Service_Sector_in_Indian

MINI PROJECT IN SERVICE SECTOR (INSURANCE SECTOR) Done by, ARUN GEORGE M.COM FIRST SEMESTER KRISTU JAYANTI COLLEGE CONTENTS • Introduction • Types of Insurance • Functions • Insurance Sector in India • Insurance Companies  Birla Sun Life Financial  Tata AIG Insurance Solutions  Reliance Life Insurance Company Ltd  SBI Life Insurance • Life Insurance Corporation of India  Nationalisation  People  Objectives • Conclusion Service Sector in India Service Sector in India today accounts for more than half of India's GDP. According to data for the financial year 2006-2007, the share of services, industry, and agriculture in India's GDP is 55.1 per cent, 26.4 per cent, and 18.5 per cent respectively. The fact that the service sector now accounts for more than half the GDP marks a watershed in the evolution of the Indian economy and takes it closer to the fundamentals of a developed economy. Services or the "tertiary sector" of the economy covers a wide gamut of activities like trading, banking & finance, infotainment, real estate, transportation, security, management & technical consultancy among several others. The various sectors that combine together to constitute service industry in India are: • Trade • Hotels and Restaurants • Railways • Other Transport & Storage • Communication (Post, Telecom) • Banking • Insurance • Dwellings, Real Estate • Business Services • Public Administration; Defence • Personal Services • Community Services • Other Services There was marked acceleration in services sector growth in the eighties and nineties, especially in the nineties. While the share of services in India's GDP increased by 21 per cent points in the 50 years between 1950 and 2000, nearly 40 per cent of that increase was concentrated in the nineties. While almost all service sectors participated in this boom, growth was fastest in communications, banking, hotels and restaurants, community services, trade and business services. One of the reasons for the sudden growth in the services sector in India in the nineties was the liberalisation in the regulatory framework that gave rise to innovation and higher exports from the services sector. The boom in the services sector has been relatively "jobless". The rise in services share in GDP has not accompanied by proportionate increase in the sector's share of national employment. Some economists have also cautioned that service sector growth must be supported by proportionate growth of the industrial sector, otherwise the service sector grown will not be sustainable Insurance Sector in India Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. Together with banking services, it contributes to about 7 per cent to the country's GDP. Insurance is a federal subject in India and Insurance industry in India is 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. The origin of life insurance in India can be traced back to 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. It was conceived as a means to provide for English Widows. In those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered riskier for coverage. The Bombay Mutual Life Insurance Society that started its business in 1870 was the first company to charge same premium for both Indian and non-Indian lives. In 1912, insurance regulation formally began with the passing of Life Insurance Companies Act and the Provident Fund Act. By 1938, there were 176 insurance companies in India. But a number of frauds during 1920s and 1930s tainted the image of insurance industry in India. In 1938, the first comprehensive legislation regarding insurance was introduced with the passing of Insurance Act of 1938 that provided strict State Control over insurance business. Insurance sector in India grew at a faster pace after independence. In 1956, Government of India brought together 245 Indian and foreign insurers and provident societies under one nationalised monopoly corporation and formed Life Insurance Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore. The (non-life) insurance business/general insurance remained with the private sector till 1972. There were 107 private companies involved in the business of general operations and their operations were restricted to organised trade and industry in large cities. The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from January 1, 1973. The 107 private insurance companies were amalgamated and grouped into four companies: National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC). In 1993, the first step towards insurance sector reforms was initiated with the formation of Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra. The committee was formed to evaluate the Indian insurance industry and recommend its future direction with the objective of complementing the reforms initiated in the financial sector. Key Recommendations of Malhotra Committee Structure • Government stake in the insurance Companies to be brought down to 50%. • Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. • All the insurance companies should be given greater freedom to operate. Competition • Private Companies with a minimum paid up capital of Rs.1billion should be allowed to enter the industry. • No Company should deal in both Life and General Insurance through a single Entity. • Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. • Postal Life Insurance should be allowed to operate in the rural market. • Only one State Level Life Insurance Company should be allowed to operate in each state. Regulatory Body • The Insurance Act should be changed. • An Insurance Regulatory body should be set up. • Controller of Insurance should be made independent. Investments • Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. • GIC and its subsidiaries are not to hold more than 5% in any company. Customer Service • LIC should pay interest on delays in payments beyond 30 days • Insurance companies must be encouraged to set up unit linked pension plans. • Computerisation of operations and updating of technology to be carried out in the insurance industry. Malhotra Committee also proposed setting up an independent regulatory body - The Insurance Regulatory and Development Authority (IRDA) to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. Insurance sector in India was liberalized in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. There is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the insurance sector has led to rapid growth of the sector. Presently, there are 16 life insurance companies and 15 non-life insurance companies in the market. The potential for growth of insurance industry in India is immense as nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be well below international standards. The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost 190 years. 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: • 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 nationalized. 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: • 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. • 1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 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. The functions of Insurance can be bifurcated into two parts: 1. Primary Functions 2. Secondary Functions 3. Other Functions The primary functions of insurance include the following: Provide Protection - The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others. Collective bearing of risk - Insurance is a device to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. Assessment of risk - Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also Provide Certainty - Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain. The secondary functions of insurance include the following: Prevention of Losses - Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc. Prevention of losses cause lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and better protection to the insured. Small capital to cover larger risks - Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contributes towards the development of larger industries - Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery. The other functions of insurance include the following: Means of savings and investment - Insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing income-tax exemptions also, people invest in insurance. Source of earning foreign exchange - Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways. Risk Free trade - Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover. Insurance companies Birla Sun Life Financial Services Birla Sun Life Financial Services provide three major financial service products by the name of Birla Sun Life Mutual Fund, Birla Sun Life Wealth Management and Birla Sun Life Insurance. It is interesting to note that the Sun Life Financial Group operates in 22 countries globally. While, the Aditya Birla Group is regarded as India's 'first global corporation'. It operates in 25 countries. Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund offers a number of unique investment options to its clients. They include Equity Schemes, Offshore Schemes, Debt Schemes and Hybrid Schemes. Under Equity Schemes clients can choose from the following: • Diversified Fund • Sectoral Fund • Theme Based Fund The investment options available under Debt Schemes are stated below. • Long Term Fund • Fixed Term Funds • Gilt Fund • Fixed Maturity Plan • Short Term Fund • Cash Fund • Floating Fund The Hybrid Schemes under this fund comprise Balanced Fund, Capital Protection Fund, MIP and Fund of Funds. Birla Sun Life Wealth Management Birla Sun Life Wealth Management offers: • Mutual fund • Equity IPOs • Life Insurance Again, under the head of life insurance, the following products are offered by Birla Sun Life Financial Services. • Unit Linked Policies • Birla Sun Life Insurance Gold Plus II • Term plans • Birla Sun life Insurance Saral Jeevan • Classic Life Premier • Dream Plan • Simply Life • Supreme Life Birla Sun Life Insurance Birla Sun Life Insurance services are available for three main categories, Individuals, NRIs and Groups. Individual insurance products are available under the following categories. • Protection • Riders • Savings • Rural • Retirement • Children Birla Sun Life Financial Services maintain dedicated websites for each of its products. Clients can receive updated information about various products on offer. Related information on issues like NAV and dividend are also available at the home site of this financial services company. Birla Sun Life Financial Services products are unique and innovative ones. The customers of this company can leverage substantial financial benefits from the market, aided by the strong financial base, market penetration power and rich corporate experience of Birla Sun Life. Tata AIG Insurance Solutions Tata AIG Insurance Solutions is one of the leading insurance companies that provide both life insurance as well as general insurance. This pioneer company is a joint collaboration between the American International Group, Inc. (AIG) and Tata Group. They own the company in the ratio of 26:74. It is a leading financial institution that has carved a niche for itself all over the world. Tata AIG Insurance provides facilities to both corporates and individuals. Starting its operations on April 1, 2001, it seeks to serve different categories of people. It acquired its license for carrying out operations in India on February 12, 2001 Tata AIG Insurance Solutions is one of the most prestigious organizations in the business world. It employs thousands of employees and offers various opportunities to people to build a prospective career. This insurance company identifies the clients’ needs and works accordingly. It stresses on innovative aspect and opening of new markets. It believes in new economy and latest Internet technology. Tata AIG Insurance offers a number of products for the General Insurance holders. General insurance products include: • Individual insurance • Small business insurance • Corporate insurance Tata AIG Insurance offers flexible life insurance to the individuals, business organization and other association. For the corporates, there are various insurance products like group pensions, employee benefits, work place solutions and credit life. For the individuals, Tata AIG Insurance offers various products for adults, children and for retirement planning Reliance Life Insurance Company Ltd. Reliance Life Insurance Company Ltd. Is one of the major market players in insurance sector. It is an associate company of Reliance Capital Ltd., a part of Reliance - Anil Dhirubhai Ambani Group. Being one of the top 3 private sector financial services companies in India, Reliance Insurance aims at "empowering everyone live their dreams". Reliance Life Insurance or RLIC has insured more than 1.7 Million people in 2 years of operation. Not only this, it is certified ISO 9001:2000 for all the processes. To add another feather to its hat, Reliance Life Insurance was awarded the Jamnalal Bajaj Uchit Vyavahar Puraskar 2007- Certificate of Merit. Reliance Life Insurance Products Reliance Life Insurance provides a number of investment plans for individuals as well as group. Some of these plans include: • Protection Plans- with these plans one can protect his/her family. One can choose between a limited period plan and a lifetime protection plan. • Savings & Investment Plans- these plans help one to save some money for the specific future purposes. Now, one can provide for the family's daily needs and also not worry about expenditures! • Retirement Plans- as the name suggests, these plans help one to save money even after retirement. Now enjoy the freedom of being independent even after your retirement! • Child Plans- if one is planning to secure one's child's future, then s/he can invest in Reliance Child Plans SBI Life Insurance When one is worrying too much about one’s savings, investments, etc and when one feels insecure about his/her life, it’s time for him/her to insure his/her life. And what can be better than SBI Life Insurance! SBI, a leading company in India, offers a comprehensive range of life insurance and pension products. SBI Life Insurance is an integral part of the SBI Group. It is a joint venture between the State Bank of India and BNP Paribas Assurance. It is also the largest banking franchisee in India. SBI Life Insurance comprises Bancassurance, Agency and Group Corporates. SBI Life Insurance Products SBI Life Insurance features both individual and group products like: • Unit Linked Products: this is a single non participating product group that meets both the financial as well as insurance needs. • Pension Products: these comprehensive plans help to meet your post retirement financial needs. • Pure Protection Products: nobody can predict future. So, any time anything can shatter one’s dreams. Pure Protection Products help to keep one safe and secure during these trouble times. SBI Life also offers some protection cum savings products and money back scheme products. SBI also has products for brokers. These products take inspiration from the endeavors of various industries and make your life easy. Other SBI Life Insurance plans are: • Retirement Solutions • Protection Plans • Specialized Term Insurance: • Group Term with ROP • Group Loan Protection Products • Group Savings Protection Products • Group Micro Insurance Life Insurance Corporation of India The Life Insurance Corporation of India is the largest life insurance company in India and also the country's largest investor.; it is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses.It has assets estimated of 5 Trillion Rupees. It was founded in 1956. Headquartered in Mumbai, which is considered the financial capital of India, the Life Insurance Corporation of India currently has 8 zonal Offices and 101 divisional offices located in different parts of India, at least 2048 branches located in different cities and towns of India along with satellite Offices attached to about some 50 Branches, and has a network of around 1.2 million agents for soliciting life insurance business from the public, Today LIC can boast of great achievements in IT and investment under able Chairmanship of T S Vijayan. After years of poor performance despite near monopoly, LIC started showing performance under G N Bajpai and again went into slip under succeeding chairman till T S Vijayan took over. He faded G N Bajpai into oblivion ably supported by HR initiatives taken by another Genius K B Saha despite serious internal war by MDs. People criticise LIC about large scale miss selling and holes in investment but nobody criticises LIC's superb HR initiatives under sharpest ever HR ED K B Saha and IT initiatives directly under T S Vijayan, the tallest of the Chairmen of LIC. The Oriental Life Insurance Company, the first corporate entity in India offering life insurance coverage, was established in Calcutta in 1818 by Bipin Behari Dasgupta and others. Europeans in India were its primary target market, and it charged Indians heftier premiums. The Bombay Mutual Life Assurance Society, formed in 1870, was the first native insurance provider. Other insurance companies established in the pre-independence era included • Bharat Insurance Company (1896) • United India (1906) • National Indian (1906) • National Insurance (1906) • Co-operative Assurance (1906) • Hindustan Co-operatives (1907) • Indian Mercantile • General Assurance • Swadeshi Life (later Bombay Life) The first 150 years were marked mostly by turbulent economic conditions. It witnessed, India's First War of Independence, adverse effects of the World War I and World War II on the economy of India, and in between them the period of world wide economic crises triggered by the Great depression. The first half of the 20th century also saw a heightened struggle for India's independence. The aggregate effect of these events led to a high rate of bankruptcies and liquidation of life insurance companies in India. This had adversely affected the faith of the general public in the utility of obtaining life cover. The LIFE INSURANCE Act and the Provident Fund Act were passed in 1912, providing the first regulatory mechanisms in the Life Insurance industry. The Indian Insurance Companies Act of 1928 authorized the government to obtain statistical information from companies operating in both life and non-life insurance areas. The subsequent Insurance Act of 1938 brought stricter state control over an industry that had seen several financially unsound ventures fail. A bill was also introduced in the Legislative Assembly in 1944 to nationalize the insurance industry. Nationalization In 1955, parliamentarian Feroze Gandhi raised the matter of insurance fraud by owners of private insurance companies. In the ensuing investigations, one of India's wealthiest businessmen, Ram Kishan Dalmia, owner of the Times of India newspaper, was sent to prison for two years. Eventually, the Parliament of India passed the Life Insurance of India Act on 1956-06-19, and the Life Insurance Corporation of India was created on 1956-09-01, by consolidating the life insurance business of 245 private life insurers and other entities offering life insurance services. Nationalization of the life insurance business in India was a result of the Industrial Policy Resolution of 1956, which had created a policy framework for extending state control over at least seventeen sectors of the economy, including the life insurance. The company began operations with 5 zonal offices, 33 divisional offices and 212 branch offices People LIC is one of the largest employers in India. The organization is headed by 4 officers, namely the Chairman and three Managing Directors. The top brass is appointed by the Government of India after an intensive selection procedure. Though the company was accused to go by mere seniority in number of years for the selection of the senior management, this has changed as seen in the case of Thomas Mathew and A. Dasgupta (Managing Directors). The Chairman assumes authority of the CEO and chairs the board while the Managing Directors are allotted the three main categories of the organization's functioning. The current Chairman, Mr. T.S. Vijayan, is particularly responsible for the major IT infrastructure turnaround that the organization has witnessed and for its advanced EDMS structure. D.K. Mehrotra manages the Marketing Units of LIC, which also happens to be one of the largest spenders on advertising in India. Thomas Mathew manages the close to $187 billion investment portfolio of the company, which is the largest investor in the country. A. Dasgupta manages the engineering and other functions, many of which are very advanced in the Indian corporate scenario. Objectives of LIC of India • Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. • Maximize mobilization of people's savings by making insurance-linked savings adequately attractive. • Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. • Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. • Act as trustees of the insured public in their individual and collective capacities. • Meet the various life insurance needs of the community that would arise in the changing social and economic environment. • Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy. • Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective. TYPES OF INSURANCE Insurance can be classified into types two:- i. GENERAL INSURANCE ii. LIFE INSURANCE I. GENERAL INSURANCE Insurance business other than life insurance is known as general insurance. In the case of general insurance contract the insurer undertakes to indemnify the insured against any loss which may occur on the happening of the event insured against on the subject matter of insurance. ll. LIFE INSURANCE In the case of life insurance, insurer undertakes to pay a sum of money to the insured either on the death of the policy holder or on the maturity of the policy whichever is earlier. Life of individuals is the subject matter in the case of life insurance contract. Life insurance is also known as life assurance. conclusion The project entitled “A study on insurance sector”.The purpose of this project is to study about insurance sector.There are many service sectors in India.Some service sectors are banking, insurance, trade, railways, communication, (post,telegram), business services, personel services etc.There are two types of insurance in India,they are General insurance and Life insurance. The service sector assumes importance in an economy because it represents essentially the contribution of the human mind .perhaps the role of the human mind is not as prominent in the agriculture and manufacturing sectors which depend more on physical strength,though it is diffcult to justify this traditional distinction in the present day world.For an economy to make progess,human ingenuity effort must improve in all its sectors,especically the manufacturing sector,with possibly the sector providing the impetus.The performance of the service sector alone guarantee economic well-being. The outlook for the various segments of the service sector is positive from a longterm standpoint despite short term jitters. The sectors dicussed here directly and indirectly generate huge employment which results in increased income in the hands of the people and in turn, increase consumption which is likely to get impacted in theshort run.Following the economic liberalization in India,the service sector has gained prominence in the economy as it accounts for the largest share of GDP and also that the share of this sector in GDP has been growing very rapidly.Emprical data reveal two significant trends in the service sector following liberalizationin 1991: growth in service sector productivity and growth in service track. Insurance sector – A preview The insurance sector in India dates back to 1818,whenOriental Life Insurance Company was incorpated at Calcutta. Thereafter ,few other companies like Bombay Life Insurance Company in 1823 and Triton Insurance company for General Insurance,in 1850 were iccorpated.Insurance Act was passed in 1928 but it was subsequently reviewed and comprehensive legislation was enacted in 1938.The nationalization of the life insurance business took place in 1956,when 245 Indian and Foreign Insurance provident societies were frist merged and then nationalized. It paved the way towards the establishment of Life Insurance Corporation(LIC) and since then it has enjoyed o monopoly over the life insurance business in India.General Insurance followed suit and in 1968,the insurance act was amended to allow for social control over the general insurance business.Subsequently in 1973, non-life insurance business was nationalized and the General Insurance Business Act, 1972 was promulgated.The General Insurance Corporation(LIC) in its present form was incorporated in 1972 and maintains avery strong hold over the non-life insurance business in India.