What Is Insurance?

Insurance is a form of risk management in which the insured transfers the cost of potential loss
to another entity in exchange for monetary compensation known as the premium. (For
background reading, see The History Of Insurance In America.)
Insurance allows individuals, businesses and other entities to protect themselves against
significant potential losses and financial hardship at a reasonably affordable rate. We say
"significant" because if the potential loss is small, then it doesn't make sense to pay a premium to
protect against the loss. After all, you would not pay a monthly premium to protect against a $50
loss because this would not be considered a financial hardship for most.
Insurance is appropriate when you want to protect against a significant monetary loss. Take life
insurance as an example. If you are the primary breadwinner in your home, the loss of income
that your family would experience as a result of our premature death is considered a significant
loss and hardship that you should protect them against. It would be very difficult for your family
to replace your income, so the monthly premiums ensure that if you die, your income will be
replaced by the insured amount. The same principle applies to many other forms of insurance. If
the potential loss will have a detrimental effect on the person or entity, insurance makes sense.
(For more insight, see 15 Insurance Policies You Don't Need.)

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Everyone that wants to protect themselves or someone else against financial hardship should
consider insurance. This may include:

Protecting family after one's death from loss of income

Ensuring debt repayment after death

Covering contingent liabilities

Protecting against the death of a key employee or person in your business

Buying out a partner or co-shareholder after his or her death

Protecting your business from business interruption and loss of income

Protecting yourself against unforeseeable health expenses

Protecting your home against theft, fire, flood and other hazards

Protecting yourself against lawsuits

Protecting yourself in the event of disability

Protecting your car against theft or losses incurred because of accidents

And many more

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The concept of insurance

Running a business of any kind involves a certain amount of risk. Whether its the risk of fire,
the risk of damage to exported goods or the risk of natural disasters, all these incidents will have
a financial impact on your business if they occur. This is what is being referred to when we use
the term risk.
Most businesses take small steps to manage the effects of risk. For example, by installing smoke
alarms and sprinkler systems to reduce the damage caused by fire or by installing security alarms
to deter thieves.
However, business owners also want to protect themselves against the financial consequences of
something untoward happening, and this is where insurance comes in. In effect, the business can
transfer the risk away from themselves and on to someone else.
This transfer of risk is the basis of all insurance, and is something that Lloyds has been doing
since the 17th century.

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Insurance in India
Insurance in India refers to the market for insurance in India which covers both the public and
private sector organizations. It is listed in the Constitution of India in the Seventh Schedule as
a Union List subject, meaning it can only be legislated by the Central government.
The insurance sector has gone through a number of phases by allowing private companies to
solicit insurance and also allowing foreign direct investment. India allowed private companies in
insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014.
[1]
However, the largest life-insurance company in India, Life Insurance Corporation of India is
still owned by the government and carries a sovereign guarantee for all insurance policies issued
by it.

In India, insurance has a deep-rooted history. Insurance in various forms has been mentioned in
the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya(Arthashastra).
The fundamental basis of the historical reference to insurance in these ancient Indian texts is the
same i.e. pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. The early references to Insurance in these texts have reference to
marine trade loans and carriers' contracts.
Insurance in its current form has its history dating back until 1818, when Oriental Life Insurance
Company[3] was started by Anita Bhavsar in Kolkata to cater to the needs of European
community. The pre-independence era in India saw discrimination between the lives of
foreigners (English) and Indians with higher premiums being charged for the latter. In
1870, Bombay Mutual Life Assurance Society became the first Indian insurer.

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At the dawn of the twentieth century, many insurance companies were founded. In the year
1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the
insurance business. 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.
However, the disparity still existed as discrimination between Indian and foreign companies.
The oldest existing insurance company in India is theNational Insurance Company , which was
founded in 1906, and is still in business.
The Government of India issued an Ordinance on 19 January 1956 nationalising the Life
Insurance sector and Life Insurance Corporation came into existence in the same year. The Life
Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident
societies245 Indian and foreign insurers in all. In 1972 with the General Insurance Business
(Nationalisation) Act was passed by the Indian Parliament, and consequently, General Insurance
business was nationalized with effect from 1 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 commence business on 1 January 1973.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private
sector. Before that, the industry consisted of only two state insurers: Life Insurers (Life
Insurance Corporation of India, LIC) and General Insurers (General Insurance Corporation of
India, GIC). GIC had four subsidiary companies. With effect from December 2000, these
subsidiaries have been de-linked from the parent company and were set up as independent
insurance companies: Oriental Insurance Company Limited, New India Assurance Company
Limited, National Insurance Company Limited and United India Insurance Company Limited.

Industry structure
By 2012 Indian Insurance is a US$72 billion industry. However, only two million people (0.2%
of the total population of 1 billion) are covered under Mediclaim, whereas in developed nations
like USA about 75% of the total population are covered under some insurance scheme. With
more and more private companies in the sector, this situation is expected to change. ECGC,
ESIC and AIC provide insurance services for niche markets. So, their scope is limited by
legislation but enjoy some special powers
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Insurance Repository
On 16 September 2013, IRDA launched 'Insurance Repository' services in India. It is a unique
concept and first to be introduced in India. This system enables policy holders to buy and keep
insurance policies in dematerialized or electronic form. Policy holders can hold all his insurance
policies in an electronic format in a single account called electronic insurance account (eIA).
Insurance Regulatory and Development Authority has issued licenses to five entities to act as
Insurance Repository:
NSDL Database Management Limited, Central Insurance Repository Limited ( CIRL ), SHCIL
Projects Limited, Karvy Insurance repository Limited, CAMS Repository Services Limited
The insurance sector went through a full circle of phases from being unregulated to completely
regulated and then currently being partly deregulated. It is governed by a number of acts.
The Insurance Act of 1938[4] was the first legislation governing all forms of insurance to provide
strict state control over insurance business.Life insurance in India was completely nationalized
on 19 January 1956, through the Life Insurance Corporation Act. All 245 insurance companies
operating then in the country were merged into one entity, the Life Insurance Corporation of
India.
The General Insurance Business Act of 1972 was enacted to nationalize about 100 general
insurance companies then and subsequently merging them into four companies. All the
companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance
and United India Insurance, which were headquartered in each of the four metropolitan
cities.Until 1999, there were no private insurance companies in India. The government then
introduced the Insurance Regulatory and Development Authority Act in 1999, thereby deregulating the insurance sector and allowing private companies. Furthermore, foreign investment
was also allowed and capped at 26% holding in the Indian insurance companies.
In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on
par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects and
Company Secretaries.A minimum capital of US$80 million(Rs.400 Crore) is required by
legislation to set up an insurance business.

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Authorities
The primary regulator for insurance in India is the Insurance Regulatory and Development
Authority (IRDA) which was established in 1999 under the government legislation called
the Insurance Regulatory and Development Authority Act, 1999.[5][6]
The industry recognises examinations conducted by IAI (for actuaries), III (for agents, brokers
and third-party administrators) and IIISLA (for surveyors and loss assessors). TAC is the sole
data repository for the non-life industry. IBAI gives voice for brokers while GI Council and LI
Council are platforms for insurers. AIGIEA, AIIEA, AIIEF, AILICEF, AILIEA, FLICOA,
GIEAIA, GIEU and NFIFWI cater to the employees of the insurers. In addition, there are a
dozen Ombudsman offices to address client grievances.

Insurance education
A number of institutions provide specialist education for the insurance industry, these include;

National Insurance Academy, Pune, specialized in teaching, conducting research and

providing consulting services in the insurance sector. NIA offers a two year PGDM program
in insurance. NIA was founded as Ministry of Finance initiative with capital support from
the then public insurance companies, both Life (LIC) and Non-Life (GIC, National, Oriental,
United & New India).

Institute of Insurance and Risk Management, Hyderabad, was established by the

regulator IRDA. The institute offers Postgraduate diploma in Life, General Insurance, Risk
Management and Actuarial Sciences. The institute is a global learning and research center in
insurance, risk management, actuarial sciences. They provide consulting services for the
financial industry.

Amity School of Insurance Banking and Actuarial science (ASIBAS) of Amity

University, located in Noida and established in 2000, offers MBA programs in Insurance,
Insurance and Banking, and M.Sc./B.Sc. actuarial sciences to a Post Graduate Diploma in
Actuarial Sciences.

Pondicherry University is offering mba in insurance management. Pondicherry university

is the only central university which offers insurance management in India.

Birla Institute of Management Technology is a graduate business school located in

Greater Noida, established in 1988, offers a PGDM-IBM program in insurance business
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management. This program was launched in 2000 by the Centre for Insurance and Risk
Management and is accredited by the Insurance Regulatory and Development Authority.
Life Office Management Association (LOMA), USA is BIMTECH's educational partner and
BIMTECH is an approved centre for LOMA examination. The Chartered Insurance
Institute (CII), UK has accorded recognition (by way of credits) to the BIMTECH PGDMIBM program. Their two year PGDM program in insurance business has been recognized as
equivalent to the Associate level of the Insurance Institute of India, Mumbai.

NLU, Jodhpur, offers a two year MBA and one year MS (for engineering graduates)
program in insurance.

ance act 1938 mandates that the individual has to be "a Major with sound mind". After the
advent of IRDA as Insurance Regulator it has framed various regulations viz training hours,
examination and fees which are amended from time to time. Since November 2011 IRDA the
Insurance Regulator in India has introduced a syllabus (IC-33) conceived and developed by CII,
London. The syllabus mainly aims to make an Insurance Agent a financial professional. But
almost all insurers are facing tough times making the candidates pass the examination which has
become relatively tough. Prestige Institute and management and Research Indore offered in
insurance management in MBA Financial administration.

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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
highly 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. 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
companiesatadisadvantage.
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
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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. However,
it was much later 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.
LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate
office in the year 1956. Since life insurance contracts are long term contracts and during the
currency of the policy it requires a variety of services need was felt in the later years to expand
the operations and place a branch office at each district headquarter. Re-organization of LIC took
place and large numbers of new branch offices were opened. As a result of re-organisation
servicing functions were transferred to the branches, and branches were made accounting units.
It worked wonders with the performance of the corporation. It may be seen that from about
200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year
1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But
with re-organisation happening in the early eighties, by 1985-86 LIC had already crossed
7000.00 crore Sum Assured on new policies.
Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8
zonal offices, 992 satallite offices and the Corporate office. LICs Wide Area Network covers
109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied
up with some Banks and Service providers to offer on-line premium collection facility in
selected cities. LICs ECS and ATM premium payment facility is an addition to customer
convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at
Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many
other cities. With a vision of providing easy access to its policyholders, LIC has launched its
SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the
customer. The digitalized records of the satellite offices will facilitate anywhere servicing and
many other conveniences in the future.
LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance
and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued
over one crore policies during the current year. It has crossed the milestone of issuing
1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the
corresponding period of the previous year.

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From then to now, LIC has crossed many milestones and has set unprecedented performance
records in various aspects of life insurance business. The same motives which inspired our
forefathers to bring insurance into existence in this country inspire us at LIC to take this message
of protection to light the lamps of security in as many homes as possible and to help the people
in providing security to their families.

Some of the important milestones in the life insurance business in India are:
1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started
functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its
business.
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life
insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of
protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a
capital contribution of Rs. 5 crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton
Insurance Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of
general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of
conduct for ensuring fair conduct and sound business practices.

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1968: The Insurance Act amended to regulate investments and set minimum solvency margins
and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973.
107 insurers amalgamated and grouped into four companies viz. the National Insurance
Company
Ltd.,
the
New
India
Assurance
Company
Ltd.,
the
Oriental Insurance Company Ltd. and the United India Insurance Company
Ltd. GIC incorporated as a company.

What are the various types of life insurance

A wide range of vehicles are available to fund future financial goals. These could be low risklow return instruments like bank deposits and small savings, or higher risk products such as
equity, which can offer potentially higher returns. Insurance scores over other investment
vehicles in a number of aspects.

Life Insurance for Future Goal Planning

Certainty
Once a goal has been identified and a value for it has been crystallized, an insurance policy is an
excellent vehicle to fund the goal. This is because one can be rest assured that even in the
unfortunate event of death or even critical illness, the sum assured will fund a future goal of the
policyholder.

Tax efficient
Maturity benefits of most insurance policies are tax free under Section 10 (10D) and the
premium paid is eligible for deduction under Section 80C of the Income Tax Act, 1961.

Flexibility
Insurance products, especially Unit Linked Plans, provide flexibility in terms of asset allocation
to suit specific risk appetites, policy durations, premium payment terms and fund switching
options.

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Wider options
Depending on the time horizon of the goal, the return required and the investor's risk appetite, a
broad spectrum of asset allocations between equity and debt is possible in a Unit Linked Plan.
An investor may tailor his policy to suit his requirement.

Liquidity
Most Insurance products offer good liquidity after the lock-in period to take care of any
emergency requirement of funds. But they do have inherent deterrents in the form of charges to
discourage unnecessary encashment.

Earmarking
Very often an insurance policy is taken for a specific goal. This therefore can become a deterrent
against utilizing these funds for any other purpose and also encourages continued contributions.

Insurance for Financial Security

Insurance helps you to provide for contingent liabilities like hospitalization, critical illness, debt
redemption, etc. in a cost efficient manner.

Term insurance
Term insurance is the simplest and cheapest form of life cover, which pays the sum assured on
death. This is useful to simply provide for a family's survival in the unfortunate event of demise
of the bread winner. This can also be used to cover repayment of any debt of a policy holder by
simply assigning the policy to the creditor. Upon maturity or claim on the policy, the proceeds
are paid to the creditor. Loan Cover policies are a variant where the sum assured keeps reducing
in line with the loan balance.

Health insurance

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These policies provide cover against major health care expenses like hospitalization, surgery,
critical illness, etc. The benefits could be in the form of fixed pay-outs on hospitalization or a
lump sum on diagnosis against some specified critical illnesses.

Accident benefit
This is usually an add-on cover over a basic policy and pays an additional sum assured to the
beneficiary in case of death due to accident. Since accidental death is sudden and unforeseen, the
family could be faced with issues like relocation, debt servicing and other requirement for funds.

Retirement Planning
Indian life expectancy has improved dramatically over the years due to availability of advanced
medical facilities. However, a longer working life may not really be possible due to occurrences
of life-style induced illness and high burn-out rate. The evolving demographic balance with
plenty of young talent becoming continuously available may also be a deterring factor to a
longer working life unless one is self-employed.
Consequently, our retirement life span could well be as long as our active working life span. This
means that we have to build a solid corpus during our active life to maintain our life style for the
long post retirement life if we are to enjoy the true meaning of the word "retirement". Pension
Plans help us build up our savings during our earning years and provide us a lump sum on
retirement. This lump sum can then provide us a retirement income by investing in an annuity.

Provide Post Retirement Income

The worst situation that a retiree can face is to run out of funds late into retirement. Such a
situation may force him to seek help from friends / relatives or liquidate his fixed assets which
essentially are a compromise of self-respect. This is where insurance offers the best solution in
the form of an annuity. Annuities bought from the retirement corpus can either be used to
provide regular post retirement income for a fixed term or for the entire life.

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A retirement plan may be broadly divided into two phases, namely accumulation (preretirement) and distribution or consumption (post-retirement). In the above graph*, we assume a
30-year old who plans to retire at the age of 60 years and expects to live till the age of 80 years.
His accumulation phase is between the age of 30 and 60 years when he builds his retirement
corpus and distribution phase is between the age of 60 and 80 years when he drfaws down this
corpus for his living. Pension Plans ensure that the distribution phase of your life is as
comfortable as your earning years.
* This is only to explain the point and the figures are not based on any calculation.

Insurance as Inflation Shield

Inflation lowers the purchasing power of money and makes a dramatic cumulative impact over
the long term. It reduces our real income year after year as our cost of living keeps increasing.
So, it must be taken into account while framing financial goals.
The following illustration depicts the impact of inflation on income and prices.

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Insurance products such as Unit Linked Plans help us combat the impact of inflation on our
financial goals by providing the option to invest in equity, which is known to deliver one of the
best returns from all asset classes, over the long term. Ignoring inflation would result in our
savings falling short of the estimated value of future goals, especially over the long term.

4 Types of Insurance Everyone Needs

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Life throws many unexpected things at all of us. While we usually can't stop these things from
occurring, we can opt to give our lives a bit of protection. Insurance is meant to give us some
measure of protection, at least financially, should a disaster happen. There are numerous
insurance options available, and many financial experts tell us that we need to have these
insurance policies in place. Yet, with so many options, it can be difficult to determine what
insurance you really need. Purchasing the right insurance is always determined by your specific
situation. Factors such as children, age, lifestyle and employment benefits are all points to
consider when planning your insurance portfolio. (For related reading, see How Much Life
Insurance Should You Carry?)
SEE: IntroToInsurance
There are however, four insurances that most financial experts recommend that all of us have:
life, health, auto and long-term disability. Each one of these covers a specific aspect of your life,
and each one is very important to your financial future.

Life Insurance
The greatest factor in having life insurance is providing for those you leave behind. This is
extremely important if you have a family that is dependent on your salary to pay the bills.
Industry experts suggest a life insurance policy should cover "ten times your yearly income."
This sum would provide enough money to cover existing expenses, funeral expenses and give
your family a financial cushion. That cushion will help them re-group after your death.
When estimating the amount of life insurance coverage you need, remember to factor in not only
funeral expenses, but also mortgage payments and living expenses such as loans, credit cards
and taxes, but also child care, and future college costs.
LIMRA, formerly known as the Life Insurance Marketing & Research Association, says that if
the primary wage earner dies in a family with dependent children that family will only be able to
cover their living expenses for a few months, and four in 10 would have difficulty immediately.
The two basic types of life insurance are Traditional Whole Life and Term Life. Simply
explained, Whole Life is a policy you pay on until you die and Term Life is a policy for a set
amount of time. You should seek the advice of a financial expert when planning your life
insurance needs. There are considerable differences between the two policies. In deciding
between these two, consumers should consider their age, occupation, number of dependent
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children and other factors to ensure they have the coverage necessary to protect their families.
(For additional reading, see What To Expect When Applying For Life Insurance.)

Health Insuranc
A recent Harvard study noted that statistically, "your family is just one serious illness away
from bankruptcy." They also concluded that, "62% of all personal bankruptcies in the U.S. in
2007 were caused by health problems and 78% of those filers had medical insurance at the start
of their illness."
Those numbers alone should urge you to obtain health insurance, or increase your current
coverage. The key to finding adequate coverage is shopping around. While the best option and
the least expensive is participating in your employer's insurance program, many smaller
businesses do not offer this benefit.
Finding affordable health insurance is difficult, particularly without anemployer-sponsored
program or if you have a pre-existing condition. According to the Kaiser/HRET survey, the
average premium cost to the employee in an employer sponsored health care program was
around $4,100. With rising co-payments, yearly deductibles and dropped coverage's, health
insurance has become a luxury less and less can afford, yet even a minimal policy is better than
having no coverage. The cost for a day in the hospital can range from $985 to $2,696. Even if
you have minimal coverage, it can provide some monetary benefit for your hospital stay.
As the health care debate continues in Washington, approximately 48 million Americans are
without insurance coverage. Check with your employer regarding health care benefits, inquire of
any occupational organizations that you belong to regarding possible group health coverage. If
you are over age 50,AARP has some health insurance offers available. (To learn more, check
out Buying Private Health Insurance.)

Long-Term Disability Coverage

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This is the one insurance most us think we will never need, as none of us assumes we will
become disabled. Yet, statistics from the Social Security Administration show that three in 10
workers entering the workforce will become disabled, and will be unable to work before they
reach the age of retirement. Of the population, 12% are currently disabled in some form, and
nearly 50% of those workers are in their working years.
Even those workers that have great health insurance, a nice nest egg and a good life insurance
policy never prepare for the day when they might not be able to work for weeks, months or may
not ever be able to return to the job. While health insurance pays for your hospitalization and
medical bills, where is money coming from to pay those daily expenses that your paycheck
covers? Here are a few very sobering statistics regarding disability:

Disability Causes Nearly 50% of all Mortgage Foreclosures, 2% are Caused by Death.

Close to 90% of Disabling Accidents and Illnesses Are not Work Related.

In the Last 10 Minutes, 498 Americans Became Disabled.

If you are injured and off work for even three months, would you have enough in savings to
cover your living expenses? Consider what you might face financially if you suffer a major
medical condition such as cancer and were unable to work for over a year.
Many employers offer both short-term and long-term disability coverage as part of their benefits
package. This would be the best option for securing affordable disability coverage. If they don't,
seek out a private insurer. If you aren't sure how much coverage you need, AARP offers a very
good disability insurance calculator to help you.
A policy that guarantees income replacement is the optimal policy; more usual terms are
replacement of 50 to 60% of your income. The cost of disability insurance is based on many
factors including age, lifestyle and health. For group or employer coverage, the average rate in
2009 was about $238 per year or approximately $5 per week. A small price to pay if you are
faced with a devastating illness or injury. Disability insurance will guarantee that you will have
some income when you can't work.

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Auto Insurance
There were over 10-million traffic accidents in the U.S. in 2009 (latest available data) and
33,808 people died in motor vehicle crashes in those accidents, according to data released by the
Fatality Analysis Reporting System (FARS). The number one cause of death for American's
between the ages of 5 and 34 were auto accidents. Over 2.3 million drivers and passengers
received treatment in emergency rooms in 2009, and the costs of those accidents including
deaths and disabling injuries was around $70 billion.
While all states do not require drivers to have auto insurance, most do have requirements
regarding financial responsibility in the event of an accident. Many states do periodic random
checks of drivers for proof of insurance. If you do not have coverage, the fines can vary by state
and can range from the suspension of your license, to points on your driving record, to fines
from $500 to $1,000.
If you drive without auto insurance and have an accident, the fines will probably be the least of
your financial burden. Your car, like your home is a valuable assetyou use every day. If your car
is damaged in an accident and you have no auto insurance, you will have no way to replace that
vehicle unless you have a large savings account, and you don't really want to tap into that
savings when auto insurance could cover the cost.
If you, a passenger or the other driver is injured in the accident, your auto insurance will pay
those expenses, and help guard you against any litigation that might result from the accident.
Auto insurance also protects your vehicle against theft, vandalism or a natural disaster such as a
tornado or other weather related incidents.
Again, as with all insurances, your individual circumstances will determine the price of your
auto insurance. The best advice is to seek out several rate quotes, read the coverage provided
carefully and check periodically to see if you qualify for lower rates based on age, driving record
or the area where you live.

21 | P a g e

The Bottom Line

While insurance is expensive and certainly takes a chunk out of your budget, being without it
could lead to financial ruin. Always check with your employer first for available coverage, as
this will probably be where you will find the most economical way to of securing coverage. If
your employer doesn't offer it, obtain multiple quotes from several insurance providers. Schedule
times with agents who offer coverage in multiple areas as they may have some discounts
available if you purchase more than one type of coverage. (For additional reading,
see Understanding Your Insurance Contract.)
The expense of not having insurance is nothing compared to the expense of living without it.

Let Insurance Be Your Peace of Mind

Do you know the 4 Types of Insurance Everyone Needs? Investopedias FREE Personal Finance
newsletter provides the knowledge and information you need to make the best financial
decisions. Click here to get this weekly guide and start learning how to prepare for lifes
unexpected surprises.

Insurance Accounting

MARCH 2014
Accounting is a system of recording, analyzing and verifying an organizations financial status.
In the United States, all corporate accounting is governed by a common set of accounting rules,
known as generally accepted accounting principles, or GAAP, established by the independent
22 | P a g e

Financial Accounting Standards Board (FASB). The Securities and Exchange Commission
(SEC) currently requires publicly owned companies to follow these rules. Over time, both
organizations intend to align their standards with International Financial Reporting Standards
(IFRS).
Accounting rules have evolved over time and for different users. Before the 1930s corporate
accounting focused on management and creditors as the end users. Since then GAAP has
increasingly addressed investors need to be able to evaluate and compare financial performance
from one reporting period to the next and among companies. In addition, GAAP has emphasized
transparency, meaning that accounting rules must be understandable by knowledgeable people,
the information included in financial statements must be reliable and companies must fully
disclose all relevant and significant information.
Special accounting rules also evolved for industries with a fiduciary responsibility to the public
such as banks and insurance companies. To protect insurance company policyholders, states
began to monitor solvency. As they did, a special insurance accounting system, known as
statutory accounting principles, or SAP, developed. The term statutory accounting denotes the
fact that SAP embodies practices required by state law. SAP provides the same type of
information about an insurers financial performance as GAAP but, since its primary goal is to
enhance solvency, it focuses more on the balance sheet than GAAP. GAAP focuses more on the
income statement.
Publicly owned U.S. insurance companies, like companies in any other type of business, report
to the SEC using GAAP. They report to insurance regulators and the Internal Revenue Service
using SAP. Accounting principles and practices outside the U.S. differ from both GAAP and
SAP.
In 2001 the International Accounting Standards Board (IASB), an independent international
accounting organization based in London, began work on a set of global accounting standards.
About the same time, the European Union (EU) started work on Solvency II, a framework
directive aimed at streamlining and strengthening solvency requirements across the EU in an
effort to create a single market for insurance see Issues Updates on U.S. Solvency
Regulation Solvency II.
Ideally, a set of universal accounting principles would facilitate global capital flows and lower
the cost of raising capital. Some 100 countries now require or allow the international standards
that the IASB has developed.

23 | P a g e

Some insurers have been concerned that some of the initially proposed standards for insurance
contracts will confuse more than enlighten and introduce a significant level of artificial volatility
that could make investing in insurance companies less attractiy.
RECENT DEVELOPMENTS

Insurance Contracts: It appears unlikely that the U.S. Financial Accounting Standards
Board (FASB) and the International Accounting Standard Board (IASB) will be able to
achieve a convergence of the two systems with regard to property/casualty insurance. In
February 2014 Accounting Today reported that FASB decided to focus on improving
U.S. GAAP instead of continuing with the convergence project. For short-duration
contracts which includes most property/casualty insurance FASB will target changes
that enhance disclosures. For long-duration contracts like life insurance, the board
concluded it should consider IASBs approach, though the auditing and consulting firm
of Deloitte notes that even in this regard convergence is not the primary objective of the
changes.

Financial Reporting: An SEC report published in July 2012 made no recommendations

about whether the IFRS should be incorporated into the U.S. financial reporting system
although it did say that there was little support among major U.S. corporations for
adopting the IFRS as authoritative guidanc

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Statutory accounting
As the leading auditor of insurance companies in the United States of
America, we have extensive knowledge of statutory accounting principles
and their application. We have dedicated national resources whose sole
purposes are to monitor and communicate statutory accounting
developments and to serve as consultative resources on emerging statutory
accounting issues. We attend the quarterly meetings of the NAIC and
participate in various industry working groups that develop statutory
accounting principles.
Because of our extensive client base, our engagement teams have
experience working with virtually all state insurance departments on
financial accounting matters, and we formally and informally share this
individual and collective experience within the insurance practice.
We routinely communicate with clients on emerging statutory accounting
matters and their implications and release a newsletter each quarter based
on the NAIC meetings. We also have assisted clients to address issues raised
by NAIC Codification (including providing clients with our RapidSTAT software
so they could develop comprehensive documentation relating to their
statutory accounting policies). Moreover, we have a strong relationship with
state insurance departments, which we believe is critical to understanding
and anticipating the unique application of statutory accounting principles.
We also share our thinking on emerging topics from a GAAP and SEC
accounting and reporting perspective. As the NAIC is required to review each
GAAP pronouncement and consider its applicability for statutory reporting
purposes, much of this GAAP guidance ultimately affects statutory
accounting.
Last but not least, we have dedicated National Office resources whose sole
responsibility is to monitor and communicate statutory accounting
developments and serve as consultative resources on emerging statutory
accounting issues. Several of these individuals are part of a team that
supports our insurance engagements.

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Accountancy Insurance
Accountancy Insurance was established in 2003 specializing in Audit Shield a comprehensive
tax audit insurance product which covers the professional fees incurred as a result of an official
audit, enquiry, investigation or review instigated by the Australian Taxation Office (ATO) and
other federal, state and territory based agencies. Today, Accountancy Insurance provide service
to more than 2000 accounting firms across Australasia. Professional Indemnity, Management
Liability Insurance and Cyber Insurance are also peace of mind Accountancy Insurance products
available to Australian accounting firm

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What is marine insurance?

Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or
cargo by which property is transferred, acquired, or held between the points of origin and final
destination.

TYPES OF MARINE INSURANCE POLICIES

This article explains: How many types of marine Insurance Policies are there?
Different clauses of marine insurance policies, Scope of cargo insurance policy
and how does marine Insurance policies work?

27 | P a g e

The shipper or insured covers the risks depending on the

terms of letter of credit/ export order. The Institute of
London Underwriters has drawn up the different clauses in
marine insurance policy in respect of risk coverage. The risk
coverage is done in terms of various institute cargo clauses.
Different marine insurance policies with different risk coverage are :

Institute Cargo Clause A: This policy covers all the risks of loss or damage to
goods. This is the widest cover.

Institute Cargo Clause B: This policy covers risks less than under clause A.

Institute Cargo Clause C: This policy covers lowest risks.

War and Strikes, Riots and Civil Commotion (SRCC) clause is excluded in all the
above policies. These risks can be covered by specifically asking for, paying
additional prem

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Insurance Sector in India

Introduction

The insurance industry of India consists of 52 insurance companies of which 24 are in life
insurance business and 28 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. Other stakeholders in Indian Insurance market
include agents (individual and corporate), brokers, surveyors and third party administrators
servicing health insurance claims.

Out of 28 non-life insurance companies, five private sector insurers are registered to underwrite
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.

29 | P a g e

Market Size

India's life insurance sector is the biggest in the world with about 36 crore policies which are
expected to increase at a compound annual growth rate (CAGR) of 12-15 per cent over the next
five years. The insurance industry plans to hike penetration levels to five per cent by 2020, and
could top the US$ 1 trillion mark in the next seven years.
The total market size of India's insurance sector is projected to touch US$ 350-400 billion by
2020 from US$ 66.4 billion in FY13.

The general insurance business in India is currently at Rs 77,000 crore (US$ 12.41 billion)
premium per annum industry and is growing at a healthy rate of 17 per cent.
The Rs 12,606 crore (US$ 2.03 billion) domestic health insurance business accounts for about a
quarter of the total non-life insurance business in the country.
Investment corpus in India's pension sector is anticipated to cross US$ 1 trillion by 2025,
following the passage of the Pension Fund Regulatory and Development Authority (PFRDA)
Act 2013, according to a joint report by CII-EY on Pensions Business in India.
Indian insurance companies are expected to spend Rs 117 billion (US$ 1.88 billion) on IT
products and services in 2014, an increase of five per cent from 2013, as per Gartner Inc. Also,
insurance companies in the country could spend Rs 4.1 billion (US$ 66.11 million) on mobile
devices in 2014, a rise of 35 per cent from 2013.

Investments

30 | P a g e

Insurance sector of India needs capital infusion of Rs 50,000 crore (US$ 8.06 billion) to expand,
maintain a healthy capital base and improve solvency standards, according to Insurance
Regulatory Development Authority (IRDA).
The following are some of the major investments and developments in the Indian insurance
sector.

Life Insurance Corp of India (LIC) has earmarked a total of around Rs 1 trillion (US$
16.12 billion) for investments in bonds, including non-convertible debentures (NCDs),
certificates of deposit (CDs), commercial papers (CPs) and collateralized borrowing and
lending obligations (CBLOs), with primary focus on infrastructure and real estate in the
year to March 31, 2015.

Aditya Birla Financial Services Group has signed an agreement to form a health
insurance joint venture (JV) with MMI Holdings of South Africa. The two will enter into
a formal JV in which the foreign partner will hold a 26 per cent stake.

South African financial services group Sanlam plans to increase stake in its Indian JV
Shriram Life Insurance from 26 per cent to 49 per cent.

JLT Independent plans to develop India as a service hub for all countries that are a part of
South Asian Association for Regional Cooperation (SAARC), according to Mr Sanjay
Radhakrishnan, CEO, JLT Independent.
Kotak Mahindra Bank became the first bank to get the permission from Reserve Bank of
India (RBI) to set up a wholly-owned non-life insurance company.

Government Initiatives

The Government of India has taken a number of initiatives to boost the insurance industry. Some
of them are as follows:

The Reserve Bank of India (RBI) has allowed banks to become insurance brokers,
permitting them to sell policies of different insurance firms subject to certain conditions.

The select committee of the Rajya Sabha gave its approval, permitting 49 per cent
composite foreign equity investment in insurance companies. A broad agreement has also
been achieved with the states on most of the issues concerning the implementation of the
single goods and services tax (GST), which is scheduled to be rolled out from April 1,
2016.
31 | P a g e

The Government of India plans to implement a Rs 1,900 crore (US$ 306.41 million) egovernance project called Panch Deep to automate transactions of the Employees State
Insurance Corporation (ESIC), said Mr Bandaru Dattatreya, Union Minister for Labour
and Employment with Independent Charge, Government of India. Under the project,
enterprise resource planning (ERP) solution would be installed across the country which
will give a unique card to the employees and facilitate clearance of third party bills.

The Government of India plans to launch a new insurance scheme to protect farmers and
their incomes against production and price risks.

Under the Pradhan Mantri Jan Dhan Yojana, it has been decided that even those accounts
which had been opened prior to August 28, 2014 and have zero balance will get Rs
100,000 (US$ 1,612.55) insurance cover.

Secrets of public insurance adjusters: What they know about

insurance companies that you don't

You're at a disadvantage when you have major house damage or a total loss of your home. You
face a home insurance claims process that could easily stretch out for more than a year, require
reams of paperwork and leave you mentally and physically exhausted.

32 | P a g e

Unless you've already run the gauntlet of a major home insurance claim, you don't know what to
expect. We asked Ron Reitz, President of Quality Claims Management Corp. in San Diego, to
give us an inside look at what, many times, is an eye-opening process for policyholders.

Reitz helps policyholders work through the insurance-claim process and shows them how to
recoup their losses. He has nearly 17 years of experience in the insurance industry and is a
licensed public insurance adjuster in nearly every state that has licensing regulations.
"Most people don't learn much about insurance until they have a loss," sums up Reitz.
Public adjusters work on behalf of policyholders to help people get all that they're entitled to
from insurance claims. They help evaluate damage and rebuilding costs, track the flow of
insurance payments and amounts due, and work with home insurance companies to expedite
their clients' insurance claims. Find out more about how to hire a public insurance adjuster.
Here's what takes many people by surprise when they have large home insurance claims,
whether it's due to fire or natural disasters.

A claim for a total loss of a house can cost less than rebuilding a damaged house.
New construction from scratch costs less per foot than construction for rebuilding. Often it's
"easier" to fix your problem if your house is simply gone, rather than to try to repair damaged
sections.

33 | P a g e

"When you start from scratch (new construction), you don't have to tie into existing construction
-- some of which may be outdated, so you have a clean slate to start with," explains Reitz. Also,
it's often more costly to bring your old house up to code than to start fresh.

If you have a mortgage, your insurance checks will be made out to you and your mortgage
bank.
Your mortgage holder is likely listed as a "loss payee" on your home insurance policy, so
payments for rebuilding are issued to both you and your lien holder. And don't expect your
mortgage holder to sign the check over to you.
Policyholders "have to endorse and send the check to the mortgage company, and it will sit in an
escrow account until repairs are made," says Reitz. Mortgage banks typically release the funds
back to you in three installments over the course of your reconstruction. Mortgage companies
want to be sure your property is repaired before releasing payment to you. As a result, you may
have to advance your own money for constructions costs until the mortgage company verifies
the repairs.

Don't cash any insurance checks marked "full and final settlement."
In some states, such as California, it's illegal for an insurer to issue a check like this. You don't
want to cut yourself off from what you're entitled to if you later discover that not everything has
been paid for.

Don't sign a release on your home insurance claim.

This takes the home insurer off the hook for any future payments on your claim.
"Insurance companies ask the insured to do it when they think there's a problem or big dispute
coming," says Reitz. The home insurance policy does not require the insured to execute a
release, so why should you?

34 | P a g e

Don't let your insurance company replace your Pottery Barn stuff with Walmart stuff.

The values of particular items are often disputed in home insurance claims. If you've bought
expensive items, your insurance company may say it can replace them with very similar items
from Walmart or Target.
"We battle back and forth," says Reitz. The insured is entitled to be paid for what he had not a
knock-off version of it.

Many condo owners have no idea that they need their own home insurance policies.

They think that the condo association's policy covers their property. However, the association's
policy covers only common areas, typically up to the walls of your condo. If you want your own
space and belongings protected, you need an HO-6 home insurance policy. Otherwise, all your
belongings, furniture, appliances and cabinets are uninsured.
Without an HO-6, you may have no liability protection if you're sued for something that happens
within your condo, like a slip-and-fall injury.

If you're evacuated, don't sleep at a shelter.

Your home insurance covers your "additional living expenses" if there's a mandatory evacuation,
including hotels and food even additional transportation costs.
"Why sleep on a cot when you could go to a hotel?" says Reitz. "You don't realize you have that
coverage until you have a loss."

After a widespread disaster, insurance companies will bring in company adjusters from out
of state who aren't familiar with local costs.

35 | P a g e

Adjusters from outside your area will not have a handle on how much tradespeople such as
electricians or plumbers charge, or how much it costs to rebuild a house. Often they will rely on
a software program called Xactimate which isn't very exact if you don't account for local
costs, in Reitz's opinion.
"The insurance company will bring in out-of-state adjusters who are probably not licensed in
your state," observes Reitz. "They're not as familiar with local building codes. What we saw
from the 2007 and 2009 fires in Southern California was that out-of-state adjusters can't
comprehend that it will cost $800,000 or $1 million to rebuild someone's house. They can't
comprehend local building values if they are accustomed to handling total losses of $200,000."

People regularly settle for less than the total cost of their damages because they are
exhausted.

Especially near the end of a complicated claim such as a total home loss, homeowners just want
the process to be over.
Even if your policy entitles you to "replacement cost" of your belongings, home insurance
companies will initially issue checks for your belongings' actual cash value. Then, later, when
you replace the items, you need to submit your receipts to get the remainder due.
"In reality, most people don't go back and submit receipts because they're so frustrated with the
claim, they're done with it. They'll settle for less and close the claim and rebuild for less, and the
insurance company knows this," says Reitz.

The value of hiring a public insurance adjuster

Hiring a public claims adjuster can put you on an even playing field with your insurance
company. Your insurer may assign three different adjusters to work on your claim: one for
"additional living expenses," one for your personal property and one for the building portion of
your claim. A public adjuster will be able to explain the process and work on your behalf
handling the countless meetings, e-mails, phone calls and paper documents that flow for a large
claim.
The insured can get on with daily life and leave the insurance adjusting to a professional, says
Reitz.

36 | P a g e

Public adjuster fees

Most public adjusters calculate their fees based on a percentage of your total claim, which gives
them incentive to maximize your insurance payments. Fees vary across the country but, for
example, an adjuster may charge 20 percent for a $20,000 to $30,000 loss and 10 percent to 12
percent for a loss over $100,000.
It's better to hire a public adjuster early in the process in order to streamline your claim. It's
difficult for an adjuster to come in halfway or at the end of a claim and try to work backwards to
assess the situation. An adjuster hired at the end of a claim to help squeeze out the remainder due
could charge 25 percent because he still has to determine the value of the entire claim.

Policy benefits and features

What's in it for You?
Maturity Benefit
Under Bajaj Allianz Future Gain, the maturity benefit will be the regular premium fund value
plus top up premium fund value as on the maturity date, provided the policy is in-force.
Surrender Benefit
You have the option to surrender your policy at anytime.

On surrender during the lock-in period of first five years of your policy, the regular
premium fund value, less the discontinuance/surrender charge plus the top up premium fund
value, if any, as on the date of surrender, will be transferred to the discontinued life policy fund
(maintained by the company), and life cover shall cease immediately. The discontinuance value
as at the end of the lock-in period will be available to you as surrender value.

On surrender after the lock-in period of first five years of your policy, the surrender value
available will be regular premium fund value plus top up premium fund value, if any, as on the
date of surrender, and will be payable immediately.

The policy shall terminate upon payment of the surrender/discontinuance value by the
company.

37 | P a g e

Death Benefit
In case of unfortunate death before the maturity date, provided the policy is in-force, the death
benefit payable to the nominee/ policyholder as a lump-sum is:

The higher of the sum assured or regular premium fund value PLUS

The higher of top-up premium sum assured or top-up premium fund value, if any;
All the above as on date of receipt of intimation of death The death benefit is subject to the
guaranteed death benefit, which is 105% of the total premiums paid including top-up premiums
paid, if any, till the date of death.

If death of the life assured occurs before attaining age 60 years, then, the sum assured
shall be reduced to the extent of any partial withdrawals made from the regular premium fund
during the two year period immediately preceding the date of death of the life assured.

If death of the life assured occurs on or after attaining age 60 years, then, the sum assured
shall be reduced to the extent ofthe partial withdrawals made from the regular premium fund
during the two year period before attaining age 60 and all the partial withdrawals made from the
regular premium fund after attaining age 60.

The partial withdrawal made from the top up premium fund shall not be deducted for this
purpose

38 | P a g e

Charges under the Plan

Charges

Details
Annualized Premium/ Policy Year

Premium
Allocation
Charge

2-5

6 and above

25,000 to 99,999

5.50%

3.75%

0%

100,000 to 199,999

2.50%

1.75%

0%

200,000 and above

0%

0%

0%

All Top ups have a premium allocation charge of 2%

Policy
Rs.33.33 per month inflating at 5% per annum every month. The charge will
Administration be deducted at each monthly anniversary by cancellation of units at prevailing
Charge
unit price
BALANCE SHEETS
The balance sheet, also known as the statement of financial position, is a snapshot of a
company's financial condition at a single point in time. It presents a summary listing of a
company's assets, liabilities, and owners' equity. The balance sheet is prepared as of the last day
of the business year. Therefore, it corresponds to the end of the time period covered by the
income statement.
To understand the balance sheet, its purpose, and its contents, several accounting concepts need
to be examined. First of all, the balance sheet represents the accounting equation for a company.
The accounting equation is a mathematical expression that states the following:
Assets = Liabilities + Owners' Equity
Stated more fully, this means that the dollar total of the assets equals the dollar total of the
liabilities plus the dollar total of the owners' equity. The balance sheet presents a company's
resources (i.e., assets, or anything the company owns that has monetary value) and the origin or
source of these resources (i.e., through borrowing or through the contributions of the owners).
By expressing the same dollar amount twice (once as the dollar total of the assets, then as the
39 | P a g e

dollar total of where the assets came from or who has an equity interest in them), we see that the
two amounts must be equal or balance at any given point in time.
An interesting observation about the balance sheet is the valuation at which assets are presented.
The average person would assume that the assets listed on the balance sheet would be shown at
their current market values. In actuality, generally accepted accounting principles require that
most assets be recorded and disclosed at their historical cost, or the original amount that the
company paid to obtain ownership or control of the assets. As time passes, however, the current
value of certain assets will drift further and further away from their historical cost. In an attempt
to present useful information, financial statements show some assets (for which there is a
definite market value) at their current market value. When there is no specific market value,
historical values are used. An expanded discussion of this concept
A simple example of a balance sheet appears in Table 1.
ASSETS
As a category, assets include current assets, fixed or long-term assets, property, intangible assets,
and other assets.
CURRENT ASSETS.
Assets can be viewed as company-owned or controlled resources, from which the organization
expects to gain a future benefit. Examples of assets for a typical company include cash,
receivables from customers, inventory to be sold, land, and buildings. In order to make the
balance sheet more readable, assets are grouped together based on similar characteristics and
presented in totals, rather than as a long list of minor component parts.
The first grouping of assets is current assets. Current assets consist of cash, as well as other
assets that will probably be converted to cash or used up within one year. The one-year horizon
is the crucial issue in classifying assets as current. The concern is to
------------------- in Rs. Cr. -------------------

Profit & Loss account of Bajaj Auto

Mar '14

Mar '13

Mar '12

Mar '11

40 | P a g e

Mar '10

12 mths

12 mths

12 mths

12 mths

12 mths

20,149.5
1

19,997.25

20,475.74

17,386.51

12,420.95

0.00

0.00

959.09

934.71

607.70

20,149.5
1

19,997.25

19,516.65

16,451.80

11,813.25

706.41

795.49

413.66

1,176.00

22.50

18.90

-24.00

94.15

82.79

47.60

20,874.8
2

20,768.74

20,024.46

17,710.59

11,883.35

14,289.2
0

14,761.83

14,580.24

11,965.30

8,187.11

Power & Fuel Cost

106.16

121.33

101.85

86.61

70.35

Employee Cost

726.58

639.48

541.04

494.33

411.76

Other Manufacturing Expenses

0.00

0.00

73.76

61.77

57.54

Selling and Admin Expenses

0.00

0.00

364.06

517.27

407.61

940.73

815.36

263.37

168.53

221.94

0.00

0.00

-49.43

-16.66

-15.67

16,062.6
7

16,338.00

15,874.89

13,277.15

9,340.64

Mar '14

Mar '13

Mar '12

Mar '11

Mar '10

12 mths

12 mths

12 mths

12 mths

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials

Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses

12m
ths

41 | P a g e

Operating Profit

4,105.74

3,635.25

3,735.91

3,257.44

2,520.21

PBDIT

4,812.15

4,430.74

4,149.57

4,433.44

2,542.71

0.49

0.54

22.24

1.69

5.98

4,811.66

4,430.20

4,127.33

4,431.75

2,536.73

179.61

163.97

145.62

122.84

136.45

Other Written Off

0.00

0.00

2.14

2.14

0.00

Profit Before Tax

4,632.05

4,266.23

3,979.57

4,306.77

2,400.28

0.00

0.00

46.60

46.77

26.87

PBT (Post Extra-ord Items)

4,632.05

4,266.23

4,026.17

4,353.54

2,427.15

Tax

1,388.73

1,222.66

1,022.12

1,011.02

710.12

Reported Net Profit

3,243.32

3,043.57

3,004.05

3,339.73

1,702.73

Total Value Addition

1,773.47

1,576.17

1,294.65

1,311.85

1,153.53

0.00

0.00

0.00

0.00

0.00

1,446.84

1,302.15

1,302.15

1,157.47

578.73

245.89

221.30

211.24

187.77

96.12

2,893.67

2,893.67

2,893.67

2,893.67

1,446.84

Earning Per Share (Rs)

112.08

105.18

103.81

115.42

117.69

Equity Dividend (%)

500.00

450.00

450.00

400.00

400.00

Book Value (Rs)

332.04

273.08

208.77

169.69

202.40

Interest
PBDT
Depreciation

Extra-ordinary items

Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)

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Sample Balance Sheet

Assets

Liabilities and Owners' Equity

Current assets

600,000

Current liabilities

280,000

Fixed Assets

90,000

Long-term debt

500,000

Property

800,000

Owners' equity

900,000

Intangible assets

50,000

Other assets

140,000

TOTAL ASSETS 1,680,000 TOTAL LIABILITIES AND OWNERS' EQUITY 1,680,000

present assets that will provide liquidity in the near future. Current assets should be listed on the
balance sheet in the order of most liquid to least liquid. Therefore, the list of current assets
begins with cash. Cash includes monies available in checking accounts and any cash on-hand at
the business that can be used immediately as needed. Any cash funds or temporary investments
that have restrictions on their withdrawals, or that have been set up to be spent beyond one year,
should not be included in current assets.
Temporary investments known as trading securities are short-term investments that a company
intends to trade actively for profit. These types of investmentscommon to the financial
statements of insurance companies and banksare shown on the balance sheet at their current
market value as of the date of the balance sheet. Any increase or decrease in market value since
the previous balance sheet is included in the calculation of net income on the income statement.
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The next category on the list of current assets is accounts receivable, which includes funds that
are to be collected within one year from the balance sheet date. Accounts receivable represent
the historical amounts owed to the company by customers as a result of regular business
operations. Many companies are unable to collect all of the receivables due from customers. In
order to disclose the amount of the total receivables estimated to be collectible, companies
deduct what is known as a contra account. A contra account has the opposite balance of the
account from which it is subtracted. The specific account title might be "allowance for
uncollectible accounts" or "allowance for bad debts," and its balance represents the portion of
the total receivables that will probably not be collected. The expense related to this is shown on
the income statement as bad debt expense. The net amount of accounts receivable shown is
referred to as the book value. Other receivables commonly included on the balance sheet are
notes receivable (due within one year) and interest receivable.
Inventory is shown next in the current asset section of the balance sheet. If the company is a
retailer or wholesaler, this asset represents goods that a company has purchased for resale to its
customers. If the company is a manufacturer, it will have as many as three different inventory
accounts depending on the extent to which the goods have been completed. Inventory classified
as raw materials represents the basic components that enter into the manufacture of the finished
product. For a tractor manufacturer, raw materials would include the engine, frame, tires, and
other major parts that are directly traceable to the finished product. The second type of inventory
for a manufacturer would be goods in process. As the name implies, this category represents
products that have been started but are not fully completed. After the goods are completed, they
are included in the final inventory classification known as finished goods. The value assigned to
inventory is either its current market price or its cost to the manufacturer, whichever is lower.
This is a conservative attempt to show inventory at its original cost, or at its lower market value
if it has declined in value since it was purchased or manufactured.
The final group in the current assets section of the balance sheet is prepaid expenses. This group
includes prepayments for such items as office supplies, postage, and insurance for the upcoming
year. The total for these items is shown at historical cost.

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FIXED OR LONG-TERM ASSETS.

These assets differ from those listed under current assets because they are not intended for sale
during the year following the balance sheet date; that is, they will be held for more than one year
into the future. Such asset investments are classified under the headings of held to maturity for
investments in debt instruments such as corporate or government bonds, and available for
sale for investments in equity (stock) instruments of other companies or debt securities that will
not be held to maturity. Held-to-maturity investments are disclosed in the balance sheet at
their carrying value. The carrying value is initially equal to the historical cost of the investment;
this amount is adjusted each accounting period so that, when the investment matures, its carrying
value will then be equal to its maturity value. These adjustments are included in the calculation
of income for each accounting period. Available-for-sale investments are adjusted to market
value at the end of each accounting period, and these adjustments are included in the calculation
of owners' equity.
PROPERTY.
Sometimes listed under the expanded heading property, plant, and equipment, this section of the
balance sheet includes long-term, tangible assets that are used in the operation of the business.
These assets have a long-term life and include such things as land, buildings, factory and office
equipment, and computers. Land is listed first because it has an unlimited life, and it is shown at
its historical cost. The other assets, such as buildings and equipment, are shown at book value.
Book value is the original cost of the asset reduced by its total depreciation since being placed
into service by a company. This net amount is frequently called net book value, and it represents
the remaining cost of the asset to be depreciated over the remaining useful life of the asset.

Several methods are used to calculate depreciation (e.g., straight-line and accelerated), and each
uses a mathematical formula to determine the portion of the original cost of the asset that is
associated with the current year's operations. Note that depreciation is not an attempt to reduce a
long-lived asset to its market value. Accountants use market value on the balance sheet when it
is readily available and required for use by generally accepted accounting principles. However,
in the case of many property items an unbiased estimate of market value may not be available.

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As a result, accountants use the asset's historical cost, reduced by the depreciation taken to date,
as an indication of its remaining useful service potential.
INTANGIBLE ASSETS.
Some long-lived assets of a company represent legal rights or intellectual property protections
that are intangible by nature. Examples of this type of asset include a company's patents,
copyrights, and trademarks. Each of these assets has a legally specified life and expires at the
end of that period, although a few can be renewed. Accountants attempt to measure this decline
in usefulness by amortizing the historical costs of these assets. This concept is the same as
recording depreciation for items of tangible property discussed above.
One special type of intangible asset is known as goodwill. Goodwill is acquired when one
company purchases another company and pays more than the estimated market value of the net
assets held by the purchased company. The buying company might do this for a number of
reasons, but it is often necessary in order to encourage the previous owners to sell, and to
guarantee that the acquisition is successful. The difference between the purchase price and the
market value of the assets also can be attributed to intangible factors in the purchased company's
success, such as proprietary processes or customer relationships. Like other intangible assets, the
historical cost of goodwill is amortized over its future years. Accounting rules set a maximum
life of 40 years for goodwill, but this rule will be reduced to 20 years in the future.
OTHER ASSETS.
This final section covering the disclosure of assets on the balance sheet is a miscellaneous
category that includes any long-lived asset that does not fit in any of the categories defined
above. This category might include such assets as long-lived receivables (from customers or
related companies) and long-lived prepaid insurance premiums (those paid for coverage beyond
the next year from the balance sheet date). Another example is a deferred charge (such as a
deferred tax asset), or an amount that has been prepaid based on generally accepted accounting
principles and holds future benefit for the company
LIABILITIES
Liabilities include current liabilities, as well as long-term debt.

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CURRENT LIABILITIES.
Current liabilities are debts that come due within one year following the balance sheet date.
These debts usually require cash payments to another entity, and they often have the word
"payable" as part of their name. Accounts payable are amounts owed to suppliers by a company
that has purchased inventory or supplies on a credit basis. Interest payable represents interest
that has accrued on notes payable or other interest-bearing payables since the last payment was
made by a company; this type of payable might be included in a general group known as accrued
expenses. Other current liabilities include estimated warranty payments, taxes payable, and the
current year's portion of long-term debt that is coming due within one year from the balance
sheet date.
LONG-TERM DEBT.
Long-term debts are those that come due more than one year following the balance sheet date.
They include bonds payable, mortgage payable, and long-term notes payable, all of which have a
specific maturity date. Deferred income taxes payable might also be disclosed in this category.
The latter item is rather technical and controversial; it arises when accounting rules used in
preparing the financial statements for reporting to owners differ from rules used on income tax
returns for income tax authorities. Deferred income taxes payable typically result from an item
being deducted on the income tax return (as allowed by tax rules) before it is reported as an
expense on the income statement (as allowed by generally accepted accounting principles).
When these timing differences reverse in future years, the deferred income taxes payable
category is removed as the actual payment to tax authorities is made.
OWNERS' EQUITY
This final section of the balance sheet is one of the most difficult to comprehend. It is known
as stockholders' equity for a corporation and consists of several possible subdivisions: paid-in
capital, adjustments for changes in value of certain investments in stocks of other companies,
and retained earnings. The paid-in capital section discloses the investment made in the
corporation by the stockholder-owners. It will include the amount paid into the corporation by
the stockholders for different types of equity instruments that have been issued by the
corporation, such as preferred stock equity and common stock equity. Paid-in capital usually is

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separated into two partsthe par value of the stock and the amount paid in excess of the par
valueas required by generally accepted accounting principles.
Adjustments for market value changes in available-for-sale investments in other companies are
shown as a component of owners' equity. These adjustments also are reported in comprehensive
income, because they reflect a change in owners' equity that is not a part of net income. Changes
in the value of trading securities, which are short-term investments, are included in the
calculation of net income, whereas changes in value of available-for-sale securities are reported
only in owners' equity and the statement of comprehensive income.
The last category usually found under the heading of owners' equity is retained earnings. This
amount represents any earnings (or the difference between total net income and net loss) since
the inception of the business that have not been paid out to stockholders as dividends.
Returning to the aforementioned accounting equation, a user of financial statements can better
understand that owners' equity is the balancing amount. If assets are considered a company's
resources, they must equal the "sources" from which they came. The sources for assets are a
company's creditors (as seen in the total of the liabilities) and its owners (as seen in the total for
owners' equity). As such, retained earnings does not represent a fund of cash; instead it
represents the portion of each asset that is owned by the stockholders. The remaining portion of
each asset is owed to creditors in the form of liabilities.
It is important to keep in mind that the balance sheet does not present a company's market value.
While some assets are presented at market value, others cannot be disclosed at market value
because no such specific market value exists. The changes in the value of the assets that are
required to be adjusted to market value for each balance sheet are included in either net income
or comprehensive income, depending on the nature of the asset and the purpose for which
management chose to acquire it.
Another important consideration about the balance sheet is the manner in which both assets and
liabilities are separated into current and noncurrent groups. While not all companies will have all
of the classifications discussed above, all will have both current and noncurrent items. This

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separation allows the user of the balance sheet to compare a company's current liquidity needs
and resources to its long-term solvency status.
In conclusion, balance sheets are an important tool to help managers, lenders, and investors
analyze a company's financial status and capabilities. They are particularly useful in helping to
identify trends in the areas of payables and receivables. However, it is vital to remember that the
document only presents a company's financial situation at a given point in time. It does not
provide any information about the past decisions that helped the company to arrive at that point,
or about the company's future direction or potential for success. For this reason, the balance
sheet should be considered along with other required financial statements, as well as historical
data, when evaluating a company's performance.

SUGGESTIONS
Here are some suggestions, which may help to strengthen the firm further
Many of the insurance care consultants of the Bajaj Allianz. Has the lack of goodcommunication
skills and training. So training should be easy.
Bajaj Allianz. Should use new techniques of sales promotion.
Customer services should be more comfortable than others.

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People must be made aware of the benefits of the policies of Bajaj Allianz.
The company should give personal attention to each customer.
Proper assistance should be provided to the customer at the time o
f c l a i m settlement.
All the details about the company should be given to the customers.
Regular advertisement of the company should be given TV and Newspaper.
The company must try to find new markets especially in the rural areas.
The company should do frequent analysis of the competitors.

Bibliography
http://www.bankbazaar.com/insurance/bajaj-allianz-life-insurance.html
http://www.slideshare.net/__mitra90/bajaj-allianz-survey
http://www.slideshare.net/hemanthcrpatna/a-study-of-customer-satisfaction-on-after-salesand-service-conducted-at-arpita-bajaj-hassan
http://www.academia.edu/4911687/TO_STUDY_THE_LEVEL_OF_CUSTOMER_SATISF
ACTION_TOWARDS_BAJAJ_A_PROJECT_REPORT_Submitted_to_the
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http://en.wikipedia.org/wiki/Bajaj_Allianz_Life_Insurance
http://summertrainingreports.blogspot.in/2010/01/bajaj-allianz.html
https://www.scribd.com/doc/19698293/bajaj-allianz-general-insurance-Trianing-Report
https://www.scribd.com/doc/61451735/Introduction-of-Bajaj-Allianz-Life-InsuranceCompany

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