LIFE INSURANCE INDUSTRY

IN INDIA - AN OVERVIEW

T.S.VIJAYAN
Chairman, LIC of India
President, Insurance Institute of India
LIFE INSURANCE INDUSTRY
IN INDIA - AN OVERVIEW

THEME OF THE PRESENTATION

Future challenges in Life Insurance

Business in India
LIFE INSURANCE INDUSTRY
IN INDIA - AN OVERVIEW
• India is the seventh largest country in the world
with a population of around 1100 million.
• India is the second most populous country in the
world, next only to China.
• It has 28 states and 7 Union Territories with
distinct cultural backgrounds.
• India is known for its diversity with multi varied
socio-economic conditions and languages. It has
many geographical features and a rich history.
• India is the largest democratic country in the
world with a strong judicial framework.
LIFE INSURANCE INDUSTRY
IN INDIA - AN OVERVIEW

• The middle class segment is 250 million strong. It

has aspirations and is ambitious.

• India has the 4th largest economy based on

Purchasing Power Parity.

• Indian GDP is growing at an average of 9% over

the last few years.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• The total individual policies serviced by all life
companies in India are around 270 millions of
which LIC alone has around 250 million.

• Total premium of all life companies is only about

4% GDP.

• It still leaves a lot of potential for the life

companies to grow and prosper in India.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• Since Independence, in 1947 India had followed a
socialistic pattern of economy, wherein
government intervention and investment were
high.

• Even then there was a strong private sector

participation since the time of Independence.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
The history of Life Insurance in India
• The birth and growth of the Insurance sector in
India is quite breath taking.

• In the year 1818 the Oriental Life Insurance

Company was started at Kolkata.

• In 1912 the Indian Life Assurance Companies Act

was enacted as the first statute to regulate the Life
Insurance Business.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• In 1938 the earlier legislation was consolidated
and amended to become the Insurance Act with
the objective of protecting the interests of the
insuring public.
• In 1956, the LIC of India was formed under the
LIC Act,1956 with a capital contribution of Rs. 5
crores i.e $ 1.2 million at current rates from the
Government of India, nationalising 245 life
insurance companies.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• In 1999, the Insurance Regulatory and
Development Authority popularly known as IRDA
was created by an act of the Parliament to
regulate all insurance companies and businesses in
India.
• IRDA has evolved into an effective regulator and
it has facilitated the entry and growth of private
players in the insurance sector.
• Since then the growth of the insurance industry in
India has never been the same again.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• Life Insurance is a sun rise industry in India.
• Many major international players are operating
in collaboration with Indian partners. The Joint
Ventures are backed by strong capital base and
latest technology.
• The sector was opened up for private players in
the year 2000. Currently there are 19 companies
operating in India in addition to LIC of India.
• I am proud to state that LIC is the dominant
player.
 LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
LIC Highlights

Assets as on 31.03.2008 : $ 185 billion

No. of policies : 250 million
No. of employees : 1,13,000
No. of agents : 1.2 million
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW

• After opening up of the sector the life insurance

industry has grown leaps and bounds. The
industry has earned $ 45 billion total premium
income during the F.Y 2007-08.

• The life insurance companies are the largest

institutional investors in India.
 LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• The life insurance companies have brought in
huge capital for investment and expansion. They
have generated good employment opportunities,
both direct and in-direct.

• The latest technology is being introduced by all the

companies thereby improving the servicing
standards.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• Innovative and market driven products are being
offered by all the companies.
• All companies are building the distribution channels
with strong tied agency network.
• Alternate distribution channels are also being
developed in order to strengthen the overall process
of procuration of business and deliver of service.
• India has a total of 2.5 million agents of which 50%
are with LIC alone.
• There is a sharp increase in the remuneration of life
insurance professionals
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
Challenges : Many

• Professionals and experts are in short supply. Man

power requirement has increased manifold.

• Increase in salaries to employees leading to high

levels of attrition. Retention of employees is a
major challenge.
 LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
Challenges : Many

• India being a vast country and with huge

population, is a challenge for the life companies.

• Designing products for the people of various

economic strata is a daunting task indeed.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• Prosperity of all companies depends upon their
capability to innovate and include all sections of
the society into their business portfolio.
• Micro Insurance and financial inclusion will be
major challenges for all the companies.
• There is a shift from traditional endowment
policies to unit linked policies.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW

• There is a shift from long term policies to short

term.

• Customers are expecting higher returns and

thereby a strong emphasis on unit linked plans.

• When stock markets are volatile can the life

insurance companies overcome the turbulence?
Are they equipped to tide over the storm?
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
• One of the key drivers of the Indian economy has been the
dramatic increase of the urban population.

• Urban India today is already more populous than the

entire United States. By 2025, it will exceed the current
population of the European Union.

• Apart from this, the real potential lies in the rural India
where prosperity is on the rise

• Go Rural is the slogan for most of the companies in India

today.
 LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW
Key Issues
• Building institutions for development of self
regulation for better market conduct
• Development professionalism and
organising research for industry to develop
on scientific lines
• Ensuring profitability and return to
stakeholders by cost competitive policies.
LIFE INSURANCE INDUSTRY IN
INDIA - AN OVERVIEW

Thank You