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Factors Influencing Recrutiment of Financial Consultants

Factors Influencing Recrutiment of Financial Consultants

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Published by debaion

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Published by: debaion on Aug 26, 2012
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Insurance may be described as a social device to reduce or eliminate risk of life andproperty. Under the plan of insurance, a large number of people associate themselves bysharing risk, attached to individual.The risk, which can be insured against include fire, the peril of sea, death, incident, &burglary. Any risk contingent upon these may be insured against at a premiumcommensurate with the risk involved.Insurance is actually a contract between 2 parties whereby one party called insurerundertakes in exchange for a fixed sum called premium to pay the other party happeningof a certain event.Insurance is a contract whereby, in return for the payment of premium by the insured, theinsurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events.With the help of Insurance, large number of people exposed to a similar risk makecontributions to a common fund out of which the losses suffered by the unfortunate few,due to accidental events, are made good.
The domestic insurance industry in India is estimated to be around US$ 60.5 billion by 2010,of which US$ 35 billion will come from rural and semi-urban areas. While the life insurancemarket is expected to grow to US$ 35 billion, non-life insurance market will touch anestimated US$ 25 billion.
With the largest number of life insurance policies in force in the world, India‘s insurance
sector accounted for 4.1 per cent of GDP in 2006-07, up from 1.2 per cent in 1999-2000,far ahead of China where insurance accounts for just 1.7 per cent of the GDP and eventhe US where insurance penetration stands at 4 per cent of the GDP. One area that
 2continues to cause concern is the number of customer grievances in insurance, especiallyin a few specific classes. This calls for more transparency in designing the contractwording and on insisting that the applicant is sufficiently informed about the coverageand more particularly the exclusions. In addition, the legislation itself requires to betransformed to meet the needs of the emerging markets. The Law Commission of Indiawhich has gone extensively into the various insurance laws has submitted its report. Thedemand for health insurance covers has seen a healthy increase, and today the sector isthe fastest growing segment in the non-life insurance industry in India, which grew atover 40% last year. It is also emerging as an increasingly significant line of business forlife insurance companies. During the last five years, the premium from health insuranceproducts in non-life companies has grown from 675 crores in 2001-02 to Rs 3200 croresin 2006-07, almost 5 times its level 5 years back. While this rate of growth appears to bevery healthy, it is on a low base, and health insurance penetration in the countrycontinues to be low. Only about 25 million persons are presently covered for healththrough commercial insurance, in a country of over 1.1 billion people. Overall, the Indianhealth sector is still characterized by the near absence of any significant risk protectionagainst major health-related expenditure, as insurance and other organized forms of payment for health services, including ESIS, CGHS and other such schemes barelyconstitute a tenth of all health expenditure in the country. Almost four-fifths of the healthspending in the country is private, out-of-pocket expenditure. In the absence of suchprotection, the financial impact of hospitalization can be very pronounced, and indeed isreported as one of the leading causes of impoverishment in the country.Indian insurance companies recorded a 19.9 per cent growth in premium in dollar terms(adjusted for inflation) in 2006-07, compared to the world market growth rate of 2.9 percent. This rate of growth of the industry looks particularly impressive when seen againstthe fact that the combined penetration of both life and non-life is less than 2 per cent of the GDP compared to world average of 7.52 per cent. Clearly, the scope for growth isenormous.Led by the Life Insurance Corporation (LIC), the life insurance industry registered agrowth of 110 per cent in fiscal 2006-07, taking the total business to US$ 19.2 billion
from the previous year‘s US$ 9.1 billion. The life insurance market has grown rapidly
over the past six years, with new business premiums growing at over 40 per cent per yearowing to the entry of a host of new players with significant growth aspirations and capitalcommitments.The total life insurance market premiums is likely to more than double from the currentUS$ 40 billion to US$ 80-US$100 billion by 2012, says a study by McKinsey. The study
titled ‗India Insurance 2012: Fortune Favours the Bold,‘ expects a rise in premiums
between 5.1 and 6.2 per cent of the GDP in 2012 from the current 4.1 per cent driven bygreater insurance intensity per capita as the average per capita income increases and risein penetration in urban and rural areas. The life insurance premium contributions percapita have jumped from a little over US$ 7 in 1999-2000 (pre-liberalization) to US$38.5 in 2006-07.Life insurance penetration in India - which was less than 1 per cent till 1990-91 -increased to 2.53 per cent in 2005, and to 3 per cent in 2006-07. While the impetus forgrowth has come from both public and private insurers, the number of players in thissegment have also increased to 16 (15 in private sector), with Life Insurance Corporation(LIC) being the dominant player (market share of over 74 per cent).The general insurance industry grew 11.6 per cent between April and November in 2007-08 with robust performances by private players. The 13 non-life insurers collected US$4.7 billion in premium against US$ 4.2 billion in the same period last year. While thepublic sector could increase its premiums by just 3.57 per cent, 9 private sector playerscl
ocked premium growth of 26.49 per cent. Private sector players‘ market share hasgrown to about 40 per cent in FY08 as compared to the public sector‘s 60 per cent.
Foreign direct investment up to 26 per cent is permitted under the automatic routesubject to obtaining a license from the IRDA.

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