General Insurance: History, Sectors, Types of Insurance
General Insurance: In India, Insurance has a deep-rooted history. It was noted mentioned in Manu (Manusmurthi) Dharmasastra & kautilya (Arthsastra) pooling of resources for re-distribution in time of calamities Such as Fire, Floods, Epidemics & Famine etc. Modern insurance in the world started in the year 1686 by Lyod’s London UK, started for marine insurance.
Modern General Insurance business in India dates back as old as 1850. In 1907, the Indian Mercantile Insurance Company Ltd., was set up. This was the first company to transact all classes of general insurance business in India. In 1938,with a view to protect the interest of the insurance public, the earlier legislation was consolidated and amended by the Insurance Act,1938 with comprehensive provisions for effective control over the activities of insurers.
In 1972, the General Insurance Business (Nationalisation) Act, general insurance business was nationalised with effect from 1st January 1973. 107, General insurers were nationalised to bring them under 4 Companies having their Head Offices, The Oriental Insurance Company Ltd., at Delhi, National Insurance Company Ltd.,at Calcutta,United India Insurance Company Ltd., at Madras & The New India Assurance Company Ltd., at Mumbai.
Following the recommendations of the Malhotra Committee Report in 1994, in the year 1999, Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. Malhotra Committee also recommended that the private sector be permitted to enter in the insurance industry & accordingly private insurance companies are also working in the country & public is getting competitive services in general insurance.
General Insurance Corporation of India was parent company of 4 subsidiaries but in December 2000, all the 4 nationalised companies were allowed to work independently in competition with private sector insurance companies. General Insurance Company was converted into a national re-insurer.
Sectors of insurance
Three main sectors of insurance are prevailing in our country at present:
- LIFE INSURANCE
- INSURANCE RE-INSURANCE
There are number of hazards in practical life causing losses to Building, Machinery, Stock, Property & Manpower working for the business & industry. Motor accidents are seen in general & eye catching of general public. To cover the risk for such losses such Insurance policies are designed to cater the need of the public concerned to indemnify them in case of losses due to insured perils.
There are number of branches of insurance to cover various types of risks suitable to various types of business, industry & property for safety of the insured public namely:-
- A. FIRE INSURANCE,
- B. MOTOR INSURANCE,
- C. MARINE INSURANCE,
- D. MISCELLANEOUS INSURANCE,
- E. ENGINEERING INSURANCE,
- F. NON-TRADITIONAL INSURANCE,
- G. CONSEQENTIAL LOSS INSURANCE,
A. Fire Insurance
From 2001, FIRE POLCIY covering almost all the perils earlier covered was now renamed as THE STANDARD FIRE & SPECIAL PERILS POLICY & is effective today, covering following perils (cause of loss) inbuilt in the policy.
- RIOT & STRIKE & MALICIOUS DAMAGE,
- STORM, CYCLONE, TYPHOON, TEMPEST, HURRICANE, TORNADO, FLOOD & INDUDATION (ACT OF GOD PERIL),
- IMPACT DAMAGE,
- SUBSIDENCE AND LANDSLIDE INCLUDING ROCKSLIDE,
- BURSTING AND OVERFLOWING OF WATER TANKS, APPARATUS & PIPES,
- AIR CRAFT DAMAGE,
- MISSILE TESTING OPERATIONS,
- LEAKAGE FROM AUTOMATIC SPINKLER INSTALLATION,
- BUSH FIRE.
There may be further risks attached to the property due to its inherent nature/circumstances, can be covered as ADD ON COVERS on payment of additional premium, according to the requirement of the insured.
- ARCHITECTS, ETC. FEE IN EXCESS OF 3%,
- DEBRIS REMOVAL IN EXCESS OF 1%,
- DETERIORATION OF STOCKS IN COLD STORAGE DUE TO POWER FAILURE, CAUSED DUE TO AN INSURED PERIL.
- FOREST FIRE,
- IMPACT DAMAGE DUE TO INSURED’S OWN VEHICLE,
- LEAKAGE & CONTAMINATION,
- RENT FOR ALTERNATE ACCOMODATION,
- SPOILAGE MATERIAL DAMAGE,
- SPONTANEOUS COMBUSTION,
- START UP EXPENSES,
- TEMPORAY REMOVAL OF STOCK.
Motor insurance is well known by public at large since third party insurance of any vehicle on road is compulsory as per Motor Vehicle Act in India. At the time of any motor accident insurance formalities are required to be completed to get the indemnification of loss. There are, two types of covers generally issued by underwriters:-
- Package Policy covers own vehice damage, third party risk, loss to passengers, driver coverage etc.as per requirement of the insured.
- Third party insurance, covers the risk for damage to third party by the insured vehicle which is must for a vehicle as per Motor Vehicle Act.
Dictionary meaning of MARINE denotes, of sea, whereas in insurance marine mean in transit either by sea/ rail/road etc. Modern insurance originally started as Marine insurance in the world to cover the risk of transportation of merchandise by sea. Instances are available that traders from Bharuch & Surat used to send merchandis to
Lanka, Egypt & Greece using such type of marine contracts for their safety long back.
Marine insurance covers in two parts:
1. MARINE CARGO: It covers the risk in transit of the merchandise(cargo) by sea/ rail/road etc from one place/country to other place. Loss due to any of the perils covered while in transit is indemnified by the underwriters(insurer).
2. MARINE HULL: This covers the risk of ship/vessel. Loss to the ship/vessel insured is payable to the extent damaged, covered in the insurance policy.
Underwriters provide various types of insurance policies to suit the requirement of public at large according to time, place & circumstances prevailing in the country. Basic purpose of the underwriters is to safe guard the public at large from the hazards, proximity of which is seen in the public.
Following insurance covers broadly are available in the market:
- ALL RISK INSURANCE FOR JEWELLERY,
- BANKERS INDEMNITY INSURANCE,
- BURGLARY & HOUSE BREAKING INSURANCE,
- CARRIERS LIABILITY INSURANCE,
- FIDELITY GUARANTEE INSURANCE,
- HOUSEHOLDERS INSURANCE,
- JEWELLERS BLOCK INSURANCE(FOR TRADERS),
- MEDICALAIM INSURANCE,
- MONEY INSURANCE,
- MULTI PERILS INSURANCE FOR LPG DEALERS,
- OVERSEAS TRAVEL MEDICAL INSURANCE,
- PERSONAL ACCIDENT INSURANCE,
- PUBLIC LIABILITY INSURANCE,
- PLATE GLASS INSURANCE,
- PROFESSIONAL INDEMNITY INSURANCE,
- SHOPKEEPER’S INSURANCE,
- WORKMEN’S COMPENSATION INSURANCE,
This insurance is meant for industry at large for damages to the plant & machinery. Underwriters will indemnify the insured for the loss occurred by an insured peril.
Following insurance policies are generally issued to the public as required from time to time to safeguard them from the loss if any to take place while running the industry or setting up plant & machinery. Composite policies are being issued covering various property involved in setting up a new project or expansion/ renovation in the industry :
- BOILER INSURANCE,
- ELECTRONIC EQUIPMENT INSURANCE,
- LOSS OF PROFIT MACHINERY INSURANCE,
- ERECTION INSURANCE,
- MARINE CUM ERECTION INSURANCE,
- STORAGE CUM ERECTION INSURANCE,
- MACHINERY BREAKDOWN INSURANCE,
- REFERIGERATION PLANT INSURANCE,
- SOLAR INSURANCE
Non Traditional Insurance
To cater the need of the social security, various insurance policies are designed to indemnify the losses suffered by insured from time to time, e.g. Cattle insurance, Honey Bee insurance, Fishing insurance, etc or any other insurance which may be notified by the Central Government from time to time.
Coneqential Loss Insurance
As the name denotes itself, due to operation of any of the perils of the policy, loss causes to the insured & payable in the policy, then the resultant loss due to non working of the industry/business of the insured, causing direct monetary loss to the insured is payable under such type of policy.
Such policies are issued for broking of fire, breakdown of machinery, the production is stopped whereas regular expenses are to be incurred by the insured, can be indemnified under such policies. However, proper accounting records & details are required to be maintained by the insured to arrive at the indemnification.
General insurance is governed by special principles namely:
- UTMOST GOOD FAITH: Facts & figures given in the proposal form are taken as correct in good faith & they got bearing on the claim if found untoward.
- INSURABLE INTEREST: Insured must have the insurable interest in the subject matter of the claim at the time of loss.
- INDEMNITY: Underwriters will make good the loss subject to policy conditions so that the insured get proper indemnification of the loss suffered.
- SUBROGATION: If any culprit is found causing the loss & responsible for the same after making the payment of the claim, underwriters are entitled to get subrogation from the insured to recover such loss from the responsible party.
- CONTRIBUTION: Due to some reason or other, if more than one insurance has been taken on the same subject matter of loss, main underwriters got the right to recover from other underwriters, their prorata contribution from such underwriters, details of which are to be declared by the insured before the claim is paid.
General insurance is subject to mainly:-
- There are certain exclusions under the policy.
- Terms conditions & warranties are part of the insurance, specified in the policy issued to the insured.
General insurance is meant for great safety of the public in business/industry & for social security. Premium generally paid is very minor amount, comparing to the indemnification of loss to the insured. Public awareness is required in modern world where hazards are much more, to take proper insurance looking to the need/hazards prevailing in the practical life.