Page 50 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 3: Nature and Scope of Insurance

Notes
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Caution The operation of the investment chain is critical to the efficient allocation of
capital across the economy and therefore to improving productivity and competitiveness.

Today, in the rare instance in which commercial insurance is not available to business, alternative
risk-sharing mechanisms soon arise to fill the gap. For example, in the mid-1980s, a crisis in the
U.S. liability insurance market dramatically reduced the levels of cover available, particularly
to large industrial companies, and a sharp increase in premium levels ensued. The response by
the U.S. manufacturing industry was immediate, and new mutually owned insurance groups
were quickly set up in Bermuda and other tax-haven countries to replace the missing insurance
cover.

Self Assessment

Fill in the blanks:
16. Today the insurance industry contributes to economic growth and national
………………………….. in various ways.
17. Insurance enables members of the general public to be homeowners and supports the
private ………………………………. market.

18. Individuals benefit from ……………………………… of scale in accessing capital markets.

Case Study Reliance General Insurance to focus on fire,
Engineering and Marine

eliance General Insurance is focusing more on fire, engineering and marine
insurance segments as part of its plan to diversify product basket and achieve
Rprofitable growth, a top company official said.
“We are focusing on commercial lines, fire, engineering and marine insurance, which are
still untapped and more profitable than traditional segments. We are trying to grow these
portfolios this fiscal,” Reliance General Insurance Chief Executive Rakesh Jain said.
As per the company, while fire insurance accounts for 8 per cent of its total business,
engineering segment contributes around 4 per cent, marine 2 per cent and others including
commercial lines account for 6 per cent.

Jain also said the company is reducing its dependence on motor insurance segment and
plans to bring it down to below 60 per cent by the end of this financial year.
“Our aim is to expand our presence in fire and engineering segments and increase their
business contributions in the next couple of years,” he said, adding the company plans to
increase health insurance contribution to 20 per cent from present 16 per cent.
The general insurer also aims to come up with sector specific insurance products. “We are
planning to devise sector-wise insurance schemes. We are in touch with people in cement,
IT and power sectors and are working to create a more risk-based approach for different
sectors,” Jain said.

Contd...

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