insurance companies

Introduction

The journey of insurance liberalization process in India is now over seven years old. The first major milestone in this journey has been the passing of Insurance Regulatory and Development Authority Act, 1999. This along with amendments to the Insurance Act 1983, LIC and GIC Acts paves the way for the entry of private players and possibly the privatization of the hitherto public monopolies LIC and GIC. Opening up of insurance to private sector including foreign participation has resulted into various opportunities and challenges.

Concept of Insurance

In our daily life, whenever there is uncertainly there is an involvement of risk. The instinct of security against such risk is one of the basic motivating forces for determining human attitudes. As a sequel to this quest for security, the concept of insurance must have been born. The urge to provide insurance or protection against the loss of life and property must have promoted people to make some sort of sacrifice willingly in order to achieve security through collective co-operation. In this sense, the story of insurance is probably as old as the story of mankind.

Life insurance in particular provides protection to household against the risk of premature death of its income earning member. Life insurance in modern times also provides protection against other life related risks such as that of longevity (i.e. risk of outliving of source of income) and risk of disabled and sickness (health insurance). The products provide for longevity are pensions and annuities (insurance against old age). Non-life insurance provides protection against accidents, property damage, theft and other liabilities. Non-life insurance contracts are typically shorter in duration as compared to life insurance contracts. The bundling together of risk coverage and saving is peculiar of life insurance. Life insurance provides both protection and investment.

Insurance is a boon to business concerns. Insurance provides short range and long range relief. The short-term relief is aimed at protecting the insured from loss of property and life by distributing the loss amongst large number of persons through the medium of professional risk bearers such as insurers. It enables a businessman to face an unforeseen loss and, therefore, he need not worry about the possible loss. The long-range object being the economic and industrial growth of the country by making an investment of huge funds available with insurers in the organized industry and commerce.

General Insurance

Prior to nationalizations of General insurance industry in 1973 the GIC Act was passed in the Parliament in 1971, but it came into effect in 1973. There was 107 General insurance companies including branches of foreign companies operating in the country upon nationalization, these companies were amalgamated and grouped into the following four subsidiaries of GIC such as National Insurance Co.Ltd., Calcutta; The New India Assurance Co. Ltd., Mumbai; The Oriental Insurance Co. Ltd., New Delhi and United India Insurance Co. Ltd., Chennai and Now delinked.

General insurance business in India is broadly divided into fire, marine and miscellaneous GIC apart from directly handling Aviation and Reinsurance business administers the Comprehensive Crop Insurance Scheme, Personal Accident Insurance, Social Security Scheme etc. The GIC and its subsidiaries in keeping with the objective of nationalization to spread the message of insurance far and wide and to provide insurance protection to weaker section of the society are making efforts to design new covers and also to popularize other non-traditional business.

Liberalization of Insurance

The comprehensive regulation of insurance business in India was brought into effect with the enactment of the Insurance Act, 1983. It tried to create a strong and powerful supervision and regulatory authority in the Controller of Insurance with powers to direct, advise, investigate, register and liquidate insurance companies etc. However, consequent upon the nationalization of insurance business, most of the regulatory functions were taken away from the Controller of Insurance and vested in the insurers themselves. The Government of India in 1993 had set up a high powered committee by R.N.Malhotra, former Governor, Reserve Bank of India, to examine the structure of the insurance industry and recommend changes to make it more efficient and competitive keeping in view the structural changes in other parts of the financial system on the country.

Malhotra Committee’s Recommendations

The committee submitted its report in January 1994 recommending that private insurers be allowed to co-exist along with government companies like LIC and GIC companies. This recommendation had been prompted by several factors such as need for greater deeper insurance coverage in the economy, and a much a greater scale of mobilization of funds from the economy, and a much a greater scale of mobilization of funds from the economy for infrastructural development. Liberalization of the insurance sector is at least partly driven by fiscal necessity of tapping the big reserve of savings in the economy. Committee’s recommendations were as follows:

o Raising the capital base of LIC and GIC up to Rs. 200 crores, half retained by the government and rest sold to the public at large with suitable reservations for its employees.
o Private sector is granted to enter insurance industry with a minimum paid up capital of Rs. 100 crores.
o Foreign insurance be allowed to enter by floating an Indian company preferably a joint venture with Indian partners.
o Steps are initiated to set up a strong and effective insurance regulatory in the form of a statutory autonomous board on the lines of SEBI.
o Limited number of private companies to be allowed in the sector. But no firm is allowed in the sector. But no firm is allowed to operate in both lines of insurance (life or non-life).
o Tariff Advisory Committee (TAC) is delinked form GIC to function as a separate statuary body under necessary supervision by the insurance regulatory authority.
oAll insurance companies be treated on equal footing and governed by the provisions of insurance Act. No special dispensation is given to government companies.
oSetting up of a strong and effective regulatory body with independent source for financing before allowing private companies into sector.

competition to government sector:

Government companies have now to face competition to private sector insurance companies not only in issuing various range of insurance products but also in various aspects in terms of customer service, channels of distribution, effective techniques of selling the products etc. privatization of the insurance sector has opened the doors to innovations in the way business can be transacted.

New age insurance companies are embarking on new concepts and more cost effective way of transacting business. The idea is clear to cater to the maximum business at the lest cost. And slowly with time, the age-old norm prevalent with government companies to expand by setting up branches seems getting lost. Among the techniques that seem to catching up fast as an alternative to cater to the rural and social sector insurance is hub and spoke arrangement. These along with the participants of NGOs and Self Help Group (SHGs) have done with most of the selling of the rural and social sector policies.

The main challenges is from the commercial banks that have vast network of branches. In this regard, it is important to mention here that LIC has entered into an arrangement with Mangalore based Corporations Bank to leverage their infrastructure for mutual benefit with the insurance monolith acquiring a strategic stake 27 per cent, Corporation Bank has decided to abandon its plans of promoting a life insurance company. The bank will act as a corporate agent for LIC in future and receive commission on policies sold through its branches. LIC with its branch network of close to 2100 offices will allow Corporation Bank to set up extension centers. ATMs or branches with in its premises. Corporation Bank would in turn implement an effective Cash Flow Management System for LIC.

IRDA Act, 1999

Preamble of IRDA Act 1999 reads ‘An Act to provide for the establishment of an authority to protect the interests of holders of insurance policies, to regulate, to promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.

Section 14 of IRDA Act, lays the duties, powers and functions of the authority. The powers and functions of the authority. The powers and functions of the Authority shall include the following.

o Issue to the applicant a certificate of registration, to renew, modify withdraw, suspend or cancel such registration.
o To protect the interest of policy holders in all matters concerning nomination of policy, surrender value f policy, insurable interest, settlement of insurance claims, other terms and conditions of contract of insurance.
o Specifying requisite qualification and practical training for insurance intermediates and agents.
o Specifying code of conduct for surveyors and loss assessors.
o Promoting efficiency in the conduct of insurance business
o Promoting and regulating professional regulators connected with the insurance and reinsurance business.
o Specifying the form and manner in which books of accounts will be maintained and statement of accounts rendered by insurers and insurance intermediaries.
o Adjudication of disputes between insurers and intermediates.
o Specifying the percentage of life insurance and general and general business to be undertaken by the insurers in rural or social sectors etc.

Section 25 provides that Insurance Advisory Committee will be constituted and shall consist of not more than 25 members.Section 26 provides that Authority may in consultation with Insurance Advisory Committee make regulations consists with this Act and the rules made there under to carry the purpose of this Act.Section 29 seeks amendment in certain provisions of Insurance Act, 1938 in the manner as set out in First Schedule. The amendments to the Insurance Act are consequential in order to empower IRDA to effectively regulate, promote, and ensure orderly growth of the Insurance industry.

Section 30 & 31seek to amend LIC Act 1956 and GIC Act 1972.

Impact of Liberalization

While nationalized insurance companies have done a commendable job in extending volume of the business opening up of insurance sector to private players was a necessity in the context of liberalization of financial sector. If traditional infrastructural and semipublic goods industries such as banking, airlines, telecom, power etc. have significant private sector presence, continuing state monopoly in provision of insurance was indefensible and therefore, the privatization of insurance has been done as discussed earlier. Its impact has to be seen in the form of creating various opportunities and challenges.

Opportunities

1. Privatization if Insurance was eliminated the monopolistic business of Life Insurance Corporation of India. It may help to cover the wide range of risk in general insurance and also in life insurance. It helps to introduce new range of products.
2. It would also result in better customer services and help improve the variety and price of insurance products.
3. The entry of new player would speed up the spread of both life and general insurance. It will increase the insurance penetration and measure of density.
4. Entry of private players will ensure the mobilization of funds that can be utilized for the purpose of infrastructure development.
5. Allowing of commercial banks into insurance business will help to mobilization of funds from the rural areas because of the availability of vast branches of the banks.
6. Most important not the least tremendous employment opportunities will be created in the field of insurance which is a burning problem of the presence day today issues.

Current Scenario

After opening up of insurance in private sector, various leading private companies including joint ventures have entered the fields of insurance both life and non-life business. Tata – AIG, Birla Sun life, HDFC standard life Insurance, Reliance General Insurance, Royal Sundaram Alliance Insurance, Bajaj Auto Alliance, IFFCO Tokio General Insurance, INA Vysya Life Insurance, SBI Life Insurance, Dabur CJU Life Insurance and Max New York Life. SBI Life insurance has launched three products Sanjeevan, Sukhjeevan and Young Sanjeevan so far and it has already sold 320 policies under its plan.

Conclusion

From the above discussion we can conclude that the entry of private players in insurance business needful and justifiable in order to enhance the efficiency of operations, achieving greater density and insurance coverage in the country and for a greater mobilization of long term savings for long gestation infrastructure prefects. New players should not be treat as rivalries to government companies, but they can supplement in achieving the objective of growth of insurance business in india.

Even with today’s economy there isn’t any reason you can’t still buy trendy and fashionable clothing. There are several things happening today in the world of fashion that can actually work well to your advantage when it comes to buying clothing.

One of the things that is happening is that fashion designers are realizing that their customer bases are drying up. Even women on Rodeo Drive aren’t spending like they used to. They’re holding back on spending thousands of dollars on designer handbags, shoes and clothing. How does this affect you? Well it’s a trickle down effect.

Take a look at some of the higher end fashion sites on line. What you’ll find is places like Net-A-Porter and eLuxury are having unbelievable sales. They are offering fashions from today’s top fashion designers at rock bottom prices. It’s not unusual to find fashions from designers such as Jean Paul Gaultier, Versace, Zac Posen, Michael Kors and Tracy Reese (just to mention a few) at sales offering 50% and up to 65% off.

Now of course a $1000 Nina Ricci silk jacket is still expensive for most of us. But, you can still find great buys on less expensive items. Still not sure how this affects you?

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You’ll find these affordable fashions at lots of different stores, stores far from Rodeo Drive. Just check out the selection in your local TJ Maxx or Kohl’s. Even Target and WalMart are expanding their women’s clothing sections.

So how can you take advantage of this and be fashionable at the same time? Take advantage of fashion magazines. What, you say, the same magazines that sell high end designer fashions that I can’t afford? Yes! That’s exactly what I mean. I buy the issue that focuses on a particular fashion season.

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The main center of the American fashion industry is believed to be New York where the Fashion Week was held in 2009 featuring all the renowned names in the field not only from America but from all over the world. Although New York is supposed to be the ultimate spot for showcasing the latest fashion trends, Los Angeles is not far behind as is evident from the numbers of fashion houses which have crept up in the city during the recent years. Thus, the American fashion industry of the new millennium operates mainly from these two centers unlike the past when cities like Miami and Chicago served as the centers for fashion designing.

It is true that the American fashion industry has earned a reputation for itself for being an arena in which cut-throat competition is a way of life even for every day survival. Therefore, apart from the necessary bit of luck, aspiring models and designers who truly wish to create a name for them in the American fashion industry must possess certain basic attributes as well as pre requisites which would enhance their chances of building a worthy career. One of the most important attributes in this regard is to possess confidence in combination with an out-going personality which would not only enable one to speak out boldly but would also increase one’s chances of being noticed. Often described as flamboyant, a confident and indomitable personality is likely to make a mark and also reach places within the industry much sooner than others.

Fashion is about style and hence it is imperative for an aspiring fashion designer to be aware of the wide range of styles which are in keeping with the mind-set of the American people. Style is something which can be taught or learnt by an individual but is an inherent attribute which is honed by going through all the latest fashion magazines and understand the flexibility in clothing in terms of slim sizes and plus size clothing. At the same time, one must also be knowledgeable about the prominent fashion houses which dominate the American scenario at present so that a potential up-coming style can be easily spotted and capitalized upon.

As everyone related to the world of fashion must be aware of, it is not just the American fashion industry but the various fashion industries all over the world which now echo the sentiments of eco-friendly fashion in form of the ‘Green Revolution’. In order to express sympathy as well as concern towards the ecological issues like global warming and preserving the natural habitat of our beloved planet, the fashion industry is now focused on encouraging eco-friendly apparel and cosmetics thereby encouraging the sensible use of natural resources. Hence, an aspiring fashion designer might as well be aware of this latest trend and chalk out a career path accordingly.

Of course, ambition and experience are mandatory ingredients for an individual who is desirous of making it big in the American fashion industry as ambition which is short of arrogance often leads to unprecedented and unimaginable opportunities while experience can provide one with the all-important direction in one’s arsenal.

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