EXECUTIVE SUMMARY OF INSURANCE

Insurance sector in India is one of the booming sectors of the economy and is
growing at the rate of 15-20 per cent annum. Together with banking services, it
contributes to about per cent to the country!s "#$. Insurance is a federa% sub&ect in
India and Insurance industry in India is governed by Insurance 'ct, 1()*, the +ife
Insurance ,orporation 'ct, 1(5- and "enera% Insurance .usiness /0ationa%isation1
'ct, 1(2, Insurance 2egu%atory and #eve%opment 'uthority /I2#'1 'ct, 1((( and
other re%ated 'cts.
The origin of %ife insurance in India can be traced back to 1*1* with the
estab%ishment of the 3rienta% +ife Insurance ,ompany in ,a%cutta. It was conceived
as a means to provide for 4ng%ish 5idows. In those days a higher premium was
charged for Indian %ives than the non-Indian %ives as Indian %ives were considered
riskier for coverage. The .ombay 6utua% +ife Insurance 7ociety that started its
business in 1*0 was the first company to charge same premium for both Indian and
non-Indian %ives. In 1(12, insurance regu%ation forma%%y began with the passing of
+ife Insurance ,ompanies 'ct and the $rovident 8und 'ct.
.y 1()*, there were 1- insurance companies in India. .ut a number of frauds
during 1(20s and 1()0s tainted the image of insurance industry in India. In 1()*, the
first comprehensive %egis%ation regarding insurance was introduced with the passing
of Insurance 'ct of 1()* that provided strict 7tate ,ontro% over insurance business.
Insurance sector in India grew at a faster pace after independence. In 1(5-,
"overnment of India brought together 295 Indian and foreign insurers and provident
societies under one nationa%ised monopo%y corporation and formed +ife Insurance
,orporation /+I,1 by an 'ct of $ar%iament, vi:. +I, 'ct, 1(5-, with a capita%
contribution of 2s.5 crore.
The /non-%ife1 insurance business;genera% insurance remained with the private
sector ti%% 1(2. There were 10 private companies invo%ved in the business of genera%
operations and their operations were restricted to organised trade and industry in %arge
cities.
The "enera% Insurance .usiness /0ationa%isation1 'ct, 1(2 nationa%ised the
genera% insurance business in India with effect from <anuary 1, 1(). The 10 private
1
insurance companies were ama%gamated and grouped into four companies= 0ationa%
Insurance ,ompany, 0ew India 'ssurance ,ompany, 3rienta% Insurance ,ompany
and >nited India Insurance ,ompany. These were subsidiaries of the "enera%
Insurance ,ompany /"I,1.
In 1((), the first step towards insurance sector reforms was initiated with the
formation of 6a%hotra ,ommittee, headed by former 8inance 7ecretary and 2.I
"overnor 2.0. 6a%hotra. The committee was formed to eva%uate the Indian insurance
industry and recommend its future direction with the ob&ective of comp%ementing the
reforms initiated in the financia% sector.
2
INTRODUCTION OF INSURANCE INDUSTRY
Insurance in India can be traced back to the ?edas. 8or instance, yogakshema,
the name of +ife Insurance ,orporation of India!s corporate head@uarters, is derived
from the 2ig ?eda. The term suggests that a form of Acommunity insuranceA was
preva%ent around 1000 ., and practiced by the 'ryans.
.uria% societies of the kind found in ancient 2ome were formed in the
.uddhist period to he%p fami%ies bui%d houses, protect widows and chi%dren. .ombay
6utua% 'ssurance 7ociety, the first Indian %ife assurance society, was formed in 1*0.
3ther companies %ike 3rienta%, .harat and 4mpire of India were a%so set up in the
1*0-(0s. It was during the swadeshi movement in the ear%y 20th century that
insurance witnessed a big boom in India with severa% more companies being set up.
's these companies grew, the government began to eBercise contro% on them.
The Insurance 'ct was passed in 1(12, fo%%owed by a detai%ed and amended Insurance
'ct of 1()* that %ooked into investments, eBpenditure and management of these
companies! funds.
.y the mid-1(50s, there were around 10 insurance companies and *0
provident fund societies in the country!s %ife insurance scene. Cowever, in the absence
of regu%atory systems, scams and irregu%arities were a%most a way of %ife at most of
these companies. 's a resu%t, the government decided nationa%i:es the %ife assurance
business in India. The +ife Insurance ,orporation of India was set up in 1(5- to take
over around 250 %ife companies.
)
Industry Structure
Insurance Companies
I2#' has so far granted registration to 12 private %ife insurance companies
and ( genera% insurance companies. If the eBisting pub%ic sector insurance companies
are inc%uded, there are current%y 1) insurance companies in the %ife side and 1)
companies operating in genera% insurance business. "enera% Insurance ,orporation
has been approved as the AIndian reinsurerA for underwriting on%y reinsurance
business. $articu%ars of the %ife insurance companies and genera% insurance companies
inc%uding their web address is given be%ow=
9
!IFE INSURERS "e#sites
$u#%ic Sector
+ife Insurance ,orporation of India www.%icindia.com
$ri&ate Sector
'%%ian: .a&a& +ife Insurance ,ompany +imited www.a%%ian:ba&a&.co.in
.ir%a 7un-+ife Insurance ,ompany +imited www.bir%asun%ife.com
C#8, 7tandard +ife Insurance ,o. +imited www.hdfcinsurance.com
I,I,I $rudentia% +ife Insurance ,o. +imited www.icicipru%ife.com
I0" ?ysya +ife Insurance ,ompany +imited www.ingvysaya%ife.com
6aB 0ew Dork +ife Insurance ,o. +imited www.maBnewyork%ife.com
6et+ife Insurance ,ompany +imited www.met%ife.com
3m Eotak 6ahindra +ife Insurance ,o. +td. www.omkotakmahnidra.com
7.I +ife Insurance ,ompany +imited www.sbi%ife.co.in
T'T' 'I" +ife Insurance ,ompany +imited www.tata-aig.com
'6$ 7anmar 'ssurance ,ompany +imited www.ampsanmar.com
#abur ,"> +ife Insurance ,o. $vt. +imited www.avivaindia.com
5
'ENERA! INSURERS
$u#%ic Sector
0ationa% Insurance ,ompany +imited www.nationa%insuranceindia.com
0ew India 'ssurance ,ompany +imited www.niac%.com
3rienta% Insurance ,ompany +imited www.orienta%insurance.nic.in
>nited India Insurance ,ompany +imited www.uiic.co.in
$ri&ate Sector
.a&a& '%%ian: "enera% Insurance ,o. +imited www.ba&a&a%%ian:.co.in
I,I,I +ombard "enera% Insurance ,o. +td. www.icici%ombard.com
I88,3-Tokio "enera% Insurance ,o. +td. www.itgi.co.in
2e%iance "enera% Insurance ,o. +imited www.ri%.com
2oya% 7undaram '%%iance Insurance ,o. +td. www.roya%sun.com
T'T' 'I" "enera% Insurance ,o. +imited www.tata-aig.com
,ho%amanda%am "enera% Insurance ,o. +td. www.cho%ainsurance.com
4Bport ,redit "uarantee ,orporation www.ecgcindia.com
C#8, ,hubb "enera% Insurance ,o. +td.
REINSURER
"enera% Insurance ,orporation of India www.gicindia.com
(AC)'ROUND OF INSURANCE INDUSTRY
In India, insurance has a deep-rooted history. It finds mention in the writings
of 6anu / Manusmrithi 1, Dagnava%kya / Dharmasastra 1 and Eauti%ya / Arthasastra 1.
The writings ta%k in terms of poo%ing of resources that cou%d be re-distributed in times
-
of ca%amities such as fire, f%oods, epidemics and famine. This was probab%y a pre-
cursor to modern day insurance. 'ncient Indian history has preserved the ear%iest
traces of insurance in the form of marine trade %oans and carriersF contracts. Insurance
in India has evo%ved over time heavi%y drawing from other countries, 4ng%and in
particu%ar.
1*1* saw the ad&ent o* %i*e insurance #usiness in India with the
estab%ishment of the 3rienta% +ife Insurance ,ompany in ,a%cutta. This ,ompany
however fai%ed in 1*)9. In 1*2(, the 6adras 4@uitab%e had begun transacting %ife
insurance business in the 6adras $residency. 1*0 saw the enactment of the .ritish
Insurance 'ct and in the %ast three decades of the nineteenth century, the .ombay
6utua% /1*11, 3rienta% /1*91 and 4mpire of India /1*(1 were started in the
.ombay 2esidency. This era, however, was dominated by foreign insurance offices
which did good business in India, name%y '%bert +ife 'ssurance, 2oya% Insurance,
+iverpoo% and +ondon "%obe Insurance and the Indian offices were up for hard
competition from the foreign companies.
In 1(19, the "overnment of India started pub%ishing returns of Insurance
,ompanies in India. The Indian +ife 'ssurance ,ompanies 'ct, 1(12 was the first
statutory measure to regu%ate %ife business. In 1(2*, the Indian Insurance ,ompanies
'ct was enacted to enab%e the "overnment to co%%ect statistica% information about both
%ife and non-%ife business transacted in India by Indian and foreign insurers inc%uding
provident insurance societies. In 1()*, with a view to protecting the interest of the
Insurance pub%ic, the ear%ier %egis%ation was conso%idated and amended by the
Insurance 'ct, 1()* with comprehensive provisions for effective contro% over the
activities of insurers.
The Insurance 'mendment 'ct of 1(50 abo%ished $rincipa% 'gencies.
Cowever, there were a %arge number of insurance companies and the %eve% of
competition was high. There were a%so a%%egations of unfair trade practices. The
"overnment of India, therefore, decided to nationa%i:e insurance business.
'n 3rdinance was issued on 1(th <anuary, 1(5- nationa%ising the +ife
Insurance sector and +ife Insurance ,orporation came into eBistence in the same year.
The +I, absorbed 159 Indian, 1- non-Indian insurers as a%so 5 provident societiesG
295 Indian and foreign insurers in a%%. The +I, had monopo%y ti%% the %ate (0s when
the Insurance sector was reopened to the private sector.
The +istory o* ,enera% insurance dates back to the Industria% 2evo%ution in
the west and the conse@uent growth of sea-faring trade and commerce in the 1th

century. It came to India as a %egacy of .ritish occupation. "enera% Insurance in India

has its roots in the estab%ishment of Triton Insurance ,ompany +td., in the year 1*50
in ,a%cutta by the .ritish. In 1(0, the Indian 6ercanti%e Insurance +td, was set up.
This was the first company to transact a%% c%asses of genera% insurance business. 1(5
saw the formation of the "enera% Insurance ,ounci%, a wing of the Insurance
'ssociaton of India. The "enera% Insurance ,ounci% framed a code of conduct for
ensuring fair conduct and sound business practices.
In 1(-*, the Insurance 'ct was amended to regu%ate investments and set
minimum so%vency margins. The Tariff 'dvisory ,ommittee was a%so set up then.
In 1(2 with the passing of the "enera% Insurance .usiness /0ationa%isation1
'ct, genera% insurance business was nationa%i:ed with effect from 1st <anuary,
1(). 10 insurers were ama%gamated and grouped into four companies, name%y
0ationa% Insurance ,ompany +td., the 0ew India 'ssurance ,ompany +td., the
3rienta% Insurance ,ompany +td and the >nited India Insurance ,ompany +td. The
"enera% Insurance ,orporation of India was incorporated as a company in 1(1 and it
commence business on <anuary 1sst 1().
This mi%%ennium has seen insurance come a fu%% circ%e in a &ourney eBtending
to near%y 200 years. The process of re-openin, o* t+e sector had begun in the ear%y
1((0s and the %ast decade and more has seen it been opened up substantia%%y. In 1((),
the "overnment set up a committee under the chairmanship of 20 6a%hotra, former
"overnor of 2.I, to propose recommendations for reforms in the insurance sector.
The ob&ective was to comp%ement the reforms initiated in the financia% sector. The
committee submitted its report in 1((9 wherein, among other things, it recommended
that the private sector be permitted to enter the insurance industry. They stated that
foreign companies be a%%owed to enter by f%oating Indian companies, preferab%y a
&oint venture with Indian partners.
A #rie* +istory o* t+e Insurance sector
The business of %ife insurance in India in its eBisting form started in India in
the year 1*1* with the estab%ishment of the 3rienta% +ife Insurance ,ompany in
,a%cutta.
Some o* t+e important mi%estones in t+e %i*e insurance #usiness in India are
1(12= The Indian +ife 'ssurance ,ompanies 'ct enacted as the first statute to
regu%ate the %ife insurance business.
*
1(2*= The Indian Insurance ,ompanies 'ct enacted to enab%e the government
to co%%ect statistica% information about both %ife and non-%ife insurance
businesses.
1()*= 4ar%ier %egis%ation conso%idated and amended to by the Insurance 'ct
with the ob&ective of protecting the interests of the insuring pub%ic.
1(5-= 295 Indian and foreign insurers and provident societies taken over by
the centra% government and nationa%ised. +I, formed by an 'ct of $ar%iament,
vi:. +I, 'ct, 1(5-, with a capita% contribution of 2s. 5 crore from the
"overnment of India.
The "enera% insurance business in India, on the other hand, can trace its roots
to the Triton Insurance ,ompany +td., the first genera% insurance company estab%ished
in the year 1*50 in ,a%cutta by the .ritish.
7ome of the important mi%estones in the genera% insurance business in
India are=
1(0= The Indian 6ercanti%e Insurance +td. set up, the first company to
transact a%% c%asses of genera% insurance business.
1(5= "enera% Insurance ,ounci%, a wing of the Insurance 'ssociation of
India, frames a code of conduct for ensuring fair conduct and sound business
practices.
1(-*= The Insurance 'ct amended to regu%ate investments and set minimum
so%vency margins and the Tariff 'dvisory ,ommittee set up.
1(2= The "enera% Insurance .usiness /0ationa%isation1 'ct, 1(2
nationa%ised the genera% insurance business in India with effect from 1st
<anuary 1().
10 insurers ama%gamated and grouped into four companies vi:. the 0ationa%
Insurance ,ompany +td., the 0ew India 'ssurance ,ompany +td., the
3rienta% Insurance ,ompany +td. and the >nited India Insurance ,ompany
+td. "I, incorporated as a company.
(
$RESENT SCENARIO OF INSURANCE INDUSTRY
India with about 200 mi%%ion midd%e c%ass househo%d shows a huge untapped
potentia% for p%ayers in the insurance industry. 7aturation of markets in many
deve%oped economies has made the Indian market even more attractive for g%oba%
insurance ma&ors. The insurance sector in India has come to a position of very high
potentia% and competitiveness in the market. Indians, have a%ways seen %ife insurance
as a taB saving device, are now sudden%y turning to the private sector that are
providing them new products and variety for their choice.
,onsumers remain the most important centre of the insurance sector. 'fter the
entry of the foreign p%ayers the industry is seeing a %ot of competition and thus
improvement of the customer service in the industry. ,omputerisation of operations
and updating of techno%ogy has become imperative in the current scenario. 8oreign
p%ayers are bringing in internationa% best practices in service through use of %atest
techno%ogies
The insurance agents sti%% remain the main source through which insurance
products are so%d. The concept is very we%% estab%ished in the country %ike India but
sti%% the increasing use of other sources is imperative. 't present the distribution
channe%s that are avai%ab%e in the market are %isted be%ow.
#irect se%%ing
,orporate agents
"roup se%%ing
.rokers and cooperative societies
.ancassurance
,ustomers have tremendous choice from a %arge variety of products from pure
term /risk1 insurance to unit-%inked investment products. ,ustomers are offered
unbund%ed products with a variety of benefits as riders from which they can choose.
6ore customers are buying products and services based on their true needs and not
&ust traditiona% moneyback po%icies, which is not considered very appropriate for %ong-
term protection and savings. There is %ots of saving and investment p%ans in the
10
market. Cowever, there are sti%% some key new products yet to be introduced - e.g.
hea%th products.
The rura% consumer is now eBhibiting an increasing propensity for insurance
products. ' research conducted eBhibited that the rura% consumers are wi%%ing to do%e
out anything between 2s.),500 and 2s.2,(00 as premium each year. In the insurance
the awareness %eve% for %ife insurance is the highest in rura% India, but the consumers
are a%so aware about motor, accidents and catt%e insurance. In a study conducted by
6'2T the resu%ts showed that near%y one third said that they had purchased some
kind of insurance with the maBimum penetration skewed in favor of %ife insurance.
The study a%so pointed out the private companies have huge task to p%ay in creating
awareness and credibi%ity among the rura% popu%ace. The perceived benefits of buying
a %ife po%icy range from security of income bu%k return in future, daughter!s marriage,
chi%dren!s education and good return on savings, in that order, the study adds.
11
FEATURES OF INSURANCE INDUSTRY
Insurance $o%icy India provides the c%ients with the detai%s re@uired for the
coverages in the po%icy, date of commencement of the po%icy and their adopting
organi:ations. It p%ays a important ro%e in the Indian insurance sector.
The Insurance $o%icy India is regu%ated by certain acts %ike the Insurance 'ct /1()*1,
the +ife Insurance ,orporation 'ct/1(5-1, "enera% Insurance .usiness
0ationa%i:ation1 'ct/1(21, Insurance 2egu%atory and #eve%opment 'uthority I2#'1
'ct/1(((1. The insurance po%icy determines the covers against risks, sometime opens
investment options with insurance companies setting high returns and a%so informs
about the taB benefits %ike the +I, in India. There are two types of insurance covers=
1. +ife insurance
2. "enera% insurance
!i*e insurance H this sector dea%s with the risks and the accidents affecting the %ife of
the customer. '%ongside, this insurance po%icy a%so offers taB p%anning and investment
returns. There are various types of %ife Insurance $o%icy India=
a. 4ndowment $o%icy
b. 5ho%e +ife $o%icy
c. Term +ife $o%icy
d. 6oney-back $o%icy
e. <oint +ife $o%icy
f. "roup Insurance $o%icy
'enera% Insurance H this sector covers a%most everything re%ated to property, vehic%e,
cash, househo%d goods, hea%th and a%so one!s %iabi%ity towards others. The ma&or
segments covered under genera% Insurance $o%icy India are=
a. Come Insurance
b. Cea%th Insurance
c. 6otor Insurance
d. Trave% Insurance
12
Some o* t+e .e%% /no.n Insurance $o%icy India are
Socia% Security 'roup Sc+eme 0 a scheme covering the age group of 1*--0 years
and an insurance of 2s.5000 for natura% death and of 2s.25000 on due to accidenta%
death.
S+i/s+a Sa+yo, Yo1ana 0 a scheme providing an educationa% scho%arship of 2s.)00
per @uarter per chi%d is given for a period of four years.
2an Aro,ya (ima $o%icy 0 a scheme for the adu%ts upto the age of 95 years is 2s. 0
and for chi%dren it is 2s. 50. The %imit coverage is fiBed at 2s.5000 per annum.
Medic%aim Insurance $o%icy 0 a scheme covering the age group from 5-*0 years
with a taB benefit of up to 2s 10,000.
2ana S+ree (ima Yo1ana 0 this is a coverage of 2s 2,000 on natura% death and 2s
50,000 for accidenta% death. The premium amount is fiBed at 2s. 200 for sing%e
member.
Vides+ Yatra Mitra $o%icy 0 a scheme covering medica% eBpenses during the period
of overseas trave%.
(+a,ya S+ree C+i%d "e%*are (ima Yo1ana 0 a scheme covering one gir% chi%d in a
fami%y upto the age of 1* whose parents age does not eBceed -0 years, with a
premium of 2s.15 per annum.
Ra1 Ra1es+.ari Ma+i%a )a%yan Yo1ana 0 a scheme providing protection to woman
in the age group of 10 to 5 years with an insurance of 2s. 25,000 and premium 2s.15
per annum.
As+ray (ima Yo1ana 0 a scheme covering workers in case of %oss of &obs.
$ersona% 'ccident Insurance 7cheme for Eissan ,redit ,ard H a scheme covering a%%
the E,, ho%ders up to an age of 0 years. Insurance coverage inc%udes 50,000 for
accidenta% death and 25,000 for partia% disabi%ity.
T+e *unctions o* Insurance can #e #i*urcated into t.o parts
1. $rimary 8unctions
2. 7econdary 8unctions
). 3ther 8unctions
1)
T+e primary *unctions o* insurance inc%ude t+e *o%%o.in,
$ro&ide $rotection - The primary function of insurance is to provide protection
against future risk, accidents and uncertainty. Insurance cannot check the happening
of the risk, but can certain%y provide for the %osses of risk. Insurance is actua%%y a
protection against economic %oss, by sharing the risk with others.
Co%%ecti&e #earin, o* ris/ - Insurance is a device to share the financia% %oss of few
among many others. Insurance is a mean by which few %osses are shared among %arger
number of peop%e. '%% the insured contribute the premiums towards a fund and out of
which the persons eBposed to a particu%ar risk is paid.
Assessment o* ris/ - Insurance determines the probab%e vo%ume of risk by eva%uating
various factors that give rise to risk. 2isk is the basis for determining the premium
rate a%so.
$ro&ide Certainty - Insurance is a device, which he%ps to change from uncertainty to
certainty. Insurance is device whereby the uncertain risks may be made more certain.
T+e secondary *unctions o* insurance inc%ude t+e *o%%o.in,
$re&ention o* !osses - Insurance cautions individua%s and businessmen to adopt
suitab%e device to prevent unfortunate conse@uences of risk by observing safety
instructionsI insta%%ation of automatic spark%er or a%arm systems, etc. $revention of
%osses cause %esser payment to the assured by the insurer and this wi%% encourage for
more savings by way of premium. 2educed rate of premiums stimu%ate for more
business and better protection to the insured.
Sma%% capita% to co&er %ar,er ris/s - Insurance re%ieves the businessmen from
security investments, by paying sma%% amount of premium against %arger risks and
uncertainty.
Contri#utes to.ards t+e de&e%opment o* %ar,er industries - Insurance provides
deve%opment opportunity to those %arger industries having more risks in their setting
up. 4ven the financia% institutions may be prepared to give credit to sick industria%
units which have insured their assets inc%uding p%ant and machinery.
T+e ot+er *unctions o* insurance inc%ude t+e *o%%o.in,
Means o* sa&in,s and in&estment - Insurance serves as savings and investment,
insurance is a compu%sory way of savings and it restricts the unnecessary eBpenses by
19
the insured!s 8or the purpose of avai%ing income-taB eBemptions a%so, peop%e invest in
insurance.
Source o* earnin, *orei,n e3c+an,e - Insurance is an internationa% business. The
country can earn foreign eBchange by way of issue of marine insurance po%icies and
various other ways.
Ris/ Free trade - Insurance promotes eBports insurance, which makes the foreign
trade risk free with the he%p of different types of po%icies under marine insurance
cover.
15
DEMAND DRIVERS
(e*ore Independence
The insurance industry originated in India in the year 1*1* with the formation
of +ife Insurance ,orporation in ,a%cutta. The idea behind starting +I, was to
provide insurance coverage for 4ng%ish widows and different premium was charged
for the 4ng%ish and for the Indians. In 1*0 .ombay 6utua% +ife Insurance 7ociety
estab%ished its Insurance business and the same premium was charged for both Indians
and 4ng%ish. In 1(12 the Insurance sector came under the purview of regu%ations
when the government passed the +ife Insurance ,ompanies 'ct. .ut it was in the year
1()* when the government came up with the first %egis%ation to bring the insurance
sector under state contro%.
$ost Independence
In 1(5-, the "overnment of India nationa%i:ed insurance companies bringing
Indian Insurance sector under the purview of the "overnment. These state owned
Insurance companies became high%y inefficient and bureaucratic, had eBcess
manpower and count%ess de%ay in sett%ement of c%aims but the nation did not have an
a%ternative. 'ny effort by the government to privati:e the industry met with stiff
resistance from the trade unions.
$ost !i#era%i4ation $o%icies re,ardin, Insurance
>nder the recommendation of 6a%hotra ,ommittee the Insurance 2egu%atory
'nd #eve%opment 'uthority was set up to monitor and contro% the Insurance industry
7ome of the initiatives taken by the government after Insurance sector reforms are=
"overnment to have not more than 50 per cent stake in insurance companies.
Insurance sector to be opened up for private companies and any number of
insurance enterprises can operate.
$rivate p%ayers with minimum paid up capita% of 2s.1 bi%%ion shou%d be given
opportunity to do business.
8oreign companies can enter Indian market through &oint ventures with Indian
companies.
1-
The state contro%%ed Insurance companies %ike +I, and "I, faced stiff
competition from private insurance companies post reforms. The monopo%y of the
nationa% Insurance companies came to an end. The private Insurance companies were
ab%e to eBp%oit the shortcomings in the state run Insurance companies. The private
insurance companies %aunched a variety of new insurance products %ike hea%th care,
pension p%ans, annuity p%ans, income protection, market %inked products which were
we%comed by the end customers. The business for the private sector boomed in both
urban and rura% sector a%ike.
FDI $o%icy Re,ardin, Insurance Sector
TC4 8inance 6inister, whi%e presenting the first .udget of the >$'
government, has proposed to raise the 8#I cap in three sectors. 4%aborating upon the
decision he said, JThe 0,6$ dec%ares that 8#I wi%% continue to be encouraged and
active%y sought, particu%ar%y in areas of infrastructure, high techno%ogy and eBports.
Three sectors of the economy fu%%y meet this description. They are
te%ecommunications, civi% aviation and insurance.K The specific proposa% for the
insurance sector is to raise the 8#I cap from 2- to 9( per cent. 5e argue be%ow that
this move is un&ustifiab%e on severa% grounds.
(odies t+at re,u%ate t+e sector
8or better regu%ation purpose of the insurance sector the government has
estab%ished fo%%owing bodiesI
1. I2'= Insurance 2egu%atory 'uthority.
2. I2#'= Insurance 2egu%atory and #eve%opment 'uthority.
). T',= Tariff 'dvisory ,ommittee.
1. IRA INSURANCE RE'U!ATORY AUT5ORITY=
The I2', under the chairmanship of 2angachary, was set-up in <anuary 1((-.
The I2' .i%% has to be passed by par%iament to make the I2' a statutory body.
,omprehensive %egis%ation aimed at reviewing the insurance 'ct of 1()* and
repea%ing the %ife insurance corporation 'ct of 1(5- have to be passed.
The I2' is a%so preparing an interna% rating system to screen a%% app%ications,
as entry wi%% be in phases. The &oint venture status of %ife insurance companies /with
1
ma&ority ho%ding of the domestic partner1 is %ike%y to be approved by the par%iament.
,onsensus a%so seems to be emerging on the minimum of 2s.1 bn capita% stipu%ations
for new insurance companies.
The I2' has stipu%ated a minimum rura% presence for a%% companies. The
eBhaustive guide%ines have been issued for the appointment of intermediaries
/brokers, agents, surveyors and actuaries1.
Feature o* IRA
1. The .i%% a%%owed for up to 2-L foreign e@uity participation in the insurance
sector.
2. The current India monopo%y companies were re@uired to bring down their
e@uity ho%ding to 2-L within a period of 10 years.
'o&ernment pronouncement
1. I2' wi%% be so%e 'uthority, which wi%% be responsib%e for awarding of, %icenses
i.e. %itt%e or no government or po%itica% interference in %icensing process.
2. 0o restriction on the number of %icenses.
). 0o composite %icense for %ife insurance business.
9. +icensing to be on%y on nationa% basis /no city by city approach1
5. I2' a%%owed for up to 2-L foreign e@uity participation in the %ife insurance
sector.
-. The current Indian monopo%ies companies are re@uired to bring down their
e@uity ho%ding to 2-L within a period of 10 years.
IRA proposa%s
1. 0ew p%ayer shou%d start their business within 15-1* months.
2. Trafficking of %icenses not to be permitted.
). I2' to seek business p%an with 5-year protection for a%% app%icants.
9. ' system of direct brokers to be introduced.
5. I2' to vet top management appointments.

1*
2. IRDA INSURANCE RE'U!ATORY AND DEVE!O$MENT
AUT5ORITY-
The Insurance 2egu%atory and #eve%opment 'uthority, constituted under the
I2#' 'ct, 1(((, provide for the estab%ishment of an authority to protect the interest
po%icyho%ders, to regu%ate, promote and ensure order%y growth of the %ife insurance
industry.
(usiness Re6uirement-
' company wi%% not be issued a %icense un%ess the I2#' is satisfied with the
sound financia% condition, the genera% character of management, the vo%ume of
business, the capita% structure, earning prospects for the insurers and that the interests
of the genera% pub%ic wi%% be served if registration is granted to the insurer.
8oreign insurance companies have been a%%owed to have a maBimum 2-L
share ho%ding. 0o %ife insurance company can be registered under the 'ct un%ess they
have a paid up capita% of 2s.100 crores. 4very %ife insurer sha%% deposit with the
reserve bank of India one percent of the tota% gross premium written in India in any
financia% year, not eBceeding 2s.10 crores.
This amount wou%d not be susceptib%e to any assignment or charge nor wou%d
it be avai%ab%e for the discharge of any %iabi%ities other than %iabi%ities arising out of
po%icies issued, so %ong as any such %iabi%ities remain undercharged.
In&estment o* Assets-
4very insurer is re@uired to invest, and keep invested, assets e@uiva%ent to not
%ess than the net %iabi%ities as fo%%ows=
a. 25 L in government securities,
b. a %east 25L of the said sum in government securities or other approved
securities and
c. the ba%ance in any approved investment rated as Jvery stronK or more by
reputed rating agencies, which inc%ude various debt instruments on which
dividend on its ordinary shared for the five years immediate%y preceding or for
at %east five out of the siB or seven years immediate%y preceding have been
1(
paid and which have priority in payment over ordinary shares of the company
in winding up.
The I2#' may in the interest of the po%icyho%derFs directions re%ation the
time, manner and other conditions and investments of assets to be he%d by an insurer.
The I2#' may a%so direct the insurer to rea%i:e the investment, if it sees the
investments to be unsuitab%e or undesirab%e. The 'ct prohibits an insurer from direct%y
or indirect%y investing po%icyho%der funds outside India.
8urther, every insurer has to a%ways maintain an eBcess of the va%ue of his
assets over the amount of his %iabi%ities of not %ess than 2s. 50 crores in the case of an
insurer carrying of %ife insurance business. If at any time an insurer does not maintain
the re@uired so%vency margin, he is re@uired to submit a financia% p%an, as per
directions issued by the I2#', indicating a p%an of action to correct the deficiency
within three months.
In order to ensure that the company does not risk the money of the
po%icyho%derFs, the 'ct provides that an insurer who does not comp%y with the
aforesaid provisions may be deemed to be inso%vent and may be wou%d up by the
court.
Insurers are re@uired to get an actuary to investigate the financia% conditions of
the %ife insurance business inc%uding a va%uation of %iabi%ities every year in order to
ensure continua% comp%iance
In order to maintain transparency in its dea%ings, insurers wou%d have to keep
separate account re%ating to funds of shareho%ders and po%icyho%ders.
78 TARIFF ADVISORY COMMITTEE
The tariff advisory committee estab%ished under the 'ct is empowered to
contro% and regu%ate the rates, terms, and etc. that may be offered by insurers in
respect of any risk or of any category of risks. It is provided that in fiBing, amending
or modifying such rates etc. the committee sha%% try to ensure as far as possib%e that
there is no unfair discrimination between risk of essentia%%y the same ha:ard and a%so
that consideration is given to past and prospective %oss eBperience. 4very insurer is
re@uired to make payment to the T', of the prescribed annua% fees.
20
TAX $O!ICY AND INSURANCE SECTOR
'nother factor, which affects the insurance sector, is the taB po%icy. The taB
reforms in India are such that it encourages the citi:ens to invest in the insurance
sector.
The taB po%icy of the government is particu%ar re%evant for %ife insurance which
is a %ong-term contract and incu%cates among the po%icyho%ders the habit of saving.
TaBation of returns on investment inf%uences, investment decisions and high rates of
taBation wi%% discourage the desire to save. '%ready in India there are comp%aints that
the rates of return on %ife po%icies are not what they cou%d be. Therefore taB incentives
p%ay a vita% ro%e in determining the attractiveness of such po%icies. 7uch taB breaks are
avai%ab%e in many countries and have he%ped in the deve%opment of their %ife sector. In
western countries the gain from the proceeds of a %ife insurance po%icy is paid free of
taB. $rovided the po%icy satisfies certain @ua%ifying conditions. 0on-@ua%ifying
po%icies get basic rate taB re%ief, though higher rate taBpayers may sti%% have to pay taB
on the gain, a%though at a reduced rate. The insurance companies can use such taB
concessions rate. The insurance companies can use such taB concessions to design
products for different categories of taBpayers.
The other factors, which affect the insurance sector, are the emp%oyment %aw,
and government stabi%ity. These are the factors, which affect the insurance industry
21
)EY SUCCESS FACTORS
In order to succeed in any of the business it is very necessary to make and
fo%%ow the strategies. 7trategies are very important for any of the business. 8o%%owing
are the genera% strategies, which are recommending to the insurance sector. 3ne
approach is to focus upon product @ua%ity, which wi%% insti%% confidence in minds of
the customers that they wou%d be offered best product from out of the severa%
avai%ab%e products.
The other approach, is to focus on the customers need, wou%d invo%ve a heavy
investment in deve%oping re%ationships with po%icyho%ders. >nder this approach, one
can eBpect a range of products and services designed to give the customer what he
specia%%y desires.
The third approach is of greater market segmentation under which the
popu%ation shou%d be divided into severa% homogeneous groups and product, and
services wou%d be targeted towards such se%ected markets. The effort wou%d be to JtieK
c%ients to their company- by customi:ed combination of coverage, easy payment p%an,
risk management advice, and convenient @uick c%aim hand%ing.
$orter 'eneric Strate,ies
3ne of the eBpert 6iche% porters has identified three interna%%y consistent
generic strategies, which can be used sing%y or in combination= overa%% cost %eadership
is c%ear%y under stab%e. In a differentiation strategy, a company seeks to be uni@ue in
its industry a%ong some dimensions that are wide%y va%uab%e by the customer. 6ay be
the %owest cyc%e time for sett%ing a c%aim under say, a med c%aim po%icy cou%d be
differentiating factor. In a cost focus, a company seeks a cost advantage in its target
segment, whi%e in differentiation focusI a company seeks a differentiation target.
Mar,ina% Di**erent $roduct
'nother strategy wou%d be for the companies to design products that wi%% make
comparison-shopping difficu%t. They cou%d offer a wide variety of covers with
margina% differences and varying prices, whose terms and conditions are difficu%t to
compare for consumers who may not have sufficient eBperience in purchasing
insurance and who wou%d find it difficu%t to make a c%ear choice. If the consumer is
offered a uni@ue po%icy, he wi%% have no a%ternative coverage with which can be
22
compared. "iven the combination po%icy, which can offer protection against a number
of %osses, the consumer wi%% find comparison even more difficu%t.
Desi,nin, Ne. Strate,ies

The eBisting insurance companies cannot be satisfied with concentrating on
the conso%idation of their eBisting markets, but have to achieve further growth and
penetration. They must, therefore, concentrating on strengthening eBisting points of
service, designing new channe% of distribution, direct contact with their u%timate
customers, and front %ine emp%oyee empowerment. They a%so need to refresh their
marketing set up. The new comers, on the other hand give priority to tapping the
market, %eft uneBp%oited by the pub%ic sector companies.
Mo&e to.ards Rura% Mar/et
It is one of the most important suggestionsI data says that rura% market is sti%%
uncovered by this sector. 5e be%ieve that the sector shou%d move towards tie rura%
market. Insurance penetration can be achieved by tapping the neg%ected 2ura%
6arkets. There is vast potentia% for insurance growth in the rura% sector. ' recent
survey by foundation for research, training and 4ducation in insurance /832T41
suggests that insurance can be so%d profitab%y to rura% communities in India. The
survey revea%s that
There is distinct hierarchy of needs in rura% areas.
2ura% peop%e find security in groups the saving habit is very strong in rura%
areas.
'verage saving across the most important socio-economic strata comes to )0-
)5L of annua% income or 2s.1),500 annua%%y, which is significant.
There is high %eve% of awareness about %ife insurance and fair%y high-%eve%
about )-L a%ready own %ife insurance.
51L of these who own %ife insurance wou%d %ike to buy more.
'mongst the savers, a significant percentage does not save through forma%
financia% modes or institutions.
2)
2ura% buyers of insurance prefer a ha%f year%y mode of premium payment to
coincide with the time of the harvest. Thus there are very much chances for
any of the companies to work over this scenario. 7o we be%ieve and suggest a%%
the p%ayers to move towards the rura% areas.
Moti&ation o* sa%es *orce
' %ife insurance company shou%d constant%y be invo%ved in the process of
motivating the sa%es force in the turbu%ent times. The fo%%owing strategies are
recommendingI
.ui%ding re%ationship is rea% perk. 3ne shou%d be sure to bui%d in networking
times for agents during the program-in addition to entertainment and
education.
5eb shou%d be fre@uent%y used for creating gift ideas.
Co%d sa%es contests in the forth @uarter. It is the best times ti motivates agents
who wants to @ua%ify for a trip.
,onsider a contrast within the contest Mfor- top-tier producersI additiona%
rewards for additiona% mi%estones that are met, such as air and guest room
upgrades.
Use o* Internet
The present scenario is such that the products so%d with the he%p of Internet.
The techno%ogica% advancement is such that force the companies to take such steps.
7ti%% the fu%%-f%edged use of Internet is not done in our country. 's suggestion ear%ier
the Internet based %ife insurance wi%% he%p the companies to reduce the transaction cost
and time. 't the time it can improve the @ua%ity of service to its customers, which is
the mission of the company.
29
ENVIRONMENTA! ISSUES
$o%itica% Factors A**ectin, !i*e Insurance Industry
5ithin India po%itica% ambitions and rise of communa%ism, fissiparous
tendencies are on the rise and may we%% continue for @uite some time to time.
Therefore, it eBpected that the insurance companies might consider offering po%itica%
risk coverage a%so. The on%y area where Indian insurers consider giving cover is with
regard to customs duty change under certain conditions.
,ertain type of po%itica% risk at the internationa% %eve% has serious imp%ications
for eBporters. The term Mpo%itica% riskF has a wider connotation than common%y
understood or assumed. It covers events arising not &ust from po%itics, but risks in the
course of internationa% transactions. In this connection, it may be noted that eBport
credit insurance has evo%ved out of uncertainties re%ating to internationa% trade,
particu%ar%y due to prob%ems arising out of foreign %ega% &urisdiction, po%itica% changes
and currency eBchange difficu%ties faced by many deve%oping countries.
Economica% Factors A**ectin, !i*e Insurance Industry
Interest rate at bank and interest rate of $.8 variation very much affect to %ife
insurance industry, because peop%e a%ways attract by higher return. Therefore, they do
not prefer %ower return po%icy. >nemp%oyment a%so affects insurance industry, because
the unemp%oyment peop%e wi%% not have earning, so saving a%so affect to %ife insurance
sector +ife insurance industry wi%% direct%y affected by 4arth@uake, 6onsoon, and
0atura% ca%amity. .ecause of these events turns into %ots of death, so the %ife insurance
companies have to pay c%aim against po%icy. Infant morta%ity rate and maternity
morta%ity rate are a%so affecting to %ife insurance. Typica% Indian want %uBurious
product against %ow income, so that they prefer insta%%ment or annuity /46I1, so that
they may not have eBtra saving to invest in %ife insurance.
Socio-Cu%tura% FACTORS a**ectin, !i*e Insurance Industry
The basic socia% factors that affect the %ife insurance sector are as under= -
$opu%ation
+ife sty%e
25
4ducationa% %eve%
+eve% of earning
7ocieta% benefits These are the ma&or socia% factors, which affect the %ife
insurance sector. 5e wi%% discuss a%% of them in brief.
$opu%ation
"rowth in the popu%ation is a ma&or factor pushing up the demand. It is a%so
going to eBert a specia% inf%uence on the %ife insurance market in other ways. 'part
from eBerting pressure on demand for goods and services, and through that, i%% effects
of uncontro%%ed growth of popu%ation a%so cou%d spur the growth of demand. 8or
eBamp%e, overcrowding in pub%ic p%aces of entertainment, pub%ic support, or too many
vehic%es on the road can resu%t in ha:ards %ike stampedes and po%%ution, which re@uire
covers and sti%% are not so%d on a %arge sca%e today. Thus the positive as we%% as the
negative aspects of popu%ation growth are going to spur demand.
!i*e sty%e
The pecu%iar %ifesty%e of a country or an age a%so inf%uences the insurance
business. ,hange therein produces different demands for %ife insurance. 8or e.g. '%%
over the wor%d, fami%y si:e is shrinking and the fact that in decades to come, both
presents are more fre@uent%y %ike%y to work outside the home wi%% mean that there
cou%d be a greater possibi%ity of property %oss. 7imi%ar%y, a %arger number of
vehic%eson the roads for peop%e commuting to their &obs or business wou%d mean
%arger incidence of accidents. This wi%% increase the demand for %ife insurance
products.
3f course, there is a%so the other possibi%ity that wherever it is possib%e, some
peop%e wi%% try to spend a part of their time working at home either because they
wou%d %ike to be with their fami%ies or because they find it more convenient. 'ctivities
%ike %ife insurance and financia% services are particu%ar%y we%% suited for such
arrangements.
In recent times, there has been a surge in the high end business of the +I,. 8or
instance, as against (0 po%icies each worth more than 2s 10 mi%%ion in 1(((-2000, the
number was as high as (00 po%icies in the neBt year. 3r again, the number of &eevan
shri po%icies &umped from **,000 to a tota% of 2,)),000 po%icies in the same period.
2-
!e&e% o* education
India is one of the deve%oping countries= the %eve% of education is very %ow
here. The %iteracy rate is very poor. 6ore than 50L of the popu%ation is sti%%
uneducated or more or %ess not educated. Thus the peop%e are not ab%e to understand
the concept of the %ife insurance. 'mong the educated peop%e the @ua%ity of the
education is sti%% a big @uestion mark. Thus the awareness is not created and it has
become a big cha%%enge for the industry. Thus one of the factors, which affect the %ife
insurance sector, is %ow %eve% of education.
!e&e% o* earnin,
'nother factor, which affects the %ife insurance sector, is the %eve% of earning.
In India the ru%e of *0-20 is working. The *0L of the tota% popu%ation is having the
20L of the wea%th and the 20L of the tota% popu%ation is having *0L of tota% wea%th.
Thus the richer are richer and poorer are poorer. #ue to this the %ife insurance sector is
affected very much.
Societa% #ene*its
In view of the fact that %arge sections of India have inade@uate %ife insurance
cover, an important socia% responsibi%ity of the government re%ates to spreading it far
and wide. In addition, the government attempts to eBtent %ife insurance with certain
socia% ob%igations in view in both urban and the rura% areas through such means
specia% schemes for the weaker sections, and by ti%ting of the %ife insurance
companiesF investments in favour of socia% deve%opments.
The socia% changes emerging in the country provide opportunities for insurers
to se%% financia% services products such as fami%y hea%th care programmed, retirement
p%ans disabi%ity insurance, %ong-term care for senior citi:ens and different emp%oyee
benefit p%ans
The popu%ation in the age group 15-55 is usua%%y regarded as the insurab%e
popu%ation, since this can be considered as the main JactiveK age group / in the sense
of working, earning. 'nd supporting others1, and beyond this range %ife risk may be
considered to be not worth insuring.
2
There is one opinion, which suggests that in our country the age group 15-55
as the base is not tota%%y suitab%e. #ue to various factors inc%uding the unemp%oyment
prob%em, rea% earning starts from around the age of 25 for sa%aried persons. 8or others,
particu%ar%y sma%% entrepreneurs, traders and businessman, the starting age is a %itt%e
higher. 3n%y in the aff%uent sector of society %ife insurance can be taken before
persona% earning starts. Thus, number wise %ife insurance be%ow the age of 25 is not so
significant /a%though amount wise it need not be so1. 3n the other hand, peop%e over
the age of 50 rare%y app%y for fresh %ife insurance, main%y because in India the norma%
retirement age is around -0 years. '%so, a high percentage of the popu%ation in the
%ower income group does not remain Jinsurab%eK after the age of 50. thus, in our
country the practica% age range for insurab%e popu%ation actua%%y narrows down to 25
to 50.
Tec+no%o,ica% Factors A**ectin, !i*e Insurance Industry
Internet as an intermediary in the current Indian market customer is not aware
about the intrinsic va%ue of insurance. Ce thinks of insurance on%y in the mount of
6arch as a taB saving measure. The security provide by an insurance cover is rare%y
thought about. In such a scenario Internet can be an effective medium for educating
the consumers about insurance. It serves as a sing%e window for disseminating
product, process and procedura% information to the consumers.
$roduct deve%opment and target marketing through the Internet= with increase
in the number of insurance companies there wi%% be a need for market segmentation
and subse@uent%y product designed for each of them. In such a scenario Internet can
be a effective channe% for pushing product specific information to a particu%ar market
segment. ,onsumer feedback about a particu%ar product as we%% as suggestions for
different types or covers can a%so be generated through the Internet.
Maintainin, t+e data#ase
The most important facto that is affecting the insurance industry is the
marinating the database of the customers. The insurance industry having a huge %ist of
the customers.
In order to maintain it in manua% format it is rea%%y the work of stupidity. 5ith
the change in time the computers has taken the work of this things. Thus with the
deve%opment of the techno%ogy it has becoming possib%e to maintain such huge
2*
database very easi%y. ' person can switch over to the computer and get the detai%s of
the customer very easi%y. Thus maintaining the database has rea%%y become easy due to
the deve%opment in techno%ogy.
E-#usiness insurance in India -
The Internet has p%ayed a vita% ro%e in transforming the business of the 21
st
century. ,omputers are now being used eBtensive%y for creating a storing data,
information with the he%p of comp%eB and sophisticated techno%ogica% too%s in every
kind of business. This change having been wide%y accepted, the advantages are
numerous such as fast processing improved. 4fficiency, cost reduction among severa%
other benefits. Cowever, with every positive change, there is an evi% attached and
techno%ogy is no eBception. In technica% is an evi% attached and techno%ogy is no
eBception. In technica% terms, increased sophistications of techno%ogy brings with it,
an increased factor of risk invo%ved. The risk can be of various attributes, for eBamp%e,
the risk of data being %ost due to a virus attack, the theft of important and confidentia%
information and so on, which u%timate%y resu%ts in %osses for the business entity. 5ith
this change in the business process, insurers have to devise new methods for
assessing, underwriting and servicing c%aims for the so-ca%%ed e-business insurance.
Insurers face cha%%enges to ascertain risks, in order to @uantify them because
such risks donFt have any past data, which makes it a%% the more difficu%t for actuaries.
6oreover, what financia% impact a particu%ar risk can have is very difficu%t to be
determined. 8or eBamp%e, if some hackers obtain credit card information of few
customers, itFs a %oss for banks, their credibi%ity, customers and a%so their brand. 5i%%
an insurance po%icy cover a%% of this is mi%%ion do%%ars @uestion henceI the difficu%ty is
to design a cover first of a%%, which rea%%y answers the needs of customers. .ut even
after designing and pricing such products with difficu%ty, the cha%%enge to underwrite
and hand%e c%aims for such po%icies remains eBistent.
2(
DOMESTIC $!AYERS
Top 9: $%ayers in Insurance Companies in India
!i*e Insurance Corporation o* India
+ife Insurance ,orporation /+I,1 came into eBistence on 1st 7eptember 1(5-
through the ama%gamation of 159 Indian insurance companies, 1- non-Indian
companies and 5 provident. The ama%gamation was achieved with the he%p of +ife
Insurance 'ct passed by the $ar%iament in the same year. The +I, was created with
the goa% of reaching a%% the insurab%e peop%e in the country and providing them
financia% coverage at a reasonab%e price. In the year 1(5-, +I, had 5 :ona% offices, ))
divisiona% offices and 212 branch offices. 5ith time there was a need for a branch
office at every district head@uarter and many branches were opened, which raised the
pace of the organi:ation.
+I, now has 209* fu%%y computeri:ed branch offices, 100 divisiona% offices,
:ona% offices and the corporate office. 't present, on%ine premium co%%ection faci%ity is
being offered in se%ected cities as +I, has tied up with some banks and service
providers. 8or providing customer satisfaction the organi:ation has introduced various
schemes such as 4,7, 'T6 premium payment faci%ity, I?27, Info centers which are
set up in various cities inc%uding 6umbai, .anga%ore, ,hennai, Eo%kata, 0ew #e%hi,
$une and many more. It has a%so come up with 7'T4++IT4 7'6$'2E offices
providing easy access to po%icyho%ders. +I, has crossed many mi%estones and set
standards for itse%f fostering unmatched performance.
O#1ecti&es
Co%ding the money with ob%igation and using it in the best possib%e manner in
the interests of the po%icyho%der and the community.
.ringing attractive savings p%ans and making them easi%y accessib%e to the
po%icyho%ders.
"iving attractive returns to the peop%e and keeping in mind nationa% priorities.
.eing trustworthy to the customers and deve%op the spirit of corporate socia%
responsibi%ity.
)0
(a1a1 A%%ian4 'enera% Insurance Company !imited
.a&a& '%%ian: "enera% Insurance ,ompany +imited is a &oint venture between
.a&a& 'uto +imited and '%%ian: '" of "ermany.
.a&a& '%%ian: "enera% Insurance came into eBistence on 2nd 6ay 2001, when
it got certification of 2egistration from the Insurance and 2egu%atory #eve%opment
'uthority. .a&a& 'uto has a share of 9L, whereas '%%ian: has the remaining 2-L. In
the very first year, the company made a strong position for itse%f in the industry and
was reckoned amongst the top private insurers. The premium income of the company
as on )1st 6arch 200- was 2s. 12*5 crores, whereas the profit after taB made was 2s.
52 crores. .a&a& '%%ian: has a $an India network covering over 100 towns from
<ammu to Thiruvananthapuram and aims to spread its operations in many other cities.
The vision of the organi:ation is to be the first choice for customers, and
provide &ob satisfaction to the emp%oyees and create shareho%der va%ue. The
organi:ation strives to eBce% in its products and services, providing tota% customer
satisfaction.
.a&a& '%%ian: serves customers in a%% areas of "enera% and Cea%th Insurance as
we%% as 2isk 6anagement. It has in-depth know%edge of the %oca% market and
eBtensive distribution network with eBpertise, stabi%ity and eBperience. It has a capita%
base of 2s.19 crores, and is a%%owed to serve both the "enera% and Cea%th insurance.
It has achieved i''' rating, by I,2' +imited and has the highest c%aims-
paying abi%ity and a stab%e position in the market. In a 200- survey, .usiness 5or%d
has rated it among the 6ost 2espected ,ompanies, putting it at 0o.2 position in
Insurance sector.
The ,ompany provides the fo%%owing products under genera% insurance=
Trave% Insurance
'sset Insurance
Cea%th Insurance
,orporate Insurance
)1
ICICI $rudentia% !i*e Insurance Company
I,I,I $rudentia% is a &oint venture between I,I,I bank and $rudentia% p%c,
both having strong operations in their respective countries. I,I,I bank is one of the
%eading banks in India providing @ua%ity financia% services and $rudentia% is an
internationa% financia% service provider head@uartered at >nited Eingdom. I,I,I and
$rudentia% have respective shares of 9L and 2-L. The ,ompany started operating in
#ecember 2000. ,urrent%y, tota% capita% with the company is 2s. 1*.15 bi%%ion.
I,I,I $rudentia% was the first insurance company in India to receive a
0ationa% Insurer 8inancia% 7trength rating of ''' /Ind.1 from 8itch ratings. It has
been given the honour of being among the 6ost Trusted .rands in the industry by
4conomic Times for ) consecutive years. It has a network of 950 branches, over
1,50,000 insurance advisors and 1* banc assurance partners.
's the organi:ation grows and deve%ops, it keeps introducing new range of
products and services and enhancing the @ua%ity of p%ans and so%utions given to the
customers. The distribution network is one of the best, and is spreading across the
%ength and breadth of the country. 's on #ecember )1, 200-, it had made imprints in
over )-0 cities and towns in India. It has over 1,5,000 advisors across the country,
serving c%ients with fu%% commitment. It has tied up with I,I,I .ank, .ank of India,
8edera% .ank, +ord Erishna .ank, some co-operative banks, 0"3s, 68Is and
corporates for making inroads into the rura% areas.
ICICI !om#ard 'enera% Insurance A#out t+e &arious p%ayer o* %i*e
insurance sector
I,I,I +ombard "enera% Insurance ,ompany +imited is a &oint venture
between I,I,I .ank +imited and 8airfaB 8inancia% Co%dings +imited. I,I,I bank is
India!s second %argest bankI 8airfaB is ,anada-based, engaged in genera% insurance,
reinsurance, insurance c%aims management and investment management. I,I,I
+ombard "enera% Insurance ,ompany commenced its operations in genera% insurance
business in 'ugust 2001.
I,I,I +ombard is India!s number one private insurance companyI it is a%so the
first genera% insurance company to be given certification of I73 (001=2000. The
)2
company provides simp%e and fast documentation, fast c%aims sett%ement, on%ine
po%icy issuance, and comprehensive product %ine.
It has a%so been given i''' rating by I,2' for having highest c%aims paying
abi%ity. In the very first year of operations, it was ab%e to reach financia% breakeven
and achieve underwriting breakeven in the second year. 7ecurity is provided through
encryption and it is the first company to provide digita%%y signed documents. It has
been honored as the most ,ustomer 2esponsive ,ompany by the 4conomic Times.
Times of India has designated it as the .est Cousing Insurance in the 7mart +iving
'wards by )-0 degrees. It has a%so been awarded "o%d 7hie%d for A4Bce%%ence in
8inancia% 2eportingA. It is among the top three companies to be awarded the A"enera%
Insurance ,ompany of the DearA at the 10th 'sia Insurance Industry 'wards.
(ir%a Sun !i*e Insurance Company !imited
.ir%a 7un +ife Insurance ,ompany +imited /.7+I1 is a &oint venture between
'ditya .ir%a "roup and 7un +ife 8inancia% Inc. .7+I started functioning in 6arch
2001 after getting the certificate of registration from I2#'.
.ir%a 7un +ife Insurance ,ompany +imited introduced unit +inked +ife
Insurance 7o%utions in India. 5ithin a short span of time it was ab%e to estab%ish itse%f
as a %eading p%ayer in the $rivate +ife Insurance Industry. It has been innovative and
come up with customer-centric products to provide safety and services. The company
has web-enab%ed IT systems for better customer services and a strong distribution
channe% which is easi%y approachab%e. The company shows corporate governance and
a high degree of transparency in a%% business practices. It has professiona% know%edge
and g%oba% eBpertise of 'ditya .ir%a "roup.
.ir%a 7un%ife Insurance has been providing first c%ass financia% so%utions to its
customers and has been amongst the top three private sector %ife insurance companies.
Its mission is to be amongst the top p%ayers in the eyes of customers and the
first choice of insurance and retirement so%utions to individua%s and groups. These
innovative so%utions are %inked with g%oba% and technica% eBpertise and are dep%oyed
by a mu%ti channe% distribution network and enhanced techno%ogy.
The company aims at keeping a%% peop%e associated with it - customers, c%ients,
stakeho%ders and emp%oyees- happy and fu%%y satisfied. It wants to provide va%ue
))
added products and services to the customers, &ob satisfaction to emp%oyees and
highest returns to the shareho%ders.
Nua%ities %ike integrity, commitment, passion, and speed are the core va%ues of
the company. The products offered by the company are=
TATA AI' 'enera% Insurance
Tata 'I" "enera% Insurance ,ompany +td. is a &oint venture between Tata
7ons and 'merican Internationa% "roup, Inc. /'I"1. The Tata "roup is ho%ding 9 per
cent stake and the rest 2- percent is he%d by 'I". The company has got the eBpertise,
know%edge and strength of both the organi:ations.
Tata 'I" "enera% Insurance ,ompany was founded on <anuary 22, 2001. It
offers genera% insurance in various categories, such as automobi%e, home, persona%
accident, trave%, energy, marine, property and casua%ty and specia%i:ed financia%
so%utions.
<amset&i Tata founded Tata "roup in 1*-0s. It has an estimated turnover of
around >7 O 19.25 bi%%ion. It has spread its operations in various fie%ds such as stee%,
power, hote%s, air%ines, software services, communications, etc. 7ome of its ma&or
pro&ects have been Tata Tea, Tata 7tee%, Tata ,hemica%s, Titan, Tanish@, ?o%tas,
5estside and Tata 6otors. Its imprints are made on the te%ecommunication and
techno%ogy sector. 2egarding te%ecommunications, it is the %argest internationa% %ong
distance service provider. 'pproBimate%y two- third of the e@uity of Tata 7ons is he%d
by a host of nationa% institutions in science and techno%ogy, medica% services and
performing arts. .y combining the ethica% va%ues with business acumen and fu%fi%%ing
its commitment to the nation, it has become one of the %argest groups in India.
'merican Internationa% "roup, Inc. /'I"1 is the %eading internationa% p%ayer in
insurance and financia% services. Its network spreads across 1)0 nations. 'I" member
companies serve a%% types of customers, be it commercia% or individua%. 'I" is among
the %eading insurers and the %argest underwriter of insurance. 'ircraft %easing,
financia% products and trading are some of the services offered by 'I". 'I" has a
g%oba% eBpertise of fu%fi%%ing the customer-centric needs. It has specia%i:ed investment
management capabi%ities in e@uities, fiBed income, a%ternative investments and rea%
estate. 'I"!s stock has been %isted in the 0ew Dork 7tock 4Bchange as we%% as stock
eBchanges in +ondon, $aris, 7wit:er%and and Tokyo.
)9
The organi:ation caters to individua%s, sma%% businesses and corporates.
Individua% p%ans inc%ude motor, home, accident P hea%th and trave% insurance,
whereas corporate p%ans inc%ude accident P hea%th, trave%, energy, property, marine
and %iabi%ity p%ans.
Ne. India Assurance Company
7ir #orab Tata founded 0ew India 'ssurance ,ompany on 2)rd <u%y 1(1(. It
has 10-* offices comprising of 2- regiona% offices, )() divisiona% offices and -9*
branches with more than 21,000 emp%oyees.It is one of the %argest 0on- +ife insurers
in 'fro- 'sia and the first one to cross 2s. 5,000 crores of "ross $remium. It has a
g%oba% network eBpanding in countries %ike <apan, >.E., 6idd%e 4ast, 8i&i and
'ustra%ia. Its internationa% operations started in 1(20 and have spread across 29
countries having a network of 1( branches, 12 agencies, 2 associate companies and 2
subsidiary companies. The company contributes *0L of tota% overseas premium in
India.The company has a high%y @ua%ified staff, which eBce% in both eBpertise and
know%edge and are trained to provide satisfaction to the customers. It is the on%y
company ab%e to estab%ish strong re%ationships overseas and has a record of successfu%
trading outside India. The performance has been outstanding and the company has
been ab%e to maintain a strong position in the market.
It has been the pioneer in various fie%ds such as=
7etting up an 'viation Insurance #epartment in 1(9-.
Cand%ing the comp%ete insurance re@uirements of the Indian 7hipping 8%eet.
Introduced its own Training 7choo%.
$ioneering the concept of !6ode% 3ffice Training!.
,reating department in 4ngineering insurance.
7ate%%ite insurance.
The company wants to deve%op itse%f as the best genera% insurance company in
the industry. It is concerned about the society and community, and provides financia%
security at reasonab%e prices. The company gives utmost importance to customer
needs and there is transparency in its operations. 7ome of the po%icies and schemes
introduced by the company are=
)5
$ub%ic +iabi%ity $o%icy
<ewe%%ers .%ock $o%icy
$ravasi .haratiya .ima Do&ana $o%icy
>niversa% Cea%th Insurance 7cheme
8ire $o%icy
IFFCO To/io 'enera% Insurance
I88,3 Tokio "enera% Insurance is a customer-centric company aiming to be
easi%y accessib%e and approachab%e to a%% sections of society. It offers products and
services that provide @ua%ity at reasonab%e cost. The organi:ation has the deep
know%edge of I88,3 and thus deve%oped a business p%an that has both stabi%ity and
integrity.
It has set g%oba% standards for itse%f and is the on%y private genera% insurance
company in India to make 5 consecutive years of eBperience. IT"I has been one of
the few companies to show underwriting profits within four years of operations.
The company focuses on de%ivering creative so%utions to its customers. I88,3 Tokio
"enera% Insurance has 2) emp%oyees present in -* cities, dedicated to give fu%%
satisfaction to the customers. It is the first company to underwrite mega po%icies for a
ferti%i:er and automobi%e c%ient.
T+e Orienta% Insurance Company !td8
The 3rienta% Insurance ,ompany +td. /3I,+1 is one of the genera% insurance
companies under the support of the "enera% Insurance ,orporation /"I,1 of India. It
came into eBistence in the year 1(9 and is one of the o%dest organi:ations in India. It
caters to a%% sections and sectors ranging from 60,s to rura% sector. The head@uarters
of the company are situated at #e%hi and it has 21 2egiona% 3ffices, )11 #ivisiona%
3ffices and -)5 .ranch offices.
It has a team of hard working emp%oyees, having the ta%ent to take the
company to new heights. '%so the company shows concern for both the emp%oyees
and customers. It provides specia% covers for %arge pro&ects %ike power p%ants, stee%
p%ants and chemica% p%ants.
)-
It be%ieves in active%y participating in economic growth by being a dynamic
organi:ation catering to the society with fu%% commitment and efficiency. The main
ob&ectives of the company are to serve the insurance needs of the entire community,
provide services at reasonab%e cost, make optimum uti%i:ation of the funds,
maintaining g%oba% standards, minimi:ation of %osses and retention of business.
5DFC Standard !i*e Insurance Company !imited
C#8, 7tandard +ife Insurance ,ompany +imited is one of the first
companies to be %icensed by I2#' to operate in the Insurance sector. The company
came into eBistence on 19th 'ugust 2000. .oth ,risi% and I,2' have honored it with
''' 2atings. 7imi%ar%y 6oody!s and 7tandard and $oors have a%so honoured it '''
ratings. C#8, ho%ds *1.9L share in C#8, and the remaining 1*.-L stake is with
7tandard +ife. It integrates the strong eBpertise and stabi%ity of 7tandard +ife and
C#8,.

It is one of the most trusted companiesI it is easi%y accessib%e and
approachab%e, offering va%ue services to its customers.
The company aims to provide=
Innovative products to cater to different needs of different customers
,ustomer service of the highest order
>se of techno%ogy to improve service standards
?a%ue for money for customers
Increasing market share
$rofessiona%ism in carrying out business
The va%ues ingrained in the company are to provide financia% security to
po%icyho%ders, maintain trust and keep innovating to estab%ish it as a uni@ue p%ayer.
)
'OVERNMENT RE'U!ATIONS
Insurance Re,u%atory and De&e%opment Aut+ority ;IRDA<
2eforms in the Insurance sector were initiated with the passage of the I2#'
.i%% in $ar%iament in #ecember 1(((. The I2#' since its incorporation as a statutory
body in 'pri% 2000 has fastidious%y stuck to its schedu%e of framing regu%ations and
registering the private sector insurance companies.
The other decisions taken simu%taneous%y to provide the supporting systems to
the insurance sector and in particu%ar the %ife insurance companies were the %aunch of
the I2#'Fs on%ine service for issue and renewa% of %icenses to agents.
The approva% of institutions for imparting training to agents has a%so ensured
that the insurance companies wou%d have a trained workforce of insurance agents in
p%ace to se%% their products, which are eBpected to be introduced by ear%y neBt year.
7ince being set up as an independent statutory body the I2#' has put in a
framework of g%oba%%y compatib%e regu%ations. In the private sector 12 %ife insurance
and - genera% insurance companies have been registered.
Duties= $o.er and Functions o* IRDA
7ection 19 of I2#' 'ct, 1((( %ays down the duties, powers and functions of I2#'.
1. 7ub&ect to the provisions of this 'ct and any other %aw for the time being in
force, the 'uthority sha%% have the duty to regu%ate, promote and ensure
order%y growth of the insurance business and re-insurance business.
2. 5ithout pre&udice to the genera%ity of the provisions contained in sub section.
The powers and functions of the 'uthority sha%% inc%ude
a1 Issue to the app%icant a certificate of registration, renew, modify, withdraw,
suspend or cance% such registrationI
b1 $rotection of the interests of the po%icy ho%ders in matters concerning
assigning of po%icy, nomination by po%icy ho%ders, insurab%e interest,
sett%ement of insurance c%aim, surrender va%ue of po%icy and other terms and
conditions of contracts of insuranceI.
)*
c1 7pecifying re@uisite @ua%ifications, code of conduct and practica% training for
intermediary or insurance intermediaries and agents.
d1 7pecifying the code of conduct for surveyors and %oss assessors.
e1 $romoting efficiency in the conduct of insurance business
f1 $romoting and regu%ating professiona% organi:ations connected with the
insurance and re-insurance business.
g1 +evying fees and other charges for carrying out the purposes of this 'ct.
h1 ,a%%ing for information from, undertaking inspection of, conducting en@uiries
and investigations inc%uding audit of the insurers, intermediaries, insurance
intermediaries and other organi:ations connected with the insurance businessI
Insurance Re,u%atory and De&e%opment Aut+ority ;IRDA< Act
The Insurance 2egu%atory and #eve%opment 'uthority 'ct was introduced to
end the monopo%y of 7tate-owned companies and to invest in the Insurance
2egu%atory 'uthority power to contro% the insurance sector.
T+ese po.ers inter aria are
Imposition of prudentia% norms such as so%vency margins, capita% ade@uacyI
2e@uirements and investment guide%ines for insurance companiesI
"rant of %icenses to new companies, and cance%%ation, suspension and
withdrawa% of %icenses given to insurance companiesI
2egu%ation of fund investment by insurance companiesI
6aintenance of so%vency marginsI
'd&udication of disputes between insurers and intermediariesI and
Tariff fiBing.
's per the section 9 of I2#' 'ct! 1(((, Insurance 2egu%atory and
#eve%opment 'uthority /I2#', which was constituted by an act of par%iament1
specify the composition of 'uthority the 'uthority is a ten member team consisting of
a. ' ,hairmanI
b. 8ive who%e-time membersI
)(
c. 8our part-time members, /'%% appointed by the "overnment of India1
Re,u%atory Issues
The I2#' .i%% %ies down that the Indian promoter must di%ute the stake in the
private insurance firms from 9 per cent to 2- per cent in ten years. The bi%% stipu%ates
tough so%vency margins -- 2s 500 mi%%ion for %ife insurance firms, 2s 500 mi%%ion or a
sum e@uiva%ent to 20 per cent of net premium income for genera% insurance and 2s 1
bi%%ion for reinsurance business.
The insurer has to maintain separate accounts re%ating to fund of shareho%ders
and po%icyho%ders. The funds of po%icyho%ders shou%d be retained within the country
but does not cover repatriation of profits and dividends. Insurance companies under
the new regime wi%% have to have eBposure to rura% and socia% sectors. 8oreign
investment in insurance, the bi%% states, is crucia% to financing infrastructure and better
insurance cover.
The key to success in opening up the insurance sector in India is regu%ation.
'n eBamp%e of how poor regu%ation can destroy a market is the mutua% fund industry.
' combination of improper marketing practice has resu%ted in a %oss of investor faith
in that industry. Incidenta%%y, the insurance industry in India itse%f has gone through
the same phase.
3ne of the reasons for nationa%i:ation of the insurance industry /+I, in 1(5-
and "I, in 1()1 was the mismanagement and ma%practice of erstwhi%e private
p%ayers. .ut if the statements of I2' officia%s are anything to go by, the new
regu%ations are eBpected to be on the right track. 0 I 2angachary, chairman, I2', has
a%ready provided the timetab%e for the changes once the .i%% is passed. The I2' has
a%ready indicated that it wi%% have tough norms for new participants.
This is the most compe%%ing reason why private sector /and foreign1
companies, which wi%% spread the insurance habit in the societa% and consumer
interest, are urgent%y re@uired in this vita% sector of the economy.
5ith the nation!s infrastructure in a state of imminent co%%apse, India cou%dn!t
have afforded to be %umbered with sub-optima%%y performing monopo%y insurance
companies and therefore the passage of the Insurance 2egu%atory P #eve%opment
'uthority .i%% on #ecember 2, 1((( hera%ds an era of cautious optimism where stakes
90
are high for a%% parties concerned. 8or the "ovt. of India, 8oreign #irect Investment
/8#I1 must pour in as anticipatedI for foreign insurers, investments must start yie%ding
returns and for the domestic insurance industry - their market penetration shou%d
remain intact. 3n the fringe, the customer is pondering whether a%% the hype created
on %ibera%i:ation wi%% actua%%y benefit him.
Re,u%atory (ody
The Insurance 'ct shou%d be changed
'n Insurance 2egu%atory body shou%d be set up
,ontro%%er of Insurance /,urrent%y a part from the 8inance 6inistry1 shou%d
be made independent
In&estments
6andatory Investments of +I, +ife 8und in government securities to be
reduced from 5L to 50L
"I, and its subsidiaries are not to ho%d more than 5L in any company /There
current ho%dings to be brought down to this %eve% over a period of time1
91
FISICA! RE'U!ATIONS
Ta3 po%icy and Insurance Sector
'nother factor, which affects the insurance sector, is the taB po%icy. The taB
reforms in India are such that it encourages the citi:ens to invest in the insurance
sector.
The taB po%icy of the government is particu%ar re%evant for %ife insurance which
is a %ong-term contract and incu%cates among the po%icyho%ders the habit of saving.
TaBation of returns on investment inf%uences, investment decisions and high rates of
taBation wi%% discourage the desire to save. '%ready in India there are comp%aints that
the rates of return on %ife po%icies are not what they cou%d be. Therefore taB incentives
p%ay a vita% ro%e in determining the attractiveness of such po%icies. 7uch taB breaks are
avai%ab%e in many countries and have he%ped in the deve%opment of their %ife sector. In
western countries the gain from the proceeds of a %ife insurance po%icy is paid free of
taB. $rovided the po%icy satisfies certain @ua%ifying conditions. 0on-@ua%ifying
po%icies get basic rate taB re%ief, though higher rate taBpayers may sti%% have to pay taB
on the gain, a%though at a reduced rate. The insurance companies can use such taB
concessions rate. The insurance companies can use such taB concessions to design
products for different categories of taBpayers.
The other factors, which affect the insurance sector, are the emp%oyment %aw,
and government stabi%ity. These are the factors, which affect the insurance industry
Tari** Ad&isory Committee
The tariff advisory committee estab%ished under the 'ct is empowered to
contro% and regu%ate the rates, terms, and etc. that may be offered by insurers in
respect of any risk or of any category of risks. It is provided that in fiBing, amending
or modifying such rates etc. the committee sha%% try to ensure as far as possib%e that
there is no unfair discrimination between risk of essentia%%y the same ha:ard and a%so
that consideration is given to past and prospective %oss eBperience. 4very insurer is
re@uired to make payment to the T', of the prescribed annua% fees.
92
INTERNATIONA! SCENARIO
+ife insurance not p%ays an important ro%e in nationa% economy but a%so in
internationa% economy. 6arine cargo insurance provides risk coverage for shippers
and the banks, which finance internationa% trades. This ro%e becomes a%% the more
important in the conteBt of an active government po%icy to encourage eBports. Indian
%ife insurer operates in more than )0 countries through agencies, branches, associates
companies. These operations earn foreign eBchange.
The insurance business is concerned with 0orth 'merica, 5estern 4urope,
<apan and 3ceania. Together these regionFs accounts for about (1 L of the wor%d
annu% remium. .y regionFs 0orth 'merica and western 4urope are growing
moderate%y whi%e oceanic, +atin 'merica, eastern 4urope and 'frica disp%ay growth
above %one Hterm trends to a g%oba% conteBt g%oba%i:ation of %ife insurance he%ps
companies practices underwriting discip%ine in one regions g%oba%i:ation of the
insurance industry received a big boost.
Countries
Insurance $enetration
;premium as a> o* 'D$<
Insurance Density ;$er
Capita $remiums in
USD<
>nited Eingdom 12.1 )02*.5
<apan *.0 )1-5.1
>nited 7tates 9.9* 1-11.9
7outh 'frica 19.09 )(2.(
'ustra%ia -.09 11().5
7outh Eorea (.*( ()5.-
India 1. .-
,hina 1.12 (.5
6a%aysia 2.1) *-.9
Indonesia 0.59 9.0
.ra:i% 0.)- 12.(
India and t+e "or%d Mar/et
9)
>nfortunate%y, the progress achieved by the %ife insurance industry in India, it
compares unfavorab%y not &ust with the deve%oped countries. .ut a%so even with the
deve%oping wor%d. The g%oba% market for the %ife insurance is estimated to be around O
1912.) bi%%ions.
99
$ORTERS FIVE-FORCE ANA!YSIS
$orters fives forces mode% is an eBce%%ent mode% to use to ana%yse a particu%ar
environment of an industry. 7o for eBamp%e, if we were entering the $, industry, we
wou%d use porters mode% to he%p us find out about=
1. ,ompetitive 2iva%ry
2. $ower of supp%iers
). $ower of buyers
9. Threats of substitutes
5. Threat of new entrants.
The above five main factors are key factors that inf%uence industry
performance, hence it is common sense and practica% to find out about these factors
before you enter the industry. +ets %ook at them be%ow.
Competiti&e ri&a%ry
' starting point to ana%ysing the industry is to %ook at competitive riva%ry. If
entry to an industry is easy then competitive riva%ry wi%% %ike%y to be high. If it is easy
for customers to move to substitute products for eBamp%e from coke to water then
again riva%ry wi%% be high. "enera%%y competitive riva%ry wi%% be high if=
There is %itt%e differentiation between the products so%d between customers.
,ompetitors are approBimate%y the same si:e of each other.
If the competitors a%% have simi%ar strategies.
It is cost%y to %eave the industry hence they fight to &ust stay in / eBit barriers1
$o.er o* supp%iers
7upp%iers are a%so essentia% for the success of an organisation. 2aw materia%s
are needed to comp%ete the finish product of the organisation. 7upp%iers do have
power. This power comes from=
If they are the on%y supp%ier or one of few supp%iers who supp%y that particu%ar
raw materia%.
95
If it cost%y for the organisation to move from one supp%ier to another /known
a%so as switching cost1.
If there is no other substitute for their product.
$o.er o* #uyers
.uyers or customers can eBert inf%uence and contro% over an industry in certain
circumstances. This happens when=
There is %itt%e differentiation over the product and substitutes can be found
easi%y.
,ustomers are sensitive to price.
7witching to another product is not cost%y.
T+reat o* su#stitutes
're there a%ternative products that customers can purchase over your product
that offer the same benefit for the same or %ess priceQ The threat of substitute is high
when=
$rice of that substitute product fa%%s.
It is easy for consumers to switch from one substitute product to another.
.uyers are wi%%ing to substitute.
T+reat o* ne. entrant
The threat of a new organisation entering the industry is high when it is easy
for an organisation to enter the industry i.e. entry barriers are %ow.
'n organisation wi%% %ook at how %oya% customers are to eBisting products, how
@uick%y they can achieve economy of sca%es, wou%d they have access to supp%iers,
wou%d
9-
"overnment %egis%ation prevents them or encourages them to enter the
industry. +egis%ation prevents them or encourages them to enter the industry.
9
$ORTERS FIVE-FORCE OF INSURANCE INDUSTRY
Competiti&e ri&a%ry
There is cut thought competitions among riva%s in %ife insurance industry
There are main%y 1) private organi:ations and 1 pub%ic organi:ation in %ife
insurance competition
Insurance companies dea% in identica% po%icies as service %eve%s offered are
simi%ar
6inistry of finance contro%s a%% the insurance companies that are in the
industry at present hence there are %ess chance of eBit.
$o.er o* supp%iers
$o%icy designer tend to have %ess %everage to .rgain over premium
Insurance is taB eBempted so that supp%iers bargaining power increases
7o%vency of private p%ayers is not certain
T+reat o* Su#stitutes
,ustomers deposits in their amount in to bank P post deposits P
purchase go%d P si%ver
Investment in government securities
6oney market investment
,apita% market investment
9*
$ower of buyer =
6arket is high%y segmented
Insurance industry very return oriented and switches easi%y
Cigh switching cost creates buyers %ock in and makes a buyers bargaining
power
4Bercise bargaining %everage over premium
Threat of new entrants=
+ife insurance industry entry barriers is moderate
The Indian market is high%y brand oriented .so it is difficu%t to introduce new
brand
The acceptabi%ity of new brand is a%so very %ow
4conomies of sca%e is difficu%t to find in the initia% stage of entry in to market
7pecia% permission is re@uired from the government to enter in the insurance
sector
9(
MAR)ET S5ARE OF INSURANCE INDUSTRY
50
!i*e Insurance Industry ,ro.s ?@ per cent in Apri%
0ew #e%hi= The %ife insurance industry c%ocked 9( per cent growth in new
businesses, whi%e genera% insurance p%ayers saw 1- per cent increase in 'pri%, the first
month of the current financia% year.
7trong performance by +ife Insurance ,orporation, I,I,I $rudentia% and 7.I
+ife he%ped the 1- p%ayer-strong %ife insurance industry to mop up 2s 2,(*2 crore in
'pri% this year compared with 2s 1,((- crore co%%ected in the same month %ast year,
according to data compi%ed by the Insurance 2egu%atory and #eve%opment 'uthority.
The countryFs %argest %ife insurer, +I,, saw new premiums grow 5 per cent to
2s 2,1)9 crore in 'pri% by se%%ing 15,*(,-*9 po%icies against 2s 1,)55 crore a year
ago. It had a market share of 1.5- per cent in 'pri%.
Insurers $remium ;Rs cr<
I,I,I $rudentia% 21.00
.a&a& '%%ian: 129.00
7.I +ife (0.00
C#8, 7tandard 0.00
6aB 0ew Dork +ife -(.00
Tata 'I" 9*.00
51
'viva )(.00
2e%iance +ife )).00
.ir%a 7un%ife 2*.00
Eotak 6ahindra 3%d 6utua% 2-.00
I0" ?ysya 22.00
6et +ife 1(.00
7hriram +ife 9.50
7ahara +ife 1.0
.harti 'Ba +ife 0.2
!IC
+I, /+ife Insurance ,orporation of India1 sti%% remains the %argest %ife
insurance company accounting for -9L market share. Its share, however, has dropped
from 9L a year before, main%y owing to entry of private p%ayers with innovative
products and better sa%es force.
ICICI $rudentia% !i*e Insurance Co !td
I,I,I $rudentia% +ife Insurance ,o +td is the biggest private %ife insurance
company in India. It eBperienced growth of 5*L in new business premium,
accounting for increase in market share to *.()L in 200-0* from -.(L in 200--0.
(a1a1 A%%ian4 !i*e Insurance Co !td
.a&a& '%%ian: +ife Insurance ,o +td has reported a growth of 52L and its
market share went up to -.(*L in 200-0* form 5.--L in 200--0. The company
ranked second /after +I,1 in number of po%icies so%d in 200-0*, with tota% market
share of .)-L.
S(I !i*e Insurance Co !td
7.I +ife Insurance ,o +td in terms of new number of po%icies so%d, the
company ranked -th in 200-0*. 0ew premium co%%ection for the company was 2s
9,(2.-- crore in 200-0*, an increase of *L over %ast year.
Re%iance !i*e Insurance Co !td
52
2e%iance +ife Insurance ,o +td Tota% co%%ected was 2s 2,(2.- crore and its
market share went up to 2.(-L from 1.2)L a year back. It now ranks 5th in new
business premium and 9th in number of new po%icies so%d in 200-0*.
5DFC Standard !i*e Insurance Co !td
C#8, 7tandard +ife Insurance ,o +td with an income of 2s 2,-*0 crore in
8D200-0*, registering a year-on-year growth of -9L. Its market share is 2.**L and
it ranks - th among the insurance companies and 5th amongst the private p%ayers.
(ir%a Sun !i*e Insurance Co !td
.ir%a 7un +ife Insurance ,o +td market share of the company increased from
1.22L to 2.11L in 200-0*. The company moved to the th position in 200-0* from
*the a year before, pushing down 6aB 0ew Dork +ife insurance company.
Ma3 Ne. Yor/ !i*e Insurance Co !td
6aB 0ew Dork +ife Insurance ,o +td has reported growth of )L in 200-0*.
Tota% new business generated was 2s -91.*) crore as against 2s )*.51 crore. The
company was pushed down to the *th position from th in 200-0*.
)ota/ Ma+indra O%d Mutua% !i*e Insurance !td
Eotak 6ahindra 3%d 6utua% +ife Insurance +td the fisca% 200-0*, the
company reported growth of *0L, moving from the 11th position to (th. It captured a
market share of 1.1(L in 200-0*. +ast year the company doub%ed its branch network
to 150 from 9.
A&i&a !i*e Insurance Company India !td
'viva +ife Insurance ,ompany India +td ranking dropped to 10th in 200-0*
from (th %ast year. It has presence in more than ),000 %ocations across India via 221
branches and c%ose to 90 banc assurance partnerships. 'viva +ife Insurance p%ans to
increase its capita% base by 2s )99 crore. 5ith the fresh investment, tota% paid-up
capita% of the insurer wou%d go up to 2s 1,)9*.* crore.
Current Mar/et S+are o* !IFE INSURANCE COM$ANIES
+I, sti%% remains the %argest %ife insurance company accounting for -9L
market share. 6ain%y owing to entry of private p%ayers with innovative products and
better sa%es force.
5)
.a&a& '%%ian: +ife Insurance ,o +td has reported a growth of 52L and its
market share went up to -.(*L in 200-0*. The company ranked second /after +I,1
in number of po%icies so%d in 200-0*, with tota% market share of .)-L.
I,I,I $rudentia% +ife Insurance ,o +td is the biggest private %ife insurance
company in India. 'ccounting for increase in market share to *.()L in 200-0*.
7.I +ife Insurance ,o +td in terms of new number of po%icies so%d, the
company ranked -th in 200-0*. 0ew premium co%%ection for the company was
2s.9,(2.-- crore in 200-0*, an increase of *L over %ast year.
2e%iance +ife Insurance ,o +td Tota% co%%ected was 2s.2,(2.- crore and its
6'2E4T 7C'24 went up to 2.(-L from 1.2)L a year back.
C#8, 7tandard +ife Insurance ,o +td with an income of 2s.2,-*0 crore in
8D200-0*, registering a year-on-year growth of -9L. Its 6'2E4T 7C'24 is
2.**L and it ranks -
th
among the insurance companies and 5th amongst the private
p%ayers.
.ir%a 7un +ife Insurance ,o +td market share of the company increased from
1.22L to 2.11L in 200-0*. The company moved to the th position in 200-0* from
*the a year before.
6aB 0ew Dork +ife Insurance ,o +td has reported growth of )L in 200-0*.
Tota% new business generated was 2s.-91.*) crore as against 2s.)*.51 crore. The
company was pushed down to the *th position from th in 200-0*.
Eotak 6ahindra 3%d 6utua% +ife Insurance +td the fisca% 200-0*, the
company reported growth of *0L, moving from the 11th position to (th. It captured a
market share of 1.1(L in 200-0*.
'viva +ife Insurance ,ompany India +td ranking dropped to 10th in 200-0*
from (th %ast year. It has presence in more than ),000 %ocations across India via 221
branches and c%ose to 90 bancassurance partnerships. 'viva +ife Insurance p%ans to
increase its capita% base by 2s.)99 crore. 5ith the fresh investment, tota% paid-up
capita% of the insurer wou%d go up to 2s.1,)9*.* crore.
59
55
S"OT ANA!YSIS
Stren,t+
2isk protection is provided by this sector on%y.
Insurance having current%y good market.
TaB eBemption.
The variety of products is increasing.
Insurance to bui%d c%ose re%ationship with customers.
"ea/ness
>nab%e to convenience the peop%e about the products.
Insurance companies instabi%ity
+imited working capita%
$roducts or services simi%ar to competitors.
5-
Opportunities
Techno%ogy is improving paper%ess transaction are avai%ab%e.
.usy %ife, customer need f%eBib%e and customi:ab%e po%icies.
+ike mobi%e banking mobi%e insurance cou%d be a hit.
0ew innovations in techno%ogy-measuring weather variab%es.
T+reats
5eather cyc%es.
0ew substitute product emerging.
Increasing eBpenses and %ower profit margins with hard on the sma%%er
agencies and insurance companies.
"overnment regu%ations on issues %ike hea%th care terrorism can @uick%y
change the direction on insurance.
5
CONC!USION
Insurance sector in India is one of the booming sectors of the economy and is
growing at the rate of 15-20 per cent annum. 3ne of the key service industry in India
wou%d be hea%th and education Insurance sector in India grew at a faster pace after
independence. In 1(5-, "overnment of India brought together 295 Indian and foreign
insurers and provident societies under one nationa%ised monopo%y corporation and
formed +ife Insurance ,orporation /+I,1 by an 'ct of $ar%iament, vi:. +I, 'ct, 1(5-,
with a capita% contribution of 2s.5 crore.
The /non-%ife1 insurance business;genera% insurance remained with the private
sector ti%% 1(2. There were 10 private companies invo%ved in the business of genera%
operations and their operations were restricted to organised trade and industry in %arge
cities. The insurance sector in India has come to a position of very high potentia% and
competitiveness in the market. Indians, have a%ways seen %ife insurance as a taB
saving device.
5*