Contents
What is Insurance?
Evolution
Types of Insurance
Insurance Sector Reforms
Global Players – Indian Mergers
LIC
Global Growth
Indian Scenario
Conclusion
What is INSURANCE?
Insurance, in law and economics, is a form of risk management
primarily used to hedge against the risk of a contingent loss.
Insurance is defined as the equitable transfer of the risk of a potential
loss, from one entity to another, in exchange for a premium.
Insurance rate is a factor used to determine the amount, called the
premium, to be charged for a certain amount of insurance coverage
Risk management, the practice of appraising and controlling risk, has
evolved as a discrete field of study and practice
Evolution India
1818 - Oriental Life Insurance Company – 1st Insurance Company.
1870 - Bombay Mutual Life Assurance Society – 1st Life Insurance
Company.
1912 - The Indian Life Assurance Companies Act enacted the 1st Law to
Regulate the Life Insurance Business.
1928 - The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life & non-life
insurance businesses.
Contd…..
1938: Earlier legislation consolidated & amended the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian & foreign insurers & provident societies are taken over
by the central government & nationalized.
LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital
contribution of Rs. 5 crore from the Government of India.
The first General Insurance Company established in the year 1850 in
Calcutta by the British.
Types of Insurance
Life insurance
Non - Life Insurance
(general insurance)
Property ([Link] risk insurance)
Aviation([Link] aircraft insurance)
Marine (eg. Marine hull insurance)
Miscellaneous ([Link] insurance)
Insurance Sector Reforms
In 1993, Malhotra Committee - headed by former Finance Secretary & RBI
Governor R.N. Malhotra.
Objective - to create more efficient & competitive financial system.
Key recommendations of the reform;
[Link]: – a. government stake 50% in insurance companies.
[Link]:
Private Companies with a minimum paid up capital of Rs.1bn should be
allowed to enter the sector.
No Company should deal in both life and general insurance through a
single entity.
Foreign companies may be allowed to enter the industry in collaboration
with the domestic companies.
Regulatory Body:
• The insurance act should be changed.
• An insurance regulatory body should be set up.
• Controller of insurance-a part of the Finance Ministry – should be made
independent.
Investments :
• Mandatory Investments of LIC Life Fund in government securities to be
reduced from 75% to 50%.
• GIC and its subsidiaries are not to hold more than 5% in any company.
Customer Service:
• LIC should pay interest on delay on payment beyond 30 days.
• Insurance companies must be encouraged to set up unit link pension plans.
Players in Life Insurance Industry in India
Facing competition : LIC Vs Private players
In spite of continuous growth LIC is facing tough
competition from other players(private)
Private Companies are growing at faster rate than
LIC.
Reasons for growth of Private Players
• Lucrative offer
• High standard service
• Customer centric product
• Better communication technique
• Use of Feedback for product improvement
Life insurance industry grows 49% New Delhi June 14, 2007
life insurance industry - 49 % growth in new businesses,
general insurance players - 16 % increase in April,
Life Insurance Corporation, ICICI Prudential and SBI Life & 16 other players
Rs 2,982 crore in April’07 ------- with Rs 1,996 crore in April’06
Country’s largest life insurer – LIC saw new premiums grow 57 % to Rs 2,134
crore in April by selling 15,89,684 policies against Rs 1,355 crore last year. It had
a market share of 71.56 % in April.
life insurers - Bajaj Allianz, ING Vysya Life & Reliance Life saw a decline in
premium collections.
The 15 private players together saw their business grow 32 % to Rs 848 crore
with a market share of 28.44 %.
Insurers Premium[[Link].]
ICICI Prudential 271.00 Birla Sunlife 28.00
Bajaj Allianz 124.00
Kotak Mahindra Old
SBI Life 90.00 Mutual 26.00
HDFC Standard 70.00 ING Vysya 22.00
Max New York Life 69.00
Met Life 19.00
Tata AIG 48.00
Shriram Life 4.50
Aviva 39.00
Sahara Life 1.70
Reliance Life 33.00
Bharti Axa Life 0.72
ICICI Prudential - premium income rising 84.5 % to Rs 271 crore - 9.08% market
share.
Bajaj Allianz - 15 % in business - collected Rs 124 crore - 4.16 % market share.
general insurance industry grew 16 % in April,
New India - With 8 % growth in premium collection at Rs 651 crore, retained its
number one slot by cornering 20.72 % of market share.
ICICI Lombard - new premium 36 % to Rs 448 crore - a market share of 14.28 %
ICICI Lombard - the second-largest non-life insurance player.
Oriental Insurance premium collection at Rs 413 crore & a market of 13.16 %.
United India - 3 % growth in business at Rs 407 crore & 12.97 % of the market.
“Indian Insurance Industry: New Avenues for Growth 2012”,
The potential of the Indian insurance industry is huge. HOW???
….. It has an annual growth rate of 15-20% &
…..the largest number of life insurance policies in force.
Total value of the Indian insurance market (2004-05) is at Rs. 450 billion
(US$10 billion).
Insurance & Banking Services’ contribution to the country's gross domestic
product (GDP) is 7%
The funds available with the state-owned Life Insurance Corporation (LIC) for
investments are 8% of GDP.
India's insurance sector to see 500 per cent growth by 2010: Study
India's insurance sector - 500 % growth over the next three years -
60 billion-dollar industry by 2010
India's more than one billion people are uninsured, the study by the
Associated Chambers of Commerce and Industry (Assocham) said.
'A large part of rural India is still untapped due to poor distribution, large
distances & high costs relative to returns,‘ said Assocham president Anil K
Agarwal
He said the study had revealed that rural & semi-urban India would
contribute 35 billion dollars to the Indian insurance industry by 2010.
The study added that the urban sector insurance was estimated to reach 25
billion dollars by 2010, life insurance 15 billion and non- life insurance 10
billion dollars.
Source: Business News
Conclusion
Insurance can be summed up as
“Praying for the best …
…being PREPARED for the WROST”.
