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INTRODUCTION

1.1 Introduction, historical development and growth of

Indian Insurance sector.

Since the mankind, every individual were ready for some type of sacrifice
to avoid the evil consequences of flood and fire. The same instinct is now
in today’s businessmen to secure themselves against loss and disaster.
This instinct was the main reason for the birth of Insurance. Beginning
date of Insurance is almost 6000 years back but it largely developed in the
past few centuries, particularly after the industrial era.

In India, insurance has a deep-rooted history. It finds mention in the

writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and
Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources
that could be re-distributed in times of calamities such as fire, floods,
epidemics and famine. This was probably a pre-cursor to modern day
insurance. Ancient Indian history has preserved the earliest traces of
insurance in the form of marine trade loans and carriers’ contracts.
Insurance in India has evolved over time heavily drawing from other
countries, England in particular.

India insurance is a flourishing industry, with several national and

international players competing and growing at rapid rates. Thanks to
reforms and the easing of policy regulations, the Indian insurance sector
been allowed to flourish, and as Indians become more familiar with
different insurance products, this growth can only increase, with the period

1
from 2010 - 2015 1 projected to be the 'Golden Age' for the Indian
insurance industry.

Overview of Indian Insurance Sector2

INDIA is the 5th largest market in Asia by premium following Japan,

Korea, China and Taiwan. The US$ 30 billion insurance business in
India is expected to grow 17 per cent in fiscal 2009-103 if the country’s
economy clocks 7.6 percent GDP. In fiscal 2008-09 life insurers grew
their business by 23.3 percent to Rs.930 billion while general insurers
posted growth of about 14 percent in premium income to Rs 298 billion.
Presently the total number of insurers registered with the Insurance
Regulatory and Development Authority (IRDA) stands at 42 : 21 in life
insurance and 21 in general insurance segments. Some joint ventures
include Tata AIG, Bajaj Allianz, ICICI Prudential, SBI Life, HDFC

1
http://www.economywatch.com/indianeconomy/india-insurance-sector.html
2
http://www.indiaonestop.com/insurance/insurance.htm
3
Indian Fiscal Year is from April to March

2
Standard Life, Birla Sunlife, Max New York Life and Bharti AXA
Life.

India is the fifth-largest country in Asia in terms of total insurance

premium. The premium income in the country increased to 4.7 percent
of GDP in fiscal 2006-07 from 3.3 percent in the fiscal 2002-03.Total
premium in the insurance industry grew at a CAGR of 28.1 percent
during the same period. The life insurance sector grew at a CAGR of
29.3 percent outsmarting the general insurance sector’s CAGR of 21.3
percent.

The Indian insurance sector has a turnover of around Rs 26,287 crore.

The current FDI in this sector stands at around Rs 2500 crore and
market experts expects FDI to zoom by about 2.5 times once the FDI
cap is raised by another 23 percent to 49 percent.

The terror Pool, set up after 9/11 attacks, and being funded by the
insurers currently has a corpus of Rs 1000 crore. The settlement of the
claims for Taj, trindent and Oberoi amounting to Rs 500 crore could be
well taken care of. The urrent coverage is till March 31, 2009. It is
expected with renewals for next fiscal year, the Terror Pool fund will
increase substantially. General Insurance Corporation (GIC), the Indian
reinsurer, is planning to rise terrorism insurance cover to Rs 1000 crore
from Rs 750 crore. Currently any claim beyond Rs 750 crore is covered
by international insurers.

Meanwhile, on the expected line of foreign investors, the Congress(I)-

led UPA government in New Delhi has introduced the Insurance Laws
(Amendment) Bill 2008 in the upper house of Indian Parliament on
December 22, 2008 that seeks to raise the Foreign Direct Invest (FDI)
cap in the insurance sector from existing 26 percent to 49 percent. The

3
government move is seen as the UPA government’s most significant
and biggest reform measure in the financial sector since the then
Finance minister P. Chidambaram in his Budget speech announced plan
to hike FDI in insurance to 49 percent.

The Bill, once through in both houses of Parliament, will allow

companies, exclusively into the business of health insurance, to operate
with a minimum paid up capital of Rs 50 crore against the current
minimum paid up capital of Rs 100 crore for any insurance business-
Life or General. For re-insurance business the minimum paid-up capital
will be Rs 200 crore. The Bill when translated into an Act would enable
all the state-run general insurance companies- Oriental Insurance, New
India Assurance, United India Insurance and National Insurance – to
enter the capital market to mop up funds.

The Bill also seeks to allow Lloyd’s of London to enter Indian

insurance market as a foreign company in joint venture partnership with
local companies. The insurance regulatory body- IRDA, would chart the
terms and conditions for cancellation of registration. Business without
registration will invite fine up to Rs 25 crore. For not meeting the
obligations for rural or social sector or third party insurance of motor
vehicles, fine up to Rs 25 crore will be slapped.

According to the Bill, no insurance policy can be challenged after a gap

of five years. It will protect the interest of policy holders against any
possible litigation.

Besides Insurance Law (Amendment) Bill 2008, the government has

also introduced another Bill namely, Life Insurance Corporation
(Amendment) Bill to raise its capital from existing Rs 5 crore to Rs
100 crore. This would enable LIC comply with IRDA norms.

4
The Associated Chambers of Commerce and Industry of India
(ASSOCHAM) has projected that foreign direct investment (FDIs) will
increase in insurance sector by $ 0.46 billion in next 2 years and likely
to touch $ 0.96 billion as it is still regulated. A Paper on FDI’s
Prospects in Insurance Sector brought out by the ASSOCHAM says that
currently the total insurance market in India is about $ 30 billion, in
which the element of FDI’s is $ 0.5 billion. This is 1.6 percent of total
insurance business in India.

Despite, insurance being a highly regulated sector, however, in the first

five months of current calendar, i.e. between January to May, it could
attract FDI’s of $ 217.97 million which by any standard is not too
insignificant. If the insurance sector is opened up to an extent of 49
percent for FDI’s, in next 2 years, i.e. by 2010, the FDI’s contribution to
insurance business would touch nearly $ 2 billion. Currently, only 26
percent of FDI’s are permitted in insurance sector, the chamber expects.
It is pointed out that the domestic insurance sector has been growing at
an average speed of nearly 200 percent and that is why the chamber is
of the view that by 2012, the total insurance business would touch $ 60
billion size.

In the life insurance sector particularly on FDI’s front, the growth that
has taken between 2006 and 2007 is estimated to be around 270 percent.
This itself speaks the significance and importance, investors are
attaching to both life insurance and non-life insurance sector.

5
India’s insurance market lags behind other economies in the baseline
measure of insurance penetration. At only 3.1 percent, India is well
behind the 12.5 percent for the UK, 10.5 percent for Japan, 10.3 percent
for Korea and 9.2 percent for the US. Currently, FDI represents only
Rs.827 core of the Rs.3179 crore capitalizations of private life insurance
companies. FDI in insurance would increase the penetration of
insurance in India, where the penetration of insurance is abysmally low
with insurance premium at about 3 percent of GDP against about 8
percent global average. This would be better through marketing effort
by MNCs, better product innovation, consumer education etc.

The chamber President Sajjan Jindal maintains that insurance sector in

India has the capability of raising long term capital from the market as it
is the only avenue where people put in money for as long as 30 years
even more. An increase in FDI in insurance would indirectly be a boon
for the Indian economy, the investments not withstanding but by
making more people invest in long term funds to fuel the growth of the
Indian economy, he feels.

Since end of 2000 when insurance was privatized, life insurance

company promoters pumped in Rs 21,000 crore so far. The distribution
network also expanded significantly. In the second quarter of fiscal
2008-09 1480 branches were added including 1293 branches set up by
private sector life insurers. During this period the life industry added
53332 employees to their payrolls. The number of pay-roll employees
now crossing over 300,000. Of the total 10,037 branches of life
insurance companies around 7,000 are in semi urban and rural areas. By
the end of 1st quarter of current fiscal (2008-09) the total assets of the
life insurance companies stood at Rs 857,500 crore. Of this, Unit
Linked Policies ( ULIP) accounts for Rs 140,000 crore. The total

6
premium of all insurance companies taken together aggregated to Rs
86,500 crore in the first half of current fiscal.

Yet another highly prospective business segment is health insurance.

According to a CII-E&Y study report, the health insurance premium
income is likely to touch Rs 30,000 crore in 2015 from the existing Rs
4,000 crore. The premium was Rs 670 crore in fiscal 2001-02. It is
expected that the hike in FDI for the insurance sector from 26 percent to
49 percent will boost the healthcare business.

The immense business potential in health sector is reflected in the fact

that only about 1 percent of the country’s population is presently
covered under health insurance policies. The fillip to the health
insurance segment will also come when the Insurance Regulatory and
Development Authority’s (IRDA) recommendation to bring down
capital requirements for stand-alone health insurance companies from
Rs 100 crore to Rs 50 crore. In fact, the Insurance Laws (Amendment)
Bill 2008 makes provision to allow companies, exclusively into the
business of health insurance, to operate with a minimum paid up capital
of Rs 50 crore against the current minimum paid up capital of Rs 100
crore for any insurance business- Life or General. This is expected to
prompt entry of more health insurance companies into the country.

Micro insurance is yet another which is yet to be explored optimally.

The CII-E&Y report says that micro health insurance schemes in India
have achieved good enrolment levels among their target populations
including poor. Out of the total insurance premium of Rs 100,000 crore
collected in fiscal 2007-08, micro-insurance accounted for a meager Rs
125 crore.

7
The CII-E&Y recommendations include introduction of risk-based
capital in the life insurance segment, institutionalization of underwriting
and marketing skills in the general insurance segment, articulation of
proper reforms and industry compliance for health insurance and
regulatory and industry endeavor to promote deepening of markets for
micro insurance.

The health expenditure across the country was Rs 180,000 crore in

2007. With healthcare costs escalation, rising demand for healthcare
services and limited access of the low-income group to quality
healthcare, health insurance is emerging as an alternative mechanism
for financing healthcare. And with merely 12 percent of the population
being covered, companies are looking at the health insurance space as a
lucrative segment.

The state-owned companies constitute nearly 70 percent of the health

insurance market and private companies account for the remaining 30
percent As the out-of-pocket expenditure on healthcare is pegged at
more than 70%, private insurers are treating this as an important target
market. ICICI Prudential has started a division catering to health
insurance, while Bupa-Max is awaiting the IRDA’s approval to launch
health insurance schemes. LIC recently unveiled its health insurance
scheme to compete with players such as Apollo, Star and Bajaj Allianz.

Commenting on the prospect of the general insurance industry in India a

Moody’s-ICRA report on Indian General Insurance Industry Outlook
said: “The outlook for the general insurance industry in India is stable
based on Moody’s expectations for steady fundamental credit
conditions in the sector over the next 12-18 months. With the Indian

8
economy forecast to grow at 7.5% in 2008 and given rising income
levels and higher risk awareness among insureds, the country’s insurers
are optimistic about demand for their products. However, intense
competition from new entrants, deregulation and a moderation in
returns from the equities market will pressure pricing and ultimately
short-term profitability.”

“At the same time, despite rising inflation and a severe correction in the
stock market (the key Sensex index fell 26% in 1Q2008), the prevailing
view in Asia is that while China and India are not insulated from the
credit crisis afflicting the US and EU, domestic demand is strong
enough to support GDP growth1. Being less export dependent, India is
also less vulnerable than some of its neighbors”, the Report pointed out.

According to Moody’s-ICRA report published in April 2008, “Rising

income levels, low penetration for most consumer products, availability
of financing and changes in lifestyles/ aspirations are likely to sustain
consumer demand over the next few years. In the short term, the focus
on infrastructure development will keep the economy going, even if the
tightening in credit leads to a slowdown in consumer spending.”

“Furthermore, over the medium and long term, India’s insurance market
will continue to experience major changes as its operating environment
increasingly deregulates. On the one hand, a mix of new products, new
delivery systems and a greater awareness of risk will generate growth.
On the other hand, competition will remain intense as private sector
insurers and those about to enter India seek to win market share from
the more estab lished public sector entities,” the report indicated.

9
Some of the important milestones in the life insurance business in India
are:

 1818: Oriental Life Insurance Company, the first life insurance

company on Indian soil started functioning.
 1870: Bombay Mutual Life Assurance Society, the first Indian life
insurance company started its business.
 1912: The Indian Life Assurance Companies Act enacted as the
first statute to regulate the life insurance business.
 1928: The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and
non-life insurance businesses.
 1938: Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests of the
insuring public.
 1956: 245 Indian and foreign insurers and provident societies are
taken over by the central government and nationalized. LIC formed
by an Act of Parliament, viz. LIC Act, 1956, with a capital
contribution of Rs. 5 crore from the Government of India.

Indian Insurance Sector Reforms

The formation of the Malhotra Committee in 1993 initiated reforms in the

Indian insurance sector. The aim of the Malhotra Committee was to assess
the functionality of the Indian insurance sector. This committee was also
in charge of recommending the future path of insurance in India.

The Malhotra Committee attempted to improve various aspects of the

insurance sector, making them more appropriate and effective for the
Indian market.

10
The recommendations of the committee put stress on offering operational
autonomy to the insurance service providers and also suggested forming
an independent regulatory body.

The Insurance Regulatory and Development Authority Act of 1999

brought about several crucial policy changes in the insurance sector of
India. It led to the formation of the Insurance Regulatory and
Development Authority (IRDA) in 2000.

The goals of the IRDA are to safeguard the interests of insurance

policyholders, as well as to initiate different policy measures to help
sustain growth in the Indian insurance sector.

The Authority has notified 27 Regulations on various issues which include

Registration of Insurers, Regulation on insurance agents, Solvency
Margin, Re-insurance, Obligation of Insurers to Rural and Social sector,
Investment and Accounting Procedure, Protection of policy holders'
interest etc. Applications were invited by the Authority with effect from
15th August, 2000 for issue of the Certificate of Registration to both life
and non-life insurers. The Authority has its Head Quarter at Hyderabad.

Indian insurance companies offer a comprehensive range of insurance

plans, a range that is growing as the economy matures and the wealth of
the middle classes increases. The most common types include: term life
policies, endowment policies, joint life policies, whole life policies, loan
cover term assurance policies, unit-linked insurance plans, group
insurance policies, pension plans, and annuities. General insurance plans
are also available to cover motor insurance, home insurance, travel
insurance and health insurance.

11
Due to the growing demand for insurance, more and more insurance
companies are now emerging in the Indian insurance sector. With the
opening up of the economy, several international leaders in the insurance
sector are trying to venture into the Indian Insurance Industry.

1.2 Insurance Regulatory & Development Authority (IRDA)

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)

Duties,Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 laysdown the duties,powers and functions

of IRDA..

(1) Subject to the provisions of this Act and any other law for the time
being in force, the Authority shall have the duty to regulate, promote and
ensure orderly growth of the insurance business and re-insurance business.
(2) Without prejudice to the generality of the provisions contained in
sub-section (1), the powers and functions of the Authority shall include, -
a. Issue to the applicant a certificate of registration, renew, modify,
withdraw, suspend or cancel such registration;

12
b. Protection of the interests of the policy holders in matters concerning
assigning of policy, nomination by policy holders, insurable interest,
settlement of insurance claim, surrender value of policy and other terms
and conditions of contracts of insurance;

c. Specifying requisite qualifications, code of conduct and practical

training for intermediary or insurance intermediaries and agents;

d. Specifying the code of conduct for surveyors and loss assessors;

e. Promoting efficiency in the conduct of insurance business;

f. Promoting and regulating professional organisations connected with the

insurance and re-insurance business;

g. Levying fees and other charges for carrying out the purposes of this
Act;

h. Calling for information from, undertaking inspection of, conducting

enquiries and investigations including audit of the insurers, intermediaries,
insurance intermediaries and other organisations connected with the
insurance business;

i. Control and regulation of the rates, advantages, terms and conditions

that may be offered by insurers in respect of general insurance business
not so controlled and regulated by the Tariff Advisory Committee under
section 64U of the Insurance Act, 1938 (4 of 1938);

j Specifying the form and manner in which books of account shall be

maintained and statement of accounts shall be rendered by insurers and
other insurance intermediaries;

k. regulating investment of funds by insurance companies;

l. Regulating maintenance of margin of solvency;

13
m. Adjudication of disputes between insurers and intermediaries or
insurance intermediaries;

n. Supervising the functioning of the Tariff Advisory Committee;

o. Specifying the percentage of premium income of the insurer to finance

schemes for promoting and regulating professional organisations referred
to in clause (f);

p. Specifying the percentage of life insurance business and general

insurance business to be undertaken by the insurer in the rural or social
sector; and

q. Exercising such other powers as may be prescribed

Protection of Interest of Policy Holders

IRDA has the responsibility of protecting the interest of insurance

policyholders. Towards achieving this objective, the Authority has taken
the following steps:

 IRDA has notified Protection of Policyholders Interest Regulations

2001 to provide for: policy proposal documents in easily
understandable language; claims procedure in both life and non-
life; setting up of grievance redressal machinery; speedy settlement
of claims; and policyholders' servicing. The Regulation also
provides for payment of interest by insurers for the delay in
settlement of claim.
 The insurers are required to maintain solvency margins so that they
are in a position to meet their obligations towards policyholders
with regard to payment of claims.

14
  It is obligatory on the part of the insurance companies to disclose
clearly the benefits, terms and conditions under the policy. The
advertisements issued by the insurers should not mislead the
insuring public.
 All insurers are required to set up proper grievance redress
machinery in their head office and at their other offices.
 The Authority takes up with the insurers any complaint received
from the policyholders in connection with services provided by
them under the insurance contract.

1.3 Components of Insurance Sector.

Insurance provides financial protection against a loss arising out of

happening of an uncertain event. A person can avail this protection by
paying premium to an insurance company. A pool is created through
contributions made by persons seeking to protect themselves from
common risk. Premium is collected by insurance companies which also
act as trustee to the pool. Any loss to the insured in case of happening of
an uncertain event is paid out of this pool.

Insurance works on the basic principle of risk-sharing. A great advantage

of insurance is that it spreads the risk of a few people over a large group of
people exposed to risk of similar type.

Definition of Insurance
Insurance is a contract between two parties whereby one party agrees to
undertake the risk of another in exchange for consideration known as
premium and promises to pay a fixed sum of money to the other party on
happening of an uncertain event (death) or after the expiry of a certain

15
period in case of life insurance or to indemnify the other party on
happening of an uncertain event in case of general insurance.

The party bearing the risk is known as the 'insurer' or 'assurer' and the
party whose risk is covered is known as the 'insured' or 'assured'.

Definition of Insurer
Insurance company that issues a particular insurance policy to an insured.
In case of a very large risk, several insurance companies may combine to
issue one policy.

Definition of Insured

The person, group, or property for which an insurance policy is issued.

1.4 Indian Life Insurance Industry

1818 saw the advent of life insurance business in India with the
establishment of the Oriental Life Insurance Company in Calcutta. This
Company however failed in 1834. In 1829, the Madras Equitable had
begun transacting life insurance business in the Madras Presidency. 1870
saw the enactment of the British Insurance Act and in the last three
decades of the nineteenth century, the Bombay Mutual (1871), Oriental
(1874) and Empire of India (1897) were started in the Bombay Residency.
This era, however, was dominated by foreign insurance offices which did
good business in India, namely Albert Life Assurance, Royal Insurance,
Liverpool and London Globe Insurance and the Indian offices were up for
hard competition from the foreign companies.

16
In 1914, the Government of India started publishing returns of Insurance
Companies in India. The Indian Life Assurance Companies Act, 1912 was
the first statutory measure to regulate life business. In 1928, the Indian
Insurance Companies Act was enacted to enable the Government to collect
statistical information about both life and non-life business transacted in
India by Indian and foreign insurers including provident insurance
societies. In 1938, with a view to protecting the interest of the Insurance
public, the earlier legislation was consolidated and amended by the
Insurance Act, 1938 with comprehensive provisions for effective control
over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies.

However, there were a large number of insurance companies and the level
of competition was high. There were also allegations of unfair trade
practices. The Government of India, therefore, decided to nationalize
insurance business.

An Ordinance was issued on 19th January, 1956 nationalizing the Life

Insurance sector and Life Insurance Corporation came into existence in the
same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also
75 provident societies—245 Indian and foreign insurers in all. The LIC
had monopoly till the late 90s when the Insurance sector was reopened to
the private sector.

The history of general insurance dates back to the Industrial Revolution in

the west and the consequent growth of sea-faring trade and commerce in
the 17th century. It came to India as a legacy of British
occupation. General Insurance in India has its roots in the establishment of
Triton Insurance Company Ltd., in the year 1850 in Calcutta by the

17
British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was
the first company to transact all classes of general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the
Insurance Associaton of India. The General Insurance Council framed a
code of conduct for ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set
minimum solvency margins. The Tariff Advisory Committee was also set
up then.

In 1972 with the passing of the General Insurance Business

(Nationalization) Act, general insurance business was nationalized with
effect from 1st January, 1973. 107 insurers were amalgamated and grouped
into four companies, namely National Insurance Company Ltd., the New
India Assurance Company Ltd., the Oriental Insurance Company Ltd and
the United India Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in 1971 and it
commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey

extending to nearly 200 years. The process of re-opening of the sector had
begun in the early 1990s and the last decade and more has seen it been
opened up substantially. In 1993, the Government set up a committee
under the chairmanship of RN Malhotra, former Governor of RBI, to
propose recommendations for reforms in the insurance sector. The
objective was to complement the reforms initiated in the financial
sector. The committee submitted its report in 1994 wherein, among other
things, it recommended that the private sector be permitted to enter the
insurance industry. They stated that foreign companies be allowed to enter

18
by floating Indian companies, preferably a joint venture with Indian
partners.

Following the recommendations of the Malhotra Committee report, in

1999, the Insurance Regulatory and Development Authority (IRDA) was
constituted as an autonomous body to regulate and develop the insurance
industry. The IRDA was incorporated as a statutory body in April, 2000.
The key objectives of the IRDA include promotion of competition so as to
enhance customer satisfaction through increased consumer choice and
lower premiums, while ensuring the financial security of the insurance
market.

The IRDA opened up the market in August 2000 with the invitation for
application for registrations. Foreign companies were allowed ownership
of up to 26%. The Authority has the power to frame regulations under
Section 114A of the Insurance Act, 1938 and has from 2000 onwards
framed various regulations ranging from registration of companies for
carrying on insurance business to protection of policyholders’ interests.

19
1.4.1 Major Life Insurance Plans

Whole Life Insurance or Whole of Life Assurance

Whole Life Insurance is a life insurance policy that remains in force for
the insured's whole life and requires (in most cases) premiums to be paid
every year into the policy.

There are several types of whole life insurance policies. New York State
defines six traditional forms: non-participating (aka "non par"),
participating, indeterminate premium, economic, limited pay, and single
premium. A newer type is known generally as interest sensitive whole life.
Other jurisdictions may classify them differently, and not all companies
offer all types. There are as many types of insurance policies as can be
written in their contracts while staying within the law's guidelines.

Non-Participating

All values related to the policy (death benefits, cash surrender values,
premiums) are usually determined at policy issue, for the life of the
contract, and usually cannot be altered after issue.

This means that the insurance company assumes all risk of future
performance versus the actuaries' estimates. If future claims are
underestimated, the insurance company makes up the difference. On the
other hand, if the actuaries' estimates on future death claims are high, the
insurance company will retain the difference.

Participating

In a participating policy (also par in the USA, and known as a with-profits

policy in the Commonwealth), the insurance company shares the excess

20
profits (variously called dividends or refunds in the USA, bonus in the
Commonwealth) with the policyholder. Typically these refunds are not
taxable because they are considered an overcharge of premium. The
greater the overcharge by the company, the greater the refund/dividend.
For a mutual life insurance company, participation also implies a degree of
ownership of the mutuality.

Indeterminate Premium

Similar to non-participating, except that the premium may vary year to

year. However, the premium will never exceed the maximum premium
guaranteed in the policy.

Economic

A blending of participating and term life insurance, wherein a part of the

dividends is used to purchase additional term insurance. This can
generally yield a higher death benefit, at a cost to long term cash value. In
some policy years the dividends may be below projections, causing the
death benefit in those years to decrease.

Limited Pay

Similar to a participating policy, but instead of paying annual premiums

for life, they are only due for a certain number of years, such as 20. The
policy may also be set up to be fully paid up at a certain age, such as 65 or
80. The policy itself continues for the life of the insured. These policies
would typically cost more up front, since the insurance company needs to
build up sufficient cash value within the policy during the payment years
to fund the policy for the remainder of the insured's life.

21
Single Premium

A form of limited pay, where the pay period is a single large payment up
front. These policies typically have fees during early policy years should
the policyholder cash it in.

Interest Sensitive

This type is fairly new, and is also known as either excess interest or
current assumption whole life. The policies are a mixture of traditional
whole life and universal life. Instead of using dividends to augment
guaranteed cash value accumulation, the interest on the policy's cash value
varies with current market conditions. Like whole life, death benefit
remains constant for life. Like universal life, the premium payment might
vary, but not above the maximum premium guaranteed within the policy.

Term life insurance or term assurance

Term life insurance is life insurance which provides coverage at a fixed

rate of payments for a limited period of time, the relevant term. After that
period expires coverage at the previous rate of premiums is no longer
guaranteed and the client must either forgo coverage or potentially obtain
further coverage with different payments and/or conditions. If the insured
dies during the term, the death benefit will be paid to the beneficiary.
Term insurance is the least expensive way to purchase a substantial death
benefit on a coverage amount per premium dollar basis over a specific
period of time.

Term life insurance is the original form of life insurance and can be
contrasted to permanent life insurance such as whole life, universal life,
and variable universal life, which guarantee coverage at fixed premiums

22
for the lifetime of the covered individual. Term insurance is not generally
used for estate planning needs or charitable giving strategies but for pure
income replacement needs for an individual. Many permanent life
insurance products also build predetermined cash value over the life of the
contract, available for later withdrawal by the client under specific
conditions. However, on most cash value policies like Whole Life
insurance, the only way to receive the cash value is to cash out the policy.
The beneficiaries receive the face value of the insurance but NEVER the
cash value with Whole Life policies. Financial advisers generally advise
buying term life insurance and investing the difference elsewhere to those
who still qualify to contribute to other tax-deferred investment growth
such as IRA's or 401k's.

Term insurance functions in a manner similar to most other types of

insurance in that it satisfies claims against what is insured if the premiums
are up to date and the contract has not expired, and does not expect a
return of Premium dollars if no claims are filed. As an example, auto
insurance will satisfy claims against the insured in the event of an accident
and a home owner policy will satisfy claims against the home if it is
damaged or destroyed by, for example, a fire. Whether or not these events
will occur is uncertain, and if the policy holder discontinues coverage
because he has sold the insured car or home the insurance company will
not refund the premium. This is purely risk protection.

23
1.4.2 The key players of the Indian Life Insurance Industry

Following are the registered insurance Players in India:

In Public Sector:

Life Insurance: Life Insurance Corporation (LIC) of India,

In Private Sector:

 Bajaj Allianz Life Insurance Company Limited

 Birla Sun Life Insurance Co. Ltd
 HDFC Standard life Insurance Co. Ltd
 ICICI Prudential Life Insurance Co. Ltd.
 ING Vysya Life Insurance Company Ltd.
 Life Insurance Corporation of India
 Max New York Life Insurance Co. Ltd
 Met Life India Insurance Company Ltd.
 Kotak Mahindra Old Mutual Life Insurance Limited
 SBI Life Insurance Co. Ltd
 Tata AIG Life Insurance Company Limited
 Reliance Life Insurance Company Limited.
 Aviva Life Insurance Co. India Pvt. Ltd.
 Shriram Life Insurance Co, Ltd.
 Sahara India Life Insurance
 Bharti AXA Life Insurance
 Future Generali Life Insurance
 IDBI Fortis Life Insurance
 Canara HSBC Oriental Bank of Commerce Life Insurance
 Religare Life Insurance
 DLF Pramerica Life Insurance

24
  Star Union Dai-ichi Life Insurance

Major Life Insurance Players

Following are major life insurance players, selected for the study on the
basis of numbers of policy issued in the market, market share and
premium collected form the insurance policy holders.

1. LIC – Life Insurance Corporation of India.

Life Insurance in its modern form came to India from England in the year
1818. Oriental Life Insurance Company started by Europeans in Calcutta
was the first life insurance company on Indian Soil. The Parliament of
India passed the Life Insurance Corporation Act on the 19th of June 1956,
and the Life Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more widely and
in particular to the rural areas with a view to reach all insurable persons in
the country, providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart
from its corporate office in the year 1956. Since life insurance contracts
are long term contracts and during the currency of the policy it requires a
variety of services need was felt in the later years to expand the operations
and place a branch office at each district headquarter. Re-organization of
LIC took place and large numbers of new branch offices were opened. As
a result of re-organization servicing functions were transferred to the
branches, and branches were made accounting units. It worked wonders
with the performance of the corporation. It may be seen that from about
200.00 crores of New Business in 1957 the corporation crossed 1000.00
crores only in the year 1969-70, and it took another 10 years for LIC to
cross 2000.00 crore mark of new business. But with re-organization

25
happening in the early eighties, by 1985-86 LIC had already crossed
7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 109
divisional offices, 8 zonal offices, 992 satellite offices and the corporate
office. LIC’s Wide Area Network covers 109 divisional offices and
connects all the branches through a Metro Area Network. LIC has tied up
with some Banks and Service providers to offer on-line premium
collection facility in selected cities. LIC’s ECS and ATM premium
payment facility is an addition to customer convenience. Apart from on-
line Kiosks and IVRS, Info Centers have been commissioned at Mumbai,
Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune
and many other cities. With a vision of providing easy access to its
policyholders, LIC has launched its SATELLITE SAMPARK offices. The
satellite offices are smaller, leaner and closer to the customer. The
digitalized records of the satellite offices will facilitate anywhere servicing
and many other conveniences in the future.

LIC continues to be the dominant life insurer even in the liberalized

scenario of Indian insurance and is moving fast on a new growth trajectory
surpassing its own past records. LIC has issued over one crore policies
during the current year. It has crossed the milestone of issuing 1,01,32,955
new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67%
over the corresponding period of the previous year.

From then to now, LIC has crossed many milestones and has set
unprecedented performance records in various aspects of life insurance
business. The same motives which inspired our forefathers to bring
insurance into existence in this country inspire us at LIC to take this

26
message of protection to light the lamps of security in as many homes as
possible and to help the people in providing security to their families.

2. ICICI Prudential

ICICI Prudential Life Insurance Company is a joint venture between ICICI

Bank - one of India's foremost financial services companies-and
Prudential plc - a leading international financial services group
headquartered in the United Kingdom. Total capital infusion stands at Rs.
47.80 billion, with ICICI Bank holding a stake of 74% and Prudential plc
holding 26%.

We began our operations in December 2000 after receiving approval from

Insurance Regulatory Development Authority (IRDA). Today, our nation-
wide reach includes over 1,900 branches (inclusive of 1,074 micro-
offices), over 210,000 advisors; and 7 bancassurance partners.

For three years in a row, ICICI Prudential has been voted as India's Most
Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG
Marg survey of 'Most Trusted Brands'. As we grow our distribution,
product range and customer base, we continue to tirelessly uphold our
commitment to deliver world-class financial solutions to customers all
over India.
3. Bajaj Allianz Life Insurance Co. Ltd.
Bajaj Allianz Life Insurance Co Ltd is a unique joint venture among the
global giants Allianz Group (AG) and Bajaj Auto. Allianz AG's world
ranking establishes it among the top insurance companies in the world.
Bajaj is the biggest two and three wheeler manufacturer in the world.
Bajaj Allianz Life Insurance Company boasts of a nationwide presence
with 876 offices and over 4 million satisfied customers.

27
Both of the names are known for their strength, expertise and stability in
the insurance sector. While Bajaj Finserv Limited holds the 74% of the
paid up capital of Rs. 110 crore, Allianz SE holds the remaining 26%. It
can be added here that Bajaj Finserv Limited has very recently demerged
from Bajaj Auto Limited.

Bajaj Allianz Insurance started its journey on May 2, 2001 when it

received the certificate of Registration from Insurance Regulatory and
Development Authority (IRDA) for conducting General Insurance
business in India including Health Insurance. As on the end of March
2009, the income of Bajaj Allianz Insurance went up to Rs. 2,866 crore
with a growth of 11% over the previous year. It also registered a net profit
of Rs. 95 crore, highest by any private insurer, in the last financial year.

Bajaj Allianz India offers convenient premium payment and receipt

options. The payments can be direct through cheques, DD's or directly from
your accounts or through credit card. The premiums can also be paid
online. The insurance policy holders who also have an account with
Standard Chartered Bank can avail the direct debit mandate facility.

The Bajaj Allianz Life Insurance website offers human life value estimator,
child education cost calculator, retirement solutions and required pension
estimator and premium calculator online. The Bajaj Allianz insurance
agents will guide you about the general life insurance policies best suited to
your needs. The insurance agent also briefs you about the insurance quote
and the terms on the policy quotes.

28
 4. HDFC Standard Life

HDFC Standard Life Insurance Company Limited., being one of the key
players in the insurance sector in India, offers a host of individual and
group insurance solutions, suiting customer requirements. It happens to be
a joint venture between Housing Development Finance Corporation
Limited (HDFC Limited), and a Group Company of the Standard Life Plc,
UK. It was per the data on February 28, 2009 that HDFC Ltd. held 72.43%
and Standard Life (Mauritius Holding) 2006, Ltd. held 26.00% of equity
in the JV. The remaining stake is held by others

HDFC Standard Life’s product portfolio comprises solutions, which meet

various customer needs such as Protection, Pension, Savings, Investment
and Health. Customers have the added advantage of customizing the plans,
by adding optional benefits called riders, at a nominal price. The company
currently has 32 retail and 4 group products in its portfolio, along with five
optional rider benefits catering to the savings, investment, protection and
retirement needs of customers.

HDFC Standard Life continues to have one of the widest reaches among
new insurance companies with 568 branches servicing customer needs in
over 700 cities and towns. The company has a strong presence in its
existing markets with a base of 2,00,000 Financial Consultants.

5. TATA AIG Life Insurance

Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint
venture company, formed by Tata Sons and AIA Group Limited (AIA).
Tata AIG Life combines Tata’s pre-eminent leadership position in India
and AIA’s presence as the largest, independent listed pan-Asia life
insurance group in the world spanning 15 markets in Asia Pacific. Tata
Sons holds a majority stake (74%) in the company and AIA holds 26%

29
through an AIA Group company. Tata AIG Life Insurance Company was
licensed to operate in India on February 12, 2001 and started operations on
April 1, 2001.

1.5 Indian Non-Life Insurance Industry

The General insurance business in India can trace its roots to the Triton
Insurance Company Ltd., the first general insurance company established
in the year 1850 in Calcutta by the British. Some of the important
milestones in the general insurance business in India are:

 1907: The Indian Mercantile Insurance Ltd. set up, the first
company to transact all classes of general insurance business.
 1957: General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring fair
conduct and sound business practices.
 1968: The Insurance Act amended to regulate investments and set
minimum solvency margins and the Tariff Advisory Committee set
up.
 1972: The General Insurance Business (Nationalization) Act, 1972
nationalized the general insurance business in India with effect
from 1st January 1973.
 107 insurers amalgamated and grouped into four companies’ viz. the
National Insurance Company Ltd., the New India Assurance Company
Ltd., the Oriental Insurance Company Ltd. and the United India
Insurance Company Ltd. GIC incorporated as a company.

In December, 2000, the subsidiaries of the General Insurance Corporation

of India were restructured as independent companies and at the same time

30
GIC was converted into a national re-insurer. Parliament passed a bill de-
linking the four subsidiaries from GIC in July, 2002.

Today there are 24 general insurance companies including the ECGC and
Agriculture Insurance Corporation of India and 23 life insurance
companies operating in the country.

The insurance sector is a colossal one and is growing at a speedy rate of

15-20%. Together with banking services, insurance services add about 7%
to the country’s GDP. A well-developed and evolved insurance sector is a
boon for economic development as it provides long- term funds for
infrastructure development at the same time strengthening the risk taking
ability of the country.

1.5.1 Health Insurance

Insurance sector in India is small but growing at very pace. The insurance
companies in general have experienced significant growth during last
decade in India. The impetus for this growth came from new economic
policies and liberalization of insurance sector. There are 12 general
insurance companies in India and they can offer health insurance products.
However, given the complexities of health insurance, only few companies
have ventured into offering health insurance products. In health insurance,
25 third party administrators (TPAs) function as intermediaries in this
sector. It is estimated that there are 11.2 million health insurance
policyholders out of which almost 87 per cent have bought the
Mediclaim1 policies from four public sector general insurance companies.
Total premium collected by these four companies was around 11.29
billion (2004). The claim ratio of the insurers offering health insurance

31
products has been rising over the years and it was 96 per cent during 2003-
04. India provides a huge market for health insurance and it is estimated
that health insurance market potential is a minimum of Rs. 150 billion
while so far only 10 percent of it has been tapped up to 2004-05.

However, one important factor to sustain insurance in long run is

continuity of members to remain in health insurance pool. Since health
insurance is generally sold as one-year policy, policyholders need to
renew the policy each year. The decision of not renewing the health
insurance policy has implications for the characteristic of the risk pooling
and may indicate serious adverse selection or moral hazard problem. The
low renewal rate may also indicate the insurance company is not able to
deliver value to its policyholders because of poor networking with the
provider or inadequate access to health care facilities. The low renewal
rates also indicate high new business strain affecting the financial
performance of insurance provider. Since health insurance is not
mandatory, it faces challenge of ensuring all policyholders renew their
policies, as these policies are not sold for long-term. In health insurance
generally short-term plan of one-year duration are sold. It is only recently
some private general insurance companies have started selling two-year
health insurance plans.

Health insurance providers are generally reluctant to offer long-term

health insurance policies because of several reasons. One reason is the
unpredictability of medical costs in future. Because of the continuous
changing sphere of medical technology and medical procedures because of
technology or advancement in medical research, it is difficult to make
reasonable assessment of cost of covering health risks.

32
The health epidemiology of communities is also least understood aspect
posing challenge in determining actuarially appropriate pricing of
insurance products. The other reasons are issues related to portability of
health insurance. In health insurance, generally insurer with the help of
third-party administrator would have developed preferred provider
network. The policyholder movement from one place to another poses
challenge of ensuring the provision of medical services. The development
of provider network may happen at unpredictable different costs.
Considering these factors, long-term health insurance policies are not
popular and therefore renewal of policies assumes significant importance.

The risk category of policyholder can have significant implications for the
cost of healthcare and therefore can dramatically affect the pricing of the
product. For example, the insurance premium for an old person will be
much higher than that of a young person. When policyholder’s profile
affects costs, competition among various insurance providers may produce
undesirable results (Cutler and Zeckhauser 1992). It will be difficult for
insurance providers to develop long-term products. Another issue in this
market, which may arise here, is adverse selection problem. Health
insurance companies use the term "adverse selection" to describe the
tendency for high-risk people to be more likely to buy health insurance.
Therefore, these issues make market for health insurance more
complicated and different from other markets. Understanding the factors,
which affect the demand and renewal decisions of continuing in health
insurance program, is imperative for growth and development of this
sector.

Accidental Death In the event of an accidental death, this insurance will

pay benefits in addition to any life insurance held. [1] Some of the covered
accidents include traffic accidents, exposure, homicide, falls, heavy

33
equipment accidents, and drowning. Accidental deaths are the fifth leading
cause of death in the US[2]. Death by illness, suicide, or natural causes are
generally not covered by AD&D. Some insurers will even cover an
accidental death caused from war or terrorism.

Total Permanent Disability (TPD) is a phrase used in the insurance

industry and in law. Generally speaking, it means that because of a
sickness or injury, a person is unable to work in their own or any
occupation for which they are suited by training, education, or experience.
An individual or group of individuals can insure themselves against it
through a disability insurance policy, as part of a life insurance package or
through worker's compensation insurance

Health Insurance Product Provider in India:

Apollo DKV Insurance Company Ltd.

Aviva Life Insurance

Bajaj Allianz General Insurance Co. Ltd.

Birla Sun Life Insurance

E-Meditek Solutions Limited

Family Health Plan Limited

Health India-Bhaichand Amoluk Insurance Services Pvt. Ltd.

HSBC Health Insurance

ICICI Lombard General Insurance Co. Ltd.

Life Insurance Corporation Of India

34
Max New York Life Insurance

Med Assist India Ltd.

MetLife India Assurance Company

National Insurance Company

Paramound Health Group

Reliance Health

Royal Sundaram Alliance Insurance Company Limited

Star Health and Allied Insurance Company Limited

Tata AIG

The New India Assurance Co. Ltd.

United Healthcare

United India Insurance

1.5.2 Vehicle Insurance

Auto Insurance in India deals with the insurance covers for the loss or
damage caused to the automobile or its parts due to natural and man-made
calamities. It provides accident cover for individual owners of the vehicle
while driving and also for passengers and third party legal liability. There
are certain general insurance companies who also offer online insurance
service for the vehicle.

Auto Insurance in India is a compulsory requirement for all new vehicles

used whether for commercial or personal use. The insurance companies

35
have tie-ups with leading automobile manufacturers. They offer their
customers instant auto quotes. Auto premium is determined by a number
of factors and the amount of premium increases with the rise in the price
of the vehicle. The claims of the Auto Insurance in India can be
accidental, theft claims or third party claims. Certain documents are
required for claiming Auto Insurance in India , like duly signed claim
form, RC copy of the vehicle, Driving license copy, FIR copy, Original
estimate and policy copy.

There are different types of Auto Insurance in India :

Private Car Insurance - In the Auto Insurance in India, Private Car

Insurance is the fastest growing sector as it is compulsory for all the new
cars. The amount of premium depends on the make and value of the car,
state where the car is registered and the year of manufacture.

Two Wheeler Insurance - The Two Wheeler Insurance under the Auto
Insurance in India covers accidental insurance for the drivers of the
vehicle. The amount of premium depends on the current showroom price
multiplied by the depreciation rate fixed by the Tariff Advisory
Committee at the time of the beginning of policy period.

Commercial Vehicle Insurance - Commercial Vehicle Insurance under the

Auto Insurance in India provides cover for all the vehicles which are not
used for personal purposes, like the Trucks and HMVs. The amount of
premium depends on the showroom price of the vehicle at the
commencement of the insurance period, make of the vehicle and the place
of registration of the vehicle. The auto insurance generally includes:

Loss or damage by accident, fire, lightning, self ignition, external

explosion, burglary, housebreaking or theft, malicious act. Liability for

36
third party injury/death, third party property and liability to paid driver On
payment of appropriate additional premium, loss/damage to
electrical/electronic accessories The auto insurance does not include:

1).Consequential loss, depreciation, mechanical and electrical breakdown,

failure or breakage

2).When vehicle is used outside the geographical area

3).War or nuclear perils and drunken driving

Vehicle Insurance Providers in India

The top motor insurance companies in India are as follows:

o ICICI Lombard General Insurance

o Bajaj Allianz
o HDFC Ergo
o IFFCO-Tokio General Insurance
o Cholamandalam MS General Insurance
o Oriental Insurance
o Royal Sundaram Alliance
o Tata AIG
o HSBC India
o The New India Assurance Company
o United India Insurance Company Ltd.
o Reliance General Insurance

37
1.5.3 The key players of the Indian Non-life Insurance Industry

Following are the key players of the Indian Non-life Insurance Industry:

Public Players: National Insurance Company Limited, Oriental Insurance

Limited, New India Assurance Company Limited and United India
Insurance Company Limited.

Private Players

 Bajaj Allianz General Insurance Co. Ltd.

 ICICI Lombard General Insurance Co. Ltd.

 IFFCO Tokio General Insurance Co. Ltd.

 Reliance General Insurance Co. Ltd.

 Royal Sundaram Alliance Insurance Co. Ltd

 Tata AIG General Insurance Co. Ltd.

 United India Insurance Co. Ltd.

 Cholamandalam MS General Insurance Co. Ltd.

 HDFC ERGO General Insurance Co. Ltd.

 Export Credit Guarantee Corporation of India Ltd.

 Agriculture Insurance Co. of India Ltd.

 Star Health and Allied Insurance Co. Ltd.

 Apollo Munich Health Insurance Co. Ltd.

38
  Future Generali India Insurance Co. Ltd.

 Universal Sompo General Insurance Co. Ltd.

 Shriram General Insurance Co. Ltd.

 Bharti AXA General Insurance Co. Ltd.

 Raheja QBE General Insurance Co. Ltd.

Major Non-Life Insurance Players

Following are major non-life insurance players, selected for the study on
the basis of numbers of policy issued in the market, market share and
premium collected from the insurance policy holders.

1. GIC’s Four Subsidiary

(a) The National Insurance Company Ltd.

National Insurance Company Limited was incorporated in 1906 with its

registered office in Kolkata. Consequent to passing of the General
Insurance Business Nationalisation Act in 1972, 21 Foreign and 11 Indian
Companies were amalgamated with it and National became a subsidiary of
General Insurance Corporation of India (GIC) which is fully owned by the
Government of India. After the notification of the General Insurance
Business (Nationalisation) Amendment Act, on 7 th August 2002, National
has been de-linked from its holding company GIC and presently operating
as a Government of India undertaking.

39
(b) The New India Assurance Company Ltd.

Incorporated on July 23rd, 1919 Founded by the House of Tata Founder

member - Sir Dorab Tata. Nationalized in 1973 with merger of Indian
companies.

(c) The Oriental Insurance Company Ltd.

The Oriental Insurance Company Ltd was incorporated at Bombay on 12th

September 1947. The Company was a wholly owned subsidiary of the
Oriental Government Security Life Assurance Company Ltd and was
formed to carry out General Insurance business. The Company was a
subsidiary of Life Insurance Corporation of India from 1956 to 1973 (till
the General Insurance Business was nationalized in the country). In 2003
all shares of our company held by the General Insurance Corporation of
India has been transferred to Central Government.

(d) The United India Insurance Company Ltd

United India Insurance Company Limited is a leader in the business of

General Insurance in India. It came into being on 18 February 1938.
However, the General Insurance business was nationalized in the country
in 1972, the United India Insurance was then merged with 12 Indian
Insurance Companies, 4 Cooperative Insurance Societies, Indian
operations of 5 Foreign Insurers, and the General Insurance operations of
southern region of Life Insurance Corporation of India. The company has
progressed tremendously since nationalization and today stands as one of
the most trustworthy name in the Insurance sector.

40
2. ICICI Lombard

CICI Lombard GIC Ltd. is a 74:26 joint venture between ICICI Bank
Limited, India’s second largest bank with consolidated total assets of over
USD 100 billion at March 31, 2010 and Fairfax Financial Holdings
Limited, a Canada based USD 30 billion diversified financial services
company engaged in general insurance, reinsurance, insurance claims
management and investment management.

ICICI Lombard is the largest private sector general insurance company in

India with a Gross Written Premium (GWP) of 36,948 million for the
year ended March 31, 2010. The company issued over 44 Lakh policies
and settled over 62 Lakh claims and has a claim disposal ratio of 96%
(percentage of claims settled against claims reported) as on March 31,
2010. The company has 4,634 employees and 350 branches as on March
31, 2010.

The company has been assigned a domestic rating of ‘iAAA’ by ICRA (an
associate of Moody’s Investors Service) for highest claim paying ability
and a fundamentally strong position, for the fourth consecutive year. ICICI
Lombard Auto Insurance has been rated highest in customer satisfaction
by J.D. Power Asia Pacific in India among 11 auto insurance providers.
The company has been conferred the Golden Peacock- Eco Innovation
Award of 2009 for weather insurance and the Customer and Brand
Loyalty award in the ‘Insurance Sector - Non-Life’ at the 3rd Loyalty
awards, 2010.

It was awarded the ‘General Insurance Company of the Year’ at the 11th
Asia Insurance Industry Awards. The company also won the NDTV Profit
Business Leadership Award 2007 and was adjudged as the most Customer

41
Responsive Company in the Insurance category at the Economic Times
Avaya Global Connect Customer Responsiveness Award 2006. It has the
Gold Shield for “Excellence in Financial Reporting” by the ICAI (Institute
of Chartered Accountants of India) for the year ended March 31, 2006.

3. Bajaj Allianz General Insurance

Bajaj Allianz General Insurance Company Limited is a joint venture

between Bajaj Finserv Limited (recently demerged from Bajaj Auto
Limited) and Allianz SE. Both enjoy a reputation of expertise, stability
and strength

Bajaj Allianz General Insurance received the Insurance Regulatory and

Development Authority (IRDA) certificate of Registration on 2nd May,
2001 to conduct General Insurance business (including Health Insurance
business) in India. The Company has an authorized and paid up capital of
Rs 110 crores. Bajaj Finserv Limited holds 74% and the remaining 26% is
held by Allianz, SE.

As on 31st March 2010, Bajaj Allianz General Insurance maintained its

premier position in the industry by achieving growth as well as
profitability. Bajaj Allianz has made a profit before tax of Rs. 180 crores
and has become the only private insurer to cross the Rs.100 crore mark in
profit before tax in the last four years. The profit after tax was Rs. 121
crores, 27% higher than the previous year.

Bajaj Allianz today has a countrywide network connected through the

latest technology for quick communication and response in over 200
towns spread across the length and breadth of the country. From Surat to
Siliguri and Jammu to Thiruvananthapuram, all the offices are
interconnected with the Head Office at Pune.

42
4. Reliance General Insurance

Reliance General Insurance is one of India’s leading private general

insurance companies with over 94 customized insurance products catering
to the corporate, SME and individual customers. The Company has
launched innovative products like India’s first Over-The-Counter health &
home insurance policies. Reliance General Insurance has an extended
network of over 200 offices spread across 173 cities in 22 states, a wide
distribution channel network, 24x7 customer service assistance and a full
fledged website. It is also India’s first insurance company to be awarded
the ISO 9001:2000 certification across all functions, processes, products
and locations pan-India.

5. TATA AIG General Insurance

Tata AIG General Insurance Company Limited (Tata AIG General) is a

joint venture company, formed by the Tata Group and American
International Group, Inc. (AIG). The Tata Group holds 74 per cent stake in
the insurance venture with AIG holding the balance 26 percent. Tata AIG
General Insurance Company, which started its operations in India on
January 22, 2001, provides insurance solutions to individuals and
corporate. The Company's products are available through various channels
of distribution like agents, brokers, banks (through banc assurance tie ups)
and direct channels like Tele Marketing, Digital Marketing, worksite etc.

43
1.6 Performance of the Indian Insurance Players

The following points will provide you an insight into the insurance market
of India and its fast expanding prospects. The report is well supported by
data based on detailed analysis that would help investors, financial service
providers and global banking players to venture into the Indian insurance
market.

Taking into account the changing socio-economic demographist, rate of

GDP growth, behavior of consumers, and occurrences of natural
calamities at regular intervals the market of Life Insurance in India is
expected grow to the value of around US $ 41.44 billion by the year 2009.
The Market is expected to grow at a compounded annual growth rate
(CAGR) of more than 200 % year over year (YOY) from year 2009
onwards.

 65 % of the general insurance market is controlled by private

houses that already exist in the market.
 However in automobile insurance, public sector covers a
substantial 68 % of the total market value.
 Among individual companies that are worthy of mentioning, ICICI
Lombard enjoys a whopping 53 % market share in Accident
Insurance while the remaining 47 % is shared by New India
Assurance and United India Insurance , both belonging to the
public sector.

Top 10 insurance companies in India as on July 2009.

LIC (Life Insurance Corporation of India) still remains the largest life
insurance company accounting for 64% market share. Its share, however,

44
has dropped from 74% a year before, mainly owing to entry of private
players with innovative products and better sales force.

ICICI Prudential Life Insurance Co Ltd is the biggest private life

insurance company in India. It experienced growth of 58% in new
business premium, accounting for increase in market share to 8.93% in
2007-08 from 6.97% in 2006-07.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its
market share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The
company ranked second (after LIC) in number of policies sold in 2007-08,
with total market share of 7.36%.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the
company ranked 6th in 2007-08. New premium collection for the
company was Rs 4,792.66 crore in 2007-08, an increase of 87% over last
year.

Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and
its market share went up to 2.96% from 1.23% a year back. It now ranks
5th in new business premium and 4th in number of new policies sold in
2007-08.

HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore

in FY2007-08, registering a year-on-year growth of 64%. Its market share
is 2.88% and it ranks 6th among the insurance companies and 5th amongst
the private players.

Birla Sun Life Insurance Co Ltd market share of the company increased
from 1.22% to 2.11% in 2007-08. The company moved to the 7th position
in 2007-08 from 8the a year before, pushing down Max New York Life
insurance company.

45
Max New York Life Insurance Co Ltd has reported growth of 73% in
2007-08. Total new business generated was Rs 641.83 crore as against Rs
387.51 crore. The company was pushed down to the 8th position from 7th
in 2007-08.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the
company reported growth of 80%, moving from the 11th position to 9th. It
captured a market share of 1.19% in 2007-08. Last year the company
doubled its branch network to 150 from 74.

Aviva Life Insurance Company India Ltd ranking dropped to 10th in

2007-08 from 9th last year. It has presence in more than 3,000 locations
across India via 221 branches and close to 40 bancassurance partnerships.
Aviva Life Insurance plans to increase its capital base by Rs 344 crore.
With the fresh investment, total paid-up capital of the insurer would go up
to Rs 1,348.8 crore.

1.7 References
Books

1. Gulati c Neelam. Principles of Insurance Management. 1st

Edition. (New Delhi; Excel Book -Excel Publishing Company
Limited), pp 99-124.
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2.05.p.m.
http://www.onlineautoinsurance.com/learn/high-risk-drivers.htm
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http://www.onlineautoinsurance.com/affordable/
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http://top-car-insurance-articles.com/auto-insurance/beware-of-
scorpion-insurer-while-taking-insurance-cover/ By Dr. N. R.
Nagarjan, Virudhunagar, Published in The Insurance Times,
August, 2004
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http://www.royalsundaram.in/car-insurance
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http://www.appuonline.com/insurance/basics.html
7. Definition of Insured, Date: 11/03/11, Time: 2.05p.m.

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 http://www.investorwords.com/2519/insured.html#ixzz1GHI1pYB
G.html
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0ffers/articleshow/7448263.cms#ixzz1E7rx3iF3
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 http://www.medindia.net/patients/insurance/health-insurance-
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x.html

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