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If you think that the most important step to getting a guy to notice you is to impress him, well, you are definitely correct! Yes, it takes a lot of good impression to make a guy notice a girl he does not know. f you are serious about this guy in school, then you better start thinking about the best moves to make before other girls finally. Here are just a few steps to follow in order for you to know how to impress a boy you like:

1. Inhale and exhale confidence.

First, it all boils down to being confident about yourself. Even if you are the most beautiful girl in the whole world but then you do not carry yourself well and with utmost poise and self-assurance, not all guys will like you or even take notice of you. Fore this reason, it all the more becomes important for a girl like you to walk and talk, live and breathe with confidence.

2. Make no pretensions.

Make it a point that you just be yourself at all times. A guy will know when a girl is faking her smiles to make herself appear sweet and charming. A guy would know when you are just trying to be nice, so be natural. After all, it is harder to be unnatural than to be just the way you are; that is, without any pretensions.

3. Be physically attractive.

To be visually attractive is actually encompassing. You can be dressed really well but then there’s a stench emanating from you – still, it becomes not noteworthy in the eyes of the guy you like. One thing you must know about how to impress a boy is not merely to look good or smell good, but also to talk in a very feminine manner – just how girls are supposed to be in the eyes of boys. Do these and you are on your way to captivating the heart of the guy you like.

4. Know his interests.

Through conversing with him, try to probe on what could be most interesting him. Explore on the other facets of his life such as hobbies, sports, likes and dislikes from which you may draw out your strategies in making him impressed with you. Say, you have found out his favorite hobby or pastime, then you can use that opportunity to talk about things regarding that. Surely, you will see the spark in his eyes in no time at all!

5. Have a great sense of humor.

Be funny. Boys like it when girls are funny without trying to be and most importantly, without sounding so cheap and not so womanly. Make funny remarks and amusing jokes that the only two of you can hear. Or better yet, make green jokes in public where he will laugh so hard but just cannot hit back a remark because of fear other people in the crowd might just hear it. This will surely impress him, amuse him and make you more attractive to him.

Follow all these five steps of how to impress a boy and you will surely be in seventh heaven in no time!

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One of my favorite scenes ever from Monty Python, I just love the powerful little old people, their gigantic tower of a ship, and their happiness. I couldn’t find it anywhere on YouTube so I felt I had to post it. No copyright infringement intended, I do not own this! Go check out Monty Python instead! Now let’s sing along, lads! ;D It’s fun to charter an accountant, And sail the wide accountan-cy. To find, explore the funds offshore, And skirt the shoals of bankruptcy. It can be manly in insurance. We’ll up your premium semi-annually. It’s all tax-deductible, We’re fairly incorruptible. We’re sailing on the wide accountan-cy. www.youtube.com

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CONTENTS

Introduction

a) The Project Manager

b) The Project Team

c) The Project Plan

d) Project Plan Elements:

1) Cleanse Data

2) Create Test Environment for Application

3) Employee Numbers

4) Configure Organisational Structure

5) Configure Posts (Jobs)

6) Configuring Shift Patterns

7) Configure Employee Details

Configure Users’ Access Security

9) Configure HR and Pay Rules

10) Configure Reports

11) Configure Triggers

12) History Carried Forward

13) Populating the New Application

14) Parallel Running

15) Migrate Test Data onto Live Evironment

16) Old Data

16) De-commissioning

THE PROJECT

Introduction

This is a rather more detailed look at the HRIS implementation. This has been done with the intention of giving a sense of scope and scale to the professional contemplating the acquisition and implementation of a new or replacement HRIS, and is not exhaustive, nor constitutes the ultimate Project Plan.

Most of this article deals with HR and Payroll applications, but a lot of the actions are generic to Time & Attendance systems. We shall update and expand this article from time to time to build on our visitors’ knowledge base.

Your selected Vendor will have a wealth of experience in the management of Projects such as yours, but it is useful for you to have your own appreciation of what is involved.

A lot of this material is based on real-life experience (or scar tissue!) acquired by our Team over the course of years, and we mean it to be presented in understandable language and easily-followed format.

a) The Project Manager

If there’s one message to get across here it’s DO get your own Project Manager; do NOT rely on the Vendor to project manage on your behalf as they will ultimately fail to meet everyone’s expectations, no matter how hard they work. They will always have difficulty balancing priorities that will occasionally be in conflict. You wouldn’t expect a lawyer to act as both prosecutor and defender at the same time!

Importantly, having your own person will give more ownership, and that the introduction of your new HRIS isn’t just something remote “happening to” your organisation

Let’s get this in context right away:

i) the Project Manager is unlikely to be able to combine the PM role with another day job.

ii) The Project Manager must have experience in interpreting the Vendor’s plan, marshalling (and cajoling) resources, meeting deadlines and liaising with the Vendor. It’s not a job for the amateur.

It’s very tempting for, say, an HR Manager to assume the role, but it is inadvisable unless they have the above-mentioned experience. Really – trust me on this one.

Ideally, you should use someone with the relevant experience from elsewhere within the organisation who can look at the picture dispassionately and impartially. Doing it this way, the experience stays in the organisation. Failing this, hire a professional Project Manager; it won’t be cheap, but having committed yourself to the solution you are not improving your chances of success by skimping on the essentials.

An option to reduce external costs can be to appoint a Programme Manager to oversee your Project Manager if their overall experience is not comprehensive. The Programme Manager brief will involve taking a broad view of the project, and review – probably on a weekly basis – with the Project Manager. In this way, the contractor expenditure is minimised, and the Programme Manager can provide a mentoring role.

Whoever lands the Project Manager position MUST have discretion to take decisions (within budget and other agreed limits) and have priority access to resources when required with causing unnecessary interruption to normal activities. It is essential that all affected departments are consulted during the planning of the project on all matters that affect their people and resources.

b) The Project Team

Keep the team small. Only people who have direct influence on the Project should be in the core team. Others can be co-opted for various stages of the Plan that relate to them.

A good number for the core team is 3. Beyond that, you have a committee, which will make consensus difficult and may slow matters when team members are unable to make the meetings. The more members, the more unlikely you can get everyone together on a regular basis.

c) The Project Plan

It is usual for the Vendor to draw up a project plan detailing the actions required to load, configure, implement and test the application up to purchaser acceptance and sign-off.

As the client, you will need to draw up a shadow plan to meet the case that will comprise all the steps to be taken from your side, the persons responsible for resourcing those steps and the timelines for those steps to accord with the Vendor plan.

If you do not have the (expensive) Project planning software tools for this, you can draw up your chart in Gantt format using MS Excel.

d) Project Plan elements

Below is an illustration of some typical actions in the client plan that respond to a required action in the master plan.

1. Cleanse data

Either circulate a blank form and ask employees to complete it, or print out what you have on them and ask them to correct or add information. I actually favour the former course, as it starts the data up from a zero base and means the employees have to make the effort to get it right.

2. Create Test Environment for Application

This will be your IT /ICT department that sets this up, generally by allocating a server and loading a copy of the application on to it, ready for data entry. At a later point, they will set up a Live Environment which will be the permanent home for your application.

3. Employee Numbers

Ensure that the new application can carry the sequences that you use. If you have a historical set of employee numbers, it can be a good opportunity to start from scratch

4. Configure Organisational Structure

My recommended action here is to replicate the organisation structure on the basis of the Chart of Accounts used by the Finance Department. Not only does it make the reporting understandable across the organisation, but it facilitates the smooth export of information to other applications.

Departments can be configured to carry an alpha description and the numeric Chart number as well.

Example:

And so on…

Tip No 4.1

When setting up the structure, remember to have the organisation itself at the top of the “pyramid” otherwise you will not be able to transit people between departments.

5. Configure Posts (Jobs)

A Post (Job) can be considered as the empty “suit” for a job that exists before anyone actually fills the job.

Attached to the Post will be a range of conditions:

Hours:

If standard organisational hours are 40 per week, and the Post in question, e.g. Payroll Manager, is a 40 hpw job, then it will be considered to be 1 FTE (Full-Time Equivalent) If the Post was only 30 hours per week, then it would be expressed on a headcount report as 0.75 FTE.

Grade:

Most posts will be allocated within an agreed grade. Certain benefits or conditions may automatically accrue from grades, and will need to be added to the Post accordingly.

Reports to:

This will be the immediate report in the organisational hierarchy. This has additional importance when Triggered Actions are set up, to ensure, for instance, that all employees reporting to a certain manager are advised of impending Appraisal meetings or Training Events.

The issue is a little clouded when an employee in fact holds two Posts – both perhaps part-time – and reports to more than one Manager. Some software applications cannot handle this without having two different accounts set up for the person, which is highly unsatisfactory, especially when it then impacts on the Payroll. If you have what are known as Multi-Posts in your organisation, you will have to look very carefully at your vendor specification. As a rough guide, most vendors who sell into the Public Sector will have this feature, by necessity.

Benefits:

Either dependent upon grade or perhaps as a standard feature of employment, benefits may be attached to Jobs. Theses can include Life Assurance, Permanent Health Insurance (Salary Continuation), Holidays and other Contractual provisions.

Property:

Some positions automatically require corporate property, such as Mobile Telephones, Laptops and Company Cars.

6. Configuring Shift Patterns

Most organisations will have differing shift patterns for their employees, and can range from weekly through to rotations that repeat every 12 weeks or more. Check that you have every available current shift pattern defined, and then configure them on the T&A system. After this, you will tie each employee to a shift.

Some workers are defined as “floaters” as they have no fixed patter, but you can establish a no-shift category, and the Shift Supervisors can manually add them to shifts as required.

Good quality T&A systems make setting up and editing shifts very easy indeed. A further refinement on some applications is analysis of specific work activities within shifts.

Tip No. 6.1

Sourcing a new Time & Attendance system is the right time to re-evaluate your clock-in points. The clocks represent an investment of around couple of thousand pounds each, and so you really don’t want too many of them. Study the dynamics of your operation; are your clocking points too far away from the actual work stations?

7. Configure Employee Details

Apart from routine employee information such as Name and Address, there may be a requirement to add organisation-specific fields, or to configure existing fields.

In the former group could be Fire Officers, First Aiders or Appointed Persons; in the latter will be the organisation’s required fields for categories such as Equal Opportunity Monitoring.

8. Configure Users’ Access Security

Defines who can access the application/s and to what level of information or action that they have access.

Access policies differ from organisation to organisation, but one rule should be constant: employees must not be able to change their own records (except allowed fields in Self Service environments) although they should be able to see them (Read Only) and have them included in reporting.

You may wish to allow the Training department to see employee records relating to Job and Training History, without having access to personal and salary data or in-house Recruiters to see Job detail only.

With Time & Attendance, the most common security set-up is to allow Shift Supervisors to edit their own shift workers’ absence records. Non attendance is edited in arrears when the cause for absence is known, and can then be shown as Unpaid, Sickness, Compassionate or made up later on the shift, etc.

Access issues will also arise in Time & Attendance, where the system is used for Access Control to a building or parts of a building as well as a Time Recording device.

Self Service presents a much more complex task, as you will need to organise security levels for the majority of your workforce (those who have easy access to online access). This will involve setting parameters for the fields that can be changed by all employees (address, bank details, absence and holidays), their managers and supervisors (approvals and training recommendations) and senior management (e.g. headcount, budgets and corporate communications).

9. Configure HR and Pay Rules

There are two sets of Rules: Statutory and those set by the organisation.

Statutory rules are set by Government and standard across every organisation. These will include categories such as Statutory Maternity Pay, Statutory Sick Pay, Minimum Wage and Basic Holidays.

Organisational rules are particular to that organisation and may affect Occupational provisions such as Sick Pay, Long Service Entitlements, Pay Grades and Organisational hierarchy.

As with Data Cleansing, it is never too early too early to start collecting these rules together and tabulate them. Be sure to contact the vendor for a matrix of rules that will be required so that you have a guide. Running round looking for information of this type while the vendor’s consultant has the meter running is a wasteful way to work!

10. Configure Reports

You will have to think about the variety of reports to which you will need access from the outset, what fields should appear, how they are to be filtered and if there are any time or departmental parameters. These can be used in the Report writing Training sessions, as there is no substitute in learning as doing these things for yourself!

Some examples of the most commonly used reports are:

Headcount:

Employee Number, Employee Name, Cost Centre, Full-Time Equivalent

Salaries:

Employee Number, Employee Name, Cost Centre, Annual Salary

Long Service:

Employee Number, Employee Name, Date Joined, Years’ Service (run from date of report)

Employee Turnover:

No. of employees (within given period) x 100 divided by Average Number of Employees

Stability (example shown for annual figure)

No. of employees with 1 year’s service x 100 divided by Number of Employees employed 1 year ago.

Some reports use the same building blocks and only needed to be modified, perhaps for data between two dates. You can set up two blank dates in your report (start and finish), so that when you run the report you can insert the required dates at that time. This is known in some reporting suites as Runtime Prompt.

11. Configure Triggers

Set out on paper a list of the actions of which you want notification, what triggers them, to whom notifications should be sent, and when.

For example, all new employees are on a 12 week probation period, and you want to ensure that the probation interview is carried out in a timely fashion. You configure the trigger by ensuring that the Probation rule for this employee is 3 months. You can then set the trigger to forward a formatted and mail merged email reminder to the Line Manager, the employee (and HR department, if necessary) at start date + 10 weeks.

Example:

Trigger: New Employee

Field: Probation

Condition: Start Date + 12 weeks – 2 weeks (or +10 weeks)

Action: Email

Message: “Please note that (employee name) is due for Probation review on Date (derived from the Start Date + 12 weeks). Please ensure that this review is completed by the due date.”

This is simplistic, but gives an indication of how these Triggers are constructed.

12. History Carried Forward

Payroll history is easy to manage, as only the current tax year is held live and previous data is held as an archive. These must be accessible for not less than seven years by statute, so you will need to have arrangements in place for this to comply (see Old Data).

Time and Attendance records, too, are not usually carried forward from previous holiday years. It is advisable to retain a reasonable amount of this data, perhaps 3 years, as it may be relevant to possible disciplinary action, or litigation in respect of Sickness Absence and Industrial injury.

HR records are rather more difficult to decide upon. It’s probably fair to say that the longer an employee is with an organisation, the thinner the file! The tendency is to gather more and more information about newer employees, and the trend is escalating.

Factors that should affect the amount of employee history will include:

How often do you actually refer to records more than a year old?

Does anyone ever look back at career progression over the past 10 years?

Just how accurate – and detailed – is the history?

The more history you bring forward, the more costly it becomes. Every historical post going back in time must be created, populated, and then depopulated as the employee moves on, even though the jobs, and occasionally departments, may have passed out of living memory. You are in fact reconstructing the past, and, as previously mentioned, this history may be inaccurate enough as to be of dubious worth.

An effective way of resolving this would be to agree a point in time, say 2/3 years previous to the current migration time, and import this into the new application. Earlier data can then be retained in a form of History file (see Old Data Item 15)

13. Populating the new application

Many applications are populated by uploading a series of related spreadsheets (usually.csv derived from Excel) by way of a data importer.

You can assist this process by requesting the spreadsheet templates from the vendor, and populate them from your newly-cleansed data sources. Although this is time-consuming, it is a very good sense check on the data that you have, and gives you at least a bit more ownership and control over it; you will find at times during a project that there are times that it seems like something happening elsewhere!

14. Parallel Running

It goes without saying that the most “mission critical” application is the Payroll. Whether you are moving from one application to another, or to your first computerised HRIS you will need to parallel run – that is, run it alongside your current arrangement, for a period, mainly for testing purposes to compare and validate output as well as to discover any running problems before going live.

Payroll and, to a lesser extent, Time & Attendance run more in “real time” than HR, and therefore should be prioritised.

One of the most frequent questions we are asked is “how many parallel runs should we do?” There is no hard and fast answer, and it will all depend on your resources, but we would recommend a minimum of two, and probably no more than three. If you are still encountering significant discrepancies after two parallel runs, you must quickly establish where the faults lie and correct them, otherwise your project will come unstuck.

When the parallel running and other testing is completed satisfactorily, the purchaser will then sign off an End User Testing Acceptance document. The data is then ready to be loaded in to the Live Environment.

15. Migrate Test Data onto Live Environment

This will be carried out by the IT/ICT function, and will involve decanting the validated data into the live application Environment, ready for live use.

On web-hosted applications, this will be done by the host on their own location, and the purchaser merely points their browser to the new live address.

16. Old Data

Often overlooked. As well as establishing how much history you bring forward into the new application, you still have a decision to make on where to store historical data.

Payroll is required to be accessible for no less than seven years, and HR is an ongoing record. The main options are:

Maintaining an environment version of the previous application, where records can be accessed and read;

Data converted into a contemporary format such as Excel where it can be used at will;

The old-fashioned giant pile of printout.

The first two have a cost attached; a) is usually an ongoing rental charge and b) is a one-time charge. Neither is particularly cheap. The last option is not as impractical as it might sound; people generally overestimate the amount of access they need to historical data. Providing the history reports are produced in a range of sorts (Surname, Employee Number, National Insurance Number, Operating Division) then look-ups are not time-consuming.

17. De-commissioning

Remember if you are phasing out a previous application then you will need to study the terms under which you give it up, with special regard to notice periods and financial considerations attached to them.

Existing systems should be maintained until complete cut-over to the new application is complete, and then they can be cleared down and withdrawn from the operating platform. Ensure that all master disks are accounted for are returned to the original vendor, or disposed of in line with their wishes.

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There are loads of types of loans out there. It can be divided into three categories which is secured, unsecured and demand. A secured loan is a loan where you must mortgage some of your assets such as house or car in order for you to be eligible for the loan. Unsecured loan is a loan where you do not have to put anything under assurance. There are many types of unsecured loans, bank overdrafts, corporate bonds, credit card debt and the most common one is the personal loan. Demand loan is usually a short term loan where it does not have a fixed date to repay it except it carries a floating interest.

There are a lot of reasons why people take a loan. It can be because of emergency cases such as accident, medical emergency or pending bills. Most people take personal loans to cover up other loans such as credit card debt. Personal loans are often chosen because of their low interest rates. Most credit card company now offers an interest rate of around 30% while personal loan’s interest rate can be as low as 8%!

Loans are usually taken to buy cars, house or shops. Some people will choose to buy their car either by loan or installments. Preparing your dream home is expensive. You wouldn’t want to stay in an empty house only. Therefore, people take up loan to first, buy the house, furniture, paint and to the contractor! Pending bills such as electric bills, phone bills and credit card debt are one of the most common reasons why people take up loan, to cover other loans!

Many people take up loans to invest in their future. Invest in the future means your education or business. Studying abroad is not a very cheap thing. Million or millions are needed for education from primary to tertiary level. The last reason is because of the holiday getaways. Everyone definitely needs a break from the busy city-life and work. However, many people do not take the required break due to insufficient money. Any low interest or personal loan can bring them straightaway to their wished destination!

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INTRODUCTION

“Insurance should be bought to protect you against a calamity that would otherwise be financially devastating.”

In simple terms, insurance allows someone who suffers a loss or accident to be compensated for the effects of their misfortune. It lets you protect yourself against everyday risks to your health, home and financial situation.

Insurance in India started without any regulation in the Nineteenth Century. It was a typical story of a colonial epoch: few British insurance companies dominating the market serving mostly large urban centers. After the independence, it took a theatrical turn. Insurance was nationalized. First, the life insurance companies were nationalized in 1956, and then the general insurance business was nationalized in 1972. It was only in 1999 that the private insurance companies have been allowed back into the business of insurance with a maximum of 26% of foreign holding.

“The insurance industry is enormous and can be quite intimidating. Insurance is being sold for almost anything and everything you can imagine. Determining what’s right for you can be a very daunting task.”

Concepts of insurance have been extended beyond the coverage of tangible asset. Now the risk of losses due to sudden changes in currency exchange rates, political disturbance, negligence and liability for the damages can also be covered.

But if a person thoughtfully invests in insurance for his property prior to any unexpected contingency then he will be suitably compensated for his loss as soon as the extent of damage is ascertained.

The entry of the State Bank of India with its proposal of bank assurance brings a new dynamics in the game. The collective experience of the other countries in Asia has already deregulated their markets and has allowed foreign companies to participate. If the experience of the other countries is any guide, the dominance of the Life Insurance Corporation and the General Insurance Corporation is not going to disappear any time soon.

The aim of all insurance is to compensate the owner against loss arising from a variety of risks, which he anticipates, to his life, property and business. Insurance is mainly of two types: life insurance and general insurance. General insurance means Fire, Marine and Miscellaneous insurance which includes insurance against burglary or theft, fidelity guarantee, insurance for employer’s liability, and insurance of motor vehicles, livestock and crops.

LIFE INSURANCE IN INDIA

“Life insurance is the heartfelt love letter ever written.

It calms down the crying of a hungry baby at night. It relieves the heart of a bereaved widow.

It is the comforting whisper in the dark silent hours of the night.”

Life insurance made its debut in India well over 100 years ago. Its salient features are not as widely understood in our country as they ought to be. There is no statutory definition of life insurance, but it has been defined as a contract of insurance whereby the insured agrees to pay certain sums called premiums, at specified time, and in consideration thereof the insurer agreed to pay certain sums of money on certain condition sand in specified way upon happening of a particular event contingent upon the duration of human life.

Life insurance is superior to other forms of savings!

“There is no death. Life Insurance exalts life and defeats death.

It is the premium we pay for the freedom of living after death.”

Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

The essential features of life insurance are a) it is a contract relating to human life, which b) provides for payment of lump-sum amount, and c) the amount is paid after the expiry of certain period or on the death of the assured. The very purpose and object of the assured in taking policies from life insurance companies is to safeguard the interest of his dependents viz., wife and children as the case may be, in the even of premature death of the assured as a result of the happening in any contingency. A life insurance policy is also generally accepted as security for even a commercial loan.

NON-LIFE INSURANCE

“Every asset has a value and the business of general insurance is related to the protection of economic value of assets.”

Non-life insurance means insurance other than life insurance such as fire, marine, accident, medical, motor vehicle and household insurance. Assets would have been created through the efforts of owner, which can be in the form of building, vehicles, machinery and other tangible properties. Since tangible property has a physical shape and consistency, it is subject to many risks ranging from fire, allied perils to theft and robbery.

Few of the General Insurance policies are:

Property Insurance: The home is most valued possession. The policy is designed to cover the various risks under a single policy. It provides protection for property and interest of the insured and family.

Health Insurance: It provides cover, which takes care of medical expenses following hospitalization from sudden illness or accident.

Personal Accident Insurance: This insurance policy provides compensation for loss of life or injury (partial or permanent) caused by an accident. This includes reimbursement of cost of treatment and the use of hospital facilities for the treatment.

Travel Insurance: The policy covers the insured against various eventualities while traveling abroad. It covers the insured against personal accident, medical expenses and repatriation, loss of checked baggage, passport etc.

Liability Insurance: This policy indemnifies the Directors or Officers or other professionals against loss arising from claims made against them by reason of any wrongful Act in their Official capacity.

Motor Insurance: Motor Vehicles Act states that every motor vehicle plying on the road has to be insured, with at least Liability only policy. There are two types of policy one covering the act of liability, while other covers insurers all liability and damage caused to one’s vehicles.

JOURNEY FROM AN INFANT TO ADOLESCENCE!

Historical Perspective

The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered more risky for coverage.

The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during 20’s and 30’s desecrated insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create much needed funds for rapid industrialization. This was in conformity with the Government’s chosen path of State lead planning and development.

The (non-life) insurance business continued to prosper with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies – National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

The life insurance industry was nationalized under the Life Insurance Corporation (LIC) Act of India. In some ways, the LIC has become very flourishing. Regardless of being a monopoly, it has some 60-70 million policyholders. Given that the Indian middle-class is around 250-300 million, the LIC has managed to capture some 30 odd percent of it. Around 48% of the customers of the LIC are from rural and semi-urban areas. This probably would not have happened had the charter of the LIC not specifically set out the goal of serving the rural areas. A high saving rate in India is one of the exogenous factors that have helped the LIC to grow rapidly in recent years. Despite the saving rate being high in India (compared with other countries with a similar level of development), Indians display high degree of risk aversion. Thus, nearly half of the investments are in physical assets (like property and gold). Around twenty three percent are in (low yielding but safe) bank deposits. In addition, some 1.3 percent of the GDP are in life insurance related savings vehicles. This figure has doubled between 1985 and 1995.

A World viewpoint – Life Insurance in India

In many countries, insurance has been a form of savings. In many developed countries, a significant fraction of domestic saving is in the form of donation insurance plans. This is not surprising. The prominence of some developing countries is more surprising. For example, South Africa features at the number two spot. India is nestled between Chile and Italy. This is even more surprising given the levels of economic development in Chile and Italy. Thus, we can conclude that there is an insurance culture in India despite a low per capita income. This promises well for future growth. Specifically, when the income level improves, insurance (especially life) is likely to grow rapidly.

INSURANCE SECTOR REFORM:

Committee Reports: One Known, One Anonymous!

Although Indian markets were privatized and opened up to foreign companies in a number of sectors in 1991, insurance remained out of bounds on both counts. The government wanted to proceed with caution. With pressure from the opposition, the government (at the time, dominated by the Congress Party) decided to set up a committee headed by Mr. R. N. Malhotra (the then Governor of the Reserve Bank of India).

Malhotra Committee

Liberalization of the Indian insurance market was suggested in a report released in 1994 by the Malhotra Committee, indicating that the market should be opened to private-sector competition, and eventually, foreign private-sector competition. It also investigated the level of satisfaction of the customers of the LIC. Inquisitively, the level of customer satisfaction seemed to be high.

In 1993, Malhotra Committee – headed by former Finance Secretary and RBI Governor Mr. R. N. Malhotra – was formed to evaluate the Indian insurance industry and recommend its future course. The Malhotra committee was set up with the aim 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 needs of the economy keeping in mind the structural changes presently happening and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included:

o Structure

Government bet in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate.

Competition

Private Companies with a minimum paid up capital of Rs.1 billion should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state.

o Regulatory Body

The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance – a part of the Finance Ministry- should be made Independent.

o Investments

Compulsory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (there current holdings to be brought down to this level over a period of time).

o Customer Service

LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry. The committee accentuated that in order to improve the customer services and increase the coverage of insurance policies, industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new competitors could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores.

The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body – The Insurance Regulatory and Development Authority.

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has meticulously stuck to its schedule of framing regulations and registering the private sector insurance companies.

Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken at the same time to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity lid for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent.

The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 12 life insurance and 8 general insurance companies have been registered. A host of private Insurance companies operating in both life and non-life segments have started selling their insurance policies since 2001

Mukherjee Committee

Immediately after the publication of the Malhotra Committee Report, a new committee, Mukherjee Committee was set up to make concrete plans for the requirements of the newly formed insurance companies. Recommendations of the Mukherjee Committee were never disclosed to the public. But, from the information that filtered out it became clear that the committee recommended the inclusion of certain ratios in insurance company balance sheets to ensure transparency in accounting. But the Finance Minister objected to it and it was argued by him, probably on the advice of some of the potential competitors, that it could affect the prospects of a developing insurance company.

LAW COMMISSION OF INDIA ON REVISION OF THE INSURANCE ACT 1938 – 190th Law Commission Report

The Law Commission on 16th June 2003 released a Consultation Paper on the Revision of the Insurance Act, 1938. The previous exercise to amend the Insurance Act, 1938 was undertaken in 1999 at the time of enactment of the Insurance Regulatory Development Authority Act, 1999 (IRDA Act).

The Commission undertook the present exercise in the context of the changed policy that has permitted private insurance companies both in the life and non-life sectors. A need has been felt to toughen the regulatory mechanism even while streamlining the existing legislation with a view to removing portions that have become superfluous as a consequence of the recent changes.

Among the major areas of changes, the Consultation paper suggested the following:

a. merging of the provisions of the IRDA Act with the Insurance Act to avoid multiplicity of legislations;

b. deletion of redundant and transitory provisions in the Insurance Act, 1938;

c. Amendments reflect the changed policy of permitting private insurance companies and strengthening the regulatory mechanism;

d. Providing for stringent norms regarding maintenance of ’solvency margin’ and investments by both public sector and private sector insurance companies;

e. Providing for a full-fledged grievance redressal mechanism that includes:

o The constitution of Grievance Redressal Authorities (GRAs) comprising one judicial and two technical members to deal with complaints/claims of policyholders against insurers (the GRAs are expected to replace the present system of insurer appointed Ombudsman);

o Appointment of adjudicating officers by the IRDA to determine and levy penalties on defaulting insurers, insurance intermediaries and insurance agents;

o Providing for an appeal against the decisions of the IRDA, GRAs and adjudicating officers to an Insurance Appellate Tribunal (IAT) comprising a judge (sitting or retired) of the Supreme Court/Chief Justice of a High Court as presiding officer and two other members having sufficient experience in insurance matters;

o Providing for a statutory appeal to the Supreme Court against the decisions of the IAT.

LIFE & NON-LIFE INSURANCE – Development and Growth!

The year 2006 turned out to be a momentous year for the insurance sector as regulator the Insurance Regulatory Development Authority Act, laid the foundation for free pricing general insurance from 2007, while many companies announced plans to attack into the sector.

Both domestic and foreign players robustly pursued their long-pending demand for increasing the FDI limit from 26 per cent to 49 per cent and toward the fag end of the year, the Government sent the Comprehensive Insurance Bill to Group of Ministers for consideration amid strong reservation from Left parties. The Bill is likely to be taken up in the Budget session of Parliament.

The infiltration rates of health and other non-life insurances in India are well below the international level. These facts indicate immense growth potential of the insurance sector. The hike in FDI limit to 49 per cent was proposed by the Government last year. This has not been operationalized as legislative changes are required for such hike. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have tipped into the Indian market and 21 private companies have been granted licenses.

The involvement of the private insurers in various industry segments has increased on account of both their capturing a part of the business which was earlier underwritten by the public sector insurers and also creating additional business boulevards. To this effect, the public sector insurers have been unable to draw upon their inherent strengths to capture additional premium. Of the growth in premium in 2004-05, 66.27 per cent has been captured by the private insurers despite having 20 per cent market share.

The life insurance industry recorded a premium income of Rs.82854.80 crore during the financial year 2004-05 as against Rs.66653.75 crore in the previous financial year, recording a growth of 24.31 per cent. The contribution of first year premium, single premium and renewal premium to the total premium was Rs.15881.33 crore (19.16 per cent); Rs.10336.30 crore (12.47 per cent); and Rs.56637.16 crore (68.36 per cent), respectively. In the year 2000-01, when the industry was opened up to the private players, the life insurance premium was Rs.34,898.48 crore which constituted of Rs. 6996.95 crore of first year premium, Rs. 25191.07 crore of renewal premium and Rs. 2740.45 crore of single premium. Post opening up, single premium had declined from Rs.9, 194.07 crore in the year 2001-02 to Rs.5674.14 crore in 2002-03 with the withdrawal of the guaranteed return policies. Though it went up marginally in 2003-04 to Rs.5936.50 crore (4.62 per cent growth) 2004-05, however, witnessed a significant shift with the single premium income rising to Rs. 10336.30 crore showing 74.11 per cent growth over 2003-04.

The size of life insurance market increased on the strength of growth in the economy and concomitant increase in per capita income. This resulted in a favourable growth in total premium both for LIC (18.25 per cent) and to the new insurers (147.65 per cent) in 2004-05. The higher growth for the new insurers is to be viewed in the context of a low base in 2003- 04. However, the new insurers have improved their market share from 4.68 in 2003-04 to 9.33 in 2004-05.

The segment wise break up of fire, marine and miscellaneous segments in case of the public sector insurers was Rs.2411.38 crore, Rs.982.99 crore and Rs.10578.59 crore, i.e., a growth of (-)1.43 per cent, 1.81 per cent and 6.58 per cent. The public sector insurers reported growth in Motor and Health segments (9 and 24 per cent). These segments accounted for 45 and 10 per cent of the business underwritten by the public sector insurers. Fire and “Others” accounted for 17.26 and 11 per cent of the premium underwritten. Aviation, Liability, “Others” and Fire recorded negative growth of 29, 21, 3.58 and 1.43 per cent. In no other country that opened at the same time as India have foreign companies been able to grab a 22 per cent market share in the life segment and about 20 per cent in the general insurance segment. The share of foreign insurers in other competing Asian markets is not more than 5 to 10 per cent.

The life insurance sector grew new premium at a rate not seen before while the general insurance sector grew at a faster rate. Two new players entered into life insurance – Shriram Life and Bharti Axa Life – taking the total number of life players to 16. There was one new entrant to the non-life sector in the form of a standalone health insurance company – Star Health and Allied Insurance, taking the non-life players to 14.

A large number of companies, mostly nationalized banks (about 14) such as Bank of India and Punjab National Bank, have announced plans to enter the insurance sector and some of them have also formed joint ventures.

The proposed change in FDI cap is part of the comprehensive amendments to insurance laws – The Insurance Act of 1999, LIC Act, 1956 and IRDA Act, 1999. After the proposed amendments in the insurance laws LIC would be able to maintain reserves while insurance companies would be able to raise resources other than equity.

About 14 banks are in queue to enter insurance sector and the year 2006 saw several joint venture announcements while others scout partners. Bank of India has teamed up with Union Bank and Japanese insurance major Dai-ichi Mutual Life while PNB tied up with Vijaya Bank and Principal for foraying into life insurance. Allahabad Bank, Karnataka Bank, Indian Overseas Bank, Dabur Investment Corporation and Sompo Japan Insurance Inc have tied up for forming a non-life insurance company while Bank of Maharashtra has tied up with Shriram Group and South Africa’s Sanlam group for non-life insurance venture.

CONCLUSION

It seems cynical that the LIC and the GIC will wither and die within the next decade or two. The IRDA has taken “at a snail’s pace” approach. It has been very cautious in granting licenses. It has set up fairly strict standards for all aspects of the insurance business (with the probable exception of the disclosure requirements). The regulators always walk a fine line. Too many regulations kill the motivation of the newcomers; too relaxed regulations may induce failure and fraud that led to nationalization in the first place. India is not unique among the developing countries where the insurance business has been opened up to foreign competitors.

The insurance business is at a critical stage in India. Over the next couple of decades we are likely to witness high growth in the insurance sector for two reasons namely; financial deregulation always speeds up the development of the insurance sector and growth in per capita GDP also helps the insurance business to grow.

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