DEPARTMENTS

Organizational Structure of
General Insurance Companies
33

(contd)

Head Office
Regional Office
Divisional Office
Branch Office

IMPORTANT DEPARTMENT IN HEAD OFFICE

For the purpose of discharging these functions, some
departments have been set up in the Central Office.
The important departments are 1.
2.
3.
4.

Development Department
Investment Department
Corporate Department
Organization Planning Department

Organizational Structure of
General Insurance Companies
34

(contd)
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

Policy holder Servicing Department

The Finance & Accounts Department
The Actuarial Department
Audit & Inspection Department
Legal & Mortgage Department
Group & Superannuation Department
Personal Department
Vigilance Department
Electronic Data Processing Department
Integration Department
Publicity Department
Foreign Department

Organizational Structure of
General Insurance Companies
35

(contd)
FUNCTIONS OF HEAD OFFICE.
The important functions of the Central office are as
under
1. Determination of requisite policies & plans.
2. Issues directions to Zonal & Divisional Offices from
time to time.
3. Establishing co-ordination between Zonal &
Divisional Office.
4. Exercise control over Divisional & Branch Offices
through Zonal Offices.
5. Investment of Funds of the Corporation.
6. Organizing meetings of Zonal Managers & Annual
General Meetings of Divisional Managers.
7. Supervision of the activities of Divisional & Branch

Organizational Structure of
General Insurance Companies
36

(contd)
REGIONAL OFFICE
COMMITTEES OF THE REGIONAL OFFICE
1. Regional Advisory Board/committee
2. Employees & Agents Relations Committee
3. Regional Managers
IMPORTANT DEPARTMENT IN REGIONAL
OFFICES
1. The Personal & Industrial Relations Department
2. The Development Department
3. The Estates Department
4. The Legal & Mortgage Department
5. The Accounts Department
6. The Actuarial Department

Organizational Structure of
General Insurance Companies
37

(contd)
7. Building and Engineering Department
8. Office Services Department
9. Regional Training Department
FUNCTIONS OF REGIONAL OFFICE.
To control the functioning of the officers & employees to prepare
the
development planning of insurance business in the particular
zone.
It evaluates the quantum of risk involved in revival of policies,
which are beyond the powers of Divisional Office.
To take policy decisions in technical matters received from
subordinate offices
in the zone.
To advise & guide the Divisional Offices on the principles,
practices &
methods of accounting system.

Organizational Structure of
General Insurance Companies
38

(contd)
The roles of two committees are very important with
organization & management of zonal offices. They are
DIVISIONAL OFFICES
IMPORTANT DEPARTMENT IN DIVISIONAL OFFICES
The departments under divisional offices are as follows
1. Planning Department
2. Policy holder Servicing Department
3. Accounts & Cash Department
4. Claim Department
5. New Business Department
6. Office Service Department
7. Legal & Mortgage Department
8. Marketing Department
9. Personal & Industrial Relations Department
10. Data Processing Department

Organizational Structure of
General Insurance Companies
39

(contd)
11. Branch Support Department
12. Establishment Department
13. Mailing Department
FUNCTION OF DIVISIONAL OFFICE.
Approval of the budget proposals of branch / divisional
office.
Evaluate the monthly progress reports.
Accepting the proposals of common supervision.
Issues of directions for inter departmental cooperation.
Give suggestions to top officers for improvement in policies
towards work
methods & policies.
Efforts to increase goodwill of the corporation.
Consideration of matters where collective efforts are
needed.
Discharging of functions delegated by top authority.

Organizational Structure of
General Insurance Companies
40

(contd)
BRANCH OFFICES
IMPORTANT DEPARTMENT IN BRANCH OFFICES
Usually the following departments are setup in a
branch office.
1. New Business Department
2. Policy holder Servicing Department
3. Account Department
4. Office Service Department
5. Sales & Development Department
6. Claim Department
7. Machine Department

Module 3: General Insurance Business

in India

The General Insurance

Business Market in India in the
present Business Environment

41

Role and importance of General

insurance in India
42

General Insurance significantly contributes to the economy

and strengthens the financial system:

Drives GDP growth: 1 standard deviation increment in GI
penetration induces GDP growth of 0.39% (higher than banking or
life insurance).
Contributes to the employment of ~7 lakh people, directly and
indirectly.
GI supports the government and society

Unlocks government resources by reducing the financial burden of

social welfare and security, and shares the cost of catastrophes (it
paid Rs.1012,000 crore in recent catastrophes).
Finances government activities by investing in government
securities (~35% of total invested assets in government securities).
The industry protects individuals and enterprises against

uncertainty, and increases social harmony and stability

through the coverage of risks.

Current position of General

Insurance in India
43

GI has been on an accelerated trajectory20% CAGR

post tariff deregulation over the past 5 yearsand
reached a total size of ~Rs. 70,000 crore in FY 2013.
However, the industry has some way to go in terms of
performance against three key objectives:
Providing universal access and coverage: A detailed
micro-analysis of the underlying needs and risks indicate that
there is substantial scope to improve penetration and access
across segments; e.g., home insurance penetration is <1%;
there is significant underinsurance in segments such as two
wheelers and personal health; corporate (property and
indemnity), SME and rural risk coverage is substantially lower
than global benchmarks. Further, the total economic losses due
to underinsurance are estimated to be close to Rs.150200,000
crore annually.
Delivering returns to shareholders: India has the highest

Current position of General Insurance in

India (Contd.)
44

than 15% (i.e., below cost of capital) even in the tariff era.
Returns post detariffication (2007) have largely remained in a
single digit even after adjusting for TP pool losses. While the
average economics have been poor, there is huge spread in
industry performance a few players earn substantially higher
returns compared to the rest of the industry, mainly due to their
superior underwriting performance.
Customer experience and loyalty: The industry has
shown improvement on customer service and experience
(claims settled in 1 month is low at 60%; however, customer
grievances dropped from 2,800 per million policies in FY10 to
1,100 per million policies in FY12). Further, complaints have
been lower compared to other financial services such as
banking (~3,500 complaints per million SA), asset management
(~1,800 per million folios) and life insurance (~1,200 per million
policies). Even on this dimension, there is substantial dispersion

Current position of General Insurance in

India (Contd.)
45

The outcomes above are a result of the interplay of various

factors which have a significant influence on industry
performance. The report card of these inter-related
factors reveals mixed results:
Individual insurer capabilities: Players have significantly
improved the operating model and made progress in upgrading
their product and distribution capabilities. However, there is a large
gap vis--vis the desired best practice on core technical
capabilities (claims and underwriting), with significant spread
across players.
Industry conduct: Over time, the market has opened up and
seen the entry of new players, which has increased competition
and choice for customers. However, competition has largely
remained price driven, with limited focus on creating new
capabilities. As an industry, there has been a high degree of
collaboration on areas like dismantling pools, articulating the need
for more consistent product and distribution reforms, and the

Current position of General Insurance in

India (Contd.)
46

Other industry participants:

Regulatory interventions over the last decade have helped
open up the industry and foster more competition which
benefited the industry. However, there remain several areas to
be addressedparticularly on issues of distribution, product,
pricing and solvency reform.
India continues to attract capacity from global reinsurers,
particularly on casualty and specialty lines of business (while
witnessing a reduction in higher rated capacity on property
lines); however, the lack of local presence of global reinsurers
has inhibited the market from getting access to the best talent
and expertise.
The relationship of insurers with motor and health
stakeholders (i.e., OEMs/repair shops and providers) is
relatively poor, with limited progress made in some pockets.
Capabilities of the TPA and surveyor industry are low and

Current position of General Insurance

in India (Contd.)
47

The general insurance had grown by leaps and bounds in

the country during the past decade from Rs.10, 000
crores in 1999 to Rs.40, 000 crores in 2011. The target is
to cross the Rs. one lakh crores mark by 2020, but it could be
achieved much earlier, probably by 2017 or so.
The general insurance sector is growing at a healthy 13 per cent
per annum, but the premium density was only 4.4 US dollars,
very low in comparison with many other countries.
The market share of private general insurers has been
increasing over the years since liberalization. In FY09, the
private insurers had a market share of 41.08% which was higher
than 34.90% in FY0755. As a consequence, there has been a
decline in the market share of the public insurers to 58.92% in
FY09 from 5.10%in FY07. Despite the decline in the market
share of the public sector insurance companies the volume of
premium underwritten by them has increased over the previous

Key trends shaping the GI industry

in India
48

Global forces impacting the Indian landscape:

Emerging Asia will become the major playing field for

global insurers with heightened interest and increased
competition for China, India, and Southeast Asia.
The bar on technical capabilities will keep rising with
winners pulling away.
Several discontinuities on technology, increasing
complexity of underlying risks, and continued policy and
regulatory intervention.
Customer behaviour and expectations:

Rise in customer awareness and sophistication, along with

the blurring of boundaries between online and offline world,
will require fundamental shifts in the operating model.
Segmentation and customer centricity will become a key
capability
Shifting demandsupply dynamics in related sectors:

49

Key trends shaping the GI industry in

India (Contd.)
corporatisation of the provider space will lead to new
opportunities.
Auto: Pressure on core sales margin and ageing of car
PARC will increase the focus of OEMs/dealers on insurance
pools.
Corporate sector: Globalisation, organised retail and
infra spending will translate into significant GI
opportunities; the importance of SMEs will continue.
Economic factors:

Uncertain and volatile macroeconomic outlook will temper

near-term growth and investment return; resilient business
models will need to be built.
Human capital will be scarce while wage-cost squeeze will
increase.

Module 3: General Insurance Business

in India

General Insurance Corporation of India

50

BACKGROUND..
51

Prior to Nationalization, 107 companies including branches of

some foreign insurance companies, operated in the country
Under the General Insurance Business Nationalisation Act 1972,
these were amalgamated and grouped in to 4 operating
companies viz.
1. National Insurance Company Ltd.
Head Office Kolkota
2. The New India Insurance Company Ltd.
Head Office Mumbai.
3. The Oriental Insurance Company Ltd.
Head Office New Delhi.
4. The United India Insurance Company Ltd.
Head Office Chennai.
They became subsidiaries of a holding company namely Genera

BACKGROUND..

(Contd.)

52

The paid-up capital of GIC is fully subscribed by the government

of India, and
that of the 4 companies, fully by GIC. All the five entities are
thus government
companies registered under the companies Act. Although
established under act of
Parliament. All the five companies have Boards of Directors. The
GIC Board has a
fulltime Chairman assisted by 2 Managing Directors. The
Chairman and Managing Directors are member of the board.
The Additional Secretary (Insurance Division) is ex. officio
nominee member on the Board. There are part time members
on the Board nominated by Government from among Chief
Executives of Financial Institutions (LIC, State Bank, Exim Bank,
IDBI) and prominent representatives of special interests, social
and economic groups. The Chairman-cum-Managing Directors of
the four companies are permanent invitees on the Board.

BACKGROUND..

(Contd.)

53

The GIC does not carry on direct insurance operations expecting,

Aviation Insurance of the National Carriers. It has reinsurance
arrangements with the 4 companies where under 20% of their
business is ceded by the companies to GIC. It also administers
the
corp. Insurance scheme on behalf of Government.
The companies follow a four tier organisational structure as
under
Head Office
Regional Office
Divisional Office
Branch Office
Insurance Regulatory and Development Authority Act (IRDA)
came into effect in the year 1999. This Act removed the
exclusive privilege of GIC and its subsidiaries to carry on general

54

GIBNA (THE GENERAL INSURANCE

BUSINESS
NATIONALIZATION ACT 1972)
The General Insurance Business Nationalization Act was passed
in 1972 to set up the general insurance business. It was the
nationalization of 107 insurance companies into one main
company called General Insurance Corporation of India and its
four subsidiary companies with exclusive privilege for
transacting general insurance business.
This act has been amended and the exclusive privilege ceased
on and from the commencement of the insurance regulatory
and development authority act 1999. General Insurance
Corporation has been working as a reinsurer in India. Their
subsidiaries are working as a separate entity and plays
significant role in the public sector of general insurance.
THE GENERAL INSURANCE BUSINESS (NATIONALISATION)
AMENDMENT ACT, 2002 ACT NO. 40 OF 2002 [7th August,
2002.]

Organizational Structure
55

GIC was a holding company, separate from its

subsidiary companies. It was responsible for broad
policy matters that could affect the general
insurance industry in India. The company did not
offer any direct insurance policies except the
aviation insurance policies of Air India, Indian
Airlines, Hindustan Aeronautics and Crop insurance.
From the reinsurance business, GIC received 20%
of all direct business written in India by its
subsidiaries. Apart from the four subsidiaries, GIC
set up the GIC Asset Management Company to
manage the GIC Mutual Fund, GIC Housing Finance,
and Export Credit Guarantee Corporation...

Important functions/roles of General

Insurance Corporation of India (GICI)
56

a) Enhancing Social Security:GICI promotes social

security in the country. It sells various policies to
mitigate the risks involved in the social sector. It
provides opportunity to take insurance at a reasonable
cost.
b) Expanding the Periphery of General
Insurance:It remains engaged in spreading awareness
about general insurance throughout the country. It has
been functioning very actively and efficiently to spread
the insurance business.
c) Providing Financial Assistance:GICI provides
financial assistance to industries issue shares and
debentures of corporate sector.
d) Underwriting:GICI acts as an underwriter. When

57

Important functions/roles of
General Insurance Corporation of
India (GICI) (Contd..)
e) Making Participation in Stock Market:GICI
actively participates in the share market by acquiring
shares and debentures. It also invests in shares of
government companies.
f) Setting Claims at the Earliest Opportunity:GICI
undertakes necessary measures to settle the claims of
the insured.
g) Assisting other Financial Institutions:GICI
provide loans to other financial institution., like HUDCO.
It also purchases shares and debentures of these
organizations.
h) Economic Development:It plays an important role
in the economic development of the country. It provides
long term loans to the industries. GICI also helps

58

Restructuring of GIC (to

GIC Re)
The management consultants appointed by GIC laid down four
options for its organizational restructuring:
Merge all the four companies or form two companies, with one
exclusively conducting corporate business;
Follow the Malhotra Committee recommendations by delinking
the four subsidiaries from GIC, and give them operational
independence;
Allow equity crossholdings among the four subsidiaries; and
Entrust one geographical region to each of the four outfits.
While some of the policies offered by GIC, like motor insurance,
were mandatory, others were designed exclusively for specific
segments - for instance, the rural insurance, which included
insurance cover for huts, cattle and livestock, hens and crops. In
November 2000, with the liberalization of the insurance industry,

59

Many private players had entered the general insurance

market, which led to a significant increase in competition.
Competition was expected to be more intense in the non-life
segment than the life segment, as the term of the non-life
policies was very short, and customers could switch between
companies. Based on the recommendation of the consultants
- PriceWaterhouse Coopers and MP Chitale - all the
subsidiaries of GIC were restructured, in December 2000, as
independent insurance companies. At the same time, the
General Insurance Public Sector Association was formed to
deal with the common issues related to the four subsidiaries.
After the restructuring, New India Assurance Company, one of
the four subsidiaries of GIC, became India's largest non-life
insurer.
GIC is the 14th largest reinsurance company in the world.
Alice G Vaidyan has been appointed as the CMD of General

MARKET SHARE

60

61

Private General insurance companies

in India
The key players of the Indian Non-life Insurance Industry
Following are the key players of the Indian Non-life Insurance Industry:
Public Players: National Insurance Company Limited, Oriental Insurance
Limited, New India Assurance Company Limited and United India Insurance
Company Limited.
Private Players
Bajaj Allianz General Insurance Co. Ltd.
ICICI Lombard General Insurance Co. Ltd.
IFFCO Tokio General Insurance Co. Ltd.
Reliance General Insurance Co. Ltd.
Royal Sundaram Alliance Insurance Co. Ltd
Tata AIG General Insurance Co. Ltd.
United India Insurance Co. Ltd.

62

HDFC ERGO General Insurance Co. Ltd.

Export Credit Guarantee Corporation of India Ltd.
Agriculture Insurance Co. of India Ltd.
Star Health and Allied Insurance Co. Ltd.
Apollo Munich Health Insurance Co. Ltd.
Future Generali India Insurance Co. Ltd.
Universal Sompo General Insurance Co. Ltd.
Shriram General Insurance Co. Ltd.
Bharti AXA General Insurance Co. Ltd.
Raheja QBE General Insurance Co. Ltd.

63

Major Private Non-Life Insurance

Players
1. ICICI Lombard
ICICI Lombard GIC Ltd. is a 74:26 joint venture between ICICI Bank Limited, Indias
second largest bank with consolidated total assets of over USD 100 billion at March
31, 2010 and Fairfax Financial Holdings Limited, a Canada based USD 30 billion
diversified financial services company engaged in general insurance, reinsurance,
insurance claims management and investment management. ICICI Lombard is the
largest private sector general insurance company in India with a Gross Written
Premium (GWP) of 36,948 million for the year ended March 31, 2010. The company
issued over 44 Lakh policies and settled over 62 Lakh claims and has a claim disposal
ratio of 96% (percentage of claims settled against claims reported) as on March 31,
2010. The company has 4,634 employees and 350 branches as on March 31, 2010.
The company has been assigned a domestic rating of iAAA by ICRA (an associate of
Moodys Investors Service) for highest claim paying ability and a fundamentally
strong position, for the fourth consecutive year. ICICI Lombard Auto Insurance has
been rated highest in customer satisfaction by J.D. Power Asia Pacific in India among
11 auto insurance providers. The company has been conferred the Golden PeacockEco Innovation Award of 2009 for weather insurance and the Customer and Brand

64

adjudged as the most Customer Responsive Company in the Insurance category at

the Economic Times Avaya Global Connect Customer Responsiveness Award 2006. It
has the Gold Shield for Excellence in Financial Reporting by the ICAI (Institute of
Chartered Accountants of India) for the year ended March 31, 2006.
2. Bajaj Allianz General Insurance
Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj
Finserv Limited (recently demerged from Bajaj Auto Limited) and Allianz SE. Both
enjoy a reputation of expertise, stability and strength Bajaj Allianz General Insurance
received the Insurance Regulatory and Development Authority (IRDA) certificate of
Registration on 2nd May, 2001 to conduct General Insurance business (including
Health Insurance business) in India. The Company has an authorized and paid up
capital of Rs 110 crores. Bajaj Finserv Limited holds 74% and the remaining 26% is
held by Allianz, SE. As on 31st March 2010, Bajaj Allianz General Insurance
maintained its premier position in the industry by achieving growth as well as
profitability. Bajaj Allianz has made a profit before tax of Rs. 180 crores and has
become the only private insurer to cross the Rs.100 crore mark in profit before tax in

65

3. Reliance General Insurance

Reliance General Insurance is one of Indias leading private general insurance
companies with over 94 customized insurance products catering to the corporate, SME
and individual customers. The Company has launched innovative products like Indias
first Over-The-Counter health & home insurance policies. Reliance General Insurance
has an extended network of over 200 offices spread across 173 cities in 22 states, a
wide distribution channel network, 24x7 customer service assistance and a full fledged
website. It is also Indias first insurance company to be awarded the ISO 9001:2000
certification across all functions, processes, products and locations pan-India.
4. TATA AIG General Insurance
Tata AIG General Insurance Company Limited (Tata AIG General) is a joint venture
company, formed by the Tata Group and American International Group, Inc. (AIG). The
Tata Group holds 74 per cent stake in the insurance venture with AIG holding the
balance 26 percent. Tata AIG General Insurance Company, which started its operations
in India on January 22, 2001, provides insurance solutions to individuals and corporate.
The Company's products are available through various channels of distribution like

Performance of the Private Indian General

Insurance Players
66

65 % of the general insurance market is controlled by

private houses that already exist in the market.

However in automobile insurance, public sector covers a
substantial 68 % of the total market value.
Among individual companies that are worthy of
mentioning, ICICI Lombard enjoys a whopping 53 %
market share in Accident Insurance while the remaining
47 % is shared by New India Assurance and United India
Insurance , both belonging to the public sector.