INSURANCE

Group Members
Rohit Aroskar (62)
Advait Bhalkar (65)
Chaitanya Chaudhary (67)
Ashutosh Choudhari (70)
Abhijeet Wairagade (76)
Shaikh Mohd. Azhar (93)
Nilesh Parkar (96)
Gulshan Shivhare (110)
Vijay Singh (113)
Dhananjay Tekade (117)

MMS I (Section B)
Batch 2009 2011

Chetanas R. K.Institute of Management & Research

Bandra, Mumbai-400051

INDEX

BACKGROUND OF THE INDUSTRY..........................................................................................3

SWOT ANALYSIS OF INSURANCE SECTOR............................................................................5
PEST ANALYSIS OF INSURANCE SECTOR..............................................................................7
REGULATORY BODY IN INDUSTRY: IRDA...........................................................................11
CURRENT SCENARIO IN INDUSTRY......................................................................................13
KEY PLAYERS WITH MARKET SHARE.................................................................................15
FUTURE TRENDS: MARKET GROWTH.................................................................................17
BIBLIOGRAPHY...........................................................................................................................21

Page 2 of 25

BACKGROUND OF THE INDUSTRY

1818 saw the advent of life insurance business in India with the
establishment of the Oriental Life Insurance Company in Calcutta. This
Company however failed in 1834. In 1829, the Madras Equitable had begun
transacting life insurance business in the Madras Presidency. 1870 saw the
enactment of the British Insurance Act and in the last three decades of the
nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of
India (1897) were started in the Bombay Residency. This era, however, was
dominated by foreign insurance offices which did good business in India,
namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe
Insurance and the Indian offices were up for hard competition from the foreign
companies.

HISTORY OF INSURANCE SECTOR

Some of the important milestones in the life insurance business in India are
given in the table 1.
Table 1: milestones in the life insurance business in India
Year
1912
1928
1938
1956

Milestones in the life insurance business in India

The Indian Life Assurance Companies Act enacted as the
first statute to regulate the life insurance business
The Indian Insurance Companies Act enacted to enable
the government to collect statistical information about
both life and non-life insurance businesses
Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests
of the insuring public.
245 Indian and foreign insurers and provident societies
taken over by the central government and nationalised.
LIC formed by an Act of Parliament, viz. LIC Act, 1956, with
a capital contribution of Rs. 5 crore from the Government
of India.

The General insurance business in India, on the other hand, can trace its roots
to the Triton Insurance Company Ltd., the first general insurance company
established in the year 1850 in Calcutta by the British. Some of the important
milestones in the general insurance business in India are given in the table 2.

Page 3 of 25

Table 2: milestones in the general insurance business in India

Year
1907
1957
1968
1972

Milestones in the general insurance business in

India
The Indian Mercantile Insurance Ltd. set up, the first
company to transact all classes of general insurance
business
General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring
fair conduct and sound business practices
The Insurance Act amended to regulate investments and
set minimum solvency margins and the Tariff Advisory
Committee set up.
The General Insurance Business (Nationalisation) Act,
1972 nationalised the general insurance business in India
with effect from 1st January 1973.
107 insurers amalgamated and grouped into four
companies viz. the National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental
Insurance Company Ltd. and the United India Insurance
Company Ltd. GIC incorporated as a company.

INDIAN INSURANCE MARKET HISTORY

Insurance has a long history in India. Life Insurance in its current form was
introduced in 1818 when Oriental Life Insurance Company began its operations
in India. General Insurance was however a comparatively late entrant in 1850
when Triton Insurance company set up its base in Kolkata. History of Insurance
in India can be broadly bifurcated into three eras: a) Pre-Nationalisation b)
Nationalisation and c) Post-Nationalisation. Life Insurance was the first to be
nationalized in 1956. Life Insurance Corporation of India was formed by
consolidating the operations of various insurance companies. General
Insurance followed suit and was nationalized in 1973. General Insurance
Corporation of India was set up as the controlling body with New India, United
India, National and Oriental as its subsidiaries. The process of opening up the
insurance sector was initiated against the background of Economic Reform
process which commenced from 1991. For this purpose Malhotra Committee
was formed during this year who submitted their report in 1994 and Insurance
Regulatory Development Act (IRDA) was passed in 1999. Resultantly Indian
Insurance was opened for private companies and Private Insurance Company
effectively started operations from 2001.

Page 4 of 25

SWOT ANALYSIS OF INSURANCE SECTOR

STRENGTHS
Rural customers are a must
As per the regulator IRDA, all the companies incorporated should at least do
5% of its business in the rural parts of the country. If not, the regulator would
not allow the company to function anywhere within the country. So this is a
great advantage for not only the rural population but also the newly formed
companies since most of the revenue could be earned from the rural India.
Use of IT
IT is bringing new dimensions to insurance sector. The Insurance companies
are utilizing the Information technology applications for better customer
service, cost reduction, new product design and development. New technology
gives the policyholders / insured better, wider and faster access to products
and services.

WEAKNESS
New Insurers
The new insurers will have to invest a minimum capital of Rs. 100 crores. The
normal gestation period is of 5 years. The generation of profit normally starts
in the sixth year. Hence the new insurers have to lock up their capital for at
least 5 years.
Outdated Products
Today, LIC has more than 60 products and GIC has more than 180 products to
offer in the market. But most of them are outdated, as they are not suitable to
the needs of the consumers. Hence old as well as new insurers have to offer
innovative products to the consumers and bringing more products would
require good amount of capital investment.

OPPORTUNITIES
Vast country
India is a vast country with more than 5, 76,000 villages having a population of
at least 500-600 per village. The companies could recognize the fact that if it
takes the whole zilla as one, it would consist of a population more than 500010000. One zilla could give them a good amount of business. The company
could have this opportunity and tap it and reap revenues.

Page 5 of 25

Job opportunities
Since the sector has opened up, many new companies have already started its
operation and few are just about to begin, Major areas of employment in this
sector are the agents. A company can appoint any number of agents anywhere
within the country on commission basis. Moreover, the professional staff and
the peons and clerks appointment also increase. Thus this sector has
tremendous scope on employment.

THREATS
Lack of awareness
With limited range of products offered by LIC and GIC, there is chaos as far as
the consumers are concerned. The existing level of awareness of the
consumers for insurance products is very low. This is because only 62% of the
population of India is literate and only 10% are well educated. Even the
educated consumers are ignorant about the various products of insurance.
Lower profit margin
Increasing expenses and lower profit margins will hit hard on the smaller
agencies and insurance companies.

Page 6 of 25

PEST ANALYSIS OF INSURANCE SECTOR

There are several forces at work in every sector and every industry of an
economy. PEST refers to different political, economic, social and political
factors that affect a particular industry. With regards to Insurance sector, these
factors are as follows
POLITICAL FACTORS
1. Malhotra Committee:Till the year 1993, the insurance sector accounted to just 2% of the GDP
whereas the world average was 8%. So, to improve the share of insurance,
the government set up Malhotra committee, headed by former finance
secretary and RBI governor R.N.Malhotra. The objectives of this committee
are as follows
1. To evaluate the Indian insurance industry and recommend its future
direction.
2. To complement the reforms initiated in the financial sector.
3. To create more efficient and competitive financial system and recognising
that insurance is the important part of the overall financial system.
Key recommendations:
1. Private companies with minimum paid up capital of Rs. 1 bn should be
allowed to enter the industry.
2. Foreign companies may be allowed to enter the industry in collaboration
with the domestic companies.
3. Only one state level life insurance company should be allowed to
operate in each state.
2. Privatisation:The introduction of private players in the industry has added to the colours in
the dull industry. The initiatives taken by the private players are very
competitive and have given immense competition to the one time monopoly
of market, LIC. The new players have improved the service quality of the
insurance. As a result, LIC down the years has seen a declining phase in its
career. The market share was distributed among the private players. Though
LIC still holds 80% of the insurance sector, the upcoming nature of these
private players are enough to give more competition to LIC in the near future.
3. FDI in insurance sector:Then the issue came of the amount of FDI to be allowed by a foreign player in
the insurance sector. The government had allowed the private players to
have foreign equity upto just 26%. Efforts are going on to raise this to 49%.
After the opening up of the sector, a total of 18 private sector companies
have entered the life insurance business and all of them have entered with
the foreign partner.
ECONOMIC FACTORS
1. Growing economy:Page 7 of 25

By 2025, the Indian economy is projected to be about 60% the size of the US
economy. The transformation into the tripolar economy will be complete by
2035. With the Indian economy only a little smaller than the US economy but
larger than that of the Western Europe.
India, which is now the fourth largest economy in terms of purchasing power
parity, will overtake Japan and become the third major economic power
within 10 years.
All these facts or forecasts only drive at one point India is booming as a
market. The global insurance industry has a big eye on India owing to its big
opportunity. India is the next big thing in the global insurance industry.
2. Bancassurance:Bancassurance means selling life insurance through bank branches and has
also driven life insurance business over the two years. Heres why first,
banks deposits as a percentage of total financial assets of thehousehold
sector have gone down from about 46% in 1980 to about 30% now. This
means that banks have to seek other avenues, beyond just interest incomes,
to remain profitable. Banks have found that selling life insurance policies is
the great way to make profits.
3. Tax benefits:Payment of insurance had also been included in the service tax net in 2004
budget. The tax rebate under section 88 has now been replaced by section
80C. Under section 80C, one can invest a sum of upto Rs. 1 lakh in
investment avenues like NSC, PPF, infrastructure bonds, life insurance and
the same will be deducted from an individuals taxable income. An individual
can now allocate and enhance amount to insure himself adequately and still
get a tax benefit.
SOCIAL FACTORS
1. Life expectancy and mortality rate:The life expectancy is defined as the number of years for which a new born
baby will live in the prevailing mortality conditions of that particular year.
The mortality or the crude death rate refers to the number of deaths per
1000 people.
Both these factors are very important, as they are used to derive the
premium of a particular policy. All the insurance companies follow a set
standard table refering to which they decide upon the premium rates. This is
generally prescribed by the government. Following is the life expectancy and
death rate in India:Table 3: Life expectancy and death rate in India
Life expectancy
Crude birth rate
Crude death rate
Infant mortality
rate

1951
36.7
40.8
25
146

1981
54
33.9
12.5
110

2001
64.6
26.1
8.7
70
Page 8 of 25

2. Demographics:One of the major influences on the premiums or prices charged by the

insurance companies is on the basis of the demographics. Premium rates
largely depend on the age, sex of the individual insured. All the insurance
policies have a different rate of premiums to be paid. This is mainly due to
the difference in the risk involved of different individuals insured.
In the insurance industry, the companies have different premium rates for
men and women. This cannot be actually called as gender discrimination. As
is said earlier, the premium depends on the life expectancy in the particular
country. Usually the women are expected to live more than the men and the
difference is 5 years and greater. Hence, what the insurers argue is that the
women are a relative less risk than the men. And hence, the premium charge
is more for men.
3. Improving standard of living:If by 2030, 50% of the Indian population reaches the level of middle class,
Indian market for insurance sector will reach the level of 600 million from
conservatively estimated present level of 100 million. Indian market is big
enough by global standards for vigorous development as the premium
density is only 0.6% as compared to 3-5% for developed markets.
4. Insurance offered by NGOs / Community based health insurance:Community based schemes are typically targeted at poorer populations living
in communities in which they are involved in defining contribution level and
collecting mechanisms, defining the content of the package, allocating the
schemes, financial resourses. These schemes are generally run by trust
hospitals or non-governmental organisations. The benefits offered are mainly
in terms of preventive care, though ambulatory and in-patient care is also
covered. Such schemes tend to be financed through patent collection,
government grants and donations.
TECHNOLOGICAL FACTORS
1. Information technology:Computers were introduced in the mid 1960s and 1980s. The unit record
machines which were earlier used in 1950s were phased out and the entire
process was computerised. This brought about greater efficiency and quick
service delivery. There was a tremendous increase in the use of technology in
the late 1990s.
Today, internet has completely changed the service delivery process. It also
uses distribution networks for selling insurance policies and for sending the
premium notices to policy holders through email.
LIC has commissioned a MAN (Metropolitan Area Network) connecting more
than 75 branches in Mumbai. This enables the policy holders to pay their
premiums, get their status report, surrender the value quotation and loan
quotation from any branch in the city. These MAN centers were connected to
each other by WAN (Wide Area Network). This WAN designed for distributing
processing without a central database. Each division maintains the database
of policy holders.
Page 9 of 25

Many insurance companies have a tie up with commercial banks so as to

enable policy holders to use the facility of paying premiums to the bank
ATMs.
Almost all the insurance companies have their own call centers which cater
to the phone based queries of policy holders.

Page 10 of 25

2. Electronic Clearance Service (ECS):Almost all the big organisations today provide the ECS facility to its
customers. A policy holder having an account in any bank which is a member
of the local clearing house can opt for ECS debit to pay premiums. The
advantage here is that once the option is exercised, the policy holder need
not visit a branch for paying the premium or collecting the receipts.

Page 11 of 25

REGULATORY BODY IN INDUSTRY: IRDA

The Insurance Regulatory and Development Authority Act was
introduced to
end the monopoly of State-owned companies and to invest in the Insurance
Regulatory Authority power to control the insurance sector.
The Insurance Regulatory and Development Authority (IRDA) is a
national agency of the government of India, based in Hyderabad. It was
formed by an act of Indian Parliament known as IRDA Act 1999, which was
amended in 2002 to incorporate some emerging requirements.

MISSION
Mission of IRDA as stated in the act is "to protect the interests of the
policyholders, to regulate, promote and ensure orderly growth of the insurance
industry and for matters connected therewith or incidental thereto."

EXPECTATIONS
The law of India has following expectations from IRDA
1. To protect the interest of and secure fair treatment to policyholders;
2. To bring about speedy and orderly growth of the insurance industry
(including annuity and superannuation payments), for the benefit of the
common man, and to provide long term funds for accelerating growth of the
economy;
3. To set, promote, monitor and enforce high standards of integrity, financial
soundness, fair dealing and competence of those it regulates;
4. To ensure that insurance customers receive precise, clear and correct
information about products and services and make them aware of their
responsibilities and duties in this regard;
5. To ensure speedy settlement of genuine claims, to prevent insurance frauds
and other malpractices and put in place effective grievance redressal
machinery;
6. To promote fairness, transparency and orderly conduct in financial markets
dealing with insurance and build a reliable management information system to
enforce high standards of financial soundness amongst market players;
7. To take action where such standards are inadequate or ineffectively
enforced;
8. To bring about optimum amount of self-regulation in day to day working of
the industry consistent with the requirements of prudential regulation.
Page 12 of 25

DUTIES, POWERS AND FUNCTIONS OF IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of
IRDA
1. Subject to the provisions of this Act and any other law for the time being in
force, the Authority shall have the duty to regulate, promote and ensure
orderly growth of the insurance business and re-insurance business.
2. Without prejudice to the generality of the provisions contained in subsection (1), the powers and functions of the Authority shall include,
a) Issue to the applicant a certificate of registration, renew, modify,
withdraw, suspend or cancel such registration.
b) Protection of the interests of the policy holders in matters concerning
assigning of policy, nomination by policy holders, insurable interest,
settlement of insurance claim, surrender value of policy and other terms
and conditions of contracts of insurance.
c) Specifying requisite qualifications, code of conduct and practical training
for intermediary or insurance intermediaries and agents.
d) Specifying the code of conduct for surveyors and loss assessors.
e) Promoting efficiency in the conduct of insurance business.
f) Promoting and regulating professional organizations connected with the
insurance and re-insurance business.
g) Levying fees and other charges for carrying out the purposes of this Act.
h) Calling for information from, undertaking inspection of, conducting
enquiries and investigations including audit of the insurers,
intermediaries, insurance intermediaries and other organizations
connected with the insurance business.
i) Control and regulation of the rates, advantages, terms and conditions
that may be offered by insurers in respect of general insurance business
not so controlled and regulated by the Tariff Advisory Committee under
section 64U of the Insurance Act, 1938 (4 of 1938).
j) Specifying the form and manner in which books of account shall be
maintained and statement of accounts shall be rendered by insurers and
other insurance intermediaries.
k) Regulating investment of funds by insurance companies.
l) Regulating maintenance of margin of solvency.
m) Adjudication of disputes between insurers and intermediaries or
insurance intermediaries.
n) Supervising the functioning of the Tariff Advisory Committee.
o) Specifying the percentage of premium income of the insurer to finance
schemes for promoting and regulating professional organizations
referred to in clause.
p) Specifying the percentage of life insurance business and general
insurance business to be undertaken by the insurer in the rural or social
sector.
Page 13 of 25

Page 14 of 25

CURRENT SCENARIO IN INDUSTRY

Liberalization and Globalization have allowed the entry of foreign players
in the Insurance sector. With the entry of private and foreign players in the
Insurance business, people have got a lot of options to choose from. To
survive, the focus of the modern insurers shifted to a customer-centric
relationship.
India's economic development made it a most lucrative Insurance
market in the world. Before the year 1999, there was monopoly state run LIC
transacting life business and the General Insurance Corporation of India. In the
wake of reform process and passing Insurance Regulatory and Development
Authority (IRDA) Act through Indian parliament in 1999, Indian Insurance was
opened for private companies. India offers immense possibilities to Insurers
since it is the world's most populous country having over a billion people. At
present there are fourteen companies each in Life and General Insurance.
Private and Foreign entrants in the Insurance Industry made others
difficult to retain their market. Higher customer aspirations lead to new
expectations and compel him to move towards the insurer who provides him
the best service in time.

FACTORS INVOLVED IN CURRENT MARKET SCENARIO

1. Information Technology:The Insurance companies are utilizing the Information technology
applications for better customer service, cost reduction, new product design
and development and many more. In the initial years IT was used more to
execute back office functions like maintenance of accounts, reconciling broker
accounts, client processing etc. With the advent of "database concepts", these
functions are better integrated in an administrative efficiency. The internet
technology has enabled the Insurer to innovate new products, provide better
customer service and deeper and wider insurance coverage to them. At
present, Insurance companies are giving customers a distinct claim id to track
claims on-line, entertaining on-line enrollment, eligibility review, financial
reporting, and billing and electronic fund transfer to its benefit customers.
2. Product Innovation:Insurers are continuously innovating new products based on forwardlooking models. They have developed new products addressing the new
challenges in society and products to address the hazards from new
environmental issues. Understanding the customer better enable Insurance
companies to design appropriate products, determine price correctly and to
increase profitability. Since a single policy cannot meet all the Insurance
objectives, one should have a portfolio of policies covering all the needs.
Product development is made possible by integrating actuarial, rating, claims
and illustration systems. At present, the Life Insurers are concentrating on the
pension schemes and the Non-Life Insurers on many innovative schemes of
various realms and thereby enriching their market share. Moreover, with
Page 15 of 25

increased commoditization of insurance products, brand building is going to

play a vital role.
3. Distribution Network:While companies have been successful in product innovation, most of
them are still grappling with right mix of Distribution Channels for capturing
maximum market share to build brand equity, building strong and effective
customer relationships and cost effective customer service. While the
traditional channel of tied up advisors or agents would be the chief distribution
channel, insurer should innovate and find new methods of delivering the
products to customers. Corporate agency, brokerage, Bank assurance, einsurance, cooperative societies and panchayats are some of the channels,
which can be tapped by the insurers to reach the appropriate market
segments. Now days, the urban masses are tapped with the new techniques
provided by Information Technology through Internet. Rural masses are
attracted by the consultative approach adopted by the Insurers. Moreover,
they attract the customers through telephone and mobile also.
4. Customer services:In the present competitive scenario, a key differentiator is the
professional customer service in terms of quality of advice on product choice
along with policy servicing. Servicing focus is on enhancing the customer's
experience and maximizing his convenience. This calls the effective CRM
system, which eventually creates sustainable competitive advantage and
enables to build long lasting relationship.
5. Modern Marketing Approach:After doing market research and finalizing on segmentation, targeting
and positioning the strategy would focus on the marketing mix namely,
Product, Price, Place and Promotion. While determining the implementation
methodology, the four characteristics viz. Intangibility, Inseparability, Perish
ability and Variability gives rise to certain unique requirements that deserve
careful attention while formulating the marketing strategy for insurance. After
implementation, the insurers should concentrate on the effective control that
would enhance their business.
In India Insurance is sold and not bought. The agents / Advisors by using
various strategies sell the product by convincing the customers. Moreover,
they push Policies with the highest premium to pocket a higher commission.
The consultative approach to selling is the modern approach, which helps
customers and prospects to buy. A consultant makes calls and sells just like
any other sales person. The difference is in their attitude, their approach and
their commitment. Here, the customer is seen as a person to be served and
not a person to be sold. It helps the purchaser to make an intelligent decision.
The four-step process includes:
1. Need discovery.
Page 16 of 25

2. Selection of the product.

3. Need satisfaction presentation.
4. Serving the sale.

KEY PLAYERS WITH MARKET SHARE

INTRODUCTION
Global integration of financial markets resulted from de-regulating measures,
technological information explosion and financial innovations. Liberalization
and Globalization have allowed the entry of foreign players in the Insurance
sector. With the entry of private and foreign players in the Insurance business,
people have got a lot of options to choose from. Radical changes are taking
place in customer profile due to the changing life style and social perception,
resulting in erosion of brand loyalty. To survive, the focus of the modern
insurers shifted to a customer-centric relationship. The paper focuses the
current position of insurance industry.

LIBERALIZATION AND PRIVATISATION (HOW THE DIFFERENT

KEY PLAYERS CAME INTO MARKET?)
India's economic development made it a most lucrative Insurance market in
the world. Before the year 1999, there was monopoly state run LIC transacting
life business and the General Insurance Corporation of India with its four
Subsidiaries transacting the rest. In the wake of reform process and passing
Insurance Regulatory and Development Authority (IRDA) Act through Indian
parliament in 1999, Indian Insurance was opened for private companies.
Liberalization on the Insurance sectors has allowed the foreign players to enter
the market with their Indian partners. Most of the foreign Insurers have joined
within the local market. India offers immense possibilities to foreign Insurers
since it is the world's most populous country having over a billion people.
Insurance industry had ten and six entrants in life and non-life sector
respectively in the year 2000-2001. The industry again saw two and three
entrants in the life and non-life business respectively in the year 2001-2002.
One additional entrant was made both in the life and in non-life business in
2004 and 2005 respectively. At present there are fourteen companies each in
Life and General Insurance. The Funds earlier generated by the state owned
insurers have been diversified with other new insurers. We should wait and see
how the new players are going to boost up our economy.

COMPETITION
Private and Foreign entrants in the Insurance Industry made others difficult to
retain their market. Higher customer aspirations lead to new expectations and
compel him to move towards the insurer who provides him the best service in
time. It becomes less viable for them even to maintain the functional networks
Page 17 of 25

or competitive standards and services. To survive in the Industry they analyse,

the emerging requirements of the policyholders/insurers and they are in the
forefront in providing essential services and introducing novel products.
Thereby they become niche specialists, who provide the right service to the
right person in right time.
The following table shows the market share of life and non-life
insurers
MARKET SHARE (%)

LIFE INSURERS

NON LIFE INSURERS

1.

LIC

76.07 1.

New India

21.41

2.

ICICI Prudential

6.91

National

17.11

3.

Bajaj Allianz

4.75

United India

17.11

4.

HDFC Standard

2.98

4.

Oriental

17.02

5.

Birla Sunlife

1.72

5.

ICICI- Lombard 8.04

6.

Tata AIG

1.66

6.

Bajaj Allianz

6.15

7.

SBI Life

1.46

7.

IFFCO-Tokio

4.00

8.

Max New York

1.28

8.

9.

Aviva

1.08

9.

ECGC

2.50

10. Kotak Mahindra Old Mutual

0.71

10.

Royal
Sundaram

2.17

11. ING Vysya

0.54

11.

Cholamandala 1.22

2.

3.

Tata-AIG

2.89

Page 18 of 25

12. AMP Sanmar

0.46

12.

HDFC-Chubb

0.89

13. Met Life

0.37

13.

Reliance
General

0.75

14. Sahara Life

0.03

14.

Agriculture
Insurance Co.

--

Private total

23.93 Private total

27.35

Public total

76.07 Public total

72.65

Grand total

100.0 Grand total

0

100.0
0

Source : www.irdaindia.org

In the above table shows, the private players in the life insurance business
have increased their market share to 23.93 per cent. Among them ICICI
prudential is ranked first in capturing the market followed by Bajaj Allianz and
HDFC Standard. In the General Insurance sector the private players have
captured 27.35 per cent. Among them ICICI-Lombard is ranked first, followed
by
Bajaj
Allianz
and
IFFCO-Tokyo.
The healthy competition in the sector enabled the State owned insurers of our
mother country to reduce its market share to 76.07 per cent and 72.65 percent
in life and non-life business respectively. Moreover, private insurers have
planned to increase their market share in the next five years. The public
insurers have to enrich its approach to withhold its share.

Page 19 of 25

FUTURE TRENDS: MARKET GROWTH

With a huge population base and large untapped market, insurance industry is
a big opportunity area in India for national as well as foreign investors.
India is the fifth largest life insurance market in the emerging insurance
economies globally and is growing at 32-34% annually. This impressive growth
in the market has been driven by liberalization, with new players significantly
enhancing product awareness and promoting consumer education and
information.
The strong growth potential of the country has also made international players
to look at the Indian insurance market. Moreover, saturation of insurance
markets in many developed economies has made the Indian market more
attractive for international insurance players. This research report will help the
client to analyze the leading-edge opportunities critical to the success of
insurance industry in India. Based on this analysis, the report gives a future
forecast of the market that is intended as a rough guide to the direction in
which the market is likely to move.
-Total life insurance premium in India is projected to grow Rs 1,230,000 crore
by
2010-11.
-Total non-life insurance premium is expected to increase at a CAGR of 25% for
the period spanning from 2008-09 to 2010-11.
-With the entry of several low-cost airlines, along with fleet expansion by
existing ones and increasing corporate aircraft ownership, the Indian aviation
insurance market is all set to boom in a big way in coming years.
-Home insurance segment is set to achieve a 100% growth as financial
institutions have made home insurance obligatory for housing loan approvals.
-Health insurance is poised to become the second largest business for non-life
insurers after motor insurance in next three years.
-A booming life insurance market has propelled the Indian life insurance agents
into the top 10 country list in terms of membership to the Million Dollar
Round Table (MDRT) an exclusive club for the highest performing life
insurance agents.
To grab the maximum market share, the companies are focusing on
the following aspects:Information Technology
Insurers are the earlier adopters of technology. Because of the Information
revolution, customers are free to choose from a wide range of new and
innovative products. The Insurance companies are utilizing the Information
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technology applications for better customer service, cost reduction, new

product design and development and many more.
New technology gives the policyholders / insured better, wider and faster
access to products and services. The impact of Information Technology in
Insurance business is being felt at an accelerating pace. In the initial years IT
was used more to execute back office functions like maintenance of accounts,
reconciling broker accounts, client processing etc. With the advent of
"database concepts", these functions are better integrated in an
administrative efficiency.
The real evolution is however emerged out of Internet boom. The Internet has
provided brand new distribution channels to the Insurers. The technology has
enabled the Insurer to innovate new products, provide better customer service
and deeper and wider insurance coverage to them. At present, Insurance
companies are giving customers a distinct claim id to track claims on-line,
entertaining on-line enrollment, eligibility review, financial reporting, and
billing and electronic fund transfer to its benefit clan customers.
Product Innovations
Insurers are continuously innovating new products based on forward-looking
models. They have developed new products addressing the new challenges in
society and products to address the hazards from new environmental issues.
Companies will need to constantly innovate in terms of product development
to meet ever-changing consumer needs. Understanding the customer better
will enable Insurance companies to design appropriate products, determine
price correctly and to increase profitability. Since a single policy cannot meet
all the Insurance objectives, one should have a portfolio of policies covering all
the needs. Product development is made possible by integrating actuarial,
rating, claims and illustration systems. At present, the Life Insurers are
concentrating on the pension schemes and the Non-Life Insurers on many
innovative schemes of various realms and thereby enriching their market
share. Moreover, with increased commoditization of insurance products, brand
building is going to play a vital role.
Distribution Network
While companies have been successful in product innovation, most of them
are still grappling with right mix of Distribution Channels for capturing
maximum market share to build brand equity, building strong and effective
customer relationships and cost effective customer service. While the
traditional channel of tied up advisors or agents would be the chief distribution
channel, insurer should innovate and find new methods of delivering the
products to customers. Corporate agency, brokerage, Banc assurance, einsurance, cooperative societies and panchayats are some of the channels,
which can be tapped by the insurers to reach the appropriate market
segments. Now days, the urban masses are tapped with the new techniques
provided by Information Technology through Internet. Rural masses are
attracted by the consultative approach adopted by the Insurers. Moreover,
they attract the customers through telephone and mobile also.
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Page 22 of 25

Customer Education and Services

Insurance is a unique service industry. The key industry drivers are related to
life style issues in terms of perceiving insurance as a savings instrument rather
than for risk cover, need based selling, quality of service and customers
awareness.
In the present competitive scenario, a key differentiator is the professional
customer service in terms of quality of advice on product choice along with
policy servicing. Servicing focus is on enhancing the customer's experience
and maximizing his convenience. This calls the effective CRM system, which
eventually creates sustainable competitive advantage and enables to build
long lasting relationship.
MODERN MARKETING APPROACH:
Marketing strategies for insurance in the emerging scenario could be
understood in terms of the following steps:
Having done market research and finalizing on segmentation, targeting and
positioning the strategy would focus on the marketing mix namely, Product,
Price, Place and Promotion. While determining the implementation
methodology, the four characteristics viz. Intangibility, Inseparability, Perish
ability and Variability gives rise to certain unique requirements that deserve
careful attention while formulating the marketing strategy for insurance. After
implementation, the insurers should concentrate on the effective control that
would enhance their business.
In India Insurance is sold and not bought. The agents/Advisors by using various
strategies sell the product by convincing the customers. Moreover, they push
Policies with the highest premium to pocket a higher commission. The
consultative approach to selling is the modern approach, which helps
customers and prospects to buy. A consultant makes calls and sells just like
any other sales person. The difference is in their attitude, their approach and
their commitment. Here, the customer is seen as a person to be served and
not a person to be sold. It helps the purchaser to make an intelligent decision.
The four-step process includes:
1)
2)
3)
4)

Need discovery
Selection of the product
Need satisfaction presentation
Serving the sale

This approach to selling their products requires understanding of concepts and

principles borrowed from the fields of psychology, communications, and
sociology and needs a lot of personal commitments and self discipline from
the seller.
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The commitments referred are:

Finding and understanding the needs of the customers.

Partnering with the customers.

Helping the customers to achieve his business and other objectives by

the purchase of the product or service.

Believing that your products / services are a great fit with your
customer's needs, and

Believing in yourself and your ability to help the customers in solving

their problems.

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BIBLIOGRAPHY

1. http://www.economywatch.com
2. http://www.indianmba.com
3. http://business.mapsofindia.com
4. http://www.irda.gov.in
5. http://www.parisandpartners.com
6. http://www.scribd.com

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