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K.E.S’s SHROFF COLLEGE OF
ARTS & COMMERCE
SUBJECT :
Business Ethics
Class : S.Y.B.F.M.
Semester : 3rd
PRESENTATION ON : Ethics in Insurance Sector
Submitted to : Prof. Rupal Jain
Academic year : 2011-12
Group membersNAME ROLL NO.
PRIYANK DARJI 06
HARDIK NATHWANI 27
SHASHANK PAI 28
SAGAR PANCHAL 29
DHARMIK PATEL 32
KUSH SHAH 39
SIDDARTH TAWDE 46
What is Ethics ?
Ethics involves learning what is right or wrong,
and then doing the right thing -- but "the right
thing" is not nearly as straightforward as
conveyed in a great deal of business ethics
literature.
Many ethicists assert there's always a right
thing to do based on moral principle, and
others believe the right thing to do depend on
the situation -- ultimately it's up to the
individual. Many philosophers consider ethics
to be the "science of conduct."
Seniors explain that ethics includes the
fundamental ground rules by which we live
our lives. Philosophers have been discussing
ethics for at least 2500 years.
Many ethicists consider emerging ethical
beliefs to be "state of the art" legal matters,
i.e., what becomes an ethical guideline today
is often translated to a law, regulation or rule
tomorrow. Values which guide how we ought
to behave are considered moral values, e.g.,
values such as respect, honesty, fairness,
responsibility, etc. Discussions around how
these values are applied are sometimes
called moral or ethical principles.
Introduction of Insurance Sector :
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra, was formed to evaluate the Indian insurance industry and recommended its figure direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector.
The reforms were aimed at “creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance in an important part of the overall financial system where it was necessary to address the need for similar reforms.
The low penetration can be explained in terms of non-emphasis on customer awareness, training issues of agents and a low tax base.
The heavy capital investments in terms of the distribution networks, hiring of agents and the long gestation periods of 7-10 years provide entry barriers for the industry.
The key industry drivers are related to lifestyle issues in terms of perceiving insurance as a savings instrument rather than for risk cover, need based selling, quality of service and customer awareness. The future growth areas could be in term assurance, pension and health insurance. In terms of the distribution channels, there is tremendous opportunity with banks and finance companies and by making the channel IT driven. With increased commoditization of insurance products, brand building is going to play a vital role. The provisions of the IRDA bill acknowledge a many issues related to insurance permia that will present it from seeping out of the country. The IRDA bill provides for three levels of players – Insurance Company, Insurance brokers and Insurance agent.
Meaning Of Insurance Sector :
Insurance is a form of risk management primarily used to hedge against the risk of a
contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the insurance; an insured, or policyholder, is the person or entity buying the insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium.
The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
Types of Insurance :
Life Insurance :
Life Insurance Corporation of India (LIC) was formed in September, 1956 by an Act of Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution from the Government of India. The then Finance Minister, Shri C.D. Deshmukh, while piloting the bill, outlined the objectives of LIC thus: to conduct the business with the utmost economy, in a spirit of trusteeship; to charge premium no higher than warranted by strict actuarial considerations; to invest the funds for obtaining maximum yield for the policy holders consistent with safety of the capital; to render prompt and efficient service to policy holders, thereby making insurance widely popular.
Subsidiary of Life Insurance:
1.Birla Sun Life Insurance2.SBI Life Insurance3.ICICI Prudential4.Kotak Mahindra
General Insurance :
General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a
particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance.
Prior nationalization there were 68 Indian insurers
(including LIC) and 45 non-Indian insurers did the
business.
In Nov. 1972, the general insurance business was
nationalized by the General Insurance Business
(Nationalized), Act 1972 (GIBNA) and vested in
the hand of the GIC and its four subsidiaries viz.
1. National Insurance Co. Ltd.,
2. New India Assurance Co. Ltd.,
3. Oriental Fire and General Insurance Co. Ltd.,
and
4. United India Insurance Co. Ltd.
CSR Towards Insurance
Sector :
Selling Life Insurance is like selling intangible
product. So, the marketing staff needs to
observe a set of norms in his / her
professional conduct, which make him / her
worthy of trust and faith.
The Code of Ethics for the life insurance,
marketing staff
1. To perform his / her duties in high esteem.
2. To give utmost priority to the client's
interest.
3. Not to disclose client's confidential and
personal information.
4. To ensure prompt and sincere service to
the client and his or her family.
5. To use appropriate methods in convincing
clients to protect their insurable interest.
6. To make truthful and accurate
presentations.
7. To improve his / her knowledge of life
insurance through constant study.
8. To set a plan and work accordingly.
9. To maintain fair relations with colleagues.
10. To strictly follow the concerned laws and
regulations.
Financial System Of
Insurance :
Insurance Planning is the process of providing
advice and assistance to clients to determine
whether and how clients can meet their
financial needs and life’s goal through proper
management of financial resources.
♦ Establishing and defining the client –
planner relationship: The Financial advisor
should clearly explain or document the
services to be provided and define the
responsibilities. The advisor should explain
fully how he will be paid and by whom. The
advisor should also disclose any restrictions
on his ability to give unbiased advice and
disclose any conflicts of interests.
The advisor should agree on how long the
professional Relationship should last and how
decisions will be made.
♦ Gathering client data, including goals:
The Financial advisor should ask for
information about the financial situation. The
planner should mutually define the personal
and financial goals, understand the time frame
for results and discuss, if relevant, how one
feel’s about risk. The Financial Planner should
gather all the necessary documents before
giving the advice.
♦ Analyzing and evaluating the financial
status: The Financial advisor should analyze
the information to assess the current situation
and determine what one must do to meet the
goals, depending on what services have been
asked. For this one could include analyzing
the assets, liabilities and cash flow, current
insurance coverage, investments or tax
strategies
♦ Developing and presenting Financial
Planning recommendations and/or
alternatives: The Financial Planner should
offer Financial Planning recommendations
that address the goals, based on the
information provided.
The planner should go over the
recommendations with the client to help and
understand them so that one makes informed
decisions. The planner should also listen to
the client’s concerns and revise the
recommendations as appropriate.
♦ Implementing the Financial Planning
recommendations: The planner and the
client should agree on how the
recommendations will be carried out. The
planner may carry out the recommendations
or serve as your ‘coach’, coordinating the
whole process along with professionals such
as solicitors or stockbrokers.
Accounts Of Insurance :
There are two types of Books:
1.Statutory Book:A. Register Of PoliciesB. Register Of ClaimsC. The Register Of Licensed Insurance
Agents
2. Subsidiary Book:A. Cash BookB. Premium Cash BookC. Branch Cash BookD. Petty Cash BookE. Claim Cash BookF. Commission RegisterG. Lapsed and Cancelled Policies BookH. Investment Ledger
CONCLUSION :
There is a probability of a spurt in employment opportunities. A number of web-sites are coming up on insurance, a few financial magazines exclusively devoted to insurance and also a few
training institutes being set up hurriedly. Many of the universities and management institutes have already started or are contemplating new courses in insurance. Life insurance has today become a mainstay of any market economy since it offers plenty of scope for garnering large sums of money for long periods of time. A well-regulated life insurance industry which moves with the times by offering its customers tailor-made products to satisfy their financial needs is, therefore, essential if we desire to progress towards a worry-free future.