BASICS OF INSURANCE INDUSTRY IN INDIA

BYAMANDEEP KAUR BBA SEMESTER- 4

INSURANCE IN INDIA
y Insurance is a federal subject in India. The

insurance sector has gone through a number of phases and changes. y Since 1999, when the government opened up the insurance sector by allowing private companies to solicit insurance and also allowing foreign direct investment of up to 26%, the insurance sector has been a booming market. y However, the largest life-insurance company in India is still owned by the government.

HISTORY
y Insurance in various forms has

been mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and Kautilya (Arthashastra). y Oriental Life Insurance Company was started in 1818 by Anita Bhavsar in Kolkata to cater to the needs of European community. y In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer. y In the year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed.

HISTORY CONTD.
y The oldest existing insurance company in India is the

National Insurance Company Ltd., which was founded in 1906. y The Government of India issued an Ordinance on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. y The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies. y The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

HISTORY CONTD.
y General Insurance business was nationalized with

effect from 1st January, 1973

y With effect from December 2000, the subsidiaries

have been de-linked from the parent company and were set up as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited

INDUSTRY STRUCTURE
y Currently, a US$41 billion industry,

India is the world's fifth largest life insurance market and growing at a rapid pace of 32-34% annually as per Life Insurance Council studies. y Currently, in India only two million people (0.2 % of the total population of 1 billion) are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. y With more and more private companies in the sector, the situation may change soon.

ACTS
The insurance sector is governed by a number of actsy The Insurance Act,1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business. y The General Insurance Business Act,1972 was enacted to nationalise the about 100 general insurance companies then and subsequently merging them into four companies, which were headquartered in each of the four metropolitan cities.

ACTS CONTD.
y The Insurance Regulatory and Development

Authority Act in 1999, was passed, thereby deregulating the insurance sector and allowing private companies. y In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on par with Chartered Accountants, Notaries, Cost & Works Accountants, Advocates, Architects and Company Secretaries.

TYPES OF INSURANCE

LIFE INSURANCE
y In this, the insurance company pays in case of the

demise of the policy holder or at the time of the maturity of the policy. y Now-a-days, a new policy has been launched by LIC in which you will be covered under the insurance policy even after the maturity of the policy.

PROPERTY INSURANCE
y This insurance helps you to prevent

the losses against theft, fire, burglary, or any natural calamity like Earthquake, Floods, etc. based on the points mentioned in this policy. y Maintenance-related issues are typically the homeowner's responsibility. y The policy may include inventory, or this can be bought as a separate policy, especially for people who rent housing.

HEALTH INSURANCE
y Health insurance consists of a

package of various types of insurance related to health. y For example medical insurance is one of the major part of health insurance, however in most of the cases dental cases are not covered in this policy. So there is another Dental Insurance policy which covers dental insurance and is also a part of health insurance. y The sub category of health insurance also involves the injuries or accidents at workplace insurance benefits.

AUTO INSURANCE
y Any financial loss due to accident of a vehicle is

covered under the auto insurance policy. Coverage typically includes: y Property coverage, for damage to or theft of the car; y Liability coverage, for the legal responsibility to others for bodily injury or property damage; y Medical coverage, for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

CREDIT INSURANCE
y This type of insurance pays the loans

of the policy holder in case of any accident of the policy holder or job loss or death. y Mortgage insurance is a form of credit insurance, although the name "credit insurance" more often is used to refer to policies that cover other kinds of debt. y Many credit cards offer payment protection plans which are a form of credit insurance.

TOP 10 INSURANCE COMPANIES IN INDIA

y LIC (Life Insurance Corporation of India) y ICICI Prudential Life Insurance Co Ltd y Bajaj Allianz Life Insurance Co Ltd y SBI Life Insurance Co Ltd y Reliance Life Insurance Co Ltd y HDFC Standard Life Insurance Co Ltd y Birla Sun Life Insurance Co Ltd y Max New York Life Insurance Co Ltd y Kotak Mahindra Old Mutual Life Insurance Ltd y Aviva Life Insurance Company India Ltd

CHALLENGES FACING INSURANCE INDUSTRY

y Threat of New Entrants: The insurance

industry has been budding with new entrants every other day. Therefore the companies should carve out niche areas such that the threat of new entrants might not be a hindrance.

y Power of Buyers: No individual is a big threat

to the insurance industry and big corporate houses have a lot more negotiating capability with the insurance companies. Big corporate clients like airlines and pharmaceutical companies pay millions of dollars every year in premiums.