Insurance Industry

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INDUSTRIAL ANALYSIS
OF
INSURANCE INDUSRTY

INDEX

1. INTRODUCTION……………………………………………………………3 2. OBJECTIVES OF THE STUDY………………………………………..........8 3. GLOBAL SCENARIO……………………………………………………….9 4. INDIAN SCENARIO……………………………………………………….11 5. EMERGENCE OF IRDA…………………………………………………...19 6. MARKET STRUCTURE……………………………………………………36 7. PEST ANALYSIS…………………………………………………………...37 8. PORTERS FIVE FORCES………………………………………………….61 9. PERFORMANCE ANALYSIS……………………………………………..68 10. GLOBAL PLAYERS………………………………………………………..75 11. FUTURE OUTLOOK……………………………………………………….79 12. SUMMARY………………………………………………………………….86 13. BIBLIOGRAPHY…………………………………………………………...87

INTRODUCTION

What is Insurance and How Insurance Works
According to the U.S. Life Office Management Association Inc. (LOMA), life insurance is defined as follows: “Life insurance provides a sum of money if the person who is insured dies whilst the policy is in effect”. Anybody who has knowledge about life insurance will be tempted to say “yes BUT…” In other words, surly this is far too brief an explanation for a financial service that provides a very sophisticated range of savings and investment products, as well as mere compensation for death. ‘Insurance’ is basically a sharing device. The losses to assets resulting from natural calamities like fire, flood, earthquake; accidents, etc. are mate out of the common pool contributed by large number of person who is exposed to similar risks. This contribution of many is used to pay the losses suffered by unfortunate few. However the basic principle is that loss should occur as a result of natural calamities or unexpected events, which are beyond the human control. Secondly insured person should not make any gain out of insurance. It is natural think of insurance of physical assets such as motor car insurance or fire insurance but often we forget that creator of all these assets in the human being whose efforts have gone a long way in building up the assets. In that sense, human life is a unique image-generating asset. Unlike the physical assets, which decrease in value with passage of time, the individual becomes more experienced and more matured as he advances in age. This raises his earning capacity and the purpose of life insurance is to protect the income in the event of his premature death. The individual himself also needs financial security for the old age or on his becoming permanently disabled when his income will stop. Insurance also has an element of savings in certain cases.

Suppose there are 1000 persons all aged 35 years and healthy lives. They are insured for one year against the risk of the death. Each person is insured for Rs.50,000. If the past experience indicates that 4 out of 1,000 persons, at this age are expected to die during the year, expected amount of death claim to be paid to the family of four persons would come to Rs.2, 00,000. The contribution to be paid by each of the 1,000 persons will come to Rs.200 per year. Thus, all the 1,000 persons share loss caused to the 4 unfortunate families. 996 persons who survived till one year have not lost anything as they have secured peace of mind and a feeling of security for their family. While insurance cannot prevent accidents or premature death, it can help protect the family of the decreased against the loss of the death of the main breadwinner. In return for specified payments, insurance will provide protection against the incidents of an uncertain event- such as premature death.

The business of insurance company called insurer is to bring together persons who are exposed to similar risks, collect contribution (premium) from them on some equitable basis and pay the losses (claim) to the unfortunate few who suffer.

* The story so far...

Almost 4,500 years ago, in the ancient land of Babylonia, traders used to bear risk of the caravan trade by giving loans that had to be later repaid...
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