Test: Insurance Industry - 1 - Banking Exams MCQ

• The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business.
• In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies.
• In 1938, with a view to protecting 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.
• The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. So the government of India decided to nationalize the life insurance business in India.

EARLY INSURERS

• In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd, and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commenced business on January 1sst 1973. This millennium has seen insurance come a full circle in a journey extending to nearly 200 years.
• The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. 

MALHOTRA COMMITTEE

• In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. 
• The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.

• The life insurance business commenced in India with the establishment of Oriental Life Insurance Company in Calcutta in 1818.
• The general insurance business came to India in the year 1850 in Calcutta as the Triton Insurance Company Limited.

• Bancassurance means selling insurance products through banks. Banks and insurance companies come up in a partnership wherein the bank sells the tied insurance company's insurance products to its clients.
• Bancassurance arrangement benefits both the firms. On the one hand, the bank earns fee amount (non-interest income) from the insurance company apart from the interest income whereas, on the other hand, the insurance firm increases its market reach and customers. The bank acts as an intermediary, helping the insurance firm reach its target customer in order to increase its market share.
• Bancassurance has emerged as a very important route for the distribution of insurance products and services. This partnership of Banking and the Insurance sector, if implemented in a well-planned and structured manner, can be beneficial for all the participants i.e., banks, insurers, and the customers.
• Types of Bancassurance products:
• Life insurance facilities:
  • Term insurance plans (with accidental and death claims).
  • Endowment plans
  • ULIPs( Unit Linked Insurance Plans)
• Non-life Insurance facilities:
  • Health insurance
  • Marine insurance( for cargo shipments)
  • Property insurance( against natural calamities)
  • Key Men insurance (Top executives of companies, partnership firms, etc.) 

• An Ordinance was issued on 19th January 1956 nationalizing the Life Insurance sector and Life Insurance Corporation (LIC) came into existence in the same year.
• The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all.
• The LIC had a monopoly till the late 90s when the Insurance sector was reopened to the private sector.
• Yogakshemam Vahamyaham is the tagline of the Life Insurance Corporation.
• The headquarters of LIC is in Mumbai.
• LIC has 2048 fully computerized branch offices.
• LIC has 113 divisional offices.
• There are 1381 satellite offices and corporate offices of LIC.

• Triton Insurance CO LTD is a Non-govt company, incorporated on 04 Jul 1918.
• It's a public unlisted company and is classified as a company limited by shares'.
• The company's authorized capital stands at Rs 23.0 lakhs and has 0.0% paid-up capital which is Rs 0.0 lakhs.
• Triton Insurance CO LTD is majorly in the Insurance business for the last 103 years and currently, company operations are strike off.
• The company is registered in Kolkata (West Bengal) Registrar Office. Triton Insurance CO LTD registered address is 4, CLIVE ROW, KOLKATA W.B WB 700001 IN.

• Pursuing the suggestions mentioned in the report by the Malhotra Committee in the year 1999, gave birth to an autonomous body i.e.“Insurance Regulatory and Development Authority (IRDA)”.
• For the regulation and development of the insurance industry, Insurance Regulatory and Development Authority was integrated as a constitutional body in April 2000.
• The promotion of competition, developing customer satisfaction at the lower premium rate, and assuring financial security was one key objective of IRDA.
• The applications for registrations were invited in August 2000 by IRDA. Up to 26% of the ownership was allowed for foreign companies.
• The power to frame regulations under Section 114A of the Insurance Act, 1938 was given to the authority.
• The registration to carry insurance business by securitizing the interest of the policyholders was also allocated to the authority by 2000.

• The Union Cabinet has approved changes to the Insurance Act that will allow for 74% foreign direct investment in the industry.
• The allowable FDI cap in life and general insurance is currently set at 49 percent, with Indian ownership and management control.
• According to reports, the Cabinet approved amendments to the Insurance Act of 1938 during its meeting.
• The government raised the foreign direct investment ceiling in the insurance sector from 26% to 49% in 2015.

• The life insurance sector in India was nationalized in the year 1956 with a view to spread life insurance to more areas of the country.
• The Life Insurance Corporation of India Act was passed in the year 1956 on 19th June and LIC was established also on 1st September 1956. 

The IRDAI(Insurance Regulatory and Development Authority of India) was incorporated as a statutory body on 19th April 2000.

• It is an independent, legislative body responsible for overseeing and promoting the Indian insurance and reinsurance industries.
• It was established by the Insurance Regulatory and Development Authority Act, 1999, a legislative act passed by the Indian Government.
• The headquarters of the organization are in Hyderabad, Telangana where it relocated in 2001 from Delhi.
• Subhash Chandra Khuntia is the chairman of IRDAI.