CHAPTER- 1

INTRODUCTION

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 1. INTRODUCTION

1.1 Introduction

India is a country with a large proportion of its population being young and
employable. With the public sector ceasing to provide sufficient
opportunities of employment, the educated have to invariably look for
private sector employment for their sustenance and growth.

Insurance may be described as a social device to reduce or

eliminate risk of Life and Property. Under the plan of insurance, a large
number of people associate themselves by sharing risk, attached to
individual. The risk, which can be insured against include fire, the peril of
sea, death, accident, burglary. Any risk contingent upon these may be
insured against at a premium commensurate with the risk involved.

From just four general insurers in the year 2000, there are 28 general
insurers operating in India in 2015. Four public sector general insurers and
17 private general insurers are dealing in all types of non-life insurance
sales and servicing. Even though there is increase of insurers but only
40% people were insured & remaining 60% are non-insured.

Even though insurance industry had a rapid growth out of all

industries in service and also contribution is 15-20% towards G.D.P also
and it consists of 28 general insurers also but still the companies are
running in underwriting loss only. Out of all 28 general insurers only one
company is running in underwriting profit.

1.2 Opportunity for Insurance companies

Since the onset of reforms, the competition and service quality has
definitely improved in terms of underwriting, product innovation,
distribution channels, marketing of product and assurance of policy. The

2
reforms have also brought in new industry risks in terms of increased
competition, inadequately experienced managers, unknown risk exposure
due to different risk aggregates, information risks and mismatching of
assets and liabilities (Standard & Poor's, 2007). The changing insurance
industry dynamics present many opportunities for insurers, but capturing
these opportunities requires a well-defined and proactive business
response. The insurers must re-evaluate how they handle customer
interactions; align their offering with customer purchasing criteria, better
understanding, and act on the drivers of customer satisfaction, loyalty and
defection. At the same time, they can optimize distributor strategy by
proactively seeking to retain and attract quality distributors.

The insurers had lot of opportunities in insurance in both life and

non-life but still there is lacking in underwriting due to various facts it
makes the position of company low and effect on business also.

1.3 Definitions

1.3.1 Insurance

A promise of compensation for specific potential future losses

in exchange for a periodic payment. Insurance is designed
to protect the financial well-being of an individual, company or
other entity in the case of unexpected loss. Some forms of insurance are
required by law, while others are optional. Agreeing to the terms of
an insurance policy creates a contract between the insured and the insurer.
In exchange for payments from the insured (called premiums), the
insurer agrees to pay the policy holder a sum of money upon the
occurrence of a specific event.

Certain terms are usefully defined at the outset. Insurance is a

contract of reimbursement. For example, it reimburses for losses from
specified perils, such as fire, hurricane, and earthquake. Aninsurer is the

3
company or person who promises to reimburse. The insured (sometimes
called the assured) is the one who receives the payment, except in the case
of life insurance, where payment goes to the beneficiary named in the life
insurance contract. The premium is the consideration paid by the insured
usually annually or semiannuallyfor the insurers promise to reimburse.
The contract itself is called the policy. The events insured against are
known as risks or perils.

1.3.2.Definition of Underwriter

A person whose job is to calculate the risk that is involved in an

activity or providing insurance for a particular customer, and to decide how
much should be paid for insurance.

In simple terms an underwriter assesses insurance risks and decides

whether to offer insurance cover or not.

1.3.3. Definition of Underwriting Risk'

Underwriting risk refers to the potential loss to an insurer emanating from

faulty underwriting the same may affect the solvency and profitability of
the insurer in an adverse manner.

1.3.4. Definition of Underwriting Profit & Loss'

The premium underwritten by the insurer must incorporate the risk

premium that covers not only the claims but also capital requirements .in
the event that the matching is not done in a pragmatic manner; the
underwriting risk arises i.e. underwriting loss.

The amount of loss or profit gained by insurer from an insurance policy is

called as underwriting loss or underwriting profit. Underwriting is heart of

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insurance and it plays vital in insurance operations like premium setting,
risk classifications, proposal acceptance or rejection.

1.3.5 Investment

An Investment is an asset or item that is purchased with the hope that it

will generate income or will appreciate in the future. In an economic sense,
an investment is the purchase of goods that are not consumed today but
are used in the future to create wealth. In finance, an investment is a
monetary asset purchased with the idea that the asset will provide income
in the future or will be sold at a higher price for a profit.

1.3.6 Investment Income

Investment income comes from interest payments, dividends, capital gains

collected upon the sale of a security or other assets, and any other profit
made through an investment vehicle of any kind. Generally, most people
earn a large portion of their total net income through employment income.

1.3.7 Loss on investment

A loss on investment is the loss incurred when a capital asset, such as

an investment or real estate, decreases in value; this loss is not realized
until the asset is sold for a price that is lower than the original purchase
price.

1.4 Background of study

Underwriting is a critical risk mitigation mechanism adopted in the

insurance industry. The process helps in deciding the appropriate premium
for an insured. The underwriter needs to match the premium received with
the claims paid with an eye on profitability. In the event of a dichotomy

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between the two, with the premium sufficient is not enough to cover the
claims, the insurer is confronted with probability of loss.

1.5 Objectives of the study

To study the underwriting profit &underwritingloss of General Insurance

Companies in India.

To analyze the investment, income from investment & loss from

investment of General Insurance Companies in India.

To find out the impact of investment2015, income from investment2015

& loss on investment2015 on underwriting loss2015, according to FY
2014-15.

To find out the impact of investment2014, income from investment2014

& loss on investment2014 on underwriting loss2014, according to FY
2013-14.

1.6 Hypotheses:
According to 2014-15

H0:There is no impact of investment2015, income from investment2015 &

loss on investment2015 towards underwriting loss2015.

H1:There is impact of investment2015, income frominvestment2015 & loss

on investment2015 towards underwriting loss2015.

According to 2013-14

H0:There is no impact of investment2014, income from investment2014&

loss on investment2014 towards underwriting loss2014.

H1:There is impact of investment2014, income from investment2014& loss

on investment2014 towards underwriting loss2014.

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1.7 Scope of the study

To understand about the underwriting profit & loss regarding to 21

general insurance companies out of 29 companies for the FY 2013-14 &
FY 2014-15.

To understand the investments, income from investment & loss from

investment for 21 general insurers out of 29 companies for FY 2013-14
& FY 2014-15.

Further study also focuses on reasons of the underwriting loss &

underwriting profit.

1.8 Limitations of the study

Lack of data regarding to standalone health insurers & ECGC, AIC

companies leads limited the study to only 21 companies.

The research is limited to general insurance companies only for FY 2013-

14 & FY 2014-15.

The research is limited to only 21companies of general insurance out of

29 companies.

1.9 chapter scheme

The entire project has been presented in six chapters, the description of
which was summarized as under:

Chapter 1 deals with the introduction of the insurance sector,

Opportunity of insurance, Definitions, background of the study,
hypotheses, scope of the study and limitation of study.

7
 Chapter 2 deals with profile of the company where the study is
conducted.
Chapter 3 deals with Review of the literature.
Chapter 4 highlights the research designs, data collection, data
analysis tool, hypotheses.
Chapter 5 presents the data analysis and interpretation.
Chapter 6 summarizes the major findings, suggestions, conclusions
and managerial implications.

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 CHAPTER- 2
COMPANY PROFILE

2. COMPANY PROFILE

Company profile

Insurance Foundation of India (IFI) is set up under Trust Registration Act

1882 of Government of India as a non-profit making organization. The main
objective of IFI is to promote awareness of insurance in India through
education and publishing of books in regional languages. The IFI was set-up
in 2009 with the objective and purpose of increasing awareness about
Insurance in India by

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 To undertake projects pertaining to training/executive development
programme in Insurance

Setting up educational institutions

Working with government to include insurance in basic education

Assisting and educating the Insurance consumers of India

Organizing programs to develop deeper understanding of insurance

topics

Collaborating with world-class institutions

Encouraging on-line education of insurance related topics

To provide support to consumers in lodging claims with Insurance

companies

To publish/translate insurance books into Hindi/Vernacular languages/

Regional languages so that masses can understand insurance

Overview

Type Non-profit making organization

Headquarters New Delhi

Key person Mr.S.K.Sethi(vice-president)

Website www.Insurance foundation of india.com

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Main Objectives:

The objective and purpose behind setting up of the Insurance Foundation of

India (IFI) is

To set up educational institutions

Schools

Colleges for Under Graduate/Post Graduate Studies

Courses/Professional Courses/Vocational Courses

World Class Institute for Actuarial Science Studies

Programme& Executive Education Programme

To organize National/ International Conferences/ Programme/

Workshops for those working for Insurance industry and for common
people who may like to participate and get knowledgeable about the
Insurance policies/products

To facilitate/support/ fund members to attend international

programme with a view to widen their knowledge of the insurance
industry in the world and how the good features can be adapted in
Indian conditions

To set up Legal Cell to provide assistance to insurance customers

comprising of individuals/ families/ corporate/ NGOs/ institutions

Include Insurance in basic education

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 Inclusion of Insurance as a Subject in Class 10 & 12 of the School so
that insurance Industry gets large reservoir of pool to expand in the
rural India. Awareness of Insurance among those coming out of
Schools will result in growth of Insurance market in India

Assist the Insurance consumers of India

By protecting the interests of members by taking up issues with

Insurance Companies, Insurance Ombudsman, IRDA, Government of
India, Consumer Forums at various levels on all India basis and any
other agency

To bring out Newsletter/ Publications/ Books/ Studies/ reports in media

like print, copy, electronic, TV, web based

To Publish books/translate books in English/Hindi and all regional as

well as vernacular languages so that masses living in urban/ semi
urban/ rural parts of India can use Insurance as part of their financial
planning/risk management

World Class Institution

Intend to collaborate with Schools/Business Schools/ Institutes/

Universities of international repute (within India and abroad) for
achieving the objectives of the Foundation

On Line Education

To set up facilities for online education, training, dissemination of

Insurance and Insurance related subjects/information among
students,as well as professional specialists working in Insurance
Industry (Companies, Intermediaries, TPAs, Surveyors, Actuaries),

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 masses and general public

IFI VICE- PRESIDENT: SURESH K SETHI

Suresh K Sethi is Chief Executive Officer of RIA Insurance Brokers Pvt. Ltd.;
an IRDA approved insurance brokerage firm, headquartered in New Delhi
with branches at various locations in India. Suresh is also Vice President&
Director of Insurance Brokers Association of India, the only association of all
IRDA licensed insurance brokerage firms operating in India. He is also
member of the Insurance Committees ofFICCI, ASSOCHAMand PHD
Chamber of Commerce & Industry, which are the leading chambers of
commerce in India. He has also been a speaker on Health Insurance topics
in various national seminars including the ASSOCHAM Conference on
Insurance in 2008.

He is the author of "Best Guide to Buy Health Insurance". This e-book has
been converted to a web-site, www.healthinsuranceindia.org, which has
been widely covered in publications in India such as Mint (WSJ in India),
Money Today, Outlook Money, Financial Chronicle, Sakshi etc.
As the Project Chief of ModiCorp, he has been responsible for setting up
Joint Ventures in collaboration with leading multinationals in India such as
Xerox, Olivetti, Telstra, GBC, and International Paper. He wasbeen the
Director of various companies in India such as Modi GBC, Licensintorg& Co.
India Pvt. Limited, Ace Airways Ltd., Surekha Properties Ltd., and all the
companies of the RIA Group.

Suresh is a B.Tech from I.I.T Madras, M.B.A from FMS (University of

Delhi) and has also completed a 1 year course in Corporate Finance from
London Business School. He has been a guest faculty in leading
management schools in India such as FMS, IMT, NILLM, and FOSTIIMA;
where he has spoken on various management subjects with a focus on
Insurance.

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Experience

Vice President
Insurance Foundation of India
June 2009 Present (7 years 3 months)
Director
Ria Insurance Brokers Pvt. Ltd. New Delhi
2001 Present (15 years)

Suresh K Sethi is Chief Executive Officer of RIA Insurance Brokers Pvt. Ltd.;
an IRDA approved insurance brokerage firm, headquartered in New Delhi
with branches at various locations in India. He is of the firm opinion that
Health (Mediclaim) Insurance is the important segment of Indian insurance
industry. It is expected to grow at the rate of 200 to 225% per annum in the
years to come. It will emerge as one of the important segment of non-life
insurance Industry.
Suresh has been Vice President & Director of Insurance Brokers Association
of India from 2004 to 2013, the only association of all IRDA licensed
insurance brokerage firms operating in India. As a member of Insurance
Committee of FICCI as well as PHD Chamber of Commerce & Industry he
has made value addition towards use of technology in Insurance

Chief Executive (Projects)

Modicorp
1971 2001 (30 years) As the Project Chief of ModiCorp, he has been
responsible for setting up Joint Ventures in collaboration with leading
multinationals in India such as Xerox, Olivetti, Telstra, GBC, and
International Paper. He has been the Director of various companies in India

14
such as Modi GBC, Licensintorg& Co. India Pvt. Limited, Ace Airways Ltd.,
Surekha Properties Ltd., and all the companies of the RIA Group.

15
 CHAPTER-3

REVIEW OF THE LITERATURE

3. REVIEW OF THE LITERATURE

1. B. Benjamin, Ph.D., F.I.A. (London)

The investment funds is intriguing, drawing attention as it does to the

interesting practice of allowing investment return in rate making process.
Here rate making is highly effected by the claims and resolved by getting
profit through the investments and it tells that vast increase of claims in
general insurance sector had high adverse on the policyholders.

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2. SandeepBakhshi

The underwriting, investments and assets of general insurance companies

plays an vital role and also the ratemaking had more effect on the
insurance business and G.D.P growth rate also. It made a conclusion that
Indian the ratio of assets of insurance companies to those of banks is 3 per
cent while the ratio in the US is 10 per cent. This serves as another
indicator of the potential that the industry must live up to. And he stated
there is lot of scope for general insurance.

3. Bashir Ahmad Joo

World over after liberalization insurance sector has undergone significant
transformation. This is also true with Indian insurance market, where
insurance penetration and density is very low compared to other countries.
Therefore, many foreign insurance companies were lured to make entry in
Indian insurance in order to insulate positive spread from large untapped
insurance market, mainly by entering into joint venture with local partners.
Thus Indian insurance market after liberalization was assaulted by the
pressure of globalization, competition from multinational insurance
companies and lavish underwriting chase which are seen as threats as well
as opportunities for insurance companies. However, entry of new players
hasresulted into heavy underwriting losses for Indian public and private
insurers. But heavy underwriting losses had reverse impact on
theirsolvency margins. In present paper, the Insurance Solvency
International Ltd. (ISI) predictors have been employed in this paper to
study the solvency position of Indian non life insurers. Further, study
highlights the extent of relationship between various factors and solvency
of non life insurers in India by using multiple regression analysis. The result
of the study has shown that claim ratio and firm size have greater impact
on solvency position of insurance companies.

4. Greg Niehaus et al.

17
Time series causality tests are used to examine hypothese about the
determinants of insurance premiums and causes of the underwriting cycle.
The evidence supports the hypothesis that underwriting cycles are partially
due to costly external capital as predicted by winter (1989), Cummins and
danzon (1992), and gron (1992).

5. C kumar

Provided is a technique for evaluating risk associated with underwriting an

insurance policy. At least one location to be covered under the insurance
policy is received. Risk associated with the location is automatically
assessed. It is determined whether to underwrite the location based on the
assessed risk. Also provided is a technique for proximity analysis. Selection
of a proximity center is received. A function is executed with the proximity
center to determine target data items that fall within a proximity area
around the proximity center.

6. Benjiman Schatz

As of February 1987, over 30,000 Americans have been diagnosed with

Acquired immune deficiency syndrome (AIDS). An ever larger number of
people perhaps five to ten times the number with AIDS, suffer related
illness called AIDS-related complex (ARC). Like people with AIDS but unlike
the majority of people only exposed to HIV, the virus belonged to cause
AIDS. People with ARC also experienced medical problems. Although these
symptoms are often virtually unnoticeable, ARC can sometimes lead to
severe disability and even death.

Frighteningly, these numbers pale in comparison to future

projections. The United States Public health service (PHS) estimates that
270,000 Americans will develop AIDS by 1991. Yet the actual numbers will
likely be far higher: the PHS projections are based solely upon the number

18
of people already infected with HIV and do not take into account the
millions likely to be infected in the future.

7. John Hele et al.

Disclosed is an overall process for underwriting insurance. The
process can include automated underwriting using rules from a
plurality of insurance carriers. Rules can be general, carrier specific,
and product specific. Also featured is a reflexive process for
questioning a user that is purchasing insurance .

8. Prashant k. Ramakrishna
The system of the present invention enables an insurance company or
other provider to underwrite a life insurance policy based on relevant
insurability information or factors and in real time for potential customers
directly or indirectly accessing the system via a network. The insurability
information includes medical records and medical claims that are typically
maintained and accessed from potential customer health care provider or
other third party databases and other information provided by the potential
customers. The system retrieves and utilizes this information to produce an
underwriting score or value, where information gathered from the potential
customer is compared to information within an insurer database. The score
is computed based on a formula that takes into consideration the
importance of the information in determining mortality risk, and is
subsequently used in determining whether or not to underwrite the life
insurance policy and the corresponding policy price.

9. Tom baker

Lost in the recent efforts to take political advantage of (or explain away)
the rapid rise in liability insurance premiums is any real attempt to
understand the underwriting cycle, why it is so severe in medical
malpractice insurance, and what it might mean for the ability of

19
malpractice liability to deliver on its risk distribution, loss prevention, and
corrective justice objectives. This essay attempts to fill that gap. Part 1
provides a primer on the liability insurance underwriting cycle that draws
on the research prompted by the mid-1980s insurance hard market. This
part explains that the recent dramatic increases in predicted medical
malpractice losses are a result of the insurance cycle, not dramatic
changes in medical malpractice claim payments. Part 2 explores why the
cycle is so severe in medical malpractice insurance. This part applies my
recent Geneva

Lecture analysis of liability risks to the specific problem of medical

malpractice, with a fuller consideration of the dynamics of the
underwriting cycle. In short, the cycle is so severe because there is a
relatively long period between the time that the premiums for a medical
malpractice policy are paid and the time that losses under that policy can
be known with certainty, and because there is more uncertainty regarding
future medical malpractice losses than many other kinds of losses. Part 3
explores whether insurance regulators should consider acting to moderate
the underwriting cycle (assuming that they could do so). This part argues
that there are good reasons to believe that medical malpractice insurance
crises lead medical providers to improve patient safety and, therefore, that
efforts to moderate the cycle could have a negative impact on patient
safety. Further research is needed before we can draw firm conclusions,
but leaving the insurance cycle alone would be the wiser course for now.

10. Pierobonissone et al.

A process to structure and summarize the key information required by
automated decision-making systems for insurance underwriting is
described. The automated underwriting system may be based on rules
corresponding to underwriting components, wherein based on the degree
of satisfaction of each rule, a component may be assigned to a category,

20
 and based on the category for each component, the insurance application
may be assigned an underwriting category, or the automated underwriting
system may be based on an evaluation of the similarity of a given
application to previous application requests, to decide an underwriting
category. Most of the key information required for automated insurance
underwriting is structured and standardized, except for the Attending
Physician Statement (APS), which is almost as unique as each individual
physician. The process to structure and summarize the APS information
captures the relevant variables that characterize a given medical
impairment, allowing an automated reasoning system to determine the
degree of severity of such impairment and to estimate the underlying
insurance risk.

11. Curran, Michael P. (Lake Forest, IL, US) et al.

The present invention relates to rapid test devices, kits and systems
comprising the rapid test devices for assessing at least two analytes in a
sample derived from a life or health insurance applicant, said at least two
analytes being selected from the group consisting of a human
immunodeficiency virus (HIV) antigen (e.g., a HIV polypeptide), a HIV
polynucleotide, an anti-HIV antibody, a hepatitis C virus (HCV) antigen
(e.g., a HCV polypeptide), a HCV polynucleotide, an anti-HCV antibody, a
liver enzyme alanine transaminase (ALT), a liver enzyme aspartate
transaminase (AST), nt-probnp (or NT-proBNP), probnp (or proBNP),
cotinine, nicotine, cocaine, a metabolite of cocaine (e.g.,
benzoylecgonine), pro state-specific antigen (PSA), apolipoprotein A-1
(ApoA1), apolipoprotein B (ApoB), Hemoglobin Ale and high-sensitivity C-
reactive protein (hsCRP). The present invention also relates to methods for
using the rapid test devices, kits and systems as part of the assessment of
the life or health insurance applications.

12. Richard T Raines et al.

21
An apparatus and method for underwriting and/or rating an insurance
policy, and for generating information for underwriting and/or rating an
insurance policy, are provided. The system and method may include
identifying a vehicle, determining a value of at least one vehicle history
data variable or a group of variables, and underwriting and/or rating the
policy based on the value of the at least one vehicle history data variable
or a group of variables. The system and method may also include
generating a score based on the value of the at least one vehicle history
data variable or group of variables.

13. Tedd C DETERMAN Michael P et al.

The present invention relates to rapid test devices, kits and systems
comprising the rapid test devices for assessing at least two analytes in a
sample derived from a life or health insurance applicant, said at least two
analytes being selected from the group consisting of a human
immunodeficiency virus (HIV) antigen (e.g., a HIV polypeptide), a HIV
polynucleotide, an anti-HIV antibody, a hepatitis C virus (HCV) antigen
(e.g., a HCV polypeptide), a HCV polynucleotide, an anti-HCV antibody, a
liver enzyme alanine transaminase (ALT), a liver enzyme aspartate
transaminase (AST), nt-probnp (or NT-proBNP), probnp (or proBNP),
cotinine, nicotine, cocaine, a metabolite of cocaine (e.g.,
benzoylecgonine), prostate-specific antigen (PSA), apolipoprotein A-1
(ApoA1), apolipoprotein B (ApoB), Hemoglobin A1c and high-sensitivity C-
reactive protein (hsCRP). The present invention also relates to methods
for using the rapid test devices, kits and systems as part of the
assessment of the life or health insurance applications.

14. GM WaliUllah et al.

Insurance is a form of risk management, used to hedge against the risk of a

contingent loss. It involves the transfer of the risk of potential loss from one
entity to another, in exchange for a risk premium. Insurance sector plays an

22
important role in service based economy of both developed and developing
markets. The purpose of this research is to analyze the determinants that
serve as significant predictors of non-life insurance firms profitability in
Bangladesh. It analyzes panel data of eight different insurance companies
selected using convenience sampling method from the years 2004-2014 to
assess whether any significant relationship exists between Profitability
(ROA), and certain independent variables- Underwriting Risk, Expense
Ratio, Solvency Margin, Premium Growth, Asset Growth, and Company Size
using an Ordinary least squares (OLS) regression model. This paper found
significant inverse relationship between Underwriting Risk, and Size, with
Profitability (ROA). There is also a significant positive relationship between
Expense Ratio, Solvency Margin, and Growth, with the Profitability (ROA).
This study will help financial managers to understand which internal factors
to focus on, in order to achieve greater profitability, thus maximizing the
market value of the respective insurance company.

15. Andrew Kramer

A process for auditing insurance underwriting investigations and

underwriting decisions wherein if the underwriter determines that the
underwriter deviated from established rules whether the underwriter
documented the decision to do so and whether the decision to deviate from
established rules falls within established guidelines. If the decision to
deviate from established rules was documented and the decision was
within guidelines the underwriting investigation and the underwriting
decision are still scored as appropriate.

16. Elizabeth slabonik et al.

A method of centralized automated underwriting of an insurance policy,

and a centralized automated underwriter, are disclosed. The method may
include intaking the plurality of applicant information, applying, in parallel,

23
and to a normalized plurality of applicant information, at least two primary
executable rules, generating a report log of results of the rules applying,
wherein the report log includes at least one flag of at least one of the
plurality of applicant information, and referring, in accordance with the at
least one flag, of at least one of the flagged at least one of the plurality of
applicant information, to at least one hierarchical underwriter. The
centralized underwriter includes an intake that intakes a plurality of
applicant information in an intake format, a rules applicator that selectively
applies, to the standard format of the plurality of applicant information, and
in accordance with at least two parameters of the plurality of applicant
information, at least two primary executable rules, wherein the policy is
referred, in accordance with the at least one flag of at least one parameter,
to at least one hierarchical underwriter.

Conclusion:

It is obvious to note that many studies have been conducted in the field of
underwriting and other by various researchers. But none of the studies
covered Underwriting loss, Investment and Income from Investments, loss
from Investment. Hence this was identified as the research gap. In order to
fulfill the research gape, the researcher has chosen this topic as his
research work. Hence this study

End Notes:

1. B. Benjamin stated about the Investments and ratemaking in his

research under the title General Insurance.
2. Integrated approach: key to growth and development written by the
sandeepbakhshi. He is the CEO of ICICI lomabard General Insurance
company. Published in Vikalpa.com in 2005.
3. Analysis of Financial Stability of Indian Non Life Insurance Companies
is written by joo. He is an Associate Professor in The Business School

24
 University of Kashmir, Srinagar. He published this article in Asian
Journal of Finance & Accounting ISSN 1946-052X 2013, Vol. 5, No. 1.
4. Evidence on the Time Series Properties of Insurance Premiums and
Causes of the Underwriting Cycle; New Support for the Capital Market
Imperfection Hypothesis is written by Greg Niehaus and tery, thi
article published in The Journal of Risk and Insurance Vol. 60, No. 3
(Sep., 1993), pp. 466-479.
5. Real-time insurance policy underwriting and risk management -
United States Patent Application 20060100912; Kind Code A1 is
invented by C Kumar, David Dyrnaes, Tim Von Kaenel, Jonathan
Goodwin, Jared Wayman, Craig Trivelpiece, Joseph Mihalich, Anthony
Jenkins.
6. The AIDS Insurance Crisis: Underwriting or Overreaching? Is written
byBenjimanSchatz is reviewed by Harvard Law Review Vol. 100, No. 7
(May, 1987), pp. 1782-1805.
7. John Hele, Christopher Serflekare inventors of this article
Underwriting insuranceUnited States Patent Application
20020111835 Kind Code: A1.
8. Prashant k. Ramakrishna, IyerRamkrishnaJairam are the assignees of
the article System and method for enabling real time underwriting of
insurance policies- United States Patent Application 20020087364
Kind Code: A1
9. Medical Malpractice and the insurance underwriting cycle is written
by Tom baker, university of Pennsylvania law school, November 7,
2004, Depual law review , vol 54, May 2005.
10. Pierobonissone, Richard Messmer, Angela Patterson, Diane
Russell, William Durham, Dan Yang, Marc Pavese, David Cobourn,
Antonio Mogro-Campero, Valerie Merchant, John Orlando are the
inventors of the article Process for summarizing information for
Insurance underwriting suitable for use by an automated system
United States Patent Application 20030182159 Kind Code: A1.
11. Curran, Michael P. (Lake Forest, IL, US), Ostrow, David H. (Lake
Zurich, IL, US), Mulconrey, Brian (Austin, TX, US), Determan, Tedd C.

25
 (Chicago, IL, US) are inventors of Rapid tests for Insurance
underwriting united states patent application 20160003819; kind
code: A1; published on 01-07-2016
12. Richard T Raines, Eric J, Nesson, David Allen Lackey, Travis
Fritts, Ian Bush are the inventors of the article System and Method
for Insurance Underwriting and Rating- United States Patent
Application 20150213559; Kind Code: A.
13. Tedd C DETERMAN Michael P, CURRAN Brain MULCONREY,
David H, Ostrow are the inventors of article Rapid tests for
insurance underwriting -United States Patent Application
20140072959; Kind Code: A1.
14. Factors determining Profitability of the Insurance Industry of
Bangladesh written by GM WaliUllah, Mohammad Nasrathfaisal,
SadaqaTuzZuhara
15. Andrew Kramer was inventor of this article Process of
Insurance Underwriting united states patent application
20030167191; kind code : A1.
16. Elizabeth slabonik, steven plumb, Linda cooper, Jenniferpayne,
Gail Mayer are the inventors of this article System and method for
underwriting review in an insurance system- United States Patent
Application 20030167191;Kind Code: A1.

26
 CHAPTER-4
RESEARCH METHODOLOGY

4. RESEARCH METHODOLOGY
4.1 Research Design

A Research Design is purely and simply the framework or plan for the
guides the collection and analysis of data. It is a plan that specifies the
objectives of the study, method to be adopted in collection of data, tools in
analysis of data and helpful to frame hypothesis.
Research Design is needed because it facilitates the smooth sailing of
various project operations, thereby making the project as efficient as

27
possible yielding maximal information with minimal expenditure of effort,
time and money.
Descriptive Research Design is used in this project.
4.2 Data collection method
The main source of information for this study is based on the data
collection. Data collected are secondary in nature.
SECONDARY DATA: For the project secondary data have been
collected from official website of the company, IRDA, III and also from
other official websites and Magazines related to insurance industry &
newspapers also.
4.3 Data analysis tool
The secondary data have been analyzed by using
Linear regression model

4.4 Hypotheses
Investment, Income from investment & loss on Investment
towards underwriting loss.
According to 2014-15
Null hypothesis H0:There is no impact of investment2015, income from
investment2015 & loss on investment2015 towards underwriting loss2015.
According to 2013-14
Null hypothesis H0:There is no impact of investment2014, income from
investment2014& loss on investment2014 towards underwriting loss2014.

28
 CHAPTER -5
DATA ANALYSIS AND
INTERPRETATION

5. DATA ANALYSIS AND INTERPRETATION

5.1 Introduction

29
 Here the Underwriting Loss, Underwriting Profit, Investment, Income
from Investment and Loss on Investment for 2013-14 and 2014-15 of
General Insurance Companies in India.

Table 5.1.1: Underwriting Loss of General Insurance

Companies in India
Underwriting Loss
(Rs in lakhs)
Name of Insurer 2013-14 2014-15
NEW INDIA ASSURANCE COMPANY 198659 221637
ORIENTAL GENERAL INSURANCE COMPANY 128992.57 153213.2
NATIONAL INSURANCE COMPANY 8779.24 103730.68
UNITED INDIA GENERAL INSURANCE COMPANY 122414.79 180666.22
ICICI LOMBARD GENERAL INSURANCE
COMPANY 25148 21956
BAJAJ ALLIANZ GENERAL INSURANCE COMPANY 370 0
CHOLAMANDALAM GENERAL INSURANCE
COMPANY 10617 8308
ROYAL SUNDARAM GENERAL INSURANCE
COMPANY 9404 19622
TATA AIG GENERAL INSURANCECOMPANY 665 8418
RELIANCE GENERAL INSURANCECOMPANY 3633 40280
FUTURE GENERALI INSURANCE COMPANY 9654 12081
IFFCOTOKIO GENERAL INSURANCE COMPANY 0 6948
HDFC ERGO GENERAL INSURANCE COMPANY 6345 170255
UNIVERSAL SOMPO GENERAL INSURANCE
COMPANY 1540 7881
SHRIRAM GENERAL INSURANCE COMPANY 21358 12897
BHARTIAXA GENERAL INSURANCE COMPANY 1023 33065
RAHEJAQBE GENERAL INSURANCE COMPANY 21962 326
SBI GENERAL INSURANCE COMPANY 13280 31192
L&T GENERAL INSURANCE COMPANY 12530 12885
LIBERTY VIDEOCON GENERAL INSURANCE
COMPANY 12530 17579
MAGMA HDI GENERAL INSURANCE COMPANY 7021 7415
Source: IRDAI Handbook contents 2014-15.

Inference:
From the above table5.1.1 we can say New India Assurance Company got huge
underwriting loss of 198659 on FY 2013-14 and In FY 2014-15 United India General
Insurance got highest underwriting loss of Rs180666.22. On FY2013-14 IffcoTokio
General InsuranceCompany has no underwriting loss but as on FY2014-15 they got an
underwriting loss of Rs6948. On FY2014-15 Bajaj Allianz General Insurance company has

no underwriting loss but as on FY2013-14 they got least underwriting loss of Rs370 .

30
 Table no 5.1.2:Underwriting Profit of General Insurance
Companies in India
Underwriting Profit

(Rs. In lakhs)
Name of Insurer
2014-15 2013-14

New India Assurance General Insurance - -

Company
Oriental General Insurance Company - -

National Insurance Company - -

United India General Insurance Company - -

ICICI Lombard General Insurance Company - -

- 8335
Bajaj Allianz General Insurance Company
CholaMandalam General Insurance Company - -

Royal Sundaram General Insurance Company - -

TATA AIG General Insurance - -

Reliance General Insurance - -

Future Generali Insurance Company - -

IFFCO TOKIO General Insurance Company 157 -

HDFC ERGO General Insurance Company - -

Universal Sompo General Insurance Company - -

Shriram General Insurance Company - -

Bharti AXA General Insurance Company - -

Raheja QBE General Insurance Company - -

SBI General Insurance Company - -

L&T General Insurance Company - -

Liberty Videocon General Insurance Company - -

- -
Magma HDI General Insurance Company
Source: IRDAI Handbook contents 2014-15.

Inference

From the above table5.1.2 out of all General Insurance Companies in India
only Bajaj Allianz General Insurance got Underwriting Profit of Rs.8335 on
FY2014-15. As on FY2013-14 IffcoTokio General Insurance Company was
one and only company got Underwriting Profit of Rs.157.

31
 Table no 5.1.3: Investments of General Insurance
Companies in India
Investments
(Rs In Lakhs)
Name of Insurer 2013-14 2014-15
New India Assurance General Insurance
Company 3529734 4496081
Oriental General Insurance Company 1876706 2065942
National Insurance Company 2189593 2454496
United India General Insurance Company 2092880 2415437
ICICI Lombard General Insurance Company 930898 1019972
Bajaj Allianz General Insurance Company 601785 700693
CholaMandalam General Insurance Company 232821 316457
Royal Sundaram General Insurance Company 281076 2491.44
TATA AIG General Insurance 281076 3028424
Reliance General Insurance 384272 504833
Future Generali Insurance Company 149367 197482
IFFCO TOKIO General Insurance Company 219356 278480
HDFC ERGO General Insurance Company 314313 376669
Universal Sompo General Insurance Company 88952 103570
Shriram General Insurance Company 310978 538146
Bharti AXA General Insurance Company 197046 246424
Raheja QBE General Insurance Company 23496 24001
SBI General Insurance Company 165530 132326
L&T General Insurance Company 29383 46545
Liberty Videocon General Insurance Company 25237 53040
Magma HDI General Insurance Company 54691 76604
Source: IRDAI Handbook contents 2014-15.

Inference

From the above table 5.1.3 we can say that New India Assurance Company
Invested heavily of Rs.3529734 and least Investment done by Liberty
Videocon General Insurance Company with Rs.25237 as on FY2013-14. New
India Assurance Company Invested heavily of Rs.4496081 and least
Investment done by Royal Sundaram General Insurance Company with
Rs.2491.44 as on FY2014-15.

32
 Table no 5.1.4: Income From Investments of General
Insurance Companies in India
Income From Investments
(Rs. In Lakhs)

Name of Insurer 2013-14 2014-15

New India Assurance General Insurance
Company 37136 47543
Oriental General Insurance Company 19696 20384
National Insurance Company 21247 26851
United India General Insurance Company 15108 17132
ICICI Lombard General Insurance Company 3405 4121
Bajaj Allianz General Insurance Company 456 1396
Chola Mandalam General Insurance
Company 137 457
Royal Sundaram General Insurance
Company 25 347
TATA AIG General Insurance 784 1489
Reliance General Insurance 753 17441
Future Generali Insurance Company 318 668
IFFCO TOKIO General Insurance Company 72 74
HDFC ERGO General Insurance Company 304 593
Universal Sompo General Insurance
Company 38 2158
Shriram General Insurance Company 0 0
Bharti AXA General Insurance Company 91 56
Raheja QBE General Insurance Company 50 55
SBI General Insurance Company 526 1033
L&T General Insurance Company 117 154
Liberty Videocon General Insurance
Company 1327 1902
Magma HDI General Insurance Company 62 619
Source: Source: IRDAI Handbook contents 2014-15.

Inference

From the above table 5.1.4 we can say that New India Assurance Company
Invested heavily of Rs.37136 and least Investment done by Shriram
General Insurance Company with Rs.0 as on FY2013-14. New India
Assurance Company Invested heavily of Rs.47543 and least Investment
done by Shriram General Insurance Company with Rs.0 as on FY2014-15.

33
 Table no 5.1.5: Loss from Investments of General Insurance
Companies in India
Loss From Investment
(Rs. In Lakhs)

Name of Insurer 2013-14 2014-15

New India Assurance General Insurance
Company 0 N.A
Oriental General Insurance Company 0 N.A
National Insurance Company [31] 0
United India General Insurance Company [2] 0
ICICI Lombard General Insurance Company 1018 [635]
Bajaj Allianz General Insurance Company 127 [160]
CholaMandalam General Insurance Company [7] [3]
Royal Sundaram General Insurance Company [28] [12]
TATA AIG General Insurance [258] [96]
Reliance General Insurance [236] [15]
Future Generali Insurance Company [8] [20]
IFFCO TOKIO General Insurance Company 0 N.A
HDFC ERGO General Insurance Company 122 139
Universal Sompo General Insurance Company [67] [12]
Shriram General Insurance Company 0 N.A
BhartiAXA General Insurance Company [2] N.A
RahejaQBE General Insurance Company 0 0
SBI General Insurance Company 0 0
L&T General Insurance Company 0 0
Liberty Videocon General Insurance Company 0 N.A
Magma HDI General Insurance Company 0 N.A
Note: [ ] denote the amounts are in negative & N.A denotes that amounts are not
available.
Source: IRDAI Handbook contents 2014-15.

Inference

From the above table 5.1.5 we can say that ICICI LOMBARD GENERAL
INSURANCE COMPANYhas got huge loss on Investment of Rs.1018 as on
FY2013-14. HDFC ERGO GENERAL INSURANCE COMPANYhas got heavy loss
on Investment of Rs.139.

5.2 Regression Tool

34
 According to 2014-15

Null hypothesis H0:There is no impact of investment2015, income from

investment2015 & loss on investment2015 towards underwriting loss2015.

Alternate hypothesis H1:There is impact of investment2015, income

from investment2015 & loss on investment2015 towards underwriting
loss2015.

Table no 5.2.1: Regression Test 2014-15

Model Sum of Df mean squares F Sig
Squares
Regressio 42534921055.35 3 1478307018.452 18.00 .000
n 5 2
Residual 13388867014.8 17 787580412.641
91
Total 55923788070.2 20
46

Inference:

It is observed from the above the table that the P value is less than 0.05,
it is significant. Hence there is a significant impact on investment2015,
income from investment2015 & loss on investment2015 towards
underwritingloss2015

35
According to 2013-14

Null hypothesis H0:There is no impact of investment2014, income from

investment2014 & loss on investment2014 towards underwriting loss2014.

Alternate hypothesis H1:There is impact of investment2014, income

from investment2014& loss on investment2014 towards underwriting
loss2014.

Table no 5.2.2: Regression Test 2013-14

Model Sum of Squares df Mean Squares F Sig
Regressio 42534921055.355 3 1478307018.45 18.002 .000
n 2
Residual 13388867014.89 17 787580412.641
1
Total 55923788070.24 20
6

Inference

It is observed from the above the table that the P value is less than 0.05,
it is significant. Hence there is a significant impact on investment2014,
income from investment2014 & loss on investment2014 towards
underwritingloss2014.

36
 CHAPTER 6
FINDINGS, SUGGESTIONS AND
CONCLUSION

37
 6. FINDINGS, SUGGESTIONS& CONCLUSION

6.1 Major Findings

The research findings of the study are that there is significant

impact of investment2014, income from investment2014 & loss on
investment2014 on underwriting loss2014 for FY 2013-14.
It is also inferred from the study that there is a significant
impact of investment2015, income from investment2015 & loss on
investment2015 on underwriting loss2015 for FY 2014-15.
It is also found that there is more impact of income from
investment on underwriting loss in both FY 2013-14 & FY 2014-15.
Out of 21companies BAJAJ ALLIANZ GENERAL INSURANCE
COMPANY has one and only company got underwriting profit (8335.00
lakhs) for FY 2014-15.
Out of 21companies IFFCO-TOKIO GENERAL INSURANCE
COMPANY has one and only company got underwriting profit (157.00
lakhs) for FY 2013-14.
It also came to know that there is 33% of increase of
underwriting loss in FY 2014-15(source: The Economic Times).

38
 Out of 21 companies 20 companies are running in underwriting
loss but they are getting profit through their investments in both
FY2013-2014 & FY2014-2015.

6.2 Suggestions

Training for ethical selling of the policy should be given to the

insurance advisors.

Company should take action against policy advisor if he/she is the

reason for mis-selling or surrender of the policy.

Company should take reliable measures to improve the awareness of

policy holders relating to terms and conditions of the policy like social
media advertising, Billboards, through various channels.

6.3 Conclusion

The basic reason of increase in underwriting loss is fraudulent

claims.

The reason for increase in loss is accepting the policies by

companies without classification of the risk just to increase their
business.

The increase in loss leads to increase in premium of the

policies.

6.4 Managerial Implications

39
 The result of the study should not generalize in other life insurance
companies.
Other variables (like reasons of underwriting loss and underwriting
profit and claims occurred for the insurer, surrender policies etc.)
these variable can be taken for various years and also investments in
same manner should be taken into account for future research.
The present study was carried out for only 21 non-life insurers.
The present study has been conducted by taking the non-life insurers
only ignoring the life insurance companies and also standalone health
insurers and AIG, ECGC companies.
Some of the companies data is unavailable mainly standalone health
insurers and AIG, ECGC.

BIBLIOGRAPHY

40
 BIBLIOGRAPHY
BOOKS
Kothari C.R. (2010). Research Methodology- Methods and Techniques,
NewDelhi: New age international publishers, pp: - 27-29, 120-160,
205-235 .
Principles and practice of general insurance(IC-11), P. VenugopalRao et al
(2009) Insurance Institute of India: Mumbai
General insurance underwriting(IC-45), P. VenugopalRao et al (2009)
Insurance Institute of India: Mumbai
Naval Bajpai (2014), Business Research Methods PP: - 27-29, 56-59,
309-321.

MAGAZINES AND JOURNALS

IRDAI Handbook contents 2014-15.
The journal of Insurance Institute of India, Volume no- I, Issue no- III,
January-March 2014, published on 15th Jan 2015.

WEBSITES

41
 https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_Layout.aspx?
page=PageNo2807&flag=1
https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_List.aspx?
DF=JRNL&mid=15
https://en.wikipedia.org/wiki/Underwriting_profit

*******

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