Professional Documents
Culture Documents
2009
TABLE OF CONTENTS
Executive Summary
2
Introduction
3
Methodology
5
Conclusion
8
Bibliography
EXECUTIVE SUMMARY
The project is about the study conducted on Indian General Insurance Industry,
It studies the current market how the insurance segment is booming in the last
few years.
How the market has chanced with the new private entrants, what are the major
The role played by Government in this industry. The marketing strategies used
The opportunities available with the company to progress and to overcome the
The future of this industry is very bright the short term scenario
For the general insurance sector appears to be challenging the long term
INTRODUCTION:
This project is about the study conducted on the general insurance industry.
This is the detailed study on how auto insurance industry sector functions,
What is the current market situation about of the auto insurance sector
How the companies are taking steps in order can overcome the challenges.
“To study the Indian general insurance industry particularly with the auto
improvement”.
improvement.
METHODOLOGY
the charts and table are done with the help of MS excel
software
RELIANCE MONEY
Reliance Money, a Reliance Capital company and part of the Reliance Anil
distribution channel with over 10,000 outlets and 20,000 touch points spread
across 5,165 cities/ towns; catering to the diverse needs of over 3 million existing
customers.
Mutual Funds, IPOs, Life and General Insurance products and Gold Coins.
Customers can also avail Loans, Credit Card, Money Transfer and Money
Changing services.
Reliance Capital is one of India's leading and fastest growing private sector
financial services companies, and ranks among the top 3 private sector financial
innovative products like India’s first Over-The-Counter health & home insurance
offices spread across 173 cities in 22 states, a wide distribution channel network,
24x7 customer service assistance and a full fledged website. It is also India’s first
• Health Insurance
• Motor Insurance
• Home Insurance
• Travel Insurance
• Accident Cover
WHAT IS INSURANCE?
We face a lot of risks in our daily lives. Some of these lead to financial losses.
felling of security and also keep saving intact for the future.
One of the main reasons one should insure is to protect one’s belongings and
assets against financial loss. When one has earned and accumulated property,
liabilities. That is, in case we should cause a loss to another person, that person
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2009
company.
1. Life Insurance
2. General Insurance
Insuring anything other than human life is called general insurance. Examples
are insuring property like house and belongings against fire and theft or vehicles
illness and surgery can also be insured. Your liabilities to others arising out of the
law can also be insured and is compulsory in some cases like motor third party
insurance.
Anyone who owns an asset can buy insurance to protect it against losses due to
fire or theft and so on. Each one of us can insure our and our dependents’ health
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KRUPANIDHI INSTITUTE OF MANAGEMENT EDUCATION
2009
and well being through hospitalization and personal accident policies. To buy a
policy the person should be the one who will bear financial losses if they occur.
Non-life insurance companies have products that cover property against Fire and
allied perils, flood storm and inundation, earthquake and so on. There are
products that cover property against burglary, theft etc. The non-life companies
also offer policies covering machinery against breakdown, there are policies that
Marine Cargo policy covers goods in transit including by sea, air and road.
Further, insurance of motor vehicles against damages and theft forms a major
Personal insurance covers include policies for Accident, Health etc. Products
offering Personal Accident cover are benefit policies. Health insurance covers
Party Administrators who have arrangements with various service providers, i.e.,
hospitals. The Third Party Administrators also provide service for reimbursement
Insurance of property, it is important that the cover is taken for the actual value
of the property to avoid being imposed a penalty should there be a claim. Where
a property is undervalued for the purposes of insurance, the insured will have to
Accident and health insurance policies are available for individuals as well as
credit cards or deposit holders in a bank etc. Normally when a group is covered,
Workmen’s Compensation Policy etc offer cover against legal liabilities that may
arise under the respective statutes— Motor Vehicles Act, The Workmen’s
Compensation Act etc. Some of the covers such as the foregoing (Motor Third
Insurance not compulsory by statute is also gaining popularity these days. Many
industries insure against Public liability. There are liability covers available for
Products as well.
There are general insurance products that are in the nature of package policies
offering a combination of the covers mentioned above. For instance, there are
package policies available for householders, shop keepers and also for
protect one’s property, which one might have acquired from one’s hard earned
income. A loss or damage to one’s property can leave one shattered. Losses
left many homeless and penniless. Such losses can be devastating but
insurance could help mitigate them. Property can be covered, so also the people
against Personal Accident. A Health Insurance policy can provide financial relief
protect their building, machinery, stocks etc. They need to cover their liabilities as
well. Financiers insist on insurance. So, most industries or businesses that are
financed by banks and other institutions do obtain covers. But are they obtaining
the right covers? And are they insuring adequately are questions that need to be
Most general insurance covers are annual contracts. However, there are few
HISTORY
CATEGORIES
1. Auto Insurance
2. Health Insurance
3. Marine Insurance
4. Fire Insurance
5. Others
offerings. Big changes have occurred over the last few years, during
which the sector was opened to private participation, along with foreign
India is the 5th largest market in Asia by premium, following Japan, Korea,
China and Taiwan. The country is geographically large and has the
world’s 2nd largest population -- 1.13 billion in 2007 – but it also has one
of the lowest penetration rates for property and casualty insurance in Asia
persist over the medium term on the back of greater penetration, due
have discounted their rates by 50% in order to retain or win market share.
engineering) has impacted the premium growth, but this is also leading to
the greater sales of existing and new products. With the regulator lifting
With the increasing number of insurers in the private sector. The industry
General Insurance Penetration 0.60% of GDP and the Gross Premium has
asset creation in the Indian industries. This along with rigorous cost cutting
measures in all businesses has directly impacted the general insurance (non-life)
underwritten in 2008-09, up only 9.10 per cent from Rs 28,051 crore in 2007-08.
This was the slowest growth in gross premium underwritten in the last five years.
The general insurance industry’s premium collection grew 22 per cent in 2006-07
The most important reason for the drop in business was that many small and
medium businesses either did not buy insurance covers, like fire insurance, or
went for lower cover to save on premium expenditure. Also the sharp drop in
sales of commercial vehicles, tractors and near stagnation in car sales led to a
Among the private players IFFCO-Tokio did the best with 22 per cent growth in
premium underwritten in 2008-09. Royal Sudaram, Bajaj Allianz are the other two
United India could manage to grow14 per cent, while the other three grew only
by single digit.
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One of the major milestones in the Indian general insurance industry has been
General insurance companies also made losses because abolition of tariffs has
led to a virtual price war in certain lines of business like Fire and Engineering
insurance. This is evident from the higher claims ratio in both, the fire and motor
segment as well as the higher underwriting losses posted by both the private as
On the whole, while short term scenario for the general insurance sector appears
for growth
MAJOR CHALLENGES
Awareness
It is the main problem faced by all the insurance company is lack of awareness
populations who are living in the rural areas and sub urban areas are not aware
of the about risk exposures and about insurance products available in the market
Affordability
In India majority of the population standard of living is low and majority of them
belong to middle class and lower class and they have very little money left after
major constrains
Accessibility
The policies are complex to understand by a layman the procedures are difficult
to obtain policies if done individual .there are a lot of activities and formalities
Majority of the population is not aware of the benefits that the insurance
company provides
And they are also not aware of the various schemes which these companies
introduce
PUBLIC SECTOR
Until 2000, the general insurance sector had only four public sector
They primarily focused on their immediate regions and there was little
PRIVATE SECTOR
The private sector has been steadily growing market share despite the
fact that public sector companies have been around for a lot longer. The
ICICI LOMBARD-
BAJAJ ALLIANCCE,
CHOLAMANDALAM ,
FUTURE GENERALI
corporate accounts.
the market share of the private sector is catching that of the public sector
and the two will likely converge over the medium term.
Before the removal of tariffs, fire, engineering and motor own damage
In terms of overall business, the focus has shifted towards the retail
Regional Focus
Public insurers have traditionally focused at the regional level with one
each in north, east, west and south India. On account of their public
charters and the absence of competitive pressures, these entities did not
have to actively market their products and just wrote whatever business
Operational Flexibility
impacted their ability to tailor and aggressively price products for large
corporations.
Client Servicing
The public insurers have also been hampered in claims servicing by their
process.
The situation is not the same with the private player as they enjoy more
Private players are not hindered by their charters or legacy systems and
On the other hand, public entities have only recently upgraded their
systems and have to grapple with transition issues, such as moving from
and fragmented databases, and have not fully used their past claim
de-tariffed environment
The private players, especially during their initial years, have selectively
targeted the more profitable lines of the public sector companies for
growth. They benefit from the experiences of the public sector as well as
allowed the private sector to set high standards for policyholder services,
because of the limited amount of third party motor business that they have
Most insurers now have tie-ups with the banks, which act as corporate
Lombard sources a major portion of its business from a tie-up with ICICI
second largest private player) has tie-ups with large number of banks,
At this time, low cost channels like tele-sales and the internet are still not
REGULATORY ENVIRONMENT
IRDA was set up with introduction of the IRDA Act in 1999. Its initial
are subject to rigorous scrutiny and the conduct of their business is closely
many insurers whose domestic partners are leaders in their chosen fields
The regulator has laid down investment guidelines that limit exposure in
certain class of assets and also sets threshold limits for some assets. At
securities, in contrast to some of the more mature markets like the US and
The guidelines also stipulate a minimum 10% investment in the social and
players, being in a growth phase, may require capital infusions from time
The Indian insurance regulator has set the minimum capital required at a
level to ensure that all insurers -- especially the start-ups -- have enough
funds to meet their claim obligations and to limit their overall writings to
the amounts supported by their capital bases. The need to manage capital
to comply with IRDA’s solvency margin will induce insurers to be more risk
and risk-based pricing, IRDA has enacted enabling legislation and issued
premium growth rates. In fact, the discounting has been so extreme that
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2009
discounts at 52.5%
phases:
aviation
However, the de-tariffing did not immediately allow for free pricing.
Instead, insurers were required to follow the “file and use” method,
whereby they were expected to file a charter of proposed rates, which was
The restrictions on price discounts during the initial periods were intended
The only segment that remains under a tariff regime is the third party
motor business, although there has been a large upward revision in this
claims ratios, has been moved to a common pool, resulting in loss share
OPPORTUNITIES AVAILABLE
products
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2009
• Allowing insurers to issue their own policy wordings and set their
needs
FUTURE PROSPECTS
• Huge market largely untapped especially in Rural & Urban regions can be
company can conduct mass campaign and educated the people more
about the products and also about the risk covered and the various
benefits which they can avail .The Company can use various medium to
Groups are setup who can be the major clients of this industry
2015.
• The Large part of growth is expected to come from come from retail and
rural sectors.
• More and more number of private players entering into this industry and
investment by them.
AUTO INSURANCE
compensated related to automobiles. The main criteria that the insured wants to
Under the provisions of the Motor Vehicles Act, it is mandatory that every vehicle
should have a valid Insurance to drive on the road. Any vehicle used for social,
domestic and pleasure purpose and for the insurer's business motor purpose
➢ Car-Insurance
➢ Commercial Insurance
“Motor Policy A -Act Only Risk” (also known as third party insurance)
Motor Policy A or Third party insurance covers unlimited pay compensation for
death or bodily injuries to third Parties and damage to the property of the third
parties other than insured, up to a limit. Under this policy the insured is treated as
the first party, the insuring company the second party and all others would be
third parties. This insurance protects the insured from legal liabilities following an
accident involving his/her vehicle. It does not cover any damage to his/her
vehicle.
1. Liability for death or injuries to third parties - this means that you are insured
other vehicles, and outsiders other than passengers, for unlimited amounts.
Passengers of private vehicles and pillion riders are also deemed covered.
2. Liability to employees connected with operation of the vehicle- this means you
are insured against death or injury (caused by your vehicle) to the vehicle's
the vehicle.
3. Liability to passengers carried in the vehicle for hire or reward - this means
that as owner of a taxi, bus or auto-rickshaw, you are insured against death or
Property damage covers the vehicle itself and you are insured against various
instances.
the insured vehicle itself by the way of accident, theft etc and some other
Policy because it covers insured, vehicle and third party with a single policy.
1. Accident
5. Earthquakes
7. Malicious acts
8. Terrorism
10. Also included is the towing charge (up to Rs.1, 500/- for private
premium the insurer has to obtain a cover note from the insurance company and
which is having the validity of 60 days only. Within this period the insurance
that effect.
PREMIUM
As per the Indian Motor Tariff, published by IRDA, all the vehicles are insured at
a fixed value called the Insured's Declared Value (IDV). IDV is based on the ex-
On every renewal of policy the IDV is calculated after deducting the prescribed
depreciation. One can extend the coverage for Personal Accident, accessories
Insuring Company to give some discounts of their own. But by the end of
calculation of IDV will take into account the gender of the owner and their age
also, along with the usual norms of calculation. From April 2007 onwards the
RENEWAL
Usually the Insurance policy is valid for one year. It becomes active soon after
the payment of premium is received by the insurance company and will end
exactly a year later. So the insured must renew the policy before the expiry date.
Any delay in the renewal will make the policy invalid. For every renewal a fresh
NO CLAIM BONUS
The Policy holders who have not made any claim in the previous years will be
reducing balance basis in the future years. If you are carrying forward a no-claim
bonus on any vehicle, you can get it transferred to a new vehicle of the same
type (four wheeler to four wheeler ). The only condition to avail of this discount is
that you have to sell off your old vehicle. Even if you wish to retain your old
vehicle, you can get around this clause by gifting the old vehicle to a family
member.
If you purchase a used vehicle, you can transfer the existing insurance policy to
your name. But, you must inform the insuring company within 2 weeks of
CLAIMING PROCEDURE
If an accident takes place, you must report to the insurance company as soon as
possible and submit the claim forms. An estimate for repairs /replacements
Claim form
After repair, a final bill of the repair and replacements and the stamped receipt
for payment from the work shop should be submitted to the company to settle
the claim. Only after the inspection of the repaired vehicle that you are allowed
to take the vehicle home. According to the rule of some companies, payment
be done either directly to the repairer in the form of a cheque or the companies
may recommend preferred auto shops for repair. In case of settlement of claim
either for total loss of the vehicle or for replacement of certain items, such
In case, a third party is involved in the accident, a case must be filed immediately with
the police and at the same time a report should also be sent to the insurance company.
If your vehicle has been stolen, file a police complaint and inform the insurer. If you
don't get your vehicle within 90 days, obtain a "non-traceable report’ from the police
In case, a third party is involved in the accident, a case must be filed immediately in the
police station and a report also should be sent to the insurance company at the same
Original estimate
RTO transfer papers duly signed, mentioning that the vehicle cannot be located
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directly.
VISION
Policy Objectives
This policy aims to promote integrated, phased, enduring and self-sustained
passenger cars and a key center for manufacturing Tractors and Two-
Ensure a balanced transition to open trade at a minimal risk to the Indian economy
international standards.
SIAM welcomed the announcement of Auto Policy, and feels that the policy
would serve as a reference document for all stake holders and other
interested parties.
The Auto Policy has spelt out the direction of growth for the auto sector in India and
Impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to
Emphasis on low emission fuel auto technologies and availability of appropriate auto
unorganised sector also to 16% excise duty on body building activity as in case of
OEMs
The policy has rightly recognised the need for modernising the parc profile of vehicles
to arrest degradation of air quality. The terminal life policy for commercial vehicles and
move toward international taxing policies linked to age of vehicles, are steps in
right direction.
SIAM has always been advocating encouragement of value addition within the
country against mere trading activity. However, this aspect has not been fully
addressed. The Auto Policy allows automatic approval for foreign equity investment
upto 100% in the automotive sector and does not lay down any minimum investment
criteria.
The recommendation of promoting passenger cars of length upto 3.8 meters through
excise benefits is not in line with the free market concept and may lead to market
distortion.
However, with the Auto Policy in place, the automotive industry would get further
fillig to become vibrant and globally competitive. The industry would get the required
CHALLENGES
portfolios to generate sufficient income and gains for net profits would subject
viable or available
insurers are not readily available as none of India’s insurers are directly listed
on stock exchanges
The major part of the revenue earned by general insurance is from auto
insurance sector
Indian economy is the 12thlargest in the world, with a GDP of $1.25 trillion
With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves,
Most auto insurance companies in India have comprehensive policies to help their
customers. Some of them have also tied up with top automobile manufacturers
Auto insurance has started special services like 24/7 service by phone and provides
online assistance on all days, including national holidays. Check instant updates
Auto Insurance is one major sector which has been on a continuous growth
The huge population and growing per capita income besides several
other driving factors, has created huge opportunity for the auto insurance
With the entry of private sector players backed by foreign expertise, Indian
Auto insurance market has become more vibrant. Competition in this market is
Due continuous competition companies are making effort to lure the customers with
technology extensively
PUBLIC SECTOR
PRIVATE SECTOR
HDFC Insurance
OPPORTUNITIES
Rising per capita incomes among the strong middle class, and spreading
affluence
New players entering into this sector along with FDI investment in this sector.
FUTURE PROSPECTS
Increase in standard of living, literacy, and insurance awareness throws open huge
opportunities on insurance.
More and more number of private players entering into this industry and along with
FINDINGS
The Indian insurance sector is rapidly growing for last few years.
Big changes have occurred over the last few years, during which the sector
It also has one of the lowest penetration rates for property and casualty
engineering) has impacted the premium growth, but this is also leading to the
With the increasing number of insurers in the private sector. The industry
Majority of the revenue is earned by the motor vehicle segment of the general
insurance
SUGGESTIONS
• Create awareness among the people of the various insurance products available
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in the market
• Capture the untapped population residing in the rural and sub urban parts of the
country
Strategies
• The company should hire more agents with more knowledge about the
• The company can have an effective Bancassurance /NBFC tie ups so that the
products
• The insurance policies should be simple & less legalistic, with reasonable price,
hassle free policy issuance and claim process more package policies
CONCLUSION
premium rates would occur when the industry matures and consolidation takes place.
The ability to price effectively will also imply an increased focus on risk management
The continual entry of new private players coupled with the intense competition sparked
off by the detariffication of general insurance sector has also resulted in strengthening
the bargaining power of the customer and development of customer centric insurance
products.
On the whole, while short term scenario for the general insurance sector appears to be
challenging the long term prospects definitely present ample opportunities for growth.
While the government’s plan to raise FDI cap in insurance companies from 26 to 49 per
cent will lead to more capital flowing in, the untapped market potential holds the
BIBLIOGRAPHY
www.IRDA,com
www.generalinsuranceindia .com
www.reliancegeral.co.in