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The IUP Journal of Risk & Insurance

January'12
Focus

Insurance products are often considered as difficult to understand by the common man, for they are undefined till they are purchased. Secondly, insurance being a solicited business mostly through agents world over— “offering,

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Performance of Insurance Companies in India: A Comparison of Public and Private Insurers
A SWOT Analysis of Sri Lankan Insurance Sector
Fair Valuation of Mortgage Insurance with Current Loan-to-Value and Debt Service Ratios
On Dynamic Solvency Insurance Contract
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Performance of Insurance Companies in India: A Comparison of Public and Private Insurers

-- Debabrata Das and Jasojit Debnath

Liberalization of the insurance market in India gave entry to many private insurers, resulting in drastic changes in respect to people’s choice of companies. With the expansion of the market, insurance penetration and density of the country are getting better, leading to a competition within the companies in terms of policies sold, collection of premium income, settlement of claims and others. Companies are employing different marketing channels, apart from the conventional channel of marketing through individual agents, to stay in the competition. The present paper is thus an attempt to highlight the performance of life insurance market in terms of different parameters, and also to throw light on the different marketing channels employed.

A SWOT Analysis of Sri Lankan Insurance Sector

--S Sankaramuthukumar and K Alamelu

This article evaluates the performance of the Sri Lankan insurance sector with regard to life insurance and general insurance. The authors have ranked the Sri Lankan insurance companies on the basis of growth efficiency in order to make Strengths, Weaknesses/Limitations, Opportunities and Threats (SWOT) analysis of the Sri Lankan insurance industry. The study reveals that the insurance density and penetration is one of the lowest among the Asian countries. However, the growth rate of insurance density was above the world average, except for 2001 and 2009. Besides, life insurance penetration and density was lower than the general insurance penetration and density. The research tools for this study are correlation analysis and standard deviation. The hypothesis—the performance of life insurance business is more consistent than the performance of general insurance business—has been proved. It is also proved that there was a high (0.949) positive correlation between the Sri Lankan insurance density and world insurance density during 2000-2009.

Fair Valuation of Mortgage Insurance with Current Loan-to-Value and Debt Service Ratios

-- Yang-Che Wu and Chin-Yuan Lin

This study advances the mortgage insurance pricing literature by providing theory and methods for incorporating both equity and ability-to-pay theories (Jackson and Kasserman, 1980). We develop a new option-based model by adding the current loan-to-value and debt service ratios to the pricing process of mortgage insurance (MI). Specifically, the MI is regarded as a portfolio of a series of put options to obtain the analytical pricing formulas. Under the consistent pricing framework, we also derive three types of MI contracts designed for different purposes: full MI can compensate mortgage lenders for default loss; maximum claim policies provide insurers with a limit loss; and partial indemnity policies can be adjusted to different insurance coverage for borrowers’ default losses. Finally, we conduct numerical and empirical analyses to evaluate how different designs of MI relate to insurance premiums, and to examine how housing price dynamics and income flow affect insurance premiums.

On Dynamic Solvency Insurance Contract

-- Cristina Gosio, Ester C Lari and Marina Ravera

In the framework of collective risk theory models, the dynamic solvency insurance contract is studied. Whenever the reserve falls below the ruin level, such a contract provides a payment in the amount of the deficit. The paper focuses on the net single premium of solvency insurance by considering two different definitions of ruin, referring to models modified by the inclusion of an upper reflecting barrier. The main results are integral and integro-differential equations for the net single premium. An exact solution is given in the special case with exponential claim sizes and zero interest force.

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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.

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