INSURANCE SECTOR IN INDIA

By :Hemlata Bora C 18

V Deepak Kumar C 61
Vijeta Singh C 63 Vikas Singh Bisht C 65 Vikram Singh C 66

BASIC UNDERLYING NEED FOR THE SECTOR

Need of humans to secure themselves against loss and disaster. They are willing to make some sort of sacrifice in order to achieve security. Though rise of Insurance as a sector happened in industrial era but the beginning dates back to almost 6000 years.* In Indian context Insurance finds mention in Manusmriti Arthshastra Dharmashastra Modern form of insurance was introduced by Britishers In India

* Source - http://www.licindia.in/history.htm

PRE INDEPENDENCE

Year 1818

Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil Main purpose was looking after the needs of European community Extra premiums were charged for Indians

Year 1870
Year1912

Bombay Mutual Life Assurance Society first Indian Insurance company Removed disparity between Europeans and Indians

Two important regulations to regulate the Indian Insurance scene The Life Insurance Companies Act The Provident Fund Act were passed to regulate the insurance business

Year 1938

The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business.

INDEPENDENT INDIA
In 1956 life insurance in India was nationalized
154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization

NATIONALIZED INSURANCE
Nationalization was accomplished in two stages

Initially the management of the companies was taken over by means of an Ordinance
The ownership too by means of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956 The Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost

1 corporate office 5 Zonal office 33 divisional offices 212 branch offices

STRUCTURE OF LIC
LIC was a monopoly in the insurance scene till 1999

LPG FOR INSURANCE SECTOR IN 1999

Only in 1999 private insurance companies were allowed back into the business of insurance with a maximum of 26 per cent of foreign holding (World Bank Economic Review 2000). Till that time Insurance in India used to be tightly regulated and monopolized by state-run insurers.

HOW LPG HAPPENED FOR INSURANCE SECTOR

1993 Setting-up of the Malhotra Committee

1994 Recommendations of Malhotra Committee released

1995 Setting-up of Mukherjee Committee 1996 Setting-up of an (interim) Insurance Regulatory Authority (IRA) 1997 Mukherjee Committee Report submitted but not made public

HOW LPG HAPPENED FOR INSURANCE SECTOR

1997 The Government gives greater autonomy to LIC, GIC and its subsidiaries with regard to the restructuring of boards and flexibility in investment norms 1998 The cabinet decides to allow 40% foreign equity in private insurance companies 26% to foreign companies and 14% to non-resident &investors (FIIs) 1999 The Standing Committee headed by Murali Deora decides that foreign equity in private insurance should be limited to 26% 1999 Cabinet clears IRDA Act 2000 President gives assent to the IRDA Act

IRDA
The Insurance Regulatory and Development Authority (IRDA) Act of 1999 was passed The insurance business was opened on two fronts Firstly, domestic private-sector companies were permitted to enter both life and non-life insurance business Foreign Companies were allowed to participate, albeit with a cap on shareholding at 26% Since its inception IRDA has been taking steps to promote insurance sector and also protect interest of people A number of reforms have been introduced by IRDA regarding regulation of agents,deciding about premium, marketing strategies etc
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TYPES OF INSURANCE SCHEMES AVAILABLE IN INDIA

Life insurance: Life insurance covers all the potential dangers, which may damage your life

General Insurance: There are several types of general insurance in market. Some of them are mentioned below:

Health insurance: Health insurance cover protects the policyholder from any kind of accident and medical conditions
Car insurance: Car insurance is a must-have for all car owners Travel insurance: Travel insurance is a must for all travellers

TYPES OF INSURANCE SCHEMES AVAILABLE IN INDIA

Home insurance: Home insurance covers your home and household articles. There are landlord's insurance plan and tenant's insurance plan Property insurance: Property insurance protects your personal belonging from any danger such as theft, fire, natural calamities etc.

Casualty insurance: Casualty insurance insures the policyholder from casualties, caused by any kind of accident. Crime insurance
Political risk insurance.

TYPES OF INSURANCE SCHEMES AVAILABLE IN INDIA

Some other types of insurance policies are: All-risk insurance

Expatriate insurance
Media liability insurance Pet insurance Legal expenses insurance Collateral protection insurance Locked funds insurance Kidnap and ransom insurance

MARKET SHARE
1% 2% 2% 2% 5% 5% 1% 1% 0% 5%

Sales
LIC SBI Life ICICI Prudential HDFC standard Max New York Life Bajaj Allianz Birla Sunlife Reliance Tata AIG Others

76%

Source : Forbes India August 2011

BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED

A joint venture between Bajaj Auto Limited and Allianz AG of Germany. Bajaj Allianz General Insurance came into existence on 2nd May 2001

Bajaj Auto has a share of 74%,

Allianz has the remaining 26%

Source : http://services.indiabizclub.com

ICICI PRUDENTIAL LIFE INSURANCE COMPANY

ICICI Prudential is a joint venture between ICICI bank and Prudential, Prudential is an international financial service provider headquartered at United Kingdom.

ICICI and Prudential have respective shares of 74% and 26%.

The Company started operating in December 2000

Source : http://services.indiabizclub.com

ICICI LOMBARD GENERAL INSURANCE

ICICI Lombard General Insurance Company Limited is a joint venture between ICICI Bank Limited and Fairfax Financial Holdings Limited Fairfax is Canada-based firm, engaged in general insurance, reinsurance, insurance claims management and investment management. ICICI Lombard General Insurance Company commenced its operations in general insurance business in August 2001.

Source : http://services.indiabizclub.com

BIRLA SUN LIFE INSURANCE COMPANY LIMITED

Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between Aditya Birla Group and Sun Life Financial Inc BSLI started functioning in March 2001 after getting the certificate of registration from IRDA.

Source : http://services.indiabizclub.com

TATA AIG GENERAL INSURANCE

Tata AIG General Insurance Company Ltd. is a joint venture between Tata Sons and American International Group, Inc. (AIG) The Tata Group is holding 74 per cent stake and the rest 26 per cent is held by AIG

Tata AIG General Insurance Company was founded on January 22, 2001

Source : http://services.indiabizclub.com

HDFC STANDARD LIFE INSURANCE COMPANY LIMITED

HDFC Standard Life Insurance Company Limited is one of the first companies to be licensed by IRDA to operate in the Insurance sector The company came into existence on 14th August 2000

HDFC holds 81.4% share in HDFC and the remaining 18.6% stake is with Standard Life

Source : http://services.indiabizclub.com

SWOT ANALYSIS
STRENGHTS A range of new products had been launched to cater to different segments of the market, while traditional agents were supplemented by other channels including the Internet and bank branches These developments were instrumental in propelling business growth, in real terms, of 19% in life premiums and 11.1% in non-life premiums between 1999 and 2003. WEAKNESS India is among the lowest-spending nations in Asia in respect of purchasing insurance (China, which spent USD 36.3 per capita on insurance products & Indian spent USD 16.4) Even after the liberalization of the insurance sector, the public sector Insurance companies have continued to dominate the insurance market In the long run, other forms of nonprice competition like aggressive advertisement wars are likelyTo lead to increasing costs, eventually harming the interests of the consumers.

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SWOT CONTD
STRENGHTS India has a large population with an increase in its per capita income WEAKNESS A key challenge for Indias non-life insurance sector will be to reform the existing tariff structure. From a pricing perspective, the Indian non-life segment is still heavily regulated Reinsurance is only provided by GIC While the insurance business is highly concentrated in India, the share of foreign companies is low

Indias middle income is rapidly increasing emerging as a profitable market

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SWOT CONTD
OPPORTUNITIES Indias improving economic fundamentals will support faster growth in per capita income in the coming years, which will translate into stronger demand for insurance products Strong growth can be sustained for 3040 years before the market reaches saturation THREATS Private Insurance companies are showing gradual decline as people are showing faith in Government backed insurance companies. Market share of private life insurance companies fell from 40% in 2008-09 to 20% in 20% in May, 2011. Private insurance companies are showing negative growth in the range of 20-50%. Tata AIG is the only life insurance company that reported positive growth in May, 2011. Reliance Life reported 51.7% negative growth.
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OPPORTUNITIES

THREATS
Speculations of a second recession will make growth of this industry to dip

There is plenty of room for growth in personal accident, health and other liability classes Rising household income and risk awareness will be the key catalysts to spurring more demand for these lines of business in the future Health insurance could potentially have an important role in driving insurance market development forward

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SUGGESTIONS
To begin with, India needs to further liberalize investment regulations on insurers to strike a proper balance between insurance solvency and investment flexibility The Insurance Laws (Amendment) Bill, 2008 is pending in Parliament. The Bill, when enacted, would allow raising the FDI cap for the industry to 49% Furthermore, both the life and non-life insurance sectors would benefit from less invasive regulations There is huge untapped potential, for example, in the largely undeveloped private pension market. At the moment, less than 11% of the working population in India is eligible for participation in any formal old-age retirement scheme. Private insurers will have a key role to play in serving the large number of informal sector workers.
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