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INTRODUCTION 1.1 OVERVIEW OF INDUSTRY AS WHOLE
The insurance sector was opened up for private participation four years ago and FICCI has doing yeoman service to the development of this sector by facilitating exchange of views between the industry, policymakers, and the regulator through the annual conference. This has provided a forum to take stock of the developments and discuss the future course of action. These annual conferences before and after the reforms in the sector have provided useful inputs to the policy makers and the regulatory body and the FICCI deserves appreciation for the professional manner in which these conferences are organized and should be legitimately proud of the contribution made by it in the growth and development of insurance sector. The reasons that prompted the government to bring in reform in the insurance sector are well known. While the Public Sector insurance companies made enormous contribution in the spread of awareness about insurance, and expanded the market, it was recognized that their reach was still limited, the range of products offered restricted and the service to the consumer inadequate. It was also felt that the rapid economic growth witnessed in the 90s cannot be sustained without a thriving insurance sector. It was also recognized that India has a vast potential that is waiting to be tapped and this could be achieved when sufficient competition is generated and it is exposed to the developments in the rest of the world. The insurance sector was, therefore, opened up for private sector participation with provision for limited foreign equity exposure. We have now four years experience of the public and private sector together operation in the market. ORIGIN OF LIFE INSURANCE The concept of insurance probably began in China over five thousand years ago. Others will argue that insurance began slightly later, in Babylonia. In any case, ancient peoples were interested in protecting against loss. They devised insurance systems to protect the investments underpinning trade efforts, particularly with respect to goods shipped across the seas. It was
The ancient Romans believed that anyone who was wrongly buried would become "an unhappy ghost. The burial clubs. The Roman burial clubs represent the beginning of life insurance as we know it." This idea of a "forlorn and shivering spirit in an agony of loneliness" so bothered the Romans that they tended to invest large sums in elaborate burials Although the belief in the importance of "correct" burial reached through all levels of society. including many soldiers. that the concept of life insurance took hold in ancient Rome. when combined. resources did not. still bears a remarkable resemblance to the burial clubs of ancient Rome. A group of people enters into a voluntary agreement to pay premiums that are used to provide benefits to any paying member of the group who happens to die. The idea of the Roman burial club was compelling then. Marius. These factors led to the creation of burial clubs. the practice grew to include providing a stipend to the survivors of the deceased. in all of its complexity and with all of its variations. lacked the requisite resources for a proper Roman burial.C. life insurance today. A Roman military leader. and many similar organizations came into being in this era. Stripped to its essence. were allowed to exist. Roman society suffered a rather large gap between the rich and the poor. embrace the principle that the financial strength of many. We also tend to worry considerably less about whether or not a funeral might produce a forlorn or shivering ghost. Eventually. created a burial club among his troops in approximately 100 B. The sensibility of their plan was obvious even to tyrants. Today we may be more concerned with providing replacement income for the family of the deceased than we are about funerary expenses. can produce . however.centuries after the first "insurance policies" were drafted in efforts to aid commerce. Groups of individuals formed and all members were required to regularly donate to a common fund that was used in the event of a member's death to fund his funeral. We still do. however. Those on the lower socioeconomic strata. The Roman government was not fond of organizations of any sort forming-perceiving them as potential breeding grounds for challengers to the power structure.
Opening up of insurance to private sector including foreign participation has resulted into various opportunities and challenges in India. not as a product giving protection.necessary results for others in difficult times. Most customers were underinsured with no flexibility or transparency in the products. The nature of the insurance business is such that the cash inflow of insurance companies is constant while the payout is deferred and contingency related. secondly because it provides a safety net to rural and urban enterprises and productive individuals. This is the most compelling reason why private sector (and foreign) companies. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population. LIFE INSURANCE MARKET The Life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. Life insurance continues today because those underlying principles remain unchanged. . INDUSTRY PROFILE A thriving insurance sector is of vital importance to every modern economy. but those of us who pay our life insurance premiums in an effort to protect ourselves and our family from expense and difficulty do share a common trait with the ancients who invented life insurance in the form of burial clubs. This characteristic feature of their business makes insurance companies the biggest investors in long-gestation infrastructure development projects in all developed and aspiring nations. And perhaps most importantly it generates long. The state owned LIC sold insurance as a tax instrument.term invisible funds for infrastructure building. Firstly because it encourages the habit of saving. With the entry of the private insurers the rules of the game have changed. We don't often see ourselves as being akin to Roman legionnaires marching into battle. which will spread the insurance habit in the societal and consumer interest are urgently required in this vital sector of the economy.
they are persuading people to take out bigger policies. But a rejuvenated LIC is also trying to fight back to woo new customers. with over 90 percent of the customers. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. .The 12 private insurers in the life insurance market have already grabbed nearly 9 percent of the market in terms of premium income. with regard to state owned LIC's new premium business has fallen Innovative products. are now suddenly turning to the private sector and snapping up the new innovative products on offer.000.forwarding the second phase of their expansion plans. The state owned companies still dominate segments like endowments and money back policies. the average size of a life insurance policy before privatization was around Rs 50. Indians. The private insurers also seem to be scoring big in other ways.2 lakhway bigger than the industry average. N.000. Meanwhile. smart marketing and aggressive distribution. Buoyed by their quicker than expected success. the private insurers have already wrested over 33 percent of the market. But the private insurers are ahead in this game and the average size of their policies is around Rs 1. That has risen to about Rs 80. Malhotra. The growing popularity of the private insurers is evidenced in other ways. But in the annuity or pension products business. For instance. And in the popular unit-linked insurance schemes they have a virtual monopoly. They are coining money in new niches that they have introduced.03 over last year. who have always seen life insurance as a tax saving device. headed by former Finance Secretary and RBI Governor R. No doubt the aggressive stance of private insurers is already paying rich dividends. The new business premium of the 12 private players has tripled to Rs 1000 crore in 2002. That's the triple whammy combination that has enabled fledgling private insurance companies to sign up Indian customers faster than anyone ever expected. nearly all private insurers are fast.1 lakh to Rs 1. was formed to evaluate the Indian insurance industry and recommend its future direction. INSURANCE TODAY In 1993. Malhotra Committee.
60. If traditional infrastructural and semipublic goods industries such as banking. have significant private sector presence. power etc. airlines. As of now LIC has 2050 branches in 7 zones with strong team of 5. The introduction of private players in the industry has added colours to the dull industry. The new players have improved the service quality of the insurance. It has became necessary as if we compare our Insurance penetration and per capita premium we are much behind then the rest of the world. Monitor Group has estimated a growth form Rs. 59.With the setup of Insurance Regulatory Development Authority (IRDA) the reforms started in the Insurance sector. telecom. Its impact has to be seen in the form of creating various opportunities and challenges. continuing a state of monopoly in provision of insurance was indefensible and therefore. The table above gives the statistics for the year 2000.000 agents. The market share was distributed among the private players.683 million being LIC the biggest contributor with Rs. The estimations seems achievable as the performance of 13 life Insurance players in India for the year 2002-2003 (up to October.187 million. 1003 Billion by 2008. As per an independent consultancy company. based on the first year premium) is Rs. opening up insurance sector to private players was a necessity in the context of globalization of financial sector. 218 Billion to Rs. As a result LIC down the years have seen the declining in its career. 66. the globalization of insurance has been done as discussed earlier. With the expected increase in per capita income to 6% for the next 10 year and with the improvement in the awareness levels the demand for insurance is expected to grow. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. Though LIC still holds 75% of the insurance sector the upcoming nature of these private players are enough to give more competition to LIC in the near future. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in the sector.. LIC market share has decreased . IMPACT OF GLOBALISATION While nationalized insurance companies have done a commendable job in extending the volume of the business.
21 .51 0.3 5.56 2.03 1.29 0.90 0.80 1.36 1. IMPACT OF GLOBALISATION NAME OF THE PLAYER MARKET SHARE (%) LIC ICICI PRUDENTIAL BIRLA SUN LIFE BAJA ALLIANZ SBI LIFE HDFC STANDARD TATA AIG MAX NEW YORK AVIVA OM KOTAK MAHINDRA ING VYASA AMP SANMAR METLIFE 82. The following company holds the rest of the market share of the insurance industry.37 0.79 0.from 95%(2002-03) to 81% (2004-05).63 2.26 0.
in terms of net worth. The company has interests in asset management and mutual funds. life and general insurance. Reliance Communications Limited. national and international long distance services. and ranks among the top 3 private sector financial services and banking companies. It offers a complete range of integrated telecom services. is the realisation of our founder’s dream of bringing about a digital revolution that will provide every Indian with affordable means of communication and a ready access to information. private equity and proprietary investments. broadband. data services and a wide range of value added services and applications aimed at enhancing the productivity of enterprises and individuals. stock broking and other activities in financial services. The company began operations in 1999 and has over 20 million subscribers today.FUNCTIONS Reliance Capital: Reliance Capital is one of India’s leading and fastest growing private sector financial services companies. . Reliance Communications Limited: The flagship company of the Reliance – ADA Group. These include mobile and fixed line telephony.
. including assets. sales. is a fully integrated utility engaged in the generation. It ranks among India’s top listed private companies on all major financial parameters. incorporated in 1929. transmission and distribution of electricity.RELIANCE ENERGY LIMITED: Reliance Energy Limited. profits and market capitalization.
Reliance Health is a focused healthcare services company enabling the provision of solution to Indians.It is India’s foremost private sector utility with aggregate estimated revenues of Rs 9. These projects are at various stages of development.24. Reliance Media & Entertainment: . across an area that spans 1.4 billion). Health Informatics and Information Management and Consumer Health. The company is currently pursuing several gas.1 billion) and total assets of Rs 10. Procurement and Construction (EPC) through a network of regional offices in India.700 crore (US$ 2. Reliance Health: In a country where healthcare is fast becoming a booming industry. It generates 941 MW of electricity. Karnataka and Goa. Uttar Pradesh. Arunachal Pradesh and Uttaranchal with aggregate capacity of over 12. through its power stations located in Maharashtra.500 MW.500 crore (US$ 2. Reliance Energy Limited distributes more than 21 billion units of electricity to over 25 million consumers in Mumbai.It also plans to venture into diversified fields like Insurance Administration. at affordable prices The company aims at providing integrated health services that will compete with the best in the world. coal. It is also engaged in a portfolio of services in the power sector in Engineering. Kerala. Health care Delivery and Integrated Health. Andhra Pradesh. Reliance Energy Limited is vigorously participating in emerging opportunities in the areas of trading and transmission of power. kms. wind and hydro-based power generation projects in Maharashtra.300 sq. Reliance Health aims at revolutionising healthcare in India by enabling a healthcare environment that is both affordable and accessable through partnerships with government and private businesses. Delhi. Orissa and Goa.
exhibition & digital cinema. The key content initiative are across Movies. leading to direct opportunities in delivery across the emerging digital distribution platforms: digital cinema. which has interests in film processing. Reliance Capital has interests in asset management and mutual funds.2 PROFILE OF THE ORGANIZATION: Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd.7 FM is already India’s largest private FM radio network with 12 radio stations across the country as on 28th February 2007. Sports. Reliance in the Entertainment eco-system: across content and distribution platforms. IPTV. with many more to be launched in the coming months.com haning o 45stations in the recent bidding. production. private equity and other activities in financial services. . life and general insurance. Reliance Entertainment has made an entry into the FM Radio business through Adlabs Radio www.big927fm. DTH and Mobile TV. in terms of net worth.ADA Group. 1. 1934. Reliance Capital Limited (RCL) is a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act. of the Reliance Anil Dhirubhai Ambani Group. Gaming. Internet & mobile portals. and ranks among the top 3 private sector financial services and banking companies. Reliance Capital is one of India’s leading private sector financial services companies. Music. Reliance Capital sees immense potential in the rapidly growing financial services sector in India and aims to become a dominant player in this industry and offer fully integrated financial services. Reliance Entertainment is spearheading the Group’s foray into the media and entertainment space. one of the largest entertainment companies in India. proprietary investments. BIG 92. stock broking. Reliance ADA Group acquired Adlabs Films Limited in 2005.As part of the Reliance .
000 crore colossus—an achievement which earned Reliance a place on the global Fortune 500 list. integrated (wireless and wireline). with over 35 million subscribers. the first ever Indian private company to do so.Reliance Life Insurance is another step forward for Reliance Capital Limited to offer need based Life Insurance solutions to individuals and Corporates. the leader of men. . starting from the proverbial scratch. when Reliance Textile Industries Limited first went public. the champion of shareholder interest. the architect of India’s capital markets. As with all great pioneers. Reliance – ADA Group’s flagship company. India’s largest private sector enterprise. Reliance – Anil Dhirubhai Ambani Group. an offshoot of the Reliance Group founded by Shri Dhirubhai H Ambani (1932-2002). Dhirubhai is widely regarded as the father of India’s capital markets. It has established a pan-India. Reliance Communications. data and video) digital network.000). The group has business interests that range from telecommunications (Reliance Communications Limited) to financial services (Reliance Capital Ltd) and the generation and distribution of power (Reliance nergy Ltd). the Indian stock market was a place patronised by a small club of elite investors which dabbled in a handful of stocks. Over the next three and a half decades. convergent (voice. he had a seed capital of barely US$ 300 (around Rs 14. is India's largest private sector information and communications company. Other major group companies — Reliance Capital and Reliance Energy — are widely acknowledged as the market leaders in their respective areas of operation. high-capacity. In 1977. to offer services spanning the entire infocomm value chain. When Dhirubhai embarked on his first business venture. the proud patriot. ranks among India’s top three private sector business houses in terms of net worth. the unmatched strategist. In one lifetime. there is more than one unique way of describing the true genius of Dhirubhai: The corporate visionary. he converted this fledgling enterprise into a Rs 60. But the role Dhirubhai cherished most was perhaps that of India’s greatest wealth creator. he built.
if you own a home. your life insurance might pay off the mortgage so your family can stay in the house rather than being forced to sell it. • Set at least enough money to take care of your final expenses so your loved ones won't have to worry about these costs. Life insurance can also be used to: • Supplement your retirement. in the process making millionaires out of many of the initial investors in the Reliance stock. Dhirubhai always kept the interests of the ordinary shareholder uppermost in mind. WHY LIFE INSURANCE Life Insurance can be used to: • Make provisions to take care of your family after you are dead. and creating one of the world’s largest shareholder families. Under Dhirubhai’s extraordinary vision and leadership. in exchange for their trust. Through out this amazing journey. rent. guaranteeing that your family will continue to receive income. substantial return on their investments. . • Give your survivors choices about their future . Reliance scripted one of the greatest growth stories in corporate history anywhere in the world. Dhirubhai managed to convince a large number of first-time retail investors to participate in the unfolding Reliance story and put their hard-earned money in the Reliance Textile IPO. It was to be the start of one of great stories of mutual respect and reciprocal gain in the Indian markets. promising them. • Provide an income to let your family maintain its standard of living and cover everyday expenses such as groceries. the mortgage. etc.Undaunted. and went on to become India’s largest private sector enterprise. bills.
2001 terrorist attacks. Help pay for your children's education.S. Many rely on group insurance. • The government recommended approximate payments of 12 times income for couples with no children and 20 times income for households with children. • The U. a decline from 70 percent in 1984. Preserve your estate. Most people who have insurance coverage don't have enough. • Only 61 percent of adult Americans have life insurance protection. but the average amount of life insurance owned is $126. • Only 41 percent of adult Americans have individual life insurance. Most people who have insurance coverage don't have enough. . 2001 terrorist attacks1. • The government recommended approximate payments of 12 times income for couples with no children and 20 times income for households with children. Justice Department calculated compensation to meet the needs of families of victims of the September 11. Did you know..S.• • • • Help cover the expenses of raising your children.000. The average underinsurance is more than $300. Safeguard your home mortgage. leaving them vulnerable if they lose a job. • The average life insurance need is about $459. Justice Department calculated compensation to meet the needs of families of victims of the September 11.000.. Millions of Americans have no life insurance coverage.000. • The U.
000 the year after death. One to two years after the death. It takes years to recover economically from the death of a spouse. half the widows and one third of the widowers are just getting by financially. The average underinsurance is more than $300. Household income and assets are hit hard by premature death. there is not enough coverage to materially improve the finances of the deceased's household2. and other expenses. while widowers receive one year of household income. People who die prematurely with inadequate life insurance coverage create a financial burden on the surviving family. Nearly half the population seems inadequately prepared if the primary breadwinner were to die tomorrow3. • On average. widows (who receive life insurance proceeds) receive about three times the household income from all life insurance proceeds. Another 25 percent would have difficulty keeping up with expenses after several months. • • Some 13 percent would immediately have trouble meeting everyday living expenses.000. • Some 45 percent of widows and 37 percent of widowers say their spouse was inadequately insured. and another $5.000. burial. . • Assets also decline to cover medical.• The average life insurance need is about $459. but the average amount of life insurance owned is $126.000 during the year of death. • Because households are underinsured. or $5. • A LIMRA study of households hit by premature death shows that income declines by 15 percent.000.
38 percent find it very or somewhat difficult to choose which life insurance company to buy a policy from.about 890.000 and $85. 11 percent of American households shopped for life insurance but only 8 percent bought . • 30 percent find it very or somewhat difficult to determine how much life insurance to buy.• Widows and widowers indicate an average period of four to five years before their financial circumstances return to what they were at the time of their spouses' death4.000 households out of 111 million. • Two thirds of spouses who do receive life insurance benefits receive less than three times the annual income of the deceased. • • 39 percent find it very or somewhat difficult to decide on the kind of insurance to buy.000) have difficulty making important decisions about buying life insurance. Middle-market consumers (defined as households with income between $25. Large numbers of Americans don't recognize their need for life insurance coverage. • 30 percent find it very or somewhat difficult to determine how much life insurance they can afford. only 29 percent of households feel they need more life insurance coverage5. • Despite evidence of being underinsured. . • Even more affluent households (>$100.000 household income) lack sufficient life insurance. • In the last two years. yet say they have sufficient coverage. • Average amounts of coverage for those having life insurance is about three times incomeless than the four to five years needed for recovery.
To give millions of young Indians the power to shape their destiny. • Of households that shop for life insurance. every choice we exercise 2. growth and well-being of our vast pool of human talent 3. • Consequently 53 percent of shoppers say they have difficulty determining how much life insurance to buy. Shareholder Interest We value the trust of shareholders. • Agents and brokers are seen as more useful than the Internet. A great future for our country. and 2. 45 percent never have a needs analysis done to help them determine how much life insurance they need. VISION AND VALUES VISION 1.Life insurance agents and brokers are seen as the most useful source of information when buying life insurance. and keep their interests paramount in every business decision we make. the means to realize there full potential… VALUES 1. books and magazines. To build a global enterprise for all our stakeholders. or TV and radio programs. People Care We possess no greater asset than the quality of our human capital and no greater priority than the retention. Consumer Focus . 3.
Team Work The whole is greater than the sum of its parts. Social Responsibility We believe that organizations. about giving up control. We create an environment of accountability.integration is the rule. complex projects as much as small everyday tasks. in our rapidly-changing knowledge economy. organizations can prosper only by mobilizing diverse competencies. like individuals. escalation is an exception 6. it is worth doing well. about enabling and empowering people down the line to take decisions in their areas of operation and competence… 8. Excellence in Execution We believe in excellence of execution – in large. product and service from the standpoint of the consumer – so as to exceed expectations at every touch point 4. skill sets and expertise. If something is worth doing.We rethink every business process. depend on the support of the community for their survival and sustenance. ownership and problem solving –based on participative work ethic and leading edge research 7. 5. and must repay this generosity in the best way they can . Leadership by Empowerment We believe leadership in the new economy is about consensus building. by imbibing the spirit of “thinking together” -. encouraging cross-fertilization of ideas & flexibility of roles and functions. Proactive Innovation We nurture innovation by breaking silos.
Sh. But the role Dhirubhai cherished most was perhaps that of India’s greatest wealth creator. Dhirubhai H Ambani. starting from the proverbial scratch. substantial return on their investments. When Dhirubhai embarked on his first business venture. We can learn as much from the success of others as from our own failures Organizational Structure of Reliance life insurance Few men in history have made as dramatic a contribution to their country’s economic fortunes as did the founder of Reliance. Dhirubhai managed to convince a large number of first-time retail investors to participate in the unfolding Reliance story and put their hard-earned money in the Reliance Textile IPO. he had a seed capital of barely US$ 300 (around Rs 14. India’s largest private sector enterprise. the leader of men. he converted this fledgling enterprise into a Rs 60. there is more than one unique way of describing the true genius of Dhirubhai: The corporate visionary.000 crore colossus—an achievement which earned Reliance a place on the global Fortune 500 list. the proud patriot. . in exchange for their trust. Fewer still have left behind a legacy that is more enduring and timeless.9. As with all great pioneers. the first ever Indian private company to do so. It was to be the start of one of great stories of mutual respect and reciprocal gain in the Indian markets. Respects for Competition We respect competition – because there’s more than one way of doing things right. In one lifetime. the Indian stock market was a place patronized by a small club of elite investors.000). the unmatched strategist. the champion of shareholder interest. Over the next three and a half decades. he built. when Reliance Textile Industries Limited first went public. promising them. the architect of India’s capital markets. Undaunted. In 1977. Dhirubhai is widely regarded as the father of India’s capital markets. which dabbled in a handful of stocks.
and went on to become India’s largest private sector enterprise. Reliance scripted one of the greatest growth stories in corporate history anywhere in the world. Dhirubhai always kept the interests of the ordinary shareholder uppermost in mind. and creating one of the world’s largest shareholder families. in the process making millionaires out of many of the initial investors in the Reliance stock. Through out this amazing journey.Under Dhirubhai’s extraordinary vision and leadership. .