Maharaja Surajmal Institute Affiliated to GGSIPU Delhi Department of Business Administrative Course BBA B I Subject Module on REGULATORY FRAMEWORK OF INSURANCE SECTOR Semester III Credit 4 Module Contributor Dr Beena Devi Dr Asha Chaudhary Assistant Professor BBA E Assistant Professor BBA M JULY 2021 1 2 REGULATORY FRAMEWORK OF INSURANCE SECTOR BBA 205 Module Objectives The objective of this module is to give understanding of the basic concepts and issues in business economics and their application in business decisions Unit I This unit focuses on Insurance Business in India Business Environment and Insurance Legal Environment and Commercial Environment Insurance and Economic Development Growth and Potential Insurance Impact of Liberalization on Insurance Sector Unit II This unit basically coversInsurance Regulatory Development Authority A brief introduction of Insurance Act 1938 A brief profile of IRDA Authority and its Functioning IRDA regulations for issuance of E insurance policies IRDA Regulation 2000 Registration of New Insurance Company Unit III This unit mainly focuses on Insurance Regulations in India IRDA Regulation 2000 Obligations of Insurers to Rural or social Sectors IRDA Regulation 2000 Insurance Advertisements and Disclosure IRDA Regulation 2000 Licensing of Insurance Agents IRDA Protection of Policy Holders Interest and Amendments Unit IV This unit mainly covers on Marketing of Insurance Services Requirement of Different Market Segment Distribution Channel CRM in Insurance Financial Aspects of Insurance Business Valuation of Assets and Liabilities with particular Reference to Unexpired Risk consumer Protection Act 1986 Grievances Redressal System in Insurance Insurance Ombudsman Lokayukta 3 S No Unit Name Page Number CONTENTS Insurance Business in India Insurance Regulatory Development Authority Insurance Regulations in India 5 26 27 47 48 77 Marketing of Insurance Services 78 135 Glossary Key words References and Further Readings 1 2 3 4 4 REGULATORY FRAMEWORK OF INSURANCE SECTOR Unit 1 Insurance Business in India Business Environment and Insurance Legal Environment and Commercial Environment Insurance and Economic Development Growth and Potential Insurance Impact of Liberalization on Insurance Sector BUSINESS ENVIRONMENT The term environment s meaning as per the oxford dictionary is The setting or conditions in which a particular activity is carried on Thus the term business environment it can be explained as All the internal and external forces and factors surrounding a business that affects the functioning of a business enterprise in short as well as long run According to Barry M Richman and Melvgn Copen Environment consists of factors that are largely if not totally external and beyond the control of individual industrial enterprise and their managements These are essentially the givers within which firms and their management must operate in a specific country and they vary often greatly from country to country William F Glucck defines business environment as the process by which strategists monitor the economic governmental market supplier technological geographic and social settings to determine opportunities and threats to their firms Though some of these factors or forces may have direct impact over the business firm others may control the business indirectly Thus the business environment may be defined as the total surroundings which have a direct or indirect bearing on the functioning of business 5 INSURANCE BUSINESS ENVIRONMENT Insurance Industry in India The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non life insurers Among the life insurers Life Insurance Corporation LIC is the sole public sector company Apart from that among the non life insurers there are six public sector insurers In addition to these there is sole national re insurer namely General Insurance Corporation of India GIC Re Other stakeholders in Indian Insurance market include agents individual and corporate brokers surveyors and third party administrators servicing health insurance claims Out of 33 non life insurance companies five private sector insurers are registered to Under write policies exclusively in health personal accident and travel insurance segments They are Star Health and Allied Insurance Company Ltd Apollo Munich Health Insurance Company Ltd Max Bupa Health Insurance Company Ltd Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd There are two more specialised insurers belonging to public sector namely Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance Insurance penetration reached 3 4 per cent in FY16 and is expected to cross 4 per cent in FY17 MARKET SIZE The Indian Government s strategy of insuring the uninsured has steadily pushed insurance penetration in the country and increase of insurance schemes are expected to propel this key ratio ahead of 4 per cent mark by the end of 2018 as per ASSOCHAM latest report The number of lives covered under Health Insurance policies during the period 2015 16 was 36 crore which is just about 30 per cent of India s total population The number has seen a rise in every subsequent The Premium income of the life insurance segment in India had reached to 14 04 per cent in FY17 to 4 18 trillion US 64 92 billion In August 2017 the Life Insurance industry reported a growth rate of 24 per cent in overall annual premium equivalent with the help of both private players and Life Insurance Corporation During the period of June 2016 to May 2017 the Indian life insurance industry recorded a new premium income of 71 87 trillion US 29 03 billion 6 COMPONENTS OF INSURANCE BUSINESS ENVIRONMENT Similar to any other industry insurance industry also has components of internal micro and external macro environment A pleasant and congenial environment is a key requirement which is administered by several factors such as the economic condition of the country political stability financial literacy of the people investment for surplus generated and good steady and reasonable returns and better corporate governance There are certain other internal factors which have been direct or indirect effect on the insurance environment The various components of Insurance Business Environment are as follows Internal Environment of Insurance 1 Company s Risk Management Practices 2 Administrative
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