1.

Introduction Brief history of insurance sector: The insurance sector in India has completed all the facets of competition –from being an open competitive market to being nationalized and then getting back to the form of a liberalized market once again. The history of the insurance sector in India reveals that it has witnessed complete dynamism for the past two centuries approximately.

With the establishment of the Oriental Life Insurance Company in Kolkata, the business of Indian life insurance started in the year 1818

In the year 2000, the Government of India opened up the life insurance market to private players. Till then, the Indian life insurance industry had been dominated by Life Insurance Corporation of India (LIC), the only player in the insurance market. This monopoly had created such a strong brand identity and awareness for LIC that LIC became a generic word for life insurance in India.

After deregulation, many domestic and international players entered the life insurance market. However, the Indian insurance industry continued to face various problems such as low penetration (only 22% of the insurable population were insured) and low premium to GDP ratio (of 1.3). Growth was also hampered by the existing customer perception that life insurance was a tax saving tool. Another problem was that the entry of many players had cluttered up the market.

Important milestones in the Indian life insurance business

1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business

1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses.

1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India.

The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British.

Important milestones in the Indian general insurance business

1907: The Indian Mercantile Insurance Ltd. was set up which was the first company of its type to transact all general insurance business.

1957: General Insurance Council, an arm of the Insurance Association of India, framed a code of conduct for guaranteeing fair conduct and sound business patterns.

1968: The Insurance Act improved for regulating investments and set minimal solvency levels and the Tariff Advisory Committee was set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India. It was with effect from 1st January 1973.

107 insurers integrated 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 was incorporated as a company.

2. An overview of India’s insurance market

Insurance in India used to be tightly regulated and monopolised by state-run insurers. Following the move towards economic reform in the early 1990s, various plans to revamp the sector finally resulted in the passage of the Insurance Regulatory and Development Authority (IRDA) Act of 1999. Significantly, the insurance business was opened on two fronts. Firstly, domestic privatesector companies were permitted to enter both life and non-life insurance business. Secondly, foreign companies were allowed to participate, albeit with a cap on shareholding at 26%. With the introduction of the 1999 IRDA Act, the insurance sector joined a set of other economic sectors on the growth march. During the 2003 financial year1, life insurance premiums increased by an estimated 12.3% in real terms to INR 650 billion (USD 14 billion) while non-life insurance premiums rose 12.2% to INR 178 billion (USD 3.8 billion). The strong growth in 2003 did not come in isolation. Growth in insurance premiums has been averaging at 11.3% in real terms over the last decade.

avivaindia.com Websites .sbilife.ingvysayalife.com www.com www.birlasunlife.in www.allianzbajaj.com www. Limited www.omkotakmahnidra. Limited MetLife Insurance Company Limited Om Kotak Mahindra Life Insurance Co.com www.co.hdfcinsurance. Ltd.3. List of Insurance companies in India.co.com www.metlife.ampsanmar. Limited ING Vysya Life Insurance Company Limited Max New York Life Insurance Co.com www.iciciprulife.com www.licindia.in www. Limited ICICI Prudential Life Insurance Co. Table no.com www.com www.maxnewyorklife.tata-aig. SBI Life Insurance Company Limited TATA AIG Life Insurance Company Limited AMP Sanmar Assurance Company Limited Dabur CGU Life Insurance Co.com www. Pvt. 1 LIFE INSURERS Public Sector Life Insurance Corporation of India Private Sector Allianz Bajaj Life Insurance Company Limited Birla Sun-Life Insurance Company Limited HDFC Standard Life Insurance Co.

Export Credit Guarantee Corporation HDFC Chubb General Insurance Co.com www.nic.co.co.orientalinsurance.in www.co.com www.com www.niacl. Limited Royal Sundaram Alliance Insurance Co.royalsun.cholainsurance.GENERAL INSURERS Public Sector National Insurance Company Limited New India Assurance Company Limited Oriental Insurance Company Limited United India Insurance Company Limited Private Sector Bajaj Allianz General Insurance Co.com www. Reliance General Insurance Co. Limited Cholamandalam General Insurance Co.nationalinsuranceindia. IFFCO-Tokio General Insurance Co. Limited ICICI Lombard General Insurance Co. www.in www.bajajallianz. Ltd.itgi.uiic. Ltd.ril.tata-aig.in www.com www. Ltd.com www.in .icicilombard.ecgcindia. Ltd. TATA AIG General Insurance Co. Ltd.com www.com www.

the first general insurance company established in the year 1850 in Calcutta by the British. LIC formed by an Act of Parliament. LIC Act. with a capital contribution of Rs. Some of the important milestones in the general insurance business in India are given in the table 3 . can trace its roots to the Triton Insurance Company Ltd.. 1956 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised.gicindia. 5 crore from the Government of India. on the other hand. Table 2: milestone’s in the life insurance business in India Year Milestones in the life insurance business in India 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. The General insurance business in India. 1956.com Some of the important milestones in the life insurance business in India are given in the table 2. viz.REINSURER General Insurance Corporation of India www.

and the United India Insurance Company Ltd. the New India Assurance Company Ltd. GIC incorporated as a company. the first company to transact all classes of general insurance business 1957 General Insurance Council. the National Insurance Company Ltd. 1972 nationalised the general insurance business in India with effect from 1st January 1973. . 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. a wing of the Insurance Association of India. set up.Table 3: milestone’s in the general insurance business in India Year 1907 Milestones in the general insurance business in India The Indian Mercantile Insurance Ltd.. the Oriental Insurance Company Ltd. 1972 The General Insurance Business (Nationalisation) Act. 107 insurers amalgamated and grouped into four companies viz..

Bajaj Allianz Life Insurance Mr. Nick Taket Tel Fax: : 022-67516666 022-2822 8844 "Trade Star". Kondivita Road Junction AndheriKurla Road Andheri (East) Mumbai 400 059. Wakeling Andrew Tel Fax . Shikha Mr. Limited Airport Road . Mumbai 400 025. Ghosh . Mahmi Road. 'A' Wing. Azim Mithani Tel :022-56621996 Ltd Sharma Fax: 022-56622031 ICICI Prulife Towers . . Ltd Mr. Kedar Mulgund Tel 6th Floor. Birla Sun Life Insurance Co. Co. Mr. Vikram J. Prabhadevi. Co. Andheri(E)./E-MAIL ADDRESS PRINCIPAL ACTUARY OFFICER 1. Vaman Centre. 2nd floor.M. Competitor’s Profile Life Insurers S. Sam Mr. Appasaheb Marathe Marg. 1089. 4. : : 020-4026666 020-4026789 Company GE Plaza.D. ICICI Prudential Life Insurance Ms.4. 3. Road : 022 5678 3333 Fax: 022 5678 3232 Makhwana off Andheri-Kurla . HDFC Standard Life Insurance Mr. Ltd Satwalekar Mr. YerawadaPune 411 006 2.No NAME OF THE COMPANY NAME OF NAME OF TELEPHONE NO./FAX & WEB APPOINTED No. MUMBAI-400 059.

Kotak Mahindra Old Mutual Life Mr.Uday Mr. Life Insurance Corporation of Shri IndiaYogakshema. 5. Penisula Ganpatrao Lower MUMBAI-400 013. Fort Corporate Kadam Park. Bank Street. Mr. Gorakh Nath Tel Fax: E-Mail chairman@licindia. Park Parel. Sarma Tel Fax: : 080-26438638 080-26521970 Company Brigade Seshamahal. BANGALORE560 004. T S. Rao I Sambasiva Tel Fax: : 022-56392000 022-56621471 Turner Morrison Building. Shah A. Marg. 1-600-44-6969 Basavanagudi. Insurance Mr. Ltd Mr. SBI Life Insurance Co. 8.John Ltd 11th Floor. Post Box Jeeva No. 16. Max New York Life Insurance Co. 10. No. DLF City .56598702 22824386 . Benett Poole GURGAON 122 002.5. 6. Ltd. Toll Free No.Kshitij Ltd. Tel : 022-5663 5000 Venkatasubramanian Fax:022-5663 5111 . Phase-II. Hemamalini Tel : 080-25328000 Company Ramakrishnan Fax: 080-25559764 ING Vysya Home. Jacaranda Marg. 9. #22 Mahatma gandhi Road Bangalore560 001. 2nd Sankar Roy Floor.com Charles Tel Fax: : 0124-2561717 0124-2561764 56598701. Gaurang Mr. Bima Vijayan 19953 Agarwal MUMBAI 400 021 7. Relan Rajesh Mr. Mr. 5th Floor. Gary R. ING Vysya Life Insurance Mr. DLF Square . Mr. Insurance Limited 6th Floor Penisula Chambers. Jain Ms. P. Met Life India Pvt. Vani Vilas Road . K.

Ltd. Limited. Liberty Road. 3rd Floor. Mr R Mr N S Sastry Tel: 040-23434466-72 India Bhawan. Hotel. 12 Reliance Life Insurance Company Mr. Office : 3-6-478.122001 14 Sahara India Life Insurance Co. Mr. Pournima Gupte Tel : 022-30883444 Fax: 022-30886587 Andheri (East) . Himayat Nagar. India Pvt. JMD Regent Square. Peninsula Corporate Park Bull Mr. Tata AIG Life Insurance Company Mr. Lower Parel.Mumbai-400 023. 11. Plaza Kohinoor Kurla Midas. Albert Paterson Mr. Complex. Mr. Sahara Kopoorthala Lucknow 226024 15 Shriram Life Insurance Co. Mehrauli Gurgaon . Heerak Basu Tel Fax : : 022-56516000 022-56550711 Ganpatrao Kadam Marg.C. Complex. 1st Sahar Next Andheri to Floor. Ltd. K K Dharni Tel: 0522-2337777 road. Road. Nandagopal P Ms. Ltd. Sharma Fax: 0522-2378200 Duruvasan Fax: 040-23434488 . N.Mumbai-400 059 13 Aviva Life Insurance Co. Khasnobis Chandan Tel: 0124-280 4141 Fax: 0124-280 4151 5th floor. Peninsula Tower. Anand Estate. Mr. Regd. MUMBAI 400 013.Trevor Limited 5th 7 6th Floor.

Kalpataru Opp. Tel: 022 – 40306300/6301 Fax: 022 .500029 16 Bharti AXA Life Insurance Company 61/62. Ltd. Hotel. K.40306347 Chopra Gopalakrishnan Grand Santacruz Mumbai – 400 055 . S.Hyderabad . Nitin Mr. Synergy. Hyatt (E) Mr. Vakola.

12 0.06 .5.91 6.11 1.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Insurer LIC Bajaj Allianz ING Vysya AMP Sanmar SBI Life Tata AIG HDFC Standard ICICI Prudential Birla SunLife Aviva Kotak Mahnidra Old Mutual Max New York Met Life Sahara Life Market Sahre(%) 73.63 0.52 1.12 0. Market Share of Different Players in Insurance Industry \ Sl.32 0.54 1.96 7.78 2.40 0.84 1.71 1.

Present Scenario of Insurance Industry India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. Customers are offered . Computerisation of operations and updating of technology has become imperative in the current scenario. The concept is very well established in the country like India but still the increasing use of other sources is imperative. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. At present the distribution channels that are available in the market are listed below.6. are now suddenly turning to the private sector that are providing them new products and variety for their choice. Consumers remain the most important centre of the insurance sector. The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians. have always seen life insurance as a tax saving device. Direct selling Corporate agents Group selling Brokers and cooperative societies Banc assurance Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Foreign players are bringing in international best practices in service through use of latest technologies The insurance agents still remain the main source through which insurance products are sold. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors.

g. There is lots of saving and investment plans in the market.e. In the insurance the awareness level for life insurance is the highest in rural India.unbundled products with a variety of benefits as riders from which they can choose. The study also pointed out the private companies have huge task to play in creating awareness and credibility among the rural populace. but the consumers are also aware about motor. daughter's marriage. More customers are buying products and services based on their true needs and not just traditional moneyback policies. . in that order. which is not considered very appropriate for long-term protection and savings. the study adds. In a study conducted by MART the results showed that nearly one third said that they had purchased some kind of insurance with the maximum penetration skewed in favor of life insurance. The rural consumer is now exhibiting an increasing propensity for insurance products. accidents and cattle insurance. health products.500 and Rs 2. A research conducted exhibited that the rural consumers are willing to dole out anything between Rs 3.900 as premium each year. However. The perceived benefits of buying a life policy range from security of income bulk return in future. there are still some key new products yet to be introduced . children's education and good return on savings.

While these players have opportunities to increase share. there are other challenges like climate change. Like at the global level. penetration level ( 4% of GDP) and as an investment destination. private life insurers continued go gain market share ( 59%) in terms of weighted collected premium. Industry potential The industry size in terms of premium touched Rs 2 lakh crore last year clocking a robust 27% between 2004-05 and 2008-09. The private players' growth is driven by significant capital infusion to build distribution scale. he explained. Srinivasan said the life market is set attract two more players to the existing 21.. legal risks etc. the level playing field has allowed them to compete effectively against the public sector LIC. key challenges facing them are retention of talent ( high churn of employees). Everyone thinks. This poses challenges in selling products with cover well as promising high return on the investment". terrorism. premium growth rate.Rs 4 122 Billion by 2012. Madras on Friday. Luckily. nobody's want. That is why life insurance is never bought but sold. inflation. IIT. Since 2000. India scores high over China when it comes to demographic profile ( young population) . " India is among the fastest growing markets and its share has been growing rapidly over the years except the marginal decline in 2008" Srinivasan told the management students. no benchmarks available for costing and outdated risk tables ( more than a decade old). Speaking at an ET in Campus event on ' Life insurance growth steady in a weak economic scenario". he or she is safe and has no risks in life. Despite the down turn in the economy. at the Department of management studies.435 Billion. he said the market is forecast to grow by 17% per annum and reach a size of Rs 3. " Insurance is every body's need. But. Reliance Life will be the first player to go public in the New Year. . Quoting Mckinsey report.7. regulatory intervention.

S&P’s article – ―The Indian Non-Life Insurance Sector Is A Goldmine Of Growth Potential‖ – concludes that the country’s insurance industry has emerged as one of the fastest developing markets of the global insurance industry. superior client service. financial strength and distribution reach. diversified product offering and effective risk management solutions. Talking of Bharti-Axa Life Insurance.com. has one of the lowest penetration rates in Asia. And. With offices worldwide. . the non-life sector maintained–on absolute levels–an impressive growth momentum. multi product platform". during the past 10 years. By then.Rising affluence is expected to increase the insurable population significantly by 2015. Learn more at CatlinUS. Catlin is known for its disciplined underwriting. ―Indian regulators phased out price controls for the major insurance segments. Credit analyst Damien Magarelli explained that India’s ―non-life sector. 100 million people are estimated to be added to the working population. Private insurers took advantage of the opportunities and consistently improved their market share and emerged as serious competitors to the public insurers. which includes property/casualty and health insurance. " We want to be an aggressive player to achieve a top five market position by 2012 through a multidistribution.‖ A word from our sponsor: Catlin is a specialty insurer and reinsurer working in partnership with businesses to provide creative risk management solutions and excellent financial security. he said. S&P noted that from 1994 through 2008. Srinivasan said both are strong national brands backed by their large client base. shifting the industry’s dynamics and creating both opportunities and challenges for the non-life insurers.

the Indian insurance market (in terms of premium volume) was the 19th largest in the world.2 This was despite India being the second most populous country in the world as well as the 12th largest economy. it can be postulated that by 2014 the penetration of life insurance in India will increase to 4. Insurance development and potential Notwithstanding the rapid growth of the sector over the last decade. there are outstanding issues concerning solvency regulations. as there will be increasing needs to purchase private health cover to supplement public programmes. there are still major hurdles to overcome in order for India to realise this growth potential. At the end of 2003. only slightly bigger than that of Denmark and comparable to that of Ireland. • Health insurance is still underdeveloped in India but offers huge potential. . caps on foreign equity shareholdings5 as well as the enforcement of price tariffs in the non-life insurance sector.4 Based on this relation and other considerations.  What will it take to realise this potential? While the macro-economic backdrop remains favourable to growth. Likewise. the deficiencies in current pension schemes should offer significant opportunities to private providers. This will also have strong implications on the process of financial convergence and capital market development in India. • The proliferation of bancassurance is rapidly changing the way insurance products are distributed in India. • On the regulatory side.4% and that of non-life insurance to 0. there are strong arguments in favour of sustained rapid insurance business growth in the coming years. This report will cover some of the key challenges and issues that have to be tackled by the Indian insurance market. insurance in India remains at an early stage of development.9%.8. including India’s robust economic growth prospects and the nation’s high savings rates. It has been shown that insurance penetration and per capita income have a strong non-linear relationship. 3 The dynamic growth of insurance buying is partly affected by the (changing) income elasticity of insurance demand. Yet. further liberalising of investment rules. .

88%.6% of world premiums. against 21.62% non-life insurance business. In 2003.• With the majority of the population still residing in rural areas. India had the 11th highest insurance penetration in Asia and ranked 54th worldwide. Total insurance penetration in India was 1.26% life insurance business and 0. South Korea.5% for non-life insurance business. . In the context of international comparison. Insurance penetration Insurance penetration (premiums as a percentage of GDP) has remained stable at a relatively low level in the early 1990s. China and Taiwan. insurance penetration in India is low but commensurate with its level of per capita income. Similar to the pattern observed in other regional markets.5% of total gross premiums collected in the year. India in the international context The Indian insurance market is the 19th largest globally and ranks 5th in Asia.5% in 1990 and was not much higher by the middle of the decade. 4 While the current cap on foreign ownership in Indian insurance companies is set at 26%. after Japan. the Indian Government Budget 2004-05 proposes to raise the cap to 49%. life insurance business accounted for 78. comprising 2. total penetration had risen to 2. representing just under 0.6 In 2003.3 billion. and reflecting the country’s high savings rate. By 2003. total gross premiums collected amount to USD 17. the development of rural insurance will be critical in driving overall insurance market development over the longer term.

FY 0509. Most large Insurance players are now expected to decelerate the pace of distribution growth and increase their focus on the retention of channel partners and improve channel productivity. Insurance growth and profitability The Indian life insurance industry is at the threshold of launching Phase III growth and bringing the Insurance industry to a stable position.9. which would be instrumental in navigating the future course of the insurance industry. the regulator is amid finalizing the norms for the initial public offering (IPO) of insurance companies. the report said.‖ . ensuring ―stable profitable growth. To meet their commitment toward claim settlement and reserve creation. IRDA has introduced certain regulations to help improve disclosures. Further. developing innovative products and building a robust distribution channel. Insurance companies are poised for a quantum leap in performance with unprecedented growth opportunities. The period FY 00-05. Insurers were shifting to‖ profitable growth. notwithstanding a temporary sliding growth curve. Growth was heavily inclined versus profitability.‖ This fact emerges out of a study done by Confederation of Indian Industry (CII) and Ernst & Young (E&Y) on. profitability and capital as well as ensure consumer protection. During the Phase III. the IPO of insurance companies could be a milestone in the future growth of the sector. post sector liberalization. ―Indian Insurance sector. India is fast emerging as one of the world’s most dynamic insurance markets with significant untapped potential. In a sector where none of the players are listed. saw players focus on an expanding product range. promoters had been investing additional capital resulting in ―cash burn‖.the Insurance Regulatory and Development Authority (IRDA) will become more critical and it is in the finalization stage of its regulations. the role of the Insurance Regulator . called Phase I witnessed an unprecedented surge in sales of insurance products when the industry had been relying on regular capital infusions from the promoters as its lifeline. the Phase II. Stepping into the next decade‖.

International experience tends to suggest that demand for insurance will take off once per capita income has surpassed the USD 1000 mark (Figure 3. This change will result in the better apportionment of risk in the backdrop of the actual risk associated with the asset. which have yet not benefited from the upside of insurance. This income level is deemed high enough for households to consider insurance protection. particularly as many people begin to own their homes and cars. the industry may also witness consolidation among smaller players and the emergence of some large players. incentivizing Indian households to transfer savings from physical assets to financial assets and taking the distribution network to rural areas are expected to help bring more and more individuals within the insurance ambit. In the next three to four years. India’s growing consumer class. The government. India’s low level of insurance penetration and density has to be viewed in the context of the country’s early stage of economic development. India plans to shift from the current solvency I norms to risk-based solvency norms. increasing domestic savings and investments are among the most critical factors that have positively driven the market penetration of the insurance products among its consumer segments Risk management also plays a very critical role in the insurance business. The regulator is in the process of finalizing guidelines for mergers and acquisitions in the insurance space in India.There are large untapped areas. With the rising competition. Imparting financial literacy. called the solvency II model.4). Per capita income in India is currently at around USD 600 but is expected to increase rapidly. which could bring in an era of accelerated demand for insurance. higher contribution of the industry to economic development and the increasing reach of insurance to the underdeveloped areas of the country. rising insurance awareness. . it still has a long way to go. regulator and the insurance companies are now focused on maintaining a favorable environment for sustainable growth. While insurance penetration in India is higher than that in countries such as China and Brazil.

The empirical relationship between insurance demand elasticity and per capita income can be characterised as a bell-shaped curve. The following chart depicts the current position of different emerging markets as well as their expected position by 2013. Elasticity remains relatively low at a low income level but increases at an accelerated rate once it has passed the USD 1000 level. .

Due to the fixed pricing policy. new private players are considering it as the next target segment. But recently. National Insurance. technological advancement in medical sciences and rising demand for better healthcare. This trend is likely to continue due to strong growth in the auto segment resulting from an increase in consumer income levels. This increase is likely to be due to ageing population. the fire insurance segment is dominated by four public sector companies. which accounted for 70% of the business in FY07. As of now.  Fire Fire insurance business in India is governed by the All India Fire Tariff. . Products Offered Various products offered under the general insurance ambit are briefly introduced below:  Automobile Auto insurance provides defense against loss due to theft or traffic accidents. Auto insurance consists of two categories in India: third-party liability and auto own damage.10. namely New India Assurance. Auto insurance has been a loss making business because of low pricing and very high-claim payouts. premium rates and conditions of the fire policy. which would help to minimize losses. In the last 4–5 years. has been detariffed since January 2007. Health insurance is expected to become the second-largest general insurance class of business with a contribution of 26% in the total premium income by FY10. the insurance market in India over the last few years has had a low loss ratio of 45%. United India Insurance and Oriental Insurance. the prices have increased by 70–150%. the number of passenger cars has increased substantially.  Health As the health insurance sector is becoming unprofitable for public sector units due to low premium structures. The auto own damage category. which lays down the terms of coverage.

Other than the four public sector players. Over the years. Apart from mediclaim insurance. With the growing services sector. insurance for plantations. accounted equally in the overall marine business in FY07. against the sector’s aggregate growth rate of 22% in FY07. whereas the hull segment got deregulated in April 2005. pump sets are a few of the more popular ones. the mediclaim policy is one of the sector’s most noteworthy products. as not many private players have taken interest in marine insurance. terrorism cover and several rural insurance packages such as Janata Personal accident insurance. ICICI Lombard and Bajaj Allianz are the two private players who have made good progress in this segment. the demand for liability insurance is expected to increase. cattle. hull and cargo coverage. testing. It helps to cover risks associated with construction. products such as overseas mediclaim insurance.  Innovative products Introduced in the 1980s. it is . The cargo business underwent pricing deregulation in 1994. However. The growth in the premiums slowed down post detarrification and pricing deregulation.  Others This includes liability and aviation insurance. These two segments experienced slow growth rates of 17% and 2%. plant and equipment. The entry of new players has improved service levels considerably in the sector. Over the years. it has still not made a significant impact in terms of new product development. which together accounted for 6% of the total premiums in FY07. Engineering Engineering insurance is one of the most profitable insurance segments. the product has undergone a lot of modifications and still remains among the most popular products in the general insurance space. The public sector companies hold a clear monopoly in this sector. machinery.  Marine The two components of marine insurance.  Premium growth The gross premium underwritten from the general insurance sector increased at a CAGR of 19. GIC introduced a wide array of products even in non-traditional . Innovations also happened for corporate customers in the form of customerspecific special contingency policies. However.5% over the period of four years between FY03 and FY08. respectively.

expected to resume in the next 3–4 years. distribution processes improve and the cross-selling of products increases. This relaxation would also make it difficult for policymakers to compare various products giving insurers more pricing power. Figure 6 shows gross premiums between FY03 and FY08. . as prices stabilize.

The other products. whether life or nonlife. 7 have been designed and are restricted to groups. for the disadvantaged groups in India. i. The health coverage remains very limited (12 products). 45 (55%) cover only a single risk. 23 are pure risk products. mostly focus on 2 (20%) or 3 (18%) risks.e. a one time payment upon subscription. Most life insurance products (23 out of 42) are addressed to individuals.11. Private insurance companies have three times more products than public companies. Indian insurance industry: The task ahead 27. The available products cover a wide range of risks. Out of 42 life insurance products. some products may be bought both by individuals and groups. public insurance companies still play a predominant role in the . As per the IRDA statistics. Out of the total 12 health products. However. Most of these products also mention HIV/AIDS among their exclusion clauses. The other 19 products propose various types of maturity benefits. covering a package of risks. Most of the health insurance products specifically exclude deliveries and other pregnancyrelated illnesses. public as well as private. However. Supply and Demand Side Developments  Supply of micro insurance Recently. require a single payment of premium. the International Labour Organization (ILO) (2004a) prepared a list of products of all insurance companies. Out of the 12 currently available health insurance products. Most products. Most life insurance products (55%) have been designed to cover an extended contract duration ranging from 3 to 20 years. 7 products propose the reimbursement of hospitalization expenses while the other 5 have chosen to narrow down the coverage to some specific critical illnesses. a broad majority of insurance products cover life (40 products or 52%) or accident-related risks. Some of the observations made on the basis of the list are presented below: Out of 80 listed insurance products..

Karnataka (17%) and Kerala (8%). and about 7 schemes have been operating for more than a decade. the ILO (2004b) has prepared an inventory of microinsurance schemes operational in India. some of the observations are made below: The inventory lists 51 schemes that are operational in India. In SEWA’s experience. This is primarily a result of the number of years these incumbent public insurers have been operating in the market. training or even referral services for their schemes. Around 56% of these schemes deal with one single risk . Based on this list. while the two western states (Maharashtra — 12% and Gujarat — 6%) account for 18% of the schemes. Nearly 22% of the schemes are implemented by community based organizations. special staff has been recruited to manage insurance activities. around 24 schemes came up during the last 4 years. Life and health are the two most popular risks for which insurance is demanded: 59% of schemes provide life insurance and 57% of them provide health insurance. Most insurance schemes (66%) are linked with microfinance services provided by specialized institutions (17 schemes) or non-specialized organizations (17 schemes). there are 20 out of 32 schemes that have received external technical assistance in the form of advisory services. In addition.present coverage of the rural and social sectors. There are 25 out of 37 schemes that have received some external funds to initiate their schemes. and 12% by healthcare providers. As regards the beneficiaries. the 43 schemes for which the information is available cover 5. health insurance tops the list of risks for which the poor need insurance. Most schemes (74%) operate in four states in South India: Andhra Pradesh (27%). having begun their operations only during the last few years.  Demand for microinsurance On the demand side too. The other schemes have been relying on their regular staff to undertake the additional responsibilities linked to managing these schemes. Most schemes are still at a very nascent stage. In a majority of the schemes. Of the 39 schemes for which this information is available. technical services.2 million people. Tamil Nadu (23%).

These agents were from various segments in society and collectively covered the entire spectrum of society. Distribution Channel  Penetrating the insurance market through new distribution channels: The competitive landscape of the Indian insurance industry coupled with the introduction of new products has given way to an increasing customer base and the emergence of new distribution channels. Traditionally. people have started buying insurance products from independent producers and institutional channels such as banks. it also influences product design and directly impacts the market image of distributors. The developmentof information technology and the emergence of online and offline insurance education and training has initiated a marked change in the range and quality of insurance services. captive agents wrote the bulk of an insurance company’s business. a lot of insurance policies are bought online. Direct sales agents dominate various insurance distribution channels. . But post liberalization. brokers and direct distribution is likely to rise due to the removal of tariffs. The insurance market in India has a good range of distribution channels.12. Public sector insurance companies had their branches in almost all parts of the country and attracted local people to become their agents. as the case is in the rest of Asia. But the share of other low-cost channels such as bancassurance. About 70–75% of the Indian general insurance premiums come through direct sales agents who are largely employed by public sector insurance companies. Today. The distribution channels in the insurance industry are discussed in the following sections: Agents Agents constitute an integral part of the distribution channels that reach out to corporate clients as they prefer to deal directly with insurers to obtain discounts. Besides. The widening and strengthening of distribution channels has helped the insurance industry to become more competitive and healthy. but direct sales agents dominate and account for a majority of all Indian life and general insurance premiums. Distribution accounts for the largest element in insurers’ costs and impacts their profitability. broker-dealers and wire houses.

664 20.000 HDFC Standard 23.000 234.000 72.000 Reliance Life 7. The growing distribution network of private players has been illustrated below: Number of agents FY05 FY06 FY07 ICICI Prudential 57. As distribution through agents requires a long gestation period as well as investment.231 106.000 170. the number of agents in their network has been limited.000 74.000 Birla Sun Life 9.671 33.523 20.000 Kotak Mahindra 9. of which LIC accounts for about one million.000 85.986 50.000 Bajaj Allianz 47.468 17. The life insurance industry has more than two million tied agents (in-house sales force). Since private sector players have entered the market at a relatively later stage. private players prefer to select other distribution options.000 12.000 .

4% over the previous year. first published in 1783. although the business of underwriting commercial risks was probably not highly developed. The life insurance segment writes about 80% of the overall market value. Background : Insurance is a Rs 450 billion industry in India. This has augmented the innovative practices initiated by the private players. is still read with respect and admiration. Here’s a glimpse of Insurance Industry over 190 years. GDP rates and long term interest rates.3 in the year 2000 to 4. The ancient origin of insurance is Emerigon. Since 2001 Insurance is growing at the rate of 1520 % annually. Indian Insurance market was at its all time high in 2003 with a growth of about 17.8 in 2006. Growth in the interactive technology such as internet has further created a wave of excitement in the insurance market. Together with banking services.12. Economy driven trends A] Ancient Historical Times : Insurance is as old as human society itself. The gross premium as a percentage of the GDP has gone up from 2. Phoenicians Rhodians. the monopoly of public sector companies in life insurance and general insurance has come to an end. Fluctuations in exchange rates also affect the growth in this sector. whose brilliant and learned Traite des Assurances. The histories of Livy and Suetonius shows that the contractors who undertook to transport provisions and military stores to the troops in Spain stipulated that the government should assume all risk of loss by reason of perils of the sea or capture and this was probably the first time when insurance . The growth in the insurance industry is affected by volatility in real estate rates. The result shows that insurances were known to the ancients such as Romans. The value of the market is determined by gross premium incomes. Indian economy and Indian Insurance sector is committed to a double digit growth. Insurance trends in India With the de-regulation in Indian Insurance industry. it adds about 7% to the country’s GDP.

Independent India reduced its vulnerability to external economic shocks by close control of foreign exchange and by promoting a massive change in the export schedule. B] British-India Period : Insurance in India without any regulations started in the nineteenth century. Yajnyavalkya’s Dharmashastra and Manu’s Smriti. and covered Indian lives at normal rates. These works show that the system of credit and the law of interest were well developed in India. These societies undoubtedly existed in China and India in the earliest times. But what maintained the momentum was the commitment of . Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. 1930s was the last of the old-style crises in the Indian economy because it marked the beginning of the end of the colonial state and an acceleration of the pace of industrialization as entrepreneurs moved their capital out of the countryside. insurance remained an urban phenomenon. Indian companies strengthened their hold on this business but despite the growth that was witnessed. It was a typical story of a colonial era where a few British insurance companies dominated the market serving mostly large urban centers. for the purpose of extending aid to their unfortunate members from a fund made up of contributions from all. C] Post Independence era of Indian Insurance : The insurance business grew at a faster pace after independence. which can be found in Kautilya’s Arthashastra. They were based on clear appreciation of hazard involved and the means of safeguarding against it. there was a split within the business community of protectionists and those who wanted more open trade. During Mrs. There were friendly societies organized. Gandhi’s tenure (from 19661968). Bombay Mutual Life Assurance Society indicated the birth of first Indian life insurance company in the year 1870.process was known. The earliest traces of Insurance in the ancient Indian history was in the form of marine trade loans or carrier’s contracts.

Deregulation actually helped the poorest in India as it would eventually create more employment and faster growth.Two Ministers. and the United India Insurance Company Ltd. LIC formed by an Act of Parliament. It might be preferable to introduce liberalization during an economic upswing when the risk of switching jobs is less traumatic. with a tendency toward decontrolling larger and more important segments of the economy. the Oriental Insurance Company Ltd. Yet the intense fears of liberalization in the lower middle class and among working class employees of the state sector. 5 Crore from the Government of India. the National Insurance Company Ltd. pose serious risks in freeing the economy. and later. This was seconded with high hope of getting increased foreign aid. 1972 : The General Insurance Business (Nationalisation) Act. However. Ashok Mehta and Subramaniam towards liberalization of the economy. with a capital contribution of Rs. LIC Act.. 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. 16 non-Indian companies and 75 provident societies were taken over by the central government and nationalised. the ownership too was taken by means of a comprehensive bill. Nationalization was accomplished in two stages. The three liberalization episodes in Indian economic policy have followed clear cyclical patterns. initially the management of the companies was taken over by means of an Ordinance. 107 insurers amalgamated and grouped into four companies viz.. LIC was nationalised. . viz. the New India Assurance Company Ltd. 1956. which nationalised the general insurance business in India with effect from 1st January 1973. D] Nationalization Phase of Indian Insurance : 1944 : The Nationalization of insurance industry gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. it was only in 1956. 1956 : 154 Indian insurance companies. Economic policy has swung broadly between controls and greater openness.

providing them adequate financial cover at a reasonable cost. with 2000 branches. LIC is India’s leading Insurance company.And as of 2007. In the first year of insurance market liberalization (2001) as much as 16 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. which probably is the highest number of branches across India insurance sector. 1972 e) To end the monopoly of the Life Insurance Corporation of India and General Insurance Corporation and its subsidiaries . d) To Amend the Insurance Act. 1997 : Insurance regulator IRDA was set up as there felt the need: a) To set up an independent regulatory body. F] Indian Insurance in 21st Century : 2000 : IRDA starts giving licenses to private insurers : ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy . the Life Insurance Corporation Act. 1956 and the General insurance Business (Nationalisation) Act. 1938. c) To Protect the interest of holders of insurance policies. that provides greater autonomy to insurance companies in order to improve their performance. 10 were under the life insurance category and six under general insurance. E] Liberalization of Indian Insurance : 1994 : Insurance sector invited private participation to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers. Thus in all there are 25 players (12-life insurance and 13general insurance) in the Indian insurance industry till date. Of this. b) To Enable them to act as independent companies with economic motives.

www.2 million people in India accessed internet and that’s about 2. The insurance portals that are active in online distribution are www. According to emarketer report on India online. In the 2004-05 budget.in.in set up by an Indian Insurance Broker.com. in 2007.in. which will be about 6% of population by 2011.in.insurancemall. there will more demand of purchasing insurance online from these areas.com. Minimum capital requirement for direct life and Non-life Insurance company is INR1000 million and that for reinsurance company is INR 2000 million.insurancemall. The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill.6 million people. www.(World Bank Economic Review2000). Online Insurance In India : Internet access in India has doubled every year over the last five years and forecasts predict this growth to quadruple every year over the next three years.bimaonline. Under the current guidelines. www. www.insurancepandit. there is a 26 percent equity cap for foreign partners in direct insurance and reinsurance Company.2001 : Royal Sundaram Alliance first non life insurer to sell a policy 2002 : Banks allowed to sell insurance plans. www.co. about 33. the Government proposed for increasing the foreign equity stake to 49%.insurancemall. Compare – Choose – Buy portals like Bonsai Insurance Broker’s www. Recently.9% of Indian population. lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Considering limited access of human-insurance agents in rural areas. followed by semi-urban areas.bajajallianz.icicilombard. This figure is going to be 71. this is yet to be effected. . As TPAs enter the scene.com. insurers start setting non-life claims in the cashless mode 2007 : First Online Insurance portal. have been developed for providing comparison of different types of insurance policies. Bonsai Insurance Broking Pvt Ltd.

06 trillion in 2009. up 10. while all other types of insurance totaled $1. but the industry is dominated by a handful of major players. ICICI Lombard General Insurance 2.in ( Created by Bonsai Insurance Broking.) Government policy driven trends. www. . E-insurance offers a new gateway of incomes and provides additional market penetration.their premiums and their purchase online. up from $4. Swiss Re. worldwide insurance premiums totaled $4.com/sigma/). total premiums were $650 billion. According to a survey conducted by a leading global insurance firm. these figures are from Swiss Re (www.23 million people in 2010. including $128 billion in Latin America and the Caribbean. Total insurance premium volume for 2010 in industrialized nations was $3. Gross insurance premiums totaled $1. which is a need of an hour for Indian Insurance Segment. In emerging nations.16 trillion (per SwissRe).89% of global GDP.81 trillion. Insurance and risk management make up an immense global industry.insurancemall. where the fastest growth is to be found.swissre. $33 billion in the Middle East and Central Asia. and $67 billion in Africa. This was equal to 6. In America alone.33 trillion in 2010 (the latest data available).9% over the previous year. More than 4. the insurance business employed about 2. Global life insurance premiums were $2. Bajaj Allianz General Insurance 3. Again.52 trillion during 2010.000 companies underwrite insurance in America.6 trillion. The policy details are stored digitally and all transactions are made over secure channels. The First Movers in eDistribution of Insurance goes to 3 companies in India : 1.

The insurance market in the emerging world will be boosted by a combination of rising household incomes. Total premiums in China were $215 billion in 2010. extending life spans. but China’s premiums were up 26. pointing to excellent long-term opportunity for expansion of sales of insurance products of all types. However. to the future growth of the insurance industry. and property & casualty companies to a lesser degree. up a respectable 4. India’s premiums in 2010 totaled $78 billion.. and a tradition of families relying on personal savings and initiative rather than government social programs to provide for retirement funds and health care. along with profits (or losses) that insurance underwriters earn on the investment of their own assets and reserves. 2008’s stock market meltdown had a significant effect on profits and assets at life insurance companies in particular. Much of the world is still clearly a fertile field for expansion of companies that are willing and able to invest time and money in emerging markets.2% over the previous year. At the same time. unemployment and cost-cutting by both businesses and consumers hurt insurance sales. business bankruptcies. Insurance companies also hold immense investments in real estate. Massive amounts of insurance company earnings come from the sale of annuities and other retirement and investment products. while the U.’s were down by 2. The global financial crisis hurt nearly all of these asset classes and thus hit the capital base of the insurance industry in a hard way.Premiums on a per capita basis remain very low in much of the world.9%. to $310 billion in the U. for example. a recovery in stock and bond markets that began in the spring of 2009 and ran through late 2011 provided a boost to the investment earnings of the insurance industry.K. hedge funds. .7%. increasing education and financial sophistication among consumers. private equity. That may not sound like much compared. It would be hard to overstate the importance of emerging nations. venture capital funds and other types of investments. including annuities. Brazil and Indonesia. India. especially China.K.

etc. Companies aremoving towards making arrangementsto implement Solvency II norms. Post reforms. Since then.coupled with the growth in demand. but this is expected to become mandatory notbefore 2012. hasopened many doors for the country’sinsurance industry. in 2008. Auto and health insurance are the two mostpromising sectors and are expected to garner a large share of the total premium in the future. A stringentregulatory environment. In terms oftotal premiums.‖ The growing demand for insurancearound the world is having a positive effect on the insurance industry in alleconomies.were liberalized in 2000.1% during FY03-07.The growing life insurance marketemphasizes the shift from the currentsolvency regime of 150% to risk-basedcapital. Please read the offerdocument before investing. greater productinnovation. The life insurance sector grew at animpressive CAGR of 29. the number of playershave increased from four in life insuranceand eight in general insurance in 2000to 21 and 20 (including one reinsurer). the Indian insurance sector has seen rapid growth. Every company is expected toprovide the quality of underwriting it canquantify for itself in view of its risk-takingability. This growth has been primarilydue to rising awareness of insurance. with a rigidtariff regime. increasing GDP. has been responsible for relatively slower growth in the generalinsurance sector.respectively. the Indian insurancesector is ranked as the fifth-largestinsurance market in Asia as of FY07. For India.14. As on date.3% during FY03-07. respectively.3%. the general insurancesector grew at a CAGR of 21.changing demographics. Both the life and general insurancesectors in India. . Executive Summery ―Insurance is the subject matter ofsolicitation. A large number ofprivate sector players have entered thismarket as customers and demand highlycustomized products and prompt service. The stress is on valuing assetsas well as liabilities.increasing life expectancy rates. which were nationalized in the 1950s and 1960s. The percentage share of the privatesector is expected to increase each year. The total premium of theinsurance industry has grown at a CAGRof 28. During FY03-07.

in/indian-insurance-industry-have-stable-profitable-growth-2286879 .topnews. 15. www. has been DE tariffed. http://www.com 3. Sherkhan.which started in FY07.all segments. www.Insurance industry. www. except motorthird party. References: 1.com 4.com 2.irda. Thegrowth in premiums in the generalinsurance industry has slowed down postdetoxification and pricing deregulation.