You got answer for this.. Right ?

“How can these companies offer 1 crore term plan by charging just a small premium of Rs 10,000. Its surely a racket!”

The main source of income for insurance companies is Premium. Insurance companies collect premium and agrees to indemnify for the loss to the insured if particular event occurs. Premium income comprises of three components viz:

  1. Expected Cost of claim
  2. Administrative and other expenses
  3. A small element of profit

Suppose, there is a premium income of ₹500. Out of that ₹400 is allocated for expected claim amount,₹70 for administrative and other expenses and ₹30 as a part of profit

The main expense component for insurance companies is claim. Claim is the biggest outflow of money for insurance companies.

According to the Govt. regulations, the premium which is collected by insurance companies, a part of it has to be compulsorily be invested in govt. securities so as to maintain the solvency or to pay off liabilities in insolvency cases. So the premium collected by insurance companies can by their desire be invested in investment components to earn income from investment other than compulsory investment

The industry is divided into two categories- life insurance and non-life insurance, also known as general insurance.

With over 460 million internet users, India is the second largest online market ranked behind China. But Insurance penetration is only 2.6% which is way below to other emerging countries

Growth in general insurance business

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