PEST ANALYSIS OF LIFE INSURANCE INDUSTRY IN INDIA

A. POLITICAL FACTORS:
1. INCREASED SERVICE TAX ON PREMIUM: The imposition of service tax
on the services provided by the insurers has been increased significantly
over past few years by the government.
2. ENDING OF GOVERNMENT MONOPOLY: A great revolution in the
insurance sector came in the year 1999 when IRDA passed the bill, lifting
all entry restrictions for private players and allowing foreign players to enter
the market with some limits on direct foreign ownership.
3. INCREASE IN FDI LIMIT: The hike in the insurance foreign direct
investment (FDI) limit to 49 per cent from 26 per cent has proved to be very
beneficial for the insurance industry in India. It has encouraged foreign
investors to invest in Indian insurance industry.
4. FAVOURABLE REGULATIONS FOR RURAL INSURANCE: To encourage
insurance sector to increase its spread in rural India, government has made
regulations more favorable for rural people by decreasing the amount of
premiums, introducing new group insurance plans and various other special
plans for farmers.

B. ECONOMIC FACTORS:

1. INCREASE IN GROSS DOMESTIC SAVINGS: The gross domestic

savings of people in India have increased significantly, due to which they
are moving towards new ways of investing money for the future benefits
including various insurance plans. As compared to previous year i.e.2007,
the insurance industry thus expected to grow by about 40% during this
fiscal year, i.e.2008.
2. CONTRIBUTION TO COUNTRYS G.D.P: According to government
sources, the insurance and banking services contribution to the countrys
gross domestic product is 7% out of which the gross premium collection
by various insurance companies forms a significant part.
3. ROLE IN GOVT. SECURITIES MARKET: Insurance companies are
fest emerging as one of the most prominent players in the govt. securities

market. The share of insurance companies in overall investment in the Gsec market has more than doubled to 23% during 2007-08 from 9%
during the previous fiscal year.
4. BIGGEST DOMESTIC PLAYER IN EQUITY MARKETS: According
to RBIs annual report for 2007-08, the insurance companies invested Rs.
35880 crore in the G-sec market, which is over 173.06% higher than the
Rs.13880 crore they invested in 2006-07. Thus insurers have emerged as
the biggest domestic institutional players in the equity markets.
C. SOCIAL FACTORS:
1. LOW INSURANCE COVERAGE: In India insurance is considered as which is
pushed upon the customers to buy. People are unwilling to buy insurance due to lack
of awareness.
2. INCREASE IN LIFE SPAN AND RISE IN ELDERLY POPULATION: In India life
span has increased over past few years due to which the elderly population in India is
rising day by day. To live a happy and independent life, more no. of educated
peoples is moving towards investing in insurance to ensure a respectful and
independent life even in old age.
3. UNCERTAINITY ABOUT LIFE: Due to increasing no. of events of terrorist attacks
in various parts of the country, people have started viewing life as more uncertain. It
has developed a kind of fear factor in the minds of people leaving them more worried
about their family and kids. Due to this reason they are moving more and more
towards buying insurance policies in order to secure their familys future.
4. CHANGING INDIAN PERCEPTION: In India earlier people used to view
insurance as a tax saving device or as a method of investment. But, nowadays a great
change in the perception has come. People have started realizing the importance of
getting insured. Now more no. of people is viewing it as a transfer of risk for a good
future.
5. CHANGE IN FAMILY SYSTEM: Since past, joint family system was the most
prevalent in all the stratus of Indian society. At that time, in case of a mans death,
there were other people in the family to take care of his wife and kids. But, with the
passage of time, a big change in our culture has come. More no. of people is moving
towards nuclear family system. In todays scenario there is no one to help a widow
and her kids because everyone is busy with his/her family. In such a situation more
no. of people are opting for insurance to secure their spouse and childrens future.
6. INCREASE IN LIFE STYLE DISEASES: Due to modernization, the life has
become very fast. Many changes have taken place in the life style of people, due to
which a large no. of new life style diseases have made their place in our country.
Thus, more no. of people is opting for health insurance etc to lead a better and more
secured life.

D. TECHNOLOGICAL FACTORS:
1. AUTOMATION OF PROCESSES: Nowadays, with advancement in technology the
whole process of insurance has become automated. Earlier it used to take 15days to
45days for the issuance of policy documents. But, nowadays the whole process gets
completed within 5 to 7 days.
2. INTERNET DRIVEN INFORMATION ERA: With an increase in internet usage
and its increasing spread, it has become easier for people to get informed about
everything at their home only. Now they dont have to waste time in gathering
information before taking any financial step. Every information is now-a-days is
available on the net.
3. BUSINESS PROCESS MONITORING: It has become easier fo0r people to track
every event in a business process. It has resulted in more transparency in every
aspect of business processing.
4. E-BANKING FACILITY: More no. of people in urban sector are moving towards ebanking and credit card facilities etc, which has made payment of premium much
easier, convenient and hassle free for customer.

E. LEGAL FACTORS:
1. REGULATORY BODIES: IRDA (Insurance Regulatory Development
Authority) keeps on changing policies related to insurance which makes
difficult for the companies to adopt quickly.
2. RENEWAL OF REGISTRATION: An insurer, who has been granted a
certificate of registration, should have the registration renewed annually with
each year ending on March 31 after the commencement of the IRDA Act.
3. REQUIREMENTS AS TO CAPITAL: The minimum paid up equity capital,
excluding required deposits with the RBI and any preliminary expenses in the
formation of the country, requirement of an insurer would be Rs 100 crore to
carry on life insurance business and Rs 200 crore to exclusively do
reinsurance business as per Section 6.