1 Maharaja Surajmal Institute Affiliated to GGSIPU Delhi Course Bachelor of Business Administration B I Subject Module On Practice of Life insurance Semester V Credit 4 Module Contributor s Ms Arti Dr Anita Sharma July 2021 2 SYLLABUS 3 CONTENTS Unit Name Page Number Chapter1 Introduction and History of insurance Chapter2 Life insurance Chapter3 Pension Plans Chapter4 Life insurance are a viable alternative investment Chapter5 Collateral security in the rising hire purchase market scenario Chapter6 LIC act Chapter7 Insurance Ombudsman Multiple Choice Questions Chapter8 Group insurance Chapter9 Group insurance schemes in India Multiple Choice Questions Chapter10 Actuaries Chapter11 Actuarial Investments Chapter12 Underwriting Chapter13 Declining Documents Chapter14 Exclusions Clauses Loadings Multiple Choice Questions Chapter 15 Alterations and Surrender Chapter 16 Claim Settlement Chapter 17 Sources distribution of Profits Chapter 18 Investments Reserve Multiple Choice Questions Proposal Policy of References Subjective Questions Additional readings 6 11 14 17 23 26 32 37 44 55 63 68 72 74 75 78 85 91 95 99 102 105 109 110 112 Unit No I II III IV 4 Unit 1 5 Chapter1 History of insurance The story of insurance is probably as old as the story of mankind The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security Though the concept of insurance is largely a development of the recent past particularly after the industrial era past few centuries yet its beginnings date back almost 6000 years Life Insurance in its modern form came to India from England in the year 1818 Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies However later with the efforts of eminent people like Babu Muttylal Seal the foreign life insurance companies started insuring Indian lives But Indian lives were being treated as sub standard lives and heavy extra premiums were being charged on them Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870 and covered Indian lives at normal rates Starting as Indian enterprise with h ighly patriotic motives insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society Bharat Insurance Company 1896 was also one of such companies inspired by nationalism The Swadeshi movement of 1905 1907 gave rise to more insurance companies The United India in Madras National Indian and National Insurance in Calcutta and the Co operative Assurance at Lahore were established in 1906 6 In 1907 Hindustan Co operative Insurance Company took its birth in one of the rooms of the Jorasanko house of the great poet Rabindranath Tagore in Calcutta The Indian Mercantile General Assurance and Swadeshi Life later Bombay Life were some of the companies established during the same period Prior to 1912 India had no legislation to regulate insurance business In the year 1912 the Life Insurance Companies Act and the Provident Fund Act were passed The Life Insurance Companies Act 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary But the Act discriminated between foreign and Indian companies on many accounts putting the Indian companies at a disadvantage The first two decades of the twentieth century saw lot of growth in insurance business From 44 companies with total business in force as Rs 22 44 crore it rose to 176 companies with total business in force as Rs 298 crore in 1938 During the mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably The Insurance Act 1938 was the first legislation governing not only life insurance but also non life insurance to provide strict state control over insurance business The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly It was on the 19th of January 1956 that life insurance in India was nationalized About 154 Indian insurance companies 16 non Indian companies and 75 provident were operating in India at the time of nationalization Nationalization was accomplished in two stages initially the management of the companies was taken over by means of an Ordinance and later the ownership too by means of a comprehensive bill The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956 and the Life Insurance Corporation of India was created on 1st September 1956 with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country providing them adequate financial cover at a reasonable cost Insurance Insurance is defined as a contract which is called a policy in which an individual or organisation receives financial protection and reimbursement of damages from the insurer or the insurance company At a very basic level it is some form of protection from any possible financial losses The basic principle of insurance is that an entity will choose to spend small periodic amounts of money against a possibility of a huge unexpected loss 7 Basically all the policyholder pools their risks together Any loss that they suffer will be paid out of their premiums which they pay Life Insurance A Basic Concept Life insurance is generally considered as a means of protecting one s family against the unforeseeable circumstances In case of unfortunate death the deceased person may be one of the bread winners of the family The life insurance company will not get back the deceased person but at least support the family financially at this crucial time The life insurance benefits may accrue to other dependent family members for supporting their future life For instance an insurance company takes the risk of large and uncertain losses in exchange for small premiums This gives
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