The Emerging Insurance sector of India.

EXECUTIVE SUMMARY : Insurance sector in INDIA is booming up but not to levelcomparative with the developed economies such as Japan,Singapore etc. Also with the opening of the insurance sector to theprivate players have provided stiff competition resulting into qualityproducts. Also there is a need to restructure the Indian Governmentowned Life insurance Corporation of India so as to maximizerevenue and in turn profits. IRDA regulations and norms for theallocation of funds need to have a comprehensive look. In the phaseof declining interest rates and rising inflation the funds need to beapplied in productive areas so as to generate high returns. Also interms of clients servicing areas such as premium payments, after sales service, policy dispatch, redressal of grievances has to beamended. In the current scenario, LIC has to provide flexible productssuited to the customers requirements. Also a proper and systematicrisk management strategy needs to be adopted. After the increase interrorism and destructive events around the global world such asSeptember 11 attack on World Trade Centre, US Taliban war, US Iraq war etc.. an alternative The Emerging Insurance sector of India. EXECUTIVE SUMMARY : Insurance sector in INDIA is booming up but not to levelcomparative with the developed economies such as Japan,Singapore etc. Also with the opening of the insurance sector to theprivate players have provided stiff competition resulting into qualityproducts. Also there is a need to restructure the Indian Governmentowned Life insurance Corporation of India so as to maximizerevenue and in turn profits. IRDA regulations and norms for theallocation of funds need to have a comprehensive look. In the phaseof declining interest rates and rising inflation the funds need to beapplied in productive areas so as to generate high returns. Also interms of clients servicing areas such as premium payments, after sales service, policy dispatch, redressal of grievances has to beamended. In the current scenario, LIC has to provide flexible productssuited to the customers requirements. Also a proper and systematicrisk management strategy needs to be adopted. After the increase interrorism and destructive events around the global world such asSeptember 11 attack on World Trade Centre, US Taliban war, US Iraq war etc.. an alternative The Emerging Insurance sector of India. EXECUTIVE SUMMARY : Insurance sector in INDIA is booming up but not to levelcomparative with the developed economies such as Japan,Singapore etc. Also with the opening of the insurance sector to theprivate players have provided stiff competition

resulting into qualityproducts. Also there is a need to restructure the Indian Governmentowned Life insurance Corporation of India so as to maximizerevenue and in turn profits. IRDA regulations and norms for theallocation of funds need to have a comprehensive look. In the phaseof declining interest rates and rising inflation the funds need to beapplied in productive areas so as to generate high returns. Also interms of clients servicing areas such as premium payments, after sales service, policy dispatch, redressal of grievances has to beamended. In the current scenario, LIC has to provide flexible productssuited to the customers requirements. Also a proper and systematicrisk management strategy needs to be adopted. After the increase interrorism and destructive events around the global world such asSeptember 11 attack on World Trade Centre, US Taliban war, US Iraq war etc.. an alternative The Emerging Insurance sector of India. EXECUTIVE SUMMARY : Insurance sector in INDIA is booming up but not to levelcomparative with the developed economies such as Japan,Singapore etc. Also with the opening of the insurance sector to theprivate players have provided stiff competition resulting into qualityproducts. Also there is a need to restructure the Indian Governmentowned Life insurance Corporation of India so as to maximizerevenue and in turn profits. IRDA regulations and norms for theallocation of funds need to have a comprehensive look. In the phaseof declining interest rates and rising inflation the funds need to beapplied in productive areas so as to generate high returns. Also interms of clients servicing areas such as premium payments, after sales service, policy dispatch, redressal of grievances has to beamended. In the current scenario, LIC has to provide flexible productssuited to the customers requirements. Also a proper and systematicrisk management strategy needs to be adopted. After the increase interrorism and destructive events around the global world such asSeptember 11 attack on World Trade Centre, US Taliban war, US Iraq war etc.. an alternative The Emerging Insurance sector of India. EXECUTIVE SUMMARY : Insurance sector in INDIA is booming up but not to levelcomparative with the developed economies such as Japan,Singapore etc. Also with the opening of the insurance sector to theprivate players have provided stiff competition resulting into qualityproducts. Also there is a need to restructure the Indian Governmentowned Life insurance Corporation of India so as to maximizerevenue and in turn profits. IRDA regulations and norms for theallocation of funds need to have a comprehensive look. In the phaseof declining interest rates and rising inflation the funds need to beapplied in productive areas so as to generate high returns. Also interms of clients servicing areas such as premium payments, after sales service, policy dispatch, redressal of grievances has to beamended. In the current scenario, LIC has to provide flexible productssuited to the customers requirements. Also a proper and systematicrisk management strategy

needs to be adopted. After the increase interrorism and destructive events around the global world such asSeptember 11 attack on World Trade Centre, US Taliban war, US Iraq war etc.. an alternative The Emerging Insurance sector of India. EXECUTIVE SUMMARY : Insurance sector in INDIA is booming up but not to levelcomparative with the developed economies such as Japan,Singapore etc. Also with the opening of the insurance sector to theprivate players have provided stiff competition resulting into qualityproducts. Also there is a need to restructure the Indian Governmentowned Life insurance Corporation of India so as to maximizerevenue and in turn profits. IRDA regulations and norms for theallocation of funds need to have a comprehensive look. In the phaseof declining interest rates and rising inflation the funds need to beapplied in productive areas so as to generate high returns. Also interms of clients servicing areas such as premium payments, after sales service, policy dispatch, redressal of grievances has to beamended. In the current scenario, LIC has to provide flexible productssuited to the customers requirements. Also a proper and systematicrisk management strategy needs to be adopted. After the increase interrorism and destructive events around the global world such asSeptember 11 attack on World Trade Centre, US Taliban war, US Iraq war etc.. an alternative The Emerging Insurance sector of India. EXECUTIVE SUMMARY : Insurance sector in INDIA is booming up but not to levelcomparative with the developed economies such as Japan,Singapore etc. Also with the opening of the insurance sector to theprivate players have provided stiff competition resulting into qualityproducts. Also there is a need to restructure the Indian Governmentowned Life insurance Corporation of India so as to maximizerevenue and in turn profits. IRDA regulations and norms for theallocation of funds need to have a comprehensive look. In the phaseof declining interest rates and rising inflation the funds need to beapplied in productive areas so as to generate high returns. Also interms of clients servicing areas such as premium payments, after sales service, policy dispatch, redressal of grievances has to beamended. In the current scenario, LIC has to provide flexible productssuited to the customers requirements. Also a proper and systematicrisk management strategy needs to be adopted. After the increase interrorism and destructive events around the global world such asSeptember 11 attack on World Trade Centre, US Taliban war, US Iraq war etc.. an alternative to reinsurance such as asset backedsecurities is emerging out in the developed economies. Catastrophebonds is one of the alternatives for reinsurance. Finally some policiessuch as pure term and pension schemes needs to be addressed

NTRODUCTION :

Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance,a large number of people associate themselves by sharing risksattached to individuals. The risks which can be insured against,include fire, the perils of sea, death and accidents and burglary. Anyrisk contingent upon these, may be insured against at a premiumcommensurate with the risk involved. Thus collective bearing of risk isinsurance. DEFINITION : General definition: In the words of John Magee, Insurance is a plan by which largenumber of people associate themselves and transfer to the shouldersof all, risks that attach to individuals. Fundamental definition: NLDIMSR 3

The Emerging Insurance sector of India. In the words of D.S. Hansell, Insurance may be defined as a socialdevice providing financial compensation for the effects of misfortune,the payment being made from the accumulated contributions of allparties participating in the scheme. Contractual definition: In the words of justice Tindall, Insurance is a contract in which asum of money is paid to the assured as consideration of insurersincurring the risk of paying a large sum upon a given contingency.

The Emerging Insurance sector of India. 1972 and maintains a very strong hold over the non-life insurancebusiness in India. Due to concerns of (a) Relatively low spread of insurance in the country.(b) The efficient and quality functioning of the Public Sector insurance companies(c) The untapped potential for mobilizing long-term contractualsavings funds for infrastructure the (Congress) government setup an Insurance Reforms committee in April 1993.The Committee submitted its report in January 1994, recommended aphased program of liberalization, and called for private sector entryand restructuring of the LIC and GIC. But now the parliament hasgiven a nod to the Insurance Regulatory and Development Authority(IRDA) bill with some changes in the original structure.

How big is the insurance market ? Insurance is a Rs.400 billion business in India, and together withbanking services adds about 7% to Indias GDP. Gross premiumcollection is about 2% of GDP and has been growing by 15-20% per annum. India also has the highest number of life insurance policies inforce in the world, and total investible funds with the LIC are almost8% of GDP. Yet more than three-fourths of Indias insurable NLDIMSR 6

The Emerging Insurance sector of India. population has no life insurance or pension cover. Health insurance of any kind is negligible and other forms of non-life insurance are muchbelow international standards. To tap the vast insurance potential andto mobilize long-term savings we need reforms whichinclude revitalizing and restructuring of the public sector companies,and opening up the sector to private players. A statutory body needsto be made to regulate the market and promote a healthy marketstructure. Insurance Regulatory Authority (IRA) is one such body,which checks on these tendencies. NLDIMSR 7

The Emerging Insurance sector of India. INDIVIDUAL LIFE INSURANCE COVERAGE INDEX, 1994 COUNTRY NO. OF POLICIES PER 100 PERSONS Indonesia 2.0Philippines 5.6India 12.4Thailand 14.7Malaysia 35.5Hong Kong 69.4South Korea 70.5Taiwan 75.2Singapore 112.6Japan 198.4 Source: Charted Financial Analyst May 1999. (Insurance in Asia:The financial times, quoted from Tillinghast study) individuals. The risks which can be insured against,include fire, the perils of sea, death and accidents and burglary. Anyrisk contingent upon these, may be insured against at a premiumcommensurate with the risk involved. Thus collective bearing of risk isinsurance. DEFINITION :

General definition: In the words of John Magee, Insurance is a plan by which largenumber of people associate themselves and transfer to the shouldersof all, risks that attach to individuals. Fundamental definition: NLDIMSR 3

individuals. The risks which can be insured against,include fire, the perils of sea, death and accidents and burglary. Anyrisk contingent upon these, may be insured against at a premiumcommensurate with the risk involved. Thus collective bearing of risk isinsurance. DEFINITION : General definition: In the words of John Magee, Insurance is a plan by which largenumber of people associate themselves and transfer to the shouldersof all, risks that attach to individuals. Fundamental definition: NLDIMSR 3

individuals. The risks which can be insured against,include fire, the perils of sea, death and accidents and burglary. Anyrisk contingent upon these, may be insured against at a premiumcommensurate with the risk involved. Thus collective bearing of risk isinsurance. DEFINITION : General definition: In the words of John Magee, Insurance is a plan by which largenumber of people associate themselves and transfer to the shouldersof all, risks that attach to individuals. Fundamental definition: NLDIMSR 3

individuals. The risks which can be insured against,include fire, the perils of sea, death and accidents and burglary. Anyrisk contingent upon these, may be insured against at a premiumcommensurate with the risk involved. Thus collective bearing of risk isinsurance. DEFINITION : General definition: In the words of John Magee, Insurance is a plan by which largenumber of people associate themselves and transfer to the shouldersof all, risks that attach to individuals. Fundamental definition: NLDIMSR 3

individuals. The risks which can be insured against,include fire, the perils of sea, death and accidents and burglary. Anyrisk contingent upon these, may be insured against at a premiumcommensurate with the risk involved. Thus collective bearing of risk isinsurance. DEFINITION : General definition: In the words of John Magee, Insurance is a plan by which largenumber of people associate themselves and transfer to the shouldersof all, risks that attach to individuals. Fundamental definition: NLDIMSR 3