INSURANCE SECTOR IN INDIA:

TREND & CHALLENGES

 What is insurance?
The definition of insurance can be made from two
points:
 Functional definition.
 Contractual definition.

FUNCTIONAL DEFINITION
 Insurance is a co-operative device to spread the
loss caused by a particular risk over a number of
persons who are exposed to it and who agree to
insure themselves against the risk
Contractual Definition
In the words of justice Tindall, “Insurance is a
contract in which a sum of money is paid to
the assured as consideration of insurer’s
incurring the risk of paying a large sum upon
a given contingency.”
 Policy

• The policy contract of

insurance is known as the
policy. Certain exclusions, or
exceptions to property and
casualty insurance are stated
in the policy. Meaning that
there are certain exceptions
to coverage, that relieves the
insurance company from
paying.
 Indemnify
• Compensation for harm done
to one party.
• The individual who accepts
the compensation is known
as the insured, and the
person who agrees to
indemnify is the insurer.
 Beneficiary
• This individual is the recipient of the amount to be
paid. The maximum amount of compensation that
can be received is known as the face value.
 Importance
• Protection for dependants
• Savings for Old Age
• Encourage Savings
• Initiates Investments
• Credit worthiness
• Social Security
• Tax Benefits
 Division of Insurance Sector

INSURANCE

LIFE
GENERAL INSURANCE INSURANCE

FIRE MARINE MOTOR

INSURANCE MEDICLAIM VEHICLE
INSURANCE
 Insured Items
• There are limitless things that you -Insurance intended to compensate
can insure, in order to keep them
protected, but the most important for harm to the insured person’s
ones are:
real property.

YOUR HOUSE
YOUR
YOU BOAT

YOUR FAMILY

5
3 YOUR AWESOME
CAR
1

2 4
 LIFE INSURANCE

Life insurance is a written contract between the

insured and the insurer, that provides for the
payment of the insured sum on the date of the
maturity of the contract or on the unfortunate
death of the insured, whichever occurs earlier.
 GENERAL INSURANCE
• General insurance or non-life insurance
policies, including automobile and
homeowners policies, provide payments
depending on the loss from a particular
financial event. General insurance typically
comprises any insurance that is not
determined to be life insurance.
 TYPES OF GENERAL INSURANCE
Health insurance
Business insurance
Automobile insurance
Fire insurance
• Agricultural Insurance
• Credit Insurance
• Property Insurance
• Mortgage Insurance
• Pet Insurance
• Interest Rate Insurance
• Income Protection
HEALTH INSURANCE
 HEALTH INSURANCE
Just like one looks to safeguard ones
wealth, these policies ensure guarding the
insurer's health against any calamities that
may cause long term harm to ones life and
even hamper ones earning ability for a
lifetime. Some examples of this type of
policy are mediclaim policy, personal
accident, group accident, traffic accident,
etc.
 Business Insurance
Risks of loss of profits/business, goods, plant and
machinery are most profound in case of business.
Under this head they cover the most widely used
policies that cover a business from any loss of the
above kind. Some of these policies are burglary
insurance, shopkeepers insurance, key-man
insurance, marine insurance, public liability
insurance, workmen compensation insurance, air
transit insurance, fidelity guarantee insurance etc.
 Automobile Insurance

Auto Policy is required to be taken to

cover the risks that arise to the owner,
vehicle and third party. This includes the
Compulsory Vehicle Policy (In India, by
the Motor Vehicles Act, every car owner
is required to covered against Act risks)
and the Comprehensive Vehicle Policy.
MARINE INSURaNCE
Marine Insurance Contract

“Under Mariner Insurance Act, 1963, Marine Insurance Contract

is an agreement whereby the insurer undertakes to indemnify
the assured, in the manner and to the extent thereby agreed,
against losses incidental to Marine adventure.”
 SCOPE OF MARINE INSURANCE
 HULL INSURANCE: Hull Insurance involves insurance of ships
including vessel machinery.

 CARGO INSURANCE: Goods and commodities transported by

sea is the subject matter of Cargo Insurance.
 FIRE INSURANCE

FIRE INSURANCE
This policy is required to be taken to prevent
any loss of profits / property from incidental
fire. Eg: fire insurance and fire
consequential loss policy.
BANCASSURANCE
“There is no stronger force than an
idea whose time has come.”

Victor Hugo
(19th Century French Novelist)

 Banks & Insurers across the World have realized

Bancassurance is the distribution channel, which
would help them achieve economies of scale and
boost their revenues in the 21st Century.
 BANCASSURANCE - DEFINITION

• The sale of insurance and other similar products

through a bank.

• This can help the consumer in some situations;

for example, when a bank requires life insurance
for those receiving a mortgage loan, the
consumer could purchase the insurance directly
from the bank.
 POTENTIAL OF BANCASSURANCE IN
INDIA…

Banks are major players in the Indian Financial

System:
-> 67,000 branches(32,000 rural and 14,700 semi urban)
-> Enormous retail account base of 450 mn Deposit A/c
-> Total deposit base of Rs. 14 trillion (USD 300 bn)
 Brick & Mortar Model of Banking
Approximately 80% of Banking Transactions are done
at the Bank Branches
 Very High Trust in the Banking System
 Bank Managers looked upon as “Financial Advisors”
 FORMS OF BANCASSURANCE
ARRANGEMENTS

Strategic Alliance: There is a tie-up between a bank

and an insurance company. The bank only markets the
products of the insurance company.
Full Integration: This arrangement entails a full
integration of banking and insurance services. The
bank sells the insurance products under its brand
acting as a provider of financial solutions matching
customer needs.
Mixed Models: Under this approach, the marketing is
done by the insurer's staff and the bank is responsible
for generating leads only. In other words, the database
of the bank is sold to the insurance company.
Working of insurance
 Evolution
• Insurance in modern form originated in the Mediterranean during the 13th
century.

• Marine insurance is the oldest form of insurance followed by life insurance and
fire insurance.

• The history of life insurance in India dates back to 1818 when it was conceived
as a means to provide for English Widows.
• Oriental life Insurance Company was the first insurer and was incorporated at
Calcutta in 1818

• Insurance regulation formally began in India through the passing of two acts

- Life Insurance companies Act of 1912

- Provident Fund Act of 1912
 HISTORY OF INSURANCE IN INDIA
Phase Period Industry
Phase I
a. Life Insurance 1818 to 1956 Many (245) private sector companies only,
(about 138 yrs) competitive market.

b. General Insurance 1850 to 1972 Many (107) private sector companies only,
(about 122 yrs) competitive market.
Phase II
a.Life Insurance 1956 to 2000 Nationalization, public sector or State
(about 44 yrs) monopoly, only one company.

b.General Insurance 1972 to 2000 Nationalization, public sector monopoly, only

(about 28 yrs) one company with its four subsidiaries.

Phase III Opened to the entry of private domestic and

Life Insurance and After 2000 foreign companies, mixed sector of public and
General Insurance private sector units, oligopoly of public sector
companies (14 life insurance and 12 general
insurance companies)
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Origin And Growth Of Insurance Sector:

# In fiscal 2000-01, the Indian federal government lifted

all entry restrictions for private sector investors.

# Foreign investment insurance market was also allowed

with 26 percent cap.

# GIC was converted into India's national reinsure From

December,2000.

# All the subsidiaries working under the GIC umbrella

were restructured as independent insurance
companies.
Origin And Growth Of Insurance Sector:

# Till end of FY 1999-2000, two state-run insurance

companies, namely, Life Insurance Corporation (LIC)
and General Insurance Corporation (GIC) were the
monopoly insurance providers in India.

#Under GIC there were four subsidiaries:

–National Insurance Company Ltd.
–Oriental Insurance Company Ltd.
–New India Assurance Company Ltd.
–United India Assurance Company Ltd
Life Insurance Companies In India
1. Bajaj Allianz Life Insurance Company Limited
2. Birla Sun Life Insurance Co. Ltd
3. HDFC Standard Life Insurance Co. Ltd
4. ICICI Prudential Life Insurance Co. Ltd.
5. ING Vysya Life Insurance Company Ltd.
6. Life Insurance Corporation of India
7. Max New York Life Insurance Co. Ltd
8. Met Life India Insurance Company Ltd.
9. Kotak Mahindra Old Mutual Life Insurance Limited
10. SBI Life Insurance Co. Ltd
11. Tata AIG Life Insurance Company Limited
12. Reliance Life Insurance Company Limited.
13. Aviva Life Insurance Co. India Pvt. Ltd.
14. Sahara India Life Insurance Co, Ltd.
15. Shriram Life Insurance Co, Ltd.
16. Bharti AXA Life Insurance Company Ltd.
17. Future Generali Life Insurance Company Ltd.
18. IDBI Fortis Life Insurance Company Ltd.
19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd
20. AEGON Religare Life Insurance Company Limited.
21. DLF Pramerica Life Insurance Co. Ltd.
22. Star Union Dai-ichi Life Insurance Comp. Ltd
Non-Life Insurance companies in India
# Bajaj Allianz General Insurance Co. Ltd.
# ICICI Lombard General Insurance Co. Ltd.
# IFFCO Tokyo General Insurance Co. Ltd.
# National Insurance Co. Ltd.
# New India Assurance Co. Ltd.
# Oriental Insurance Co. Ltd.
# Reliance General Insurance Co. Ltd.
# Royal Sundaram Alliance Insurance Co. Ltd.
# Tata AIG Life Insurance Co. Ltd.
# United India Insurance Co. Ltd

Reinsurers:
# General Insurance Corporation of India.
MAJOR PLAYERS
LIC Products & Plans
Life Insurance Corporation of India (LIC) was formed in
September 1956 by an Act of Parliament, LIC Act 1956 with a
contribution of Rs. 50 million.
The then Finance Minister Mr. C. D. Deshmukh while piloting the
bill for nationalization outlined the objectives of LIC thus: “To
conduct the business with utmost economy with the spirit of
trusteeship; to charge premium no higher than warranted by strict
actuarial considerations; to invest the funds for obtaining maximum
yield for the policy holders consistent with safety of capital; to
render prompt and efficient service to policy holders thereby
making Insurance widely popular”.

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 LIC OF INDIA contd…
Presently the LIC has a network of seven zones; 100 divisions and 2,048
branches, personnel exceed seven lakhs employees and over six lakhs
agents.
Vision: A trans-nationally competitive financial conglomerate of
significance to societies and Pride of India.
Mission: To explore and enhance the quality of the life of people through
financial security by providing products and services of aspired
attributes with competitive returns and by rendering resources for
economic development.
Values: Caring and Courtesy, Initiatives and Innovation, Integrity and
Transparency, Quality and Returns, Participation and Relationship,
and Trustworthiness and Reliability
Culture: Agility (quickness), Adaptability, Collaboration, Commitment,
Discipline, Empowerment, Sensitivity, and Excellence.

3/6/2014 36
 LIC OF INDIA contd…
Objectives
• Spread Life Insurance widely and in particular to the rural areas.
• Maximise mobilization of people’s savings by making insurance-
linked savings adequately attractive.
• Deployment of funds to the best of advantage of the investors as
well as the community as whole, keeping in view national priorities
and obligations of attractive return.
• Conduct of business at most economy and with the full realisation
that the money belongs to the policyholders.
• Act as trustee of the insured public in their individual and collective
capacities.

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 INVESTMENT POLICY OF LIC’s

3/6/2014 38
 INVESTMENT POLICY OF LIC’s
contd…

3/6/2014 39
1) LIC
2) ICICI
3) HDFC
MARKET SHARE
 CURRENT SCENARIO
•Growing at the rate of 15-20% annually
•75% population has no insurance
• Adds 7% to country’s GDP
•LIC market share come down to 75% and private
insurers increased over 24%
•Annuity or pension product have over 33% of market
•Unity linked insurance scheme have monopoly
 GENERAL INSURANCE CORPORATION (GIC)
• Prior nationalization there were 68 Indian insurers (including
LIC) and 45 non-Indian insurers did the business.
• In Nov. 1972, the general insurance business was nationalized by
the General Insurance Business (Nationalized), Act 1972
(GIBNA) and vested in the hand of the GIC and its four
subsidiaries viz.
1. National Insurance Co. Ltd.,
2. New India Assurance Co. Ltd.,
3. Oriental Fire and General Insurance Co. Ltd., and
4. United India Insurance Co. Ltd.
• GIC was incorporated as a holding company in 1992.
• General Insurance Business is completely owned by the
government.
• The paid up capital of GIC was fully subscribed by the
Government and of four subsidiaries.
• It was controlled by a single organization with four subsidiaries.

3/6/2014 43
 G I C contd…

• GIC’s four subsidiaries:

1. National Insurance Co. Ltd.,
2. New India Assurance Co. Ltd.,
3. Oriental Fire and General Insurance Co. Ltd., and
4. United India Insurance Co. Ltd.

• The Govt of India took over Control, supervision, and policy

making is with GIC.

• The premium income for GIC comes mainly through the obligatory
reinsurance premium on a quota share basis from subsidiaries on
their direct business in India (almost 20% of subsidiaries business
come to GIC).

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 IRDA

3/6/2014 45
 IRDA’S MISSION
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.
Composition of Authority under IRDA Act, 1999
As per the section 4 of IRDA Act' 1999, Insurance Regulatory
and Development Authority (IRDA, which was constituted by
an act of parliament) specify the composition of Authority.
The Authority is a ten member team consisting of
a. a Chairman;
b. five whole-time members;
c. four part-time members,
(all appointed by the Government of India)

3/6/2014 46
 Current Scenario
• In 1993, Malhotra Committee was formed and several
Insurance Reforms were made.

– Redesigned the Structure

– Increased Competition
– Regulatory body (IRDA)
– Investments
– Customer Service
 Present scenario
• 1. Enormous mismatch in global healthcare financing
• 2. Developing countrieshave 84% of population & 90% of disease burden
• 3. By 2020, world population-7.5 billion
• By 2050, world population 9 billion
• Most of the growth in developing countries.
• 4. According to NHA of India 2001-02, sources of finance in health sector
• Household 68.8%
• Central Govt. 7.2%
• State Govt. 14.4%
• Private Firms 3%
• Public Firms 2%
• External Funds 2%
• Local Govt. 2.2%
 (continued)
• Govt. spending on health care of GDP 0.9%
• Private spending 4 to 4.5% of GDP
• Overall Out of Pocket Expense 80%
• (incentivises supplier induced demand)
• In Bihar & UP, it is 90%
• NSS (1995-96) showed that rich consumed public
service 3 times > the poor
 Comparison of risk pooling and
equity of financing methods
Financing method Risk pooling Equity
General revenue Widest risk pooling Most equitable

Social insurance Within the covered Redistributive within

population the covered
population
Private insurance
Group Within a group Redistributive within
a group
Individual Within an age/sex group Not equitable
Community Financing Within a community Redistribution within
a community
User fees No risk pooling Not equitable
 CONCLUSION
• Growth of Indian economy is an investment
driven growth
• Opens a wide variety of investment
avenues
• Companies help to gain knowledge of
products and services
• Achieve a better standard for near future life
 (continued)
REASONS- Unable to take treatment.
 Mostly illiterate and poor.
 First priority is food. Rest later.
 Prefer traditional / local / home made remedies.
 Public facilities:
a. far from reach – distance and
b. if managed to reach – poor quality treatment
c. to purchase medicines etc from out side
 Can’t afford high treatment cost: in Pvt. Hosp.
 Borrowing money, sale of property–make them poorer.
 Market Statistics
Life Insurance Funds accounts to 15% of household Savings & may
grow upto 20% in future.

Insurance Penetration in India is 2.6% of GDP compared to

Korea(6.77%) & Singapore(6.38%).

India is ranked 19th position in Insurance with a growth of 19% p.a.

Non Life Insurance have lower penetration and rural people needs
awareness.

620 tn rupees investment is anticipated for infrastructure

development in future.
 Strategic Policies

• Identification of Markets
• Assessment of Risks
• Penetration and exploitation of markets
• control over investment and operating costs
• Finding best prospects
• Newer Marketing Strategies
 SWOT analysis
Strengths
•Strong capital and reserve
•Technically Skilled Manpower
•Innovative product for different
demography
Opportunities
•Inflow of global managerial & financial
expertise
•Liberalization results to wider choices
•Introduce global innovations and practises
Weakness
•High administration & management
expenses
•Vertical organisational structure
•Lower Reliability on Pvt. Players
Threats
•Cut-throat competition
•New Entrants
•customers switching to other company
 Conclusion
• Today most of the insurance companies are recruiting agents who
are professionals who can sell their unsought insurance products.

• Companies also provide better policies based on customer needs

and demands.

• In this Competitive market companies provide better service

Quality, Pricing, Advertisement and Promotional activities.

• CRM is used to retain the customers and communicate with them.

• By another 20 yrs 50% of population is expected to have at least

one sort of an insurance.
Aviva Life Insurance Company India Limited ING Vysya Life Insurance Company Ltd. Met Life India Insurance Company Ltd.
Life Shield ING Term Life Plus MET Suraksha - TROP
ING Term Life MET Suraksha
AEGON Religare Life Insurance Company Met -MortgageMet-Mortgage Protector
Limited. ICICI Prudential Life Insurance Co. Ltd
Decreasing Term Plan Life Guard Return of Premium Reliance Life Insurance Company Limited.
Increasing Term Plan Life Guard Regular Premium Reliance Simple Term Plan
Level Term Plan Home Assure Loan cover term insurance Reliance Special Credit Guardian Plan
Life Guard Single Premium Reliance Special Term Plan
Birla Sun Life Insurance Co. Ltd Reliance Credit Guardian Plan
Birla Sun Life Insurance Premium Back Term IDBI Fortis Life Insurance Company Ltd.
Plan Home Assurance Sahara India Life Insurance Co, Ltd.
Birla Sun Life Insurance Term Plan Sahara Kavach
Birla Sub Life Insurance HNWI Term Plan Kotak Mahindra Old Mutual Life Insurance
Limited Shriram Life Insurance Co. Ltd.
Bharti AXA Life Insurance Company Ltd. Kotak Premium Return Plan Shri Suraksha
Secure Confident Kotak Term / Preferred Term Plan
SBI Life Insurance Co. Ltd
Bajaj Allianz Life Insurance Company Limited Life Insurance Corporation of India SBI Swadhan
Protector The Convertible Term Assurance Policy SBI Shield
New Risk Care Mortgage Redemption
Term Care New Bima Gold Tata AIG Life Insurance Company Limited
Two Year Temporary Assurance Policy Tata AIG Life LifePlus
Future Generali India Life Insurance Anmol Jeevan-I Tata AIG Life Raksha 10/15/20/25
Company Limit Amulya Jeevan-I Tata AIG Life Assure
Future Care
Max New York Life Insurance Co. Ltd HDFC Standard Life Insurance Co. Ltd
Five Yr Renewable and Convertible Plan (Non - Par) Loan Cover Term Assurance Plan
Level Term Plan
Term Assurance Plan
Home Loan Protection Plan