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Changing Times of Indian Insurance – A Fresh Perspective
“Death, Theft and Fire comes thy neighbor”– This fairly summarizes how Insurance wasperceived in India.As a student / practitioner of Insurance, since Risk and Risk mitigation tools & techniquesare changing constantly, I enjoy, like most of us, learning & analyzing about the changingtrends & opera of Great Indian Insurance. Through this article, I am making an attempt tode-classify Insurance into 3 parts (Perspectives) for the sake of easy and betterunderstanding of this sun-rise industry in our country today.1.Indian Insurance – From Customers’ Perspective
2.
Indian Insurance – From Underwriters’ Perspective (Insurance Companies)
3.
Indian Insurance – From Distributors’ Perspective (Agents / Brokers)Before, I start the sojourn, I wish to make an Open-House about 3 pertinent questionswhich I am seeking answers for. You are welcome to comment or contribute. They are :
The 1
st
Question : Why Insurance Advertisements carry micro typing “Insurance is aSubject Matter of Solicitation?”
I think this kind of writing is an ancient (British) way to portray that Insurance is bought(solicited) by customer and not sold by Insurance Company, where as we know, at groundreality, for so very long, Insurance was only sold and never bought. Now, both the Proposerand Proposed for Insurance Cover can / should inter-change the role from InsuranceCompany to Customer or Vice Versa, should we want to enhance the penetration ofInsurance Coverage in INDIA
The 2
nd
Question : Why Insurance Company Staff, who sell Insurance does not requireInsurance Producers’ License like Agents / Brokers ?
Insurance is a regulated market and Insurance distribution is also fairly regulated as itdone through qualified producers (read Agents / Brokers), since money and trust is at stakewith Insurance. But this is not 100% true in our Indian context as Insurance Companiesemployees, without having passed any IRDA prescribed Exams are free to solicit business.Whether they are Graduate or Class XII passed working for Call Centers or the Front LineBusiness Development team, they go out or Tele-call to canvass Insurance business freelywithout any regulation what-so-ever. This defies the logic and create unwanted competitionbetween a sales person from a Broking Company vis-à-vis a sales person from InsuranceCompany. In Western World, one cant solicit business of Insurance unless one hasProducer’s License, whether one works for Insurance company (Agency) or a Broking Formor a Bank. I think, India surely needs this level playing field and there should be One Lawfor all kind of Insurance Sales and Distribution.
 
The 3
rd
Open-House question : Why Indian Insurance Brokers / Agents are not ratedor ranked in terms of their Financials and Business strengths ?
As we discussed in past that Insurance distribution is a regulated and is a serious business,thus for sake of Customers, to weed out the Men from Boys, it will be good to have rankingdone for Insurance Intermediaries. At least this is an acceptable norm, in developedmarkets of USA / UK / Europe & Japan. I don’t see any challenges in publishing these dataas the Regulator (IRDA) has or can have all the records of business done by any Agency oran Insurance Broker.
I am done with my questions and would love to receive feedback on the same. So, lets get back to the main topic of discussion – Changing trends of Indian Insurance – A new perspective.
A. Indian Insurance from Customers’ perspective
Indian Insurance consumers are like Indian Voters, they are soft but when time is right andripe, they demand and seek necessary changes. De-tariff of many Insurance Products arethe reflection of changing aspirations and growing demand of Indian consumers.For historical years, Indian consumers were at receiving end. Insurance Product wasunderwritten and was practically forced onto consumers on a “Take-it-As-it-basis”. All thatgot changed with passage of IRDA act in 1999. New insurance companies have come intoexistence leading to open competition and hence better products for customers.Indian customers have become very sensitive to Coverage / Premium as well as the Products(read Risk Solution), that is given to them. There are not ready to accept any product, nomatter even if that is coming from the market leader, should that product is not serving thepurpose. A case in point is ULIP Product / Group Life and Credit Life in Life Insurancesegment and Travel / Family Floater Health and Liability Insurance in the Non-life segmentare new age Avatar. The new products are constantly being demanded by Indian consumers,which is putting huge pressures on Insurance companies (Read Risk Under-writers) andBrokers to respond.Customers are looking at Insurance for covering Pure Risk now which I have covered in mynext section. Another good reason why we are seeing quick changes in the buying behaviorof Insurance from mere Investment to risk mitigation is the cost of Replacement of Goods(ROG) or Cost of Services (COS). The case in point is Health Insurance. The cost of Medical/ Hospital and Doctors bills are rising in a meteoric manner y-o-y, thus an individual or acompany need to cover the composite risk sooner than later. Soon like Western World, young Indians will start aging and the Health and Medical Cost will be the highest cost theywould bear except perhaps the purchase of House / Flat or Condominium.
 
B. Indian Insurance from Underwriters perspective
Insurance companies in India are clearly divided into 2 part (again a British Legacy) – a) TheLife Insurance, covering the Life of an individual or group. Any thing that does not fall intothis category falls into b) Non-life Insurance. There is also a 3
rd
group or the so called agray area, where both Life and Non-life Insurance Companies compete now. It is HealthInsurance & Credit Insurance.Underwriters of Insurance companies have traditionally ruled the market beforeliberalization, since it was Seller’s Market. LIC for Life Insurance and 4 sisters from NonLife Companies (All Govt. owned) served the market for over 3 decades. It is amazing tosee, how much the Indian Insurance canvas has changed now. In flat 6 years of activeliberalization, we now have more than 30 Insurance Companies, competing and working hardover-time to garner, bigger share of growing USD 20.00 billion market. Interesting to see,that the lion share of the market is still with the past leader only i.e. Life InsuranceCorporation of India Ltd. (LIC). However, the private players viz. ICICI Prudential and BajajAllianz Life is catching in, with their double digits growth year-on-year in the Life segment.Their aggression in terms of better products & better distribution model (Bancassurance &Web) is giving them the desired results.In-contract to 100% growth in Life Insurance (reflection of growing disposable income ofgrowing middle-class of 50 million strong), Non-life insurance some how is growing onlyabout a 30% modest run-rate. Pertinent to point-out, however is that new players viz. Bajaj/ ICICI & Reliance have out maneuvered 4 sisters – Nation / Oriental / New and United interms of New Products / Annual Growth and Service Platform.I am sure you are aware that the Insurance penetration in India is perhaps the leastamongst developed countries and worst, we don’t rank good vis-à-vis developing countrieseither. One estimate suggests that Pakistan / China and Dubai has better Insurancepenetration Per Capita compared to India. There are many reasons for the same.Traditionally Insurance was bought and sold in India for Investment / Tax Saving purposesonly. Remember my opening statement – “Death / Illness and Fire comes to thy neighbor andnot me”. So, Insurance was never looked as a tool to conserve, preserve or create wealth. Itwas just an investment tool which was doubling for Tax deduction also. Thank God, all thatare changing fast now. The credit for changing mind-set goes to tireless education byinsurance companies coupled with effective campaign by IRDA. Insurance Companies,Brokers and IRDA have taken the challenge of explaining and educating Indian consumersabout the benefits of taking adequate Risk Covers, rather than depending upon a “Chance”that nothing will happen.Ignorance about Insurance, thus leading to “Self-Insurance” has come off Age, due tobrilliant sales and marketing efforts. Innovative & Price sensitive products are coming outevery day, addressing genuine insurance needs, hence we have seen a rapid rise in Insurancepenetration, in last couple of years, across the length & breath of India, which is indeed a
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mini244

thanx.......good project

reply04 / 17 / 2009
clouds9

hey !!! nice material good effort

reply08 / 04 / 2008
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