Economy, Industry, company analysis

Syndicate Learning Program II Report

EIC report on Insurance industry

Submitted To:
Prerna Chettri, PhD
Associate Professor

21BSPHH01C1819 TANAY CHAWLA

21BSPHH01C1190 SHRUTI BAGRECHA
21BSPHH01C1334 SURYADEEP SINGH
21BSPHH01C0146 ANKITA SARMA
21BSPHH01C1780 SHRAVAN PATEL
21BSPHH01C1258 SOUMYA RANJAN
21BSPHH01C1260 SOURABH PANDEY
21BSPHH01C0819 PARUL CHAUHAN
21BSPHH01C0207 ARPIT JOSHI

Declaration:
We declare that this assignment is our work and we have not copied it from any other student’s
work or from any other source except where due acknowledgement is made.

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ACKNOWLEDGMENT

First of all, we would like to thank all those, without whom this report would not have been
possible. Thank you for providing us the opportunity to make an extensive EIC report on
Insurance industry. We sincerely thank our Syndicate Learning Program Professor Prerna
Chettri ma’am, without whom this project would not have been possible. Thanks to her, we
learned new concepts and the way to apply them on this assignment.

We would also like to thank ICFAI Business School, Hyderabad for providing resources for
learning and constantly encouraging us to out-perform ourselves.

Also, this report required a lot of research and analysis and so we would also like to appreciate
the teamwork and efforts implied by our team members in this report writing.

Last but not the least, we would like to thank our families for always supporting us.

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Table of content

S.no Content Page No.

1 Economic Analysis 4
2 Introduction to the Indian Economy 4-7
3 Government Economies and their effect on Economies 8-9
4 Growth Aspects and Future aspects 9-10
5 Company Analysis 10-12
6 SWOT Analysis 12-13
7 Stakeholder’s Analysis 13-14
8 Profitability Analysis 15
9 Revenue Analysis 15-16
10 Best Practices 16-17
11 Executive Summary 17
12 Analyses 17-35

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Economic Analysis
Executive Summary
This section of the report will include an in-depth examination of India's economy. This section
begins with a brief overview of our country's economic situation. Followed by the key drivers
of the Indian economy and the features distinguishing our economy with that of the other
emerging economies. This is followed by explaining the major indicators of the Indian
Economy. This report also throws light on the major government policies issued and their
impact on the economy as a whole. At the end, there is a conclusion that gives insight on the
Indian economy's growth potential and future patterns in the next years.

Introduction to the Indian Economy:

India's economy is classified as a middle-income developing market economy. It has the
world's third-largest purchasing power parity economy and the sixth-largest nominal GDP
(PPP). According to the International Monetary Fund (IMF), India ranks 145th by nominal
GDP and 122nd by terms of GDP (PPP). From 1947 through 1991, consecutive administrations
advocated protectionist economic policies that included substantial government intervention
and regulation. The economy has opened up and provided us with numerous opportunities to
flourish since our liberalisation in 1991.

India's 25-year journey toward economic liberalisation is providing it with the much-needed
resilience it requires now. These are the industries that fuelled company expansion and helped
the country's economy withstand the storm.

• Agriculture: India is the world's second-largest producer of agricultural products.

Agriculture and related industries such as forestry, logging, and fishing accounted for
18.6% of GDP in 2005, employing 60% of the total workforce, and despite a steady
decline in its share of GDP, agriculture and related industries remain India's largest
economic sector and play a significant role in the country's overall socio-economic
development.
• Industrial Output: In terms of factory output, India ranks tenth in the world. Along with
mining, quarrying, power, and gas, the manufacturing sector accounts for 27.6% of
GDP and employs 17% of the overall workforce. After 1991, economic changes
brought international competition, led to the privatisation of certain public-sector
companies, opened up previously closed to the public sector, and increased the

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production of fast-moving consumer goods. In recent years, Indian cities have

continued to liberalise, although in some cities, such as Kochi and Kolkata, excessive
and costly corporate laws remain a concern.
• Services: In terms of service output, India ranks fifteenth. On the supply side, the
service industry employs English-speaking Indian workers, while on the demand side,
overseas consumers interested in India's service exports or those wishing to outsource
their operations have raised demand. Despite contributing considerably to India's
balance of payments, the IT sector accounts for only approximately 1% of GDP and
1/50th of total services.
• Technology: The technology sector has been thriving since the beginning of the digital
era. Technology is widely acknowledged as the primary driver of economic growth in
countries, regions, and cities. Technological progress allows for more efficient
production of more and better goods and services, which is critical for economic
growth.
• Healthcare Sector: According to a FICCI-KPMG research, India's developing
healthcare sector will be worth $ 280 billion by 2020, with a CAGR of 16 percent. As
a result, the sector has numerous chances.

Features of Indian Growth :

• Low Per Capita Income: India's per capita income is significantly lower than
that of wealthy nations. India's per capita net national income in current prices
for fiscal year 2015-16 was roughly Rs. 93231, according to the Central
Statistics Office (CSO), compared to $14,550 for Brazil and $11,273 for
Russia. Indonesia has a per capita income of around $4450.

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• Agro-based Economy: The Indian economy is entirely focused on agriculture.

Agriculture and related sectors account for over 14.2% of Indian GDP, while
agriculture employs 53 percent of the country's entire population. Whereas in
the Brazilian economy agriculture accounts to 25% of the GDP. China is the
world's largest agricultural economy accounting for approximately 10% of its
GDP.
• Overpopulation: Every ten years, India's population grows by roughly 20%.
India is home to roughly 17.5 percent of the world's population and that of china
is 17.8%, Indonesia is 3.41% and that of Russia is 1.87%.
• Imperfect Markets: Indian marketplaces are imperfect because there is a lack
of movement from one location to another, limiting the optimal application of
resources. As a result, there is a pricing difference

Indicators of Economic Growth:

• GDP Analysis: The Gross Domestic Product (GDP) is a widely used indicator
of an economy's output or production. GDP is a good indicator of an economy's
size, and the GDP growth rate is perhaps the best indicator of economic growth,
while GDP per capita has a strong link to the trend in living standards over
time. The GDP of India stands about 2.62 lakh crores USD (2020) and is
expected to grow at 9.1 per cent in 2021-22. India's major industry is the
services sector. In 2020-21, the services sector's Gross Value Added (GVA) is
expected to be 96.54 lakh crore INR at current prices. The services industry
contributes for 53.89 percent of India's overall GVA, which is worth 179.15
lakh crore rupees. Industry provides 25.92 percent of GDP, with a GVA of Rs.
46.44 lakh crore. Agriculture and related industries account for 20.19 percent

of the total.

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• PER CAPITA INCOME: Per capita

income is used to calculate the average per-
person income in order to assess a
population's standard of life. At current
prices, India's per capita net national income
(NNI) is expected to reach 128,829 Indian
rupees in 2020-21, up from 134,186 INR in
2019-20. In real terms (at 2011-12 prices),
per capita income in 2020-21 is expected to
be Rs. 86,659, down from Rs. 94,566 in 2019-20.

• INFLATION (WPI AND CPI): The inflation rate is calculated

using both the WPI and the CPI. WPI is used to assess the average
change in price in the wholesale sale of goods by a whole seller, while
CPI is used to measure the change in price in the retail or direct sale of
goods or services to a consumer. In September, the wholesale pricing
index (WPI)-based inflation rate fell to 10.66 percent from 11.39
percent the previous month, but has stayed in double digits for the first
six months of the current fiscal year (FY22). Food costs fell for the
second month in a row, causing the slowing. The Consumer Price Index
(CPI) measures retail inflation in India, and it jumped to 4.48 percent in
October 2021, according to statistics issued by the Ministry of Statistics
and Programme Implementation on November 12. According to
government figures, retail inflation increased marginally in October due
to an increase in food prices. In September 2021, CPI-based inflation
was 4.35 percent, while in October 2020, it was 7.61 percent.

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Government Economies and their effect on economy:

Certainly, good economics does pay in the long run. Government policies explain why things
should be done a certain way and why they should be done in that direction. Public issues can
manifest themselves in a variety of forms, demanding a variety of policy responses.
Governments adopt a variety of policies to guide corporations. Taxes, trade, subsidies,
regulations, interest rates, and licensing are just some of the ways the government can modify
fiscal policy. Businesses must be able to adapt to changing policies and laws. Government
policies apply at all levels, from the national to the local, including states and municipalities,
and each of these local governments has its own set of rules. There are just a few international
treaties that can have an impact on how corporations conduct business. Taxation provides
revenue for governments to spend. Increased spending necessitates either tax increases or
borrowing. Any increase in taxes will deter investment, particularly among entrepreneurs who
take on the risks of founding and operating businesses. Consumption rises, depleting the limited
savings pool and reducing the amount of money available for private investment. A few
significant modifications have occurred in recent years:

• GST: One tax rate for the entire country - With the introduction of a
new state-wide Goods and Services Tax in July, India's 29 states
became one market with a single tax rate. The GST Council lowered
rates across the board, including for a variety of daily consumables,
relaxed penalties, and revised procedures last month to make it easier
for businesses, particularly small and medium-sized businesses, to
comply. All goods and services are taxed at one of five rates: 28%, 18%,
12%, 5%, or 0%.

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• The government has gathered information on 5,800 shell businesses

whose near-zero-balance accounts witnessed approximately Rs 4,574
crore in deposits and Rs 4,552 crore in withdrawals following the note
ban, as part of its drive on illicit money.
Ms. Nirmala Sitharaman, Minister of Finance and Corporate Affairs,
presented the first Union Budget of the third decade of the twenty-first
century in Parliament on February 1, 2020. The budget included a mix
of short-, medium-, and long-term policies targeted at reviving the
Indian economy.

• In the Union Budget 2021-22, capital expenditure for FY22 is likely to

increase to increase by 34.5% at Rs. 5.5 lakh crore (US$ 75.81 billion)
over FY21 (BE) to boost the economy.
• Increased government expenditure is expected to attract private
investments, with production-linked incentive scheme providing
excellent opportunities. Consistently proactive, graded and measured
policy support is anticipated to boost the Indian economy.
• In September 2021, Union Cabinet approved major reforms in the
telecom sector, which is expected to boost employment, growth,
competition and consumer interests. The rationalisation of adjusted
gross revenue, the rationalisation of bank guarantees (BGs), and the
encouragement of spectrum sharing are all important developments.
• In September 2021, the government announced plans to release Rs.
56,027 crore (US$ 7.62 billion) under various export promotion
schemes to boost exports.
Growth Prospects and Future Aspects:
According to data published in a Department of Economic Affairs report, India's output increased
by 20.1 percent YoY in the first quarter of FY22, recovering more than 90% of the pre-pandemic
output in the first quarter of FY20. In the first quarter of FY22, India's real gross value added
increased by 18.8% YoY, indicating a recovery of more than 92 percent from its pre-pandemic
level (in the first quarter of FY20). India also had a current account surplus of 0.9 percent of GDP
in FY21. The government's ongoing attempts to increase vaccination coverage among residents
have aided the economic recovery. This also gave reason to be positive about the prospect of

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reviving industrial activity. India is 2nd fastest growing major economy after China. It is projected
that by 2050, India’s economy will be the world’s second-largest, behind only to China. Demand
in the domestic market as well as international market is picking up, which should help the Indian
economy. India needs to increase its rate of employment growth and create 90 million non-farm
jobs between 2023 and 2030's, for productivity and economic growth according to McKinsey
Global Institute. To attain 8-8.5 percent GDP growth between 2023 and 2030, the net employment
rate must increase by 1.5 percent per year.

Conclusion:
India has emerged as the world's fastest growing major economy, and it is expected to be one of
the top three economic powers in the next 10-15 years, thanks to its strong democracy and strong
partnerships. According to a Boston Consulting Group (BCG) estimate, India will be the world's
third largest consumer economy by 2025, with consumption anticipated to triple to US$ 4 trillion
due to changes in consumer behaviour and spending patterns. According to a forecast by
PricewaterhouseCoopers, it is expected to surpass the United States as the world's second largest
economy in terms of purchasing power parity (PPP) by 2040.

Company Analysis
Executive Summary
ICICI insurance sector is promoted by ICICI Bank and Prudential Corporation Holdings
Limited. Since the commencement of operations in FY2001, they have been one of India’s
leading private life insurers. Through their comprehensive product suite, Pan-India
geographical presence and robust multichannel distribution network, powered by a cutting-
edge technology platform, they have been serving the growing and changing needs of
customers in India over the past 20 years. ‘Customer First’ philosophy has enabled them to
have one of the best claim settlement ratios in the industry. Their investment policy has ensured
zero defaults since inception and across market cycles. Their wholly-owned subsidiary, ICICI
Prudential Pension Funds Management Company, distributes products under the National
Pension System (NPS) and is a registered pension fund manager. During FY2021, they were
India’s largest private life insurer on new business sum assured. Their total sum assured at
March 2021 was 20.30 trillion. (ICICI Prudential Life Insurance -Annual Report FY 2021)

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Introduction
ICICI
ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses. Until the late 1980s, ICICI primarily focused its activities on project finance,
providing long-term funds to a variety of industrial projects. With the liberalization of the
financial sector in India in the 1990s, ICICI transformed its business from a development
financial institution offering only project finance to a diversified financial services provider
that, along with its subsidiaries and other group companies, offered a wide variety of products
and services. As India’s economy became more market-oriented and integrated with the world
economy, ICICI capitalized on the new opportunities to provide a wider range of financial
products and services to a broader spectrum of clients. ICICI Bank was incorporated in 1994
as a part of the ICICI group. In 1999, ICICI became the first Indian company and the first bank
or financial institution from non-Japan Asia to be listed on the New York Stock Exchange.

ICICI Prudential Life Insurance Ltd

ICICI Prudential Life Insurance Company Limited (ICICI Prudential Life) is promoted by
ICICI Bank Limited and Prudential Corporation Holdings Limited.

ICICI Prudential Life began its operations in the fiscal year 2001. On a retail weighted received
premium basis (RWRP), it has consistently been amongst the top companies in the Indian life
insurance sector. Their Assets under Management (AUM) at 30th September 2021
were `2,370.87 billion.

ICICI Prudential Life operates on the core philosophy of customer-centricity. They offer long-
term savings and protection products to meet the different life stage requirements of their
customers. They have developed and implemented various initiatives to provide cost-effective
products, superior quality services, consistent fund performance and a hassle-free claim
settlement experience to the customers.

In FY 2015 ICICI Prudential Life became the first private life insurer to attain assets under
management of `1 trillion. ICICI Prudential Life is also the first insurance company in India to
be listed on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). (ICICI
Prudential Life Insurance website)

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Business Model
ICICI Lombard General Insurance Company Limited is a general insurance company in India.
It is engaged in general insurance, reinsurance, insurance claims management and investment
management. The company has a Gross Written Premium (GWP) of ₹143.20 billion (FY
2021). The firm offers policy insurance and renewal through its intermediaries and website. It
markets assurance products including Car Insurance, Health Insurance, International Travel
Insurance, Overseas Student Travel Insurance, Two Wheeler Insurance, Home Insurance and
Weather insurance. ICICI Lombard has 273 branches and 840 virtual offices spread across the
nation.

Management Profile
Their objective is to create value for customers, employees, shareholders and all other
stakeholders. From shareholders’ perspective, their aspiration is to double the FY2019 Value
of New Business (VNB) in 4 years through their 4P strategy of: Premium growth, Protection
business growth, Persistency improvement, and Productivity enhancement, while ensuring
customer-centricity continues to remain the bedrock of everything they do.

SWOT Analysis

STRENGTH:

• ICICI Prudential Life Insurance has a customer-centric approach

• The organization has long term savings and protection plans for different stages of life.
The company has cost-effective products, good customer support, consistent growth in
investments, and a fast claim settlement process.
• ICICI Prudential has multiple channels for selling its policies. ICICI is selling its
policies through its branches. Insurance Advisors are also recruited by the company.
Bancassurance is also a channel for selling its policies. ICICI Prudential has branches
all over the country to market its products. Marketing Executives are trained to explain
the features and benefits of ICICI Prudential Life Insurance. ICICI is also selling its
policies through Online Channel. ICICI Prudential has a simple claim settlement
process.

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WEAKNESS:

• Being A Private sector organization ICICI is not able to create its brand image like
LIC.
• No Control over Insurance Advisors. Some advisors are not giving correct information
about the policies before selling them.

OPPORTUNITIES:

• ICICI prudential can do tie-ups with new banks for selling and marketing of its Life
Insurance Policies.
• Due to Increasing demand of Insurance companies can formulate strategies to promote
and formulate new policies according to the needs of customers.

THREATS:

• There is a tough competition between Insurance companies in India. Insurance

companies are offering competitive premiums to be paid for Insurance Policies. This
can be a major threat.
• Insurance is regulated by IRDA and ICICI Prudential has to comply with the policies
and regulations of IRDA.

Stakeholder’s Analysis
They are committed to building constructive relationships with all our stakeholders. They
engage with their stakeholders on diverse issues. Proactive engagement with their stakeholders
provides them with insights that help us gain information on their material issues, shape the
business strategy and operations, and minimise the risk of reputation.

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Profitability Analysis
Value of new Business (VNB) for FY2021 was ` 16.21 billion. With an APE of ` 64.62 billion,
VNB margin was 25.1% for FY2021 as compared to 21.7% for FY2020. The increase in VNB
margin is primarily on account of growth in non-linked business and increase in protection
mix.

The Company’s profit before tax was Rs. 10.81 billion for FY2021, a growth of 1.1% as
compared to Rs. 10.69 billion for FY2020. Tax charge increased from Nil in FY2020 to ` 1.21
billion in FY2021 on account of withdrawal of dividend exemption and no final dividend paid
by Company for FY2020, resulting in a higher taxable surplus. The Company’s profit after tax
was ` 9.60 billion for the year ended March 31, 2021 as compared to ` 10.69 billion for the year
ended March 31, 2020.

Revenue Analysis

Profit after tax decreased from 10.69 billion in FY2020 to 9.60 billion in FY2021.

The performance highlights for FY2021 are given below:

• Net premium earned (gross premium less reinsurance premium) increased by 6.4% from `
328.79 billion in FY2020 to ` 349.73 billion in FY2021.

• Total investment income of ` 481.58 billion in FY2021 comprised income of ` 421.53 billion
(Investment income loss FY2020: ` 160.72 billion) under the unit-linked portfolio and an
investment income of ` 60.04 billion (FY2020: ` 39.55 billion) under the non-unit funds. The
investment income under unit-linked portfolio is directly offset by a change in valuation of
policyholder liabilities. Unit linked portfolio investment income increased from loss of ` 160.72
billion in FY2020 to income of ` 421.53 billion in FY2021 primarily on account of increase in
market value of the securities held.

• Other income increased from ` 0.81 billion in FY2020 to ` 0.94 billion in FY2021.

• Total expenses (including commission) decreased by 4.1% from ` 51.25 billion in FY2020 to
` 49.21 billion in FY2021. Commission expense (including rewards) decreased by 5.4% from
` 15.86 billion in FY2020 to ` 15.00 billion in FY2021. New business commission (including
single premium) has decreased from ` 11.40 billion in FY2020 to ` 10.32 billion in FY2021.
Renewal commission has increased from ` 3.82 billion in FY2020 to ` 3.98 billion in FY2021.

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Operating expenses of ` 34.16 billion in FY2021 (FY2020: ` 35.39 billion) comprised of unit
fund expenses (including goods and service tax on linked charges) amounting to ` 6.69 billion
(FY2020: ` 6.64 billion) under the unit-linked portfolio. The unit fund expenses under unit-
linked portfolio is directly offset by a change in valuation of policyholder liabilities. Operating
expenses of other than unit linked portfolio decreased by 4.4% from ` 28.75 billion in FY2020
to ` 27.47 billion in FY2021 primarily on account of decrease in expenses relating to employee
remuneration and welfare benefits, travel and business conferences expenses.

• Claims and benefit pay-outs increased by 16.8% from ` 193.77 billion in FY2020 to ` 226.41
billion in FY2021 primarily on account of increase in surrenders/withdrawals and death and
maturity claims. The Company had COVID-19 claims (net of reinsurance) of ` 2.15 billion.

• Change in actuarial liability, including funds for future appropriation, increased from `
(48.59) billion in FY2020 to ` 544.45 billion in FY2021. Fund reserve, which represents
liability carried on account of units held by unit linked policyholders, increased from ` (138.61)
billion in FY2020 to ` 414.64 billion in FY2021. The increase in fund reserves is primarily due
to higher investment income in the unit linked portfolio. Non-unit reserve increased from `
88.03 billion in FY2020 to `128.60 billion in FY2021.

Solvency Ratio
The solvency ratio stood at 217% on March 31, 2021, well above the regulatory requirement
of 150%. Assets under Management stood at ` 2,142.18 billion at March 31, 2021, a growth
of 40% over March 31, 2020.

Best Practices

ICICI Prudential Life Insurance bestows immense importance to human capital and has
made full use of its workforce to achieve their goals while also benefitting the employees
along the way.

A few of them are as follows:

• Support during Covid-19.by enabling health, safety and well-being and by providing
technology support.
• Enabling productivity by talent attraction and on boarding.
• Enabling a diverse workforce
• Institutionalising an engagement architecture.

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• Addressing employee concerns through a robust grievance redressal mechanics

• Measuring employee alignment and engagement and taking corrective actions.
Executive Summary
This part of the report shall take into consideration an in-depth study of the Insurance industry
as a whole. This particular section beings with a brief introduction to the Insurance industry.
This is followed by reflecting on the major government policies pertaining to the Insurance
sector. Herein, emphasis have been laid on describing the significant role of IRDAI. The key
drivers influencing the insurance industry have been described further. This is followed by
explaining the major determinants having an impact on the insurance sector. PORTER’s five
forces analysis and PESTEL analysis have been facilitated to understand the impact of various
factors on the insurance industry from a macro perspective. A conclusion has been provided at
the end drawing light on the scope and future of the insurance sector in the upcoming times.

Introduction to Industry

Insurance sector is amongst the most flourishing sectors of the Indian economy. Insurance as
such has become an indispensable part of everyone’s lives and individuals tend to seek
insurance for everything ranging from life to car to health; emphasizing on the wide scope of
this sector. Currently there are 57 insurance companies in the Indian insurance industry, 24 are
engaged in the life insurance business and 34 are non-life insurance companies. Life Insurance
Company (LIC) is the only public sector company among life insurance companies. There are
six public insurance companies in the non-life insurance segment. In addition, there is a single
domestic reinsurance company, the General Insurance Corporation of India (GIC Re). Other
stakeholders in the Indian insurance market include agents (individuals and businesses),
brokers, appraisers, and third-party managers who handle health insurance claims. US$ 280
billion in 2020. Is the estimated size of the Indian insurance sector.

Industry specific Analysis

The Insurance Regulatory and Development Authority of India, under the acronym of IRDAI
is responsible for ensuring that the Insurance sector runs effectively and efficiently along with
simultaneously monitoring the industry. The below mentioned highlights the scope of the
IRDAI.

COMPOSITION/STRUCTURE OF IRDAI: According to Section 4 of the IRDAI Act 1999,

authority consists of:

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1. a) A chairman
2. b) Five full-time members.
3. c) 4 part-time members, (appointed by the Government of India) (IRDAI, n.d.)

HEAD OFFICE: The IRDAI’s head office is in Hyderabad

INSURANCE REGULATORY FRAMEWORK:

1. India's Insurance Regulatory Development Authority (IRDAI) is established under

parliamentary law, the 1999 Insurance Regulatory Development Authority Act (IRDAI Act
1999), for the overall supervision and development of the insurance sector. It is a legal
institution. India has become (IRDAI, n.d.).

2. The authority and function of the institution is stipulated in the IRDAI Act of 1999 and the
Insurance Act of 1938. One of IRDAI's main objectives is to promote competition so as to
increase customer satisfaction through more consumer choices and fair premiums, while
ensuring the financial security of the insurance market (IRDAI, n.d.).

3. The Insurance Act of 1938 is the main law regulating the insurance sector in India. This
allows IRDAI to issue regulations that establish a legal framework for overseeing companies
doing business in the industry. In addition, there are certain other laws that regulate certain
insurance businesses and functions, such as the Marine Insurance Act 1963 and the Public
Liability Insurance Act 1991(IRDAI, n.d.).

4. IRDAI has the following missions.

To protect the interests of policyholders and ensure that they are treated fairly.

To promote rapid and orderly growth of the insurance industry (including pensions and
pension payments) for the benefit of the common people and provide a long-term means of
accelerating economic growth (IRDAI, n.d.).

To establish, promote, monitor, and implement a high level of integrity, financial soundness,
impartiality, and capacity of regulated persons.

To ensure prompt resolution of genuine claims, prevent insurance fraud and other abuses, and
introduce effective complaint relief mechanisms.

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To promote fairness, transparency and orderly behavior in the financial markets of the
insurance sector and to build a reliable management information system to ensure a high level
of financial soundness for market participants (IRDAI, n.d.).

If such standards are inadequate or not implemented effectively, take action.

To achieve the optimum level of self-regulation in the day-to-day operations of the industry in
accordance with the requirements of soundness regulation (IRDAI, n.d.).

SCOPE OF IRDAI:

a. Life insurance companies Both public and private companies (IRDAI, n.d.)

b. non-life insurance companies Both public and private companies. Among them are several
independent health insurance companies that offer health insurance (IRDAI, n.d.)

c. Reinsurance company (IRDAI, n.d.)

d. Agency channel (IRDAI, n.d.)

e. Brokers include:

Corporate Agents (IRDAI, n.d.)

Brokers (IRDAI, n.d.)

Third Party Administrators (IRDAI, n.d.)

Appraisers and Adjusters.

Supervisory Profile:

1. The purpose of the oversight stated in the preamble of the IRDAI Act is to "protect the
interests of policyholders and regulate, promote and secure the orderly growth of the insurance
industry" in both insurance and reinsurance. The authority and function of an institution is set
out in the IRDAI Act of 1999 and the Insurance Act of 1938 to enable institutions to achieve
their objectives (IRDAI, n.d.).

2. Section 25 of the IRDAI Act 1999 is an insurance advisory consisting of representatives of

commerce and industry, transportation, agriculture, consumer protection, investigators,
brokers, safety and loss prevention organizations, research institutes, and employee
associations (IRDAI, n.d.). It stipulates the establishment of a committee. The insurance

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industry is represented. All industry rules, regulations, and guidelines are hosted on the
regulatory agency website and are open to the public.

3. Section 14 of the IRDAI Act 1999 sets out the obligations, powers and functions of
government agencies (IRDAI, n.d.). These include issuing licenses to (re) insurers and
insurance intermediaries, protecting the interests of policyholders, insurers, regulating the
investment of funds by (re) insurance business-related professional associations, Maintaining
solvency margins (IRDAI, n.d.). Providing information, inspections, surveys and conducting
surveys at companies related to the insurance business.

Establish the necessary qualifications, codes of conduct and hands-on training for brokers or
insurance brokers, agents, professionals and claim professionals. Formats and types of
bookkeeping and accounting by insurance companies and other insurance company
intermediaries (IRDAI, n.d.).

Corporate Governance

To protect the long-term interests of policyholders, IRDAI enables insurers to maintain

solvency, have sound long-term investment policies and take actuarial risks. We occasionally
establish good governance practices. Based on soundness. IRDAI has issued comprehensive
guidelines for the recruitment of insurers regarding the executive responsibility of the Board
of Directors in managing insurance functions. These guidelines are in addition to the provisions
of the Companies Act 1956, the Insurance Act 1938, and other applicable laws (IRDAI, n.d.).
The Corporate Governance Guidelines issued by IRDAI require insurers to perform the
required administrative functions (IRDAI, n.d.). The management of each insurance company
is responsible for overseeing administrative functions. It defines the structure, responsibilities,
functions of the board of directors, and the management of the company. Insurers need to adopt
sound and prudent corporate governance policies and practices, and need to be able to quickly
address non-compliance or poor monitoring and management issues. The Guidelines required
insurers to form various committees: Audit Committee, Investment Committee, Risk
Management Committee, Policyholder Protection Committee and Asset Liability Management
Committee (IRDAI, n.d.). These committees play an important role in strengthening the
management environment of the company.

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Supervision

On-site inspection: Authorities have the authority to request information from the institutions
involved in the insurance business (insurance companies and intermediaries) from time to time.
On-site inspections of the are typically conducted annually and include inspections of the
company's headquarters and branches. These inspections are conducted to confirm compliance
with the insurance law provisions and the rules and regulations contained therein (IRDAI, n.d.).
The test can be broadened to cover all areas or can focus on one or a combination of major
areas. In the event of a market-wide event that affects an insurer, regulators will obtain relevant
information from the insurer, monitor progress and give instructions when deemed necessary.
There are no specific requirements, but important events trigger such actions. As part of the
on-site inspection, the line manager checks the "internal control and control" of the insurance
company's office (IRDAI, n.d.).

Off-site inspection: The main purpose of off-site inspection is to monitor the financial
condition of insurers and identify companies that are experiencing financial deterioration and
may raise regulatory concerns (IRDAI, n.d.). This acts as a trigger for timely corrective action.

Off-site inspections conducted through regular filings, returns, reports, guidelines, and
analysis of conformance certificates as required from time to time as directed by the authorities
(IRDAI, n.d.). These submission cycles are typically annual, semi-annual, quarterly, and
monthly, and auditors related to business development, capital investment, compensation
details, administrative costs, business statistics, and various compliance requirements. Related
to certificates (IRDAI, n.d.).

Micro and Rural level Obligations

IRDAI provides low-income earners with affordable insurance products to manage and recover
the general risks of standardized and popular insurance products that meet certain coverage.
Established micro insurance regulations to protect. Bonus and benefits criteria. These
regulations allow non-governmental agencies (NGOs), self-help groups (SHGs), and other
accredited entities to act on behalf of insurers in the marketing of microinsurance products, life
and non-life insurers (IRDAI, n.d.). Both can now promote combi micro insurance products.

The ordinance issued by the authorities on the insurer's obligations to the local and social
sectors set annual goals for insurers to achieve. For the purposes of these regulations, insurers
must (I) achieve certain annual goals related to the number of socially obligatory lives. (II) In

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relation to the percentage of insurance policies underwritten and the percentage of total
premiums booked directly by life and non-life insurance companies under local obligations
(IRDAI, n.d.).

Key Drivers

Government Policies/Initiatives

In August 2021, Parliament passed a bill to amend the non-life insurance business
(nationalization). The bill aims to allow state insurance companies to be privatized. The Union
Budget 2021 raised the FDI limit for the insurance sector from 49% to 74% (IRDAI, n.d.).
India's Department of Insurance Regulation and Development (IRDAI) has announced that
insurance companies will issue digital insurance policies through Digi locker. As part of the
Union's 2021 budget, Finance Minister Nirmala Sitaraman has announced that an initial public
offering (IPO) of LIC will take place in 2010 as part of the integration of the banking and
insurance sectors. There is no formal market valuation, but LIC's IPO may increase Rs. 10,000
rupees ($ 13,620 million). In June 2021, the government insured health workers across India
for Rs 50 ($ 66.85 thousand) until next year.

Contribution to GDP

In India, the total market size of the insurance sector is projected to reach $ 280 billion in 2020.
The life insurance industry is expected to grow at a CAGR of 5.3 between 2019 and 2023 (India
Brand Equity foundation, 2021). The insurance penetration rate in India was set at 4.2% in
FY2009, the penetration rate of life insurance was 3.2%, and the penetration rate of non-life
insurance was 1%. In terms of insurance density, India's total density in 2009 was $ 78 India
Brand Equity foundation, 2021)… The market share of private companies in the general and
health insurance market increased from 47.97% in FY19 to 48.03% in FY20. In the life
insurance business, private providers accounted for 33.78% of the premium insurance service
in FY2008 (India Brand Equity foundation, 2021)… In 2010 *, Indian life insurance companies
had premiums of $ 9.8 billion and renewable energy premiums of $ 53.7 billion.

Industry Metrics
The protection business in India was relied upon to arrive at US$ 280 billion by 2020. The
extra security industry is relied upon to increment at a CAGR of 5.3% somewhere in the range
of 2019 and 2023 India Brand Equity foundation, 2021)… Indian protection entrance was fixed
at 4.2% in FY21, with extra security infiltration at 3.2% and non-life coverage infiltration at

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1%. The business has been prodded by item development and dynamic circulation channels,
combined with designated exposure and special missions by guarantors. In the extra security
fragment, private players held a portion of the overall industry of 33.78% in premium
guaranteed benefits in FY20. In FY22*, charges from new organizations of extra security
organizations in India remained at US$ 9.8 billion and sustainable premium remained at US$
53.7 billion. In India, gross charges composed of non-life back up plans arrived at US$ 26.52
billion in FY21 driven by solid development from general insurance agencies. The complete
advantage sum guaranteed from private disaster protection organizations was Rs. 5,725 crore
(US$ 780 million), though LIC had an all-out advantage guarantee measure of Rs. 13,694 crore
(US$ 1,866 million) in FY20 India Brand Equity foundation, 2021). Finance Minister Nirmala
Sitharaman declared that the first sale of stock (IPO) of LIC will be executed in FY22, as a
feature of the solidification in the banking and protection area. However, no proper market
valuation has been embraced, LICs IPO can possibly raise Rs. 1 lakh crore (US$ 13.62 billion)
India Brand Equity foundation, 2021)…

Innovations and Recent Development

The following are a portion of the significant ventures and advancements in the Indian
Insurance area.

• Organizations are attempting to use key association to offer different administrations

as follows:
• In FY21, LIC accomplished a record first-year premium pay of Rs. 56,406 crore (US$
7.75 billion) under individual confirmation business with a 10.11% development over
a year ago (Meral, n.d.)
• In India, gross expenses composed of non-life safety net providers arrived at US$ 26.52
billion in FY21 (between April 2020 and March 2021), from US$ 26.49 billion in FY20
(between April 2019 and March 2020), driven by solid development from general
insurance agencies.
• In August 2021, ICICI Prudential Life Insurance restricted with the National Payments
Corporation of India (NPCI) to give a brought together instalments interface autopay.
• In August 2021, ICICI Lombard General Insurance presented broad inclusion for
remote steered airplane, especially drone administrators. This item secures the robot,

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just as the payload (camera/gear) appended to it, against robbery, misfortune, or harm,
and outsider liabilities (Meral, n.d.).

Introducing the service supply chain concept

The Insurance area conveys administrations to policyholders to shield them from unanticipated
dangers. India is the fifteenth biggest protection market on the planet as far as top notch volume.
Be that as it may, the protection infiltration is around 3.5% when contrasted with a worldwide
normal of 6.5%

Twenty years back, the insurance area depended on specialists for selling and dispersing the
arrangements. Protection was then seen as an instrument to save charge. The circumstance is
terribly unique today. Protection isn't only considered as a security apparatus or a duty saving
instrument. Protection has additionally turned into a venture choice today in India’s monetary
framework. Today protection area is being cleared by huge advances in innovation like man-
made consciousness, computerization and square chain. Private guarantors in India are
progressively sending advanced promoting strategies to spread mindfulness about different
approaches and sell arrangements on the web. The public area protection associations should
now extend their advanced impression and endeavour to expand mindfulness about the
advantages of protection. More noteworthy mindfulness will prompt more prominent entrance
of the market in India. There should be a consistent reconciliation of showcasing endeavours
and endeavours to make mindfulness about the advantages of protection plans it is the help
inventory network that assumes a crucial part in guaranteeing that assistance nature of the best
expectations is conveyed to the policyholder clients.

Consumption Pattern

Consumer overviews and deals information this year show that the pandemic has quickly raised
public mindfulness about both wellbeing hazard and protection in India and protection buys
are moving quickly to online modes. The Covid pandemic is speeding up the utilization of
computerized stages in India, offering insurance agencies an indispensable new pathway to
associate with and serve clients. As per the review, steady government approaches and a
COVID-implemented spike in computerized movement are pushing buyers and their protection
needs on the web. The developing presence of web based business and computerized wallet
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applications presents openings for imaginative associations among back up plans and advanced
stages to connect the $369-billion wellbeing assurance hole in India (guiding metrics, n.d.).
The review additionally tried their acknowledgment of choosing and buying six life and
medical coverage items custom-made to fit computerized stages. The three Asian economies
address a joined populace of over 1.5 billion individuals, with a thriving working class
progressively reliant upon innovation and availability to drive their navigation (guiding
metrics, n.d.). Overview respondents were family chiefs matured between18 and 65 and had
utilized advanced stages to some degree once inside three to a half year preceding being
studied..

PORTER’S FIVE FORCE

Competitive Rivalry: Pretty self-explanatory, right? It is defined by the level of competition

in the industry and is a core influencer in the pricing and marketing strategies of products and
services. Insurers compete with each other, as well as with government insurance programs,
risk retention groups, and self-insured entities.

The Threat of New Entrants and Development: As with competitive rivalry, every industry
faces the threat of new competitors entering the market and this threat plays a major role in
determining branding and distribution and strategies within an industry. The InsurTech
movement is giving rise to new entrants, partnerships, and operating models. From technology-
driven underwriting products to new sources of property data, from usage-based insurance
(UBI) technology to the internet of things (IoT) and drones, and from API-based insurance
functional modules to white-labelled insurance products for quick integration and launch,
change is afoot in insurance.

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The Power of Buyers: The next two forces, the power of buyers and the power of suppliers,
speak to a basic law of business, which dictates the rules of supply and demand. Buyer
influence, can be a force to be reckoned with in any industry if multiple alternatives for
procuring products and service are available. In such a market, buyers have the power and can
demand lower prices or higher product quality from industry providers.
The Power of Suppliers: Acting as a polar opposite to the power of buyers is the pressure that
suppliers can put on companies by raising prices, lowering quality, or tightly controlling
product/service availability. Agents and brokers have historically leveraged the ability to
influence policyholder choices into placing business with specific insurers. However, with
insurers increasingly leveraging front-end tools to reach potential customers directly, the
bargaining power of distributors is diminishing.
The Thread of Substitute Products or Services: Finally, the buyer’s propensity to substitute
a product or offering with another product to solve the same need constitutes the last force, the
threat of substitute products or services. Traditionally, insurers have not had to deal with any
substitute products or services. Today, however, the insurtech movement has made this much
more of a reality by enabling innovation in insurance products, including on-demand and
usage-based insurance products, which have great appeal to younger consumers looking for an
alternative to the traditional.
PESTEL Analysis

Political factors affecting insurance industry

Insurance business in rural/ social sector

Capital requirement

Renewal of registration

Requirement as to capital

Investment of funds outside India

Power to investigation or inspection

Tax policy and insurance sector

Economic factors affecting insurance industry

Adequacy of capital

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Increased economic activity

Interest rates

Inflation rate

Market related factors

Socio-Cultural factors affecting insurance industry

Population

Life style

Educational level

Level of earning

Societal benefits

Technological factors affecting insurance industry

Maintaining the database

E-business insurance in India

Impact on cost structure in Life Insurance industry

Impact on value chain structure in financial sector

Rate of technological diffusion

Environmental factors affecting the insurance industry

Laws regulating environment pollution

Air and water pollution regulations in Life Insurance industry

Recycling

Waste management in financial sector

Attitudes toward “green” or ecological products

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Endangered species

Attitudes toward and support for renewable energy

Legal factors affecting the insurance industry

Anti-trust law in Life Insurance industry and overall in the country.

Discrimination law

Copyright, patents / Intellectual property law

Consumer protection and e-commerce

Employment law

Health and safety law

Data Protection

Insurance Industry Analysis & Complex

Innovative progressions put safety net providers in a solid situation from which appraisal and
modernization of working models and serious situating is conceivable. Notwithstanding, if the
components addressed in the Five Forces are not drawn nearer comprehensively, the result can
be drawn-out and counter-productive. There are various difficulties, including recognizing
processes that require robotization, focusing on the level of computerization required, and
assessing the right innovations to take on. Once more, while Porters Five Forces was not
created in view of the protection business, the structure can be valuable in leading an advanced
investigation of any protection associations business potential.

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Life Insurance Company of India

Introduction

The Life Insurance Corporation of India (abbreviated as LIC) is India's official insurance and
investment firm. It is owned by the Ministry of Finance, Government of India. The Life
Insurance Corporation of India was established on September 1, 1956, when the Parliament
of India passed the Indian Life Insurance Act which made the Indian insurance industry under
state control. More than 245 insurance companies and provident organizations merged to
form the state-owned Life Insurance Corporation of India. As of 2019, Life Insurance
Corporation of India had a total fund of ₹ 28.3 trillion. The total number of policies sold in
2018–19 is R21.4 million. India's Life Insurance Corporation has paid 26 million claims in
2018-19. It has 290 million policy holders. Establishing organizations

Oriental Life Insurance Company, India's first life insurance company, was founded in Kolkata
in 1818. Its main target market was Europeans based in India, and it was charging the Indians
huge premiums. Surendranath Tagore had founded the Hindustan Insurance Society, which
later became the Life Insurance Corporation. The first 150 years were marked by severe
economic hardship. It saw India's First Independence War, the devastating effects of World
War I and World War II on the Indian economy, and in the midst of it a period of global
economic crises caused by the Great Depression. The first half of the 20th century saw the
struggle for India's independence. The full impact of these events has led to the high level and
liquidation of health insurance companies in India. This has seriously affected public faith in
getting life cover.

Business Model

The Life Insurance Act was introduced in 1956 which came into effect to provide people with
insurance. Before the start of L.1.C. Act, 1956, there were 243 insurance companies that used
to deal with the concept of insurance. As a result of the introduction of this Act their business
was taken over by this Act. It is an investment centre where different people invest their money
under different policies and savings are spread on different types of securities to protect interest
in the long run. The law also assists other institutions working in the field of mortgage lending.
The Act establishes a large insurance company or Indian organization. LIC has booked a high
profit by opening an equity portfolio, depending on the opportunities available and maintaining

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a highly efficient long-term portfolio. State insurance is the largest investor in its markets,
holding about approx. $ 34 lakh crore. LIC has been a major sponsor of the Institute, especially
in its fundraising programs. Its benefits mainly come from the sale of shares in its large,
unrelated portfolio, which includes general health insurance policies. lists benefits that enhance
LIC's ability to pay better bonuses and compensation to policy holders and better Institution
benefits. It also increases LIC investment which can stabilize stock markets in uncertain times
and help attract new customers because of its ability to generate such profits.

Product Portfolio

"The company's investment strategy is to acquire and maintain high quality assets ... We also
consolidate a portfolio to make a profit and change other stocks. Our investment strategy aims
to meet the reasonable expectations of policyholders and financial security," Gupta told the
newspaper. Major profits have been partially assisted in the revitalized stock market. Gupta
went on to say that LIC takes "the opportunity of emerging market opportunities to enter and
exit companies to make a profit and to build a strong budget portfolio to deliver the right
benefits in the long run."

Management Portfolio

LIC activities

The main functions of LIC are as follows: -

• Collect people's savings to get insurance and promote savings in the country.

• Protect people's finances by investing in government securities.

• Remove insurance at affordable prices

• Offer various loans such as industry-specific loans, housing loans, loans to various national
projects at reasonable interest rates.

Objectives of LIC

• The LIC aims to raise awareness of the importance of health insurance to people living in
rural areas and to people who are part of the social and economic backlog.

• Aims to meet the life insurance requirements of a number of community members who are
experiencing social and economic change.

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• It aims to run the business economically while ensuring that the money belongs to the
policyholders.

• Aims to enhance the savings movement of people through attractive insurance-related

savings.

• Aims to provide maximum job satisfaction to all agency members and employees and
encourages the creation of a co-operative environment in order to deliver more efficient
services to its insured community.

• Aims to invest in a way that benefits investors and the community as well.

Types of LIC Life Insurance Plans

LIC provides many schemes to its policyholders. It offers a variety of schemes of different
categories and segments of the Indian economy. It is the largest insurance company in terms
of the number of policies it has issued so far. Some of the principles are as follows: -

• LIC’s Jeevan Pragati

• LIC’s Jeevan Labh

• LIC’s Single Premium Endowment Plan

• LIC’S Jeevan Lakshya

• LIC’s Jeevan Tarun

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Revenue Analysis

Total GST GDP for 2019Y 2019-20 was ₹ 9,44,414 crore, an increase of 4.00% over last year's
GST.As per the interim data for F.Y 2019-20 issued by the Controller General of Accounts
(CGA), the total amount tax revenue in F.Y 2019-20 was 7.10% lower than the revised rate i.e.
₹ 20,09,882 Crore. Lack of Finance in F.Y 2019-20 was 22.00% higher than the revised average
of ₹ 9,35,635 Crore. (Equivalent to 4.60% of GDP) higher. The first estimate is 3.80% of GDP.
Direct taxation has declined for the first time in two decades. Direct tax collection was
imminent ₹ 10.27 lakh crore for the year ended March 31, 2020 (8.00% is less than ₹ 11.17
lakh Crore collected in F.Y 2019).

Profitability Analysis

Although during the year the BSE SENSEX was between 35,988 to 42,784, compared to the
growth zone. Covid-19 epidemic worldwide, S&P BSE SENSEX closed 29,468 March 31,
2020 compared to closing of 38,673 as of March 29, 2019, thus showing a decrease. Similarly,
although the NIFTY 50 travelled in a range of 8,037 to 12,431 during the year, closing 8,598
as of March 31, 2020, compared to the closing of 11,624 as of March 29, 2019.

At the end of March, 2020, the P / E Ratio (Price Earnings Ratio) for S&P BSE SENSEX and
NIFTY 50 was 19.55 and 19.38, respectively (compared to 23.71 and 29.01, last year.

Liquidity Analysis

The number of new finance news for non-governmental organizations decreased from 154 to
106 during the year. The total collected, however, increased to ₹ 79,910 Crore compared to ₹
53,433 Crore in the last financial year. The total revenue of Mutual Funds was INR 87,300
Crore during F.Y 2019-20. Working capital for year 2019-2020 is 3535305. As per the Union
Budget 2020-21, the outstanding external debt of the Government of India is estimated to be ₹
2.92 Lakh Crore as on 31st March, 2020. As at the end of December 2019, the external debt to
GDP ratio was 20.0%, the same as for the previous year.

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SWOT ANALYSIS

OPERATIONAL AND FINANCIAL RATIOS

Above table shows the company analysis for year march 2020 and march 2019 and the
percentage change in financial ratios in one year. As seen the earning per share which depicts

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the profit of the company was increased by 0.9% per share. CEPS got increased by 0.9%, DPS
by 1.4%, Book NAV per share by 10.30% but the tax Rate got decreased by 12.19%.

Solvency Ratio

In the year 2019 solvency ratio of 1.51 where as it got increased to 1.60 in the year 2020.

Competitive Advantage - While the new players struggle to increase their market in India,
LIC continue to leverage advantage of its old establishment and government support for
maintaining its growth. Life Insurance is the fastest growing sector in India since 2000 as
Government allowed Private players and FDI up to 26%.

Stake Holder Analysis - The Government of India will remain the majority shareholder after
the public listing. Ten percent of shares are proposed to be allotted to existing LIC
policyholders.

LIC Company Analysis

OPERATIONAL AND FINANCIAL RATIOS

2020 2019 % Change
Earnings per share 271.27 268.85 0.90
CEPS 271.27 268.85 0.90
DPS 269.77 266.06 1.40
Book NAV/Share 72.20 65.46 10.30
Tax Rate (%) 250.81 285.63 -12.19

Above table shows the company analysis for year march 2020 and March 2019 and the
percentage change in financial ratios in one year. As seen the earning per share which depicts
the profit of the company was increased by 0.9% per share. CEPS got increased by 0.9%, DPS
by 1.4%, Book NAV per share by 10.30% but the tax Rate got decreased by 12.19%.

Solvency Ratio – In the year 2019 solvency ratio of 1.51 where as it got increased to 1.60 in
the year 2020.

Competitive Advantage - While the new players struggle to increase their market in India,
LIC continue to leverage advantage of its old establishment and government support for

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maintaining its growth. Life Insurance is the fastest growing sector in India since 2000 as
Government allowed Private players and FDI up to 26%.

Stake Holder Analysis - The Government of India will remain the majority shareholder after
the public listing. Ten percent of shares are proposed to be allotted to existing LIC
policyholders.

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Reference

We have used several sources for preparing this report. They are:

1. Annual Report of ICICI Prudential Life Insurance FY 2020-2021

2. ICICI_Pru_Life_Q4-FY2021_Results_Press_Release.pdf
3. https://www.iciciprulife.com/about-us/company-overview.html
4. https://www.toppr.com/guides/business-economics-cs/overview-of-indian-
economy/indian-economy-in-comparison-to-major-economies-of-the-world/
5. https://www.toppr.com/guides/general-awareness/economy/indian-economy/
6. https://exampariksha.com/indian-economy-introduction-economy-study-material-
notes/
7. https://www.ibef.org/industry/insurance-sector-india.aspx
8. https://www.insurancethoughtleadership.com/the-behavioral-science-on-buying/
9. https://guidingmetrics.com/content/insurance-industrys-18-most-critical-metrics/
10. https://www.ibef.org/industry/insurance-sector-india.aspx
11. https://financialservices.gov.in/insurance-divisions/Insurance-Regulatory-&-
Development-Authority

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