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Insurance in India


 Mihir Trivedi - 02
 Rajaram Palav - 26
 Chandan Kokul - 27
 Samson Aranha - 28
 Bansi Mehta - 23
 Definition of Insurance.
 History of Insurance.
 Liberlisation.
 Contribution to the Economy.
 Introduction of Micro insurance.
 Misconceptions.
 Critical Features.
 Target Market.
 Critical Issues.
Definition :
“Covers an individual / Company
/Household for some or all of a
financial loss that is linked to an
unpredictable event or risk, via risk
pooling & the payment of a
 1850 the first insurance company was formed in India.
 1938 The insurance act was passed.
 1947 economic nationalization began in insurance
 1972 Insurance market was fully nationalized.
 1991 economic liberalization was began.
 1994 Marine tariffs were removed.
 1999 the Insurance regulatory & development
authority Act (IRDA) was formed.

“ In 1991 Economic liberlisation began under
Dr.Manmohan Singh.3 Yrs later the Malhotra
committee report on the state of Indian insurance
industry was released.
These recommendation were put in to practice via
IRDA. In particular, the monopoly previously
enjoyed by GIC (General insurance corporation of
India) was removed in yr -2000 & First licensed
were granted to private. Companies.”
Contribution of Insurance market in Indian
Insurance generated RS 400 billion business in India ,
and together with banking services adds about 7% to
India's GDP .Gross premium collection is about 2% of
GDP and has been growing by 15-20% per annum.
India also has the highest number of life insurance
policies in force in the world , and total investible
funds with the LIC are almost 8%. of GDP. Yet more
than three –fourths of India’s insurable population
has no life insurance or pension cover.
* Growth in major types of Insurance
  Life insurance Non life insurance

Total Revenue earned (2007) $ 41.36 billion $ 6.53 billion

compound annual growth rate 11.84 % 5.75 %

Premium contribution in 2011 $ 65.96 billion $ 7.48 billion

What is Micro
Insurance ?
 Micro-Insurance is a key element in the financial
services packages for people at the bottom of the

 Micro insurance is a risk transfer device characterized

by low premiums and more coverage limits, and
designed for low-income people not served by typical
social or commercial insurance schemes. It is a
financial arrangement to protect low-income people
against specific risk in exchange for risk involved.
Misconceptions on Micro
 Small insurance companies.
 Just another product offered by MFIs.
 Regular insurance products with
smaller sums insured and premiums .
 Savings, credit, risk prevention.
Critical Features of Micro
 Transactions are low-cost and reflect members’ willingness to

 Clients are essentially low-net-worth but not necessarily

uniformly poor.

 Communities are involved in the important phases of the

process (such as package design and rationing of benefits).

 The essential role of the network of micro insurance units is to

enhance risk management of the members of the entire pool of
micro insurance units over and above what each can do when
operating as a stand-alone entity.
Need for Micro Insurance
 Poor also need insurance protection

 Inclusive growth is the only way to ensure sustained growth

 Trickle down effect of the process of economic growth

benefiting the poor belied

 Poor get excluded unless special effort is made to bring

them into the development process

 Monitor it effectively
Risk Priorities by low-income
Health Problems

Death of breadwinner

Death of family member

Crop loss / bad harvest

n ce
Theft; fire o rta
I mp
Natural disaster in g
IRDA’s Initiatives
 Developmental Initiatives:-
 Legislature delegated developmental responsibilities – A unique model.
 Ensuring orderly growth and penetration of insurance are the prime
 Introduction of development oriented regulations to Bridge the Demand
Supply gap.

 Mandatory Norms :-
Rural Sector - Life Insurers
 First 5 years - 7% to 16% of total policies underwritten
 6th to 10th* year - 18% to 20%
Non Life
 First 5 years - 2% to 5% of total gross premium
 6th to 10th* year - 5% to 7%.
Social Sector - Life & Non Life
 5000 to 20000 lives for the first 5 years and 25000 to 55000 lives for 6th to
10th year*
Target Market.
A Commercial Insurance for
wealthy individuals and
B companies, as well as
Wealthy compulsory products.
B Most of non-motor related
commercial insurance.
C Social security and public
D E health services.
D Aggregate market for
microfinance providers.

Destitute / Severely Poor E Potential market for micro

Policyholders (the market):- insurance.
People do respond to “good” products.
Generally lack understanding of insurance and thus require
knowledge and appreciation .
Education, marketing, policy documents MUST be simple and
appropriate .
We need to help people link needs with insurance as an
Critical Issues
 Illiteracy.
 Ignorance.
 Lack of complete information.
 Huge untapped rural market.
 Commutation & Communication.
 Lack of expertise.