- The IRDA bill 1999 to open up the insurance sector to private investors (including foreign) was passed by parliament in 1999 and soon became an ACT.
- The Act stipulates a start-up capital of Rs. 500 crore for life, 250 crore Non-life Insurance and 750 crore for reinsurance firms.
- It is mandatory for all insurance companies to invest a portion of their funds in the social and infrastructure sectors.
- It is for the regulatory authority to specify the quantum of investment. Failure to comply with specified provisions will be made punishable with penalties and even cancellation of licenses granted to insurer.
THE FORMS OF INSURANCE
The types of insurance are:
(i) Life Insurance,
(ii) Non Life Insurance,
(iii) Reinsurance
Life Insurance : It is the risk cover in the event of loss of life of an individual. It is a contract to pay either on death of the insured or on completion of a specified term a contracted lump sum amount as per the agreed plan, against premiums received periodically from the insured.
Non Life Insurance : It is a contract which identifies the insured against financial loss suffered by him, owing to an adverse event against premium paid by the insured to the insurer. The prominent insurance covers available under this head are:
(i) Marine Insurance: which relates to loss in a marine adventure;
(ii) Fire Insurance: for protection against loss due to fire of insured property;
(iii) Personal Accident Insurance: covering death or disability of the insured from accident;
(iv) Motor Vehicle Insurance: which is cover theft or damage to the insured vehicle and injury or death of owner or passengers travelling in the insured vehicle.
Health Care : It has become an important area of business for insurance companies. Health Insurance policies provide for indirect payment or reimbursements of expenses incurred on illness/injuries and amounts sought to be reimbursed against likely medical expenses on treatment.
Reinsurance : It is resorted to when the insurance company shares or transfers a part of the risk to another insurer, since the total risk amount insured is too high for the first insurer. The insured is assured of the total risk cover even though the first insurer would get the part amount reinsured from the second insurer. This is a possibility in case of high value insurance deals where one insurer is unable to bear the total risk cover.
FREQUENTLY ASKED QUESTIONS
1. What is P/E ratio?
Price to earnings or P/E ratio refers to the ratio of market price per share to earnings per share.
2. What is Initial Public Offerings?
When a company opens to investments from the public by offering shares for the first time, it is known as Initial Public Offerings.
3. Do you know about Demat Account?
Demat Account is a dematerialised account, one needs to open a demat account if he/she want to buy or sell stocks. The demat account is similar to a bank account where in the actual money is replaced by shares.
4. What is Sensex?
Sensex is an index or indicator gives general idea about the movement of stocks whether the prices of most of the stocks have going up and down.
5. What is de-listing of shares?
De-listing happens when companies decide to buy back their own shares voluntarily. Delisting shares from the stock exchanges is a unique decision for the company as it can never be predicted.
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