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Life Insurance Industry
Present scenario & scope of policy convergence
Ishan Rohit 10/7/2010

Indian Insurance Industry The fiscal 2008-09 witnessed global financial meltdown. Despite it, the Indian insurance industry, which has big opportunity to expand, given the large population and untapped potential, grew satisfactorily. While life insurance business registered a growth of 10.15 per cent, general insurance business recorded a growth of 9.09 per cent in 2008-09. With this, Insurance penetration (premium volume as a ratio of GDP) in rupee terms for the year 2008-09 stood at 4.74 per cent; 4.17 per cent for life insurance and 0.57 per cent for non-life insurance. The level of penetration, particularly in life insurance, tends to rise as income levels increase.

India, with its huge middle class households, has exhibited growth potential for the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The insurance market in India has witnessed dynamic changes including entry of a number of global insurers. Most of the private insurance

5956.74 lakh during 2007-08 showing a marginal increase of 0.19 per cent.26 crore.61 per cent.07 per cent in 2007-08 to 29. Premium Life insurance industry recorded a premium income of Rs. with additional infusion of capital to the extent of Rs. which continued to be Rs.companies are joint ventures with recognized foreign institutions across the globe.15 per cent. stood at Rs.52 per cent as against its previous year negative growth of 1. The private insurers exhibited a growth of 13. The infusion of additional capital of Rs. New Policies New policies underwritten by the life insurers were 509.5 crore. In terms of number of policies underwritten. To that extent.18253. This decline can be attributed to subdued Indian equity market.40 per cent recorded in the previous year.62 crore comprised of Rs.90645.04 crore. LIC.221791. Life Insurance The total capital of the life insurers at end March 2009 stood at Rs. Out of Rs.78 crore.41 crore in the previous financial year.87 per cent in 2008-09 from 46. premium from unit-linked products.221791.26 crore during 2008-09 as against Rs.62 crore. 4969.14 per cent in 2007-08.05 crore from new companies and remaining Rs.57 crore from existing private insurers. private insurers have increased their market share from 26. This resulted in a fall in the share of unit linked premium to the total premium to 40. which is much lower than 67. LIC has lost its market share.201351. .23 lakh in 2008-09 as against 508. 5956. There had been no infusion of capital in the case of LIC. showed a negative growth for the second consecutive year at 4. 987. The decline was observed both in the case of LIC and private insurers.48 per cent in 2008-09.10 per cent. recording a growth of 10.

Regular premium.25191.51 46.74 per cent in 2008-09.95 crore (19.66 2005 4. The private insurers registered a marginal slowdown in ULIP products. the life insurance premium was Rs.49370.26 2006 6.41 2003 13. the market share of private life insurance companies continued to rise in 2008-09. The private insurers increased their premium by 25.96 per cent) of regular premium. .37635.97 per cent).38 2009 Growth rate of premium in percentage The share of ULIP premium to total premium fell to 22.95 20 22.01 per cent in 2008-09 as against an increase of 17.06 10 11.2740.26 per cent).18 per cent) of renewal premium. single premium and renewal premium in 2008-09 were Rs. The size of life insurance market.60 50 40 30 41.6966.25 2004 17. The LIC could grow further its life business by 5. In terms of premium underwritten.77 per cent).03 crore (60. when the industry was opened up.8 2008 32.67 crore (16.21 Life insurance premiums Non-life insurance premiums 0 3.61 2. and Rs.61 per cent in 2007-08.06 per cent in LIC from 31.45 crore (7.56 crore (22.48 crore which comprised of Rs.50 per cent in 2007-08.26 5. as the composition of ULIP premium to the total premium for them was 86.10 per cent in 2008-09 as against a higher rise of 82.07 crore (72.86 per cent) of single premium and Rs. although recording positive growth witnessed retardation in the growth.134785.81 3.19 per cent in 2007-08.34898. Rs. It may be recalled that in 2000-01. as against 88. Rs. respectively.34 per cent in 2007-08.21 2007 5.

21677.14 crore in 2008-09.58324.33 crore in 2007-08.99 per cent in 200708.61686. The benefits paid by the life insurers net of reinsurance was Rs.75 per cent of the total premium underwritten).52478.64 per cent in 200708).56 per cent from its previous year¶s level of 13. The benefits paid by the private insurers were Rs. In the case of LIC.5864. their investment base gets strengthened. 37.19 per cent constituting 9.91 crore in 2007-08.which surged to 29. It is expected that with the stipulation of minimum lock-in period of three years for ULIP products. the share of single premium of private life insurers fell to 9.13869.17 crore in 2008-09 compared to Rs. the investment income including capital gains was lower at Rs.56 crore as against Rs. LIC paid benefits of Rs.03 crore (Rs.05 crore in 200708).08 per cent from 25. constituting 33. As a percentage of total income.56672.37 crore in 2007-08) constituting 26. The market share of private insurers in first year premium increased to 38.44 per cent in 2008-09 as against 86. which showed an increase of 14.56550. Investment income As the operations of the life insurers stabilize.5136.96 per cent in 2007-08). surrenders as a per cent of premium underwritten would come down. Benefits Paid The life industry paid lower net benefits of Rs. While. In contrast.23 per cent in 2008-09 from 52. the market share of private insurers went up further to 61.58343. There has been a significant decrease in the benefits paid on account of surrenders/withdrawals which stood at Rs. In the case of regular premium.98 per cent in the previous year. the market share of LIC in single premium has increased to 90.97 crore (Rs.88 per cent in 2008-09 from 35.25 crore in 2007-08. there has been an increase in the market share in the regular premium.91 per cent . it declined by 23.23 per cent in 2007-08.01 per cent.10 crore in 2008-09 (Rs.36 per cent of the premium underwritten (Rs.61 per cent in 2007-08. resulting in investment income forming a larger proportion of their total income. On the other hand.43122.11 per cent of the premium underwritten (9. market share of private insurers in single premium has declined.32 per cent of the gross premium underwritten (30.61726.64 crore in 2007-08).

Companies have also reported an improvement in the yields on their investments.52 crore and Shriram reported a net profit of Rs. the largest private sector life insurer. Kotak Mahindra. Met Life and Shriram. As against this.71. training costs for developing the agency force.14.3412.70 crore during 2008-09. the company had incurred a loss of Rs.11 crore.06 crore in 2007-08 has recorded a loss of Rs.49 2008-09 from an increase of 37.31 crore during 2008-09. Met Life has reported a net profit of Rs.957. for the first time. During the previous year.95 per cent higher than the previous year¶s total loss of Rs. and insurers are required to inject capital at frequent intervals to achieve growth in premium income.26. the share of investment income to the total income for the private life insurers declined by 336. The company which reported a loss of Rs.779. It is 42. only four have reported profits. The industry is still in the process of stabilizing and despite additional contributions by way of share capital. would be difficult for the insurers to earn profits in the initial seven to ten years of their operations.78 per cent in 2007-08. At the end of March 2009. reported losses for the eighth consecutive years. creating a niche market for its products. Life Insurance Corporation of India has reported an increased profit of Rs. providing for policy liabilities. expenses towards setting up operations.1395.81 per cent in 2008-09 (as against an increase of 23. ICICI Prudential.37 per cent in 2007-08).81 crore. achieving reasonable levels of persistency.63 crore. Profits of life insurers Life insurance industry is capital intensive. has reported a net loss of Rs. it would require time to reach the consolidation stage.87 crore.35 crore as compared to the previous year profit of Rs. which was the first private life insurer to report profit and has been making profits for the past three years. SBI Life.844. LIC.34 crore. the life insurance industry reported a total loss of Rs. They are.8.14. Out of twentytwo life insurers. During the year under review. Given the high rate of commissions payable in the first year. the net losses of 12 companies have gone . has reported a net profit of Rs. Kotak Mahindra. and maintaining the solvency margin.4878.

. . Life Insurance Corporation : An Introduction Due to globalization of financial services and liberalization of economy. The new private players with their aggressive penetration strategies are contributing to the cause of LIC by creating insurance consciousness in the minds of a wide cross-section of customers. other companies viz. The LIC has retained the commendable position even after liberalization with entry of private insurance units. The objectives of this paper are: to know about the growth and development of LIC business before and after the LPG (Liberalization.829. Among them. No private insurer has paid any dividend. the company has paid a dividend of Rs. Canara HSBC. to study the ways to improve customer services in LIC for winning confidence.929.12 crore to the Government in 2008-09 as against Rs. Returns to Shareholders Of the surplus generated by LIC of India. the Life Insurance Corporation of India (LIC) has been facing intense competition from the new entrants and is also playing a lead role in the life insurance industry.59 crore paid in 2007-08.up as compared to the previous year. except Aegon Religare. Privatization and Globalization) concept. DLF Pramerica and Star Union Dai-ichi have reported losses. Four new life insurance companies came into existence during 2008-09. and to make appropriate suggestions for the improvement of LIC business.

Comparatively. Its annual premium in 1956 was $21 mn. the insurance contribution of developing countries like India and South Korea to GDP is very low. India is the 23rd largest market in the world for approximately $7 bn of premium collected annually. Since then LIC started transacting Life Insurance business. At present it operates within a network of 7 zones. 100 divisions and over 2. For more than five decades. LIC has been enjoying monopoly in the field and earned supernormal profits at the expense of consumers. Its growth has been manifold. Funds from Life Insurance constitute approximately 10% of the gross household savings in Indian financial assets and a little over 1% of Gross Domestic Product (GDP). At that time the LIC by its efforts tapped only 15% of the insurable population out of more than 300 million.Market Share : Life Insurance LIC ICICI Prudential Bajaj Allianz SBI Life HDFC Standard Life Birla Sunlife Reliance Life Max New York Others Development and Expansion of Life Insurance Corporation of India On September 1. 1956. Government of India took over 245 Indian and foreign insurance and provident societies and nationalized the Life Insurance business. .500 branches. Its present business investment is over $23 bn.

The . In the wake of all this. precautions can be taken. The catchphrase of LIC is ³Your Welfare is our responsibility´. ³Yogakshema Vahamyahm´ are the famous words delivered by Lord Krishna at Kurukshetra. Innovative Product Line The new entrants into the insurance market introduced innovative product lines in order to tap the customers.Life is full of risks. Precautions against such risk is called µInsurance¶. even LIC has been forced to change its outlook and has to take certain steps to customize products. the monopoly of LIC has grown in size and stature. Ever since the nationalization of life insurance industry in 1956. the LIC held a monopoly in offering products to its policyholders. Pre-liberalization. Nobody can predict or foresee the future. However. Its catchphrase is being used by LIC because of its monopoly in the insurance sector.

The private players already occupy a sharing position in the market. Therefore. The LIC Housing Finance proposes to enter European market. In this connection LIC appointed Help Age India as its corporate agent. 30 brokers and 130 corporate agents for expansion of its business.customer was forced to accept whatever was offered due to lack of an alternative. Postliberalization. LIC needs to adopt different strategies in order to offer various products to its customers. the LIC introduced new plans like Jeevan Adhar (Whole Life) and Jeevan Vishwas (Endowment) in order to attract and gain much more market share in the life insurance market. the customers¶ expectations are rising. Improved Distribution Channels The existing agent network was not sufficient to meet LIC¶s present market scenario. For the purpose of new business. LIC has tie-ups with eight banks. But it has to suit customer needs. LIC has decided to start µSpecial Business Unit¶ to promote the new business through innovative distribution channels. . As a result. the LIC had to concentrate on relative services to its customers for improving its share in the life insurance market. As a result. with the help of Kotak Securities and CLSA as the merchant bankers. which satisfy the personal needs of customers with an ample degree of flexibilities. The LIC has already started launching new products in order to target new markets. the LIC has entered into banc assurance and corporate agency tie-up. new entrants entered into the market with innovative products and services. in order to raise $50 mn through the GDR. As a result.

. Insurance is actually a protection against economic loss. Primary function 2. Other functions The primary functions of insurance include the following: Provide protection .Functions of Insurance can be classified into three parts: 1. Secondary function 3. accidents and uncertainty. by sharing the risk with others.The primary function of insurance is to provide protection against future risk.

Insurance provides development opportunity to those larger industries having more risks in their setting up. which helps to change from uncertainty to certainty. Assessment of risk . Reduced rate of premiums stimulate for more business and better protection to the insured. Source of earning foreign exchange . Contributes towards the development of larger industries . Insurance is device whereby the uncertain risks may be made more certain.Insurance is an international business.Insurance relieves the businessmen from security investments. Prevention of losses causes lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. The secondary functions of insurance include the following: Prevention of Losses . The country can earn foreign exchange by way of issue of marine insurance policies and various other ways.Insurance is a device.Collective bearing of risk . insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's.Insurance serves as savings and investment. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery. Hence. The other functions of insurance include the following: Means of savings and investment .Insurance is a device to share the financial loss of few among many others.Insurance promotes exports insurance. . Risk free trade . All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. Small capital to cover larger risks . Insurance is a means by which few losses are shared among larger number of people.Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions and installation of automatic sparkler or alarm systems etc. For the purpose of availing income-tax exemptions people may also invest in insurance. which makes the foreign trade risk free with the help of different types of policies under marine insurance cover. Provide certainty . by paying small amount of premium against larger risks and uncertainty.Insurance determines the probable volume of risk by evaluating various factors that give rise to risk.

not only insurers and IRDA.6625 crore in 2008-09. but also healthcare providers and other entities associated with the ecosystem. Recent detariffing of the general insurance business forced the insurance companies to focus on health insurance and other personal lines of business. health insurance premium has grown from Rs. Availability of products for senior citizens and children helped in popularizing health insurance. Number of persons covered under the health insurance has also seen a steady increase over the years. Many life insurance companies now have products in health insurance. and . however it is small vis-à-vis the potential.675 crore in 2001-02 to Rs. Rationalization of premium rates in respect of individual mediclaim policies in 2007 which were unrevised for many years and upward revision of rates in all group health policies have also contributed to growth in premiums. During the last seven years. In the absence of specific financial protection against high medical expenses. It is also emerging as a significant line of business for life insurance companies.Health Insurance Growth Trends The health insurance business has witnessed increased focus and attention from all stakeholders. the financial impact of hospitalization is more pronounced. Indian health insurance market size (US$ billion) 1600 1400 1200 1000 800 600 400 200 0 2003 2004 2005 2006 2007 2008 2009 Indian health insurance market size (US$ billion) Health insurance has become one of the fastest growing segment in the non-life insurance industry. It has grown by 30 per cent during 2008-09. This increasing attention and awareness was due to rising healthcare costs.

While the individuals procured new business in the year of Rs. LIC contributed most of the business procured in this portfolio by garnering Rs.57 crore under 21.26 crore lives. The Central and state governments have recently initiated large scale health insurance programmes in association with insurance companies to protect the vulnerable groups.69 crore of group premium under 1. Micro-Insurance : Life Insurance Sector The Micro-Insurance portfolio has made steady progress in the year under review.95 crore under 1.19 crore of individual premium from one of the leading causes for impoverishment in the country.36.205. The distribution infrastructure has also been considerably strengthened and the new business has shown a decent growth. the group business amounted to Rs. Micro-insurance business was procured largely under group portfolio.172.52 lakh policies.41 lakh lives and Rs. though the volumes are still small. More life insurers have commenced their Micro-Insurance operations and many new products have been launched during the year.31. .11 crore lives. Prominent amongst the government sponsored insurance schemes are the Rajiv Aarogyasri scheme of AP. the Kalaignar scheme of Tamilnadu and the centrally-sponsored Rashtriya Swasthya Bima Yojana.

With the notification of IRDA (Micro-insurance) Regulations 2005 by the Authority. .The number of micro-insurance agents at end March 2009 was 7250. of which 6647 were for the LIC and the remaining represented the private sector companies. if the sum assured for the product is within the range prescribed for Micro-insurance. there has been a steady growth in the design of products catering to the needs of the poor. The flexibilities provided in the Regulations allow the insurers for composite covers or package products. Fifteen life insurers have so far launched 30 micro-insurance products. Of the 30 products. The insurance companies are now offering already approved general products as Micro-insurance products with the approval of the Authority. 16 are for individuals and the remaining 14 are for groups.

values and customs set subculture apart from other members of the same society. income. private insurers have settled 84. Psychology factor: The buying behavior of consumer is influenced by a number of psychological factors which includes motivation. Personal factor: It is a very important factor. values and customs of their society and to avoid behavior that is judged acceptable. group. within a larger. Factors influencing consumer behaviour Social factor: Social factor divides the society into a hierarchy of distinct classes. while LIC has settled 98. They include age. life style. Beliefs.21 per cent of the total claims in the same period.84 claims within thirty days. more complex society.Of the total individual death claims settled in micro insurance individual category. The members of each class have relatively the same status and members of other classes have either more or less status. occupation. Personal factors also influence buyer¶s behavior. learning.06 per cent in the same period. It includes family. Cultural factor: It has potent influences that are brought up to follow the beliefs. They simply direct our outer personality. LIC has settled 60 per cent of total claims within thirty days whereas private insurers have settled 57. perception. celebrity etc. Thus sub-culture is a distinct cultural group that exists as an identifiable segment. beliefs and attitude and personality. In the case of group category. .

Factors influencing the buying decision .

Even if the data relating to insurance penetration and density of various sample countries is examined from Table±1. This also helps to retain the loyal clientele base within the same group. right from the psyche of individuals to the accessibility of insurance services. Increasing Diversifications: Despite the divergent business interests of various sectors like banking. it is but natural that each insurer adopts a suitable marketing approach to ensure penetration of each of its classes of businesses. . There are certain specific reasons that contribute to this trend like ± common clientele class. One more factor of various business conglomerates entering into other lines of business as part of diversification strategy is to leverage on the strengths of their group organizations to have their slice of market share. revenue augmenting objectives etc. This increased trend led to a change in the business approach of the swathe of financial institutions. the fact that life insurance industry had an edge owing to a wider network of insurance intermediaries established to cover the hinterlands is widely accepted across the industry. the life insurance business is ahead of non-life insurance business in the remaining countries and the share of life insurance business in India is far ahead of non life insurance business of any of these countries. barring Brazil and USA. When the regulations of the nation restrict the formation of composite insurance business. there is a growing trend of ever-increasing strategies adopted by business groups of different financial services. it is an acceptable fact that retail insurance penetration would have intricate business aspects that drive their respective growth. insurance and securities. The life insurance business relatively made rapid strides in covering a reasonable mass of insurable populace while the non-life insurance business is yet to make its mark felt in reaching the retail individuals of the country. value added service. While reasons for this skewed reach could be attributable to various factors. Within the various business lines of an insurance company.Combi insurance Penetration of retail insurance has its unique and distinct features in India.

The inadequate penetration and the need for covering higher number of individuals at their prime age both for health insurance and life insurance bespeaks the need for letting a product innovation with value added features. however. Progress of low cost distribution channels is in . When various other business lines of financial sector are offering the integrated product choices as value additions.Leveraging on Insurers' Strength: Except to a limited extent of offering Personal Accident coverage in Group Life Term policies. are as follows: Product Convergence . amongst various distribution channels will lead to an intense pressure on service providers to research the product innovation. the life insurers exploring the possibility of leveraging on the strengths of non life insurers and vice-versa did not take place in India. Even in the pre privatization era (prior to 2000). the idea of letting product integration of these independent sectors is praiseworthy. The proposed approach in the 'Combi Products' combines two distinct yet closely related features of insurance. The exuberance at pre sale phase could tend to taper off during the integrated post-sale service. Some of the issues that would crop up. in light of the fact that the respective business verticals of life insurance and non life insurance are independent of each other and play only a complementing role.Blurring Business Boundaries: One of the areas of concern in product convergence is expunging business boundaries of divergent businesses while offering integrated services. The operational network of the insurance companies along with their established track record in providing an effective policy service ought to give a higher level of comfort to all the stake holders. Distribution Alliances ± Inter product Cross Selling: Distribution alliances amongst various sectors of finance industry for inter product cross selling also is one of the driving forces of varied product convergence. both non life insurance and life insurance progressed on their own. Further. The increasing common areas of interest. Absence of full fledged post sale service to the customers of converged products may affect the confidence levels of customers at large. Thus the 'Health plus Life Combi Product' pioneered by IRDA as an innovative product class heralds the integration of personal lines of insurance solutions. say customized financial solutions. there is a reason to explore the same within the insurance sector.

. ASBA in securities sector are a case in point. Similarly the business generated from direct selling increased to 4. The advancement of direct sale channel enables insurers to circumvent the statutory restrictions that come in the way for promotion of integrated insurance solutions. marketing and post sale service. The success of Unit Linked Products which are in the unbundled form endorses the same.32% in 2003-04.76% from 1. The success of the low cost distribution channels highlights the scope for product innovation without clinging on to traditional tied agency channel. Creates a new Market?: The 'Health plus Life Combi Product' is altogether a new product innovation. where customization of insurance solutions may encourage the penetration of insurance business. Flexibility works like an incentive to the service providers of any sector in general and more so in insurance sector.Competition: The rapid progress made by various businesses of financial sector backed by technology support in reaching out to the customers with innovative products provides the impetus for letting promotion of integrated innovations in insurance industry. The convergence of two different insurers' products doubles the strength of their respective direct business channels for generating higher business volumes. there are no restrictions per se.63% in the same period. The 'Combi Product' structure that is permitted in India has a number of inherent flexibilities right from sum assured to policy term. bringing forth the challenges of changing paradigms of product design. The potentiality of Health Insurance market estimations are well established in various studies. As markets mature the success of pure term life products will follow when the cost elements of mortality and savings are viewed as segregated components.evidence in India. The life business generated through traditional tied agency channel reduced to 79. ULIPs in insurance industry. The independent combi product ingredients of Pure Term Life and Health Insurance have a huge potential for market in India.57% in the year 2008-09 as against 95. Except for the nature of insurance (health and pure term) that could be offered. It is well established that certain flexibilities within the statutory parameters would encourage healthy competition amongst the compeers of the financial industry. Flexibilities .

The markets do not factor the benefits of integrated policy service at either offices of the insurer at initial stages till they are explicitly felt. It is estimated that India homes 20% of world's population under 24 years of age.The health insurance policies and pure term life insurance policies are more widely prevalent in the group insurance form than in the retail segment. . Distribution: Ensuring qualitative advice from intermediaries / marketing personnel is a sine quo non for the success of this new breed of products. Pricing: The facility of having two coverages under the umbrella of a single product shall be supported by lower costs of insurance paid for the integrated product. In an emerging market like India the need for health insurance may be felt more in the advanced ages say 50 plus. When the benefits of lower costs of policy administration are passed on to the customers. The advantages of having a single product would initially find a niche market amongst the high networth individuals when they find a unified product without scouting for two different products from two different insurers. if the premium under 'Combi Product' outweighs the aggregate premium of two independent products available in the market. Providing transparent product information is the first milestone for enhancing the acceptance levels of this product. Market for 'Combi Products' would also be triggered by its pricing and the efficacies of distribution. However. It is therefore logical that the younger age groups could be a potential target for the 'Combi Products'. An innovative product if moved forward with an appropriate price is bound to attract newer market segments. Further. it would be viewed as an incentive by the prospects. While this is a common requirement for any insurance product. by when the underwriting norms for a pure term life would be further stringent in light of the higher risk involved as also owing to a possible adverse selection. its specific objective in this product class is to enable the insurance consumers the chance of knowing about the availability of independent products and the benefits of choosing the 'Combi Product'. The wide range of flexible policy service could also be considered as complex procedure in the absence of a fair understanding of the product structure. the acceptance levels of the product may be pretty low. the single product that offers two coverages can potentially attract the newer market segment that are otherwise not tapped into health insurance.

its success may herald further innovation in integration of personal lines of insurance. It also helps in accelerating the penetration of the much desired health insurance in retail segment. the possibility of sharing underwriting information between the insurers involved may reduce the ultimate underwriting costs. they also depend on various factors like age and sum assured. as the number of 'Combi holders' progress.Transformation of policy service . However. Though. the conservative requirements sought by one insurer may largely suffice the requirements for the other. 'pure term life insurance' is yet to take off in India in a big way. IRDA pioneered the concept of 'Combi Product' as an innovative product class. Conclusion Following opportunities are floating in the fast growing Indian insurance market. leveraging on the strengths of life insurers. However. insurers should overcome the initial hassles of acquiring clarity by their operating personnel on divergent nature of policy services of health insurance/life insurance. with stress on .like enabling them to access the services from anywhere and at any time. there would be economies of scale in the transaction costs bringing in benefits to both the insurers and the policy holders.A cue from Bank ATMs: The technology-driven environment has brought in a sea change in the policy service rendered to the policyholders . per transaction costs may appear prohibitive in the initial stages. The proposed single point access at either office of the two insurers would transform the policy service. As 'combi insurance policy' would be accepted as a single policy. Benefits of simultaneous underwriting: The underwriting requirements vary for health insurance and pure term insurance. both components being personal lines of insurance. Though. thereby adversely affecting the progress of this product class. the product is yet to be launched since the issue of guidelines. The new product class may enable the progression of 'pure term life insurance' along with health insurance. Despite rapid growth marked in life insurance in recent years. Absence of updated knowledge about other variants of insurance at the offices of insurers may lead to increased number of grievances. and it has a number of advantages.

. it can leverage the principle of convergence (Combi products) in the rural areas. Growing demand for Indian insurance offshoring business ‡ Total revenues from Indian offshore insurance business process outsourcing (BPO) services are estimated to have increased from US$ 367 million in 2002±03. the total expenditure on health. High potential demand for insurance products ‡ Since more than two-thirds of India¶s population lives in rural areas. government expenditure constituted 3. ‡ Favorable demographics. Since LIC has an excellent distribution network in India. micro-insurance is seen as the most suitable aid to reach the poor and socially-disadvantaged sections of society. Growing pension sector ‡ In India. as a percentage of GDP. 8. Lower penetration of the health insurance sector ‡ In India. ‡ Life insurance companies are likely to target primarily the young population so that they can amortize the risk over the policy term.2 per cent in the US.7 per cent in China. Only government employees are entitled to pension benefits post-retirement. ‡ The health insurance industry has the potential to become a US$ 5.2 per cent in the UK and 4. ‡ Employment is expected to more than double from insurance products.600 in 2005±06 to around 100. fast progression of medical technology and increasing demand for better healthcare have facilitated a high growth in health insurance. the government provides limited social security to its citizens as reflected in the fact that less than 4 per cent of the population is covered under the social security schemes. was 5 per cent in 2006±07 as against15.5 per cent. US$ 790 million in 2006±07 to US$ 2 billion by 2009±2010. Of this.500 in 2009±2010.21 billion industry by 2012.

‡ However.‡ The opening of the pension sector and the establishment of the new pension regulator have expanded the avenues for private sector employees. focus of many private players has shifted to these areas. . Rising demand from semi-urban and rural population for micro-insurance products ‡ The industry is also promoting micro-insurance as a viable business opportunity and integrating the same with the poverty alleviation programmes of various state governments. with the development of rural health insurance regulations and growing awareness about micro-insurance products. ‡ Poor insurance literacy and awareness. high transaction costs. inadequate regulations and inadequate understanding of client needs and expectations have restricted demand for microinsurance products.