Industry introduction to insurance industry


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Industry introduction to insurance industry

  1. 1. The Confederation of Indian Industry states that the insurance sector of the country has beenwitnessing a consistent growth rate of late and its present worth is 41 billion US dollars.The industry has of late achieved a yearly growth rate within 32 and 34 percent and this makes itthe 5th best among emerging economies around the world. The various entities of the industry arealso bringing out newer products on a regular basis to attract their customers.As per rules, the upper limit of foreign direct investment permitted in this sector is 26 percent.However, this has to be done through the automatic route and the investor needs a license fromInsurance Regulatory and Development Authority (IRDA).At present there are 22 life insurers in India. The IRDA has recently taken away the tariffs of theinterest rates and this has provided insurers greater independence when it comes to deciding theprice of their insurance policies. The insurance industry has also become more competitive as aresult.Yet another important factor affecting this sector has been the recent financial meltdown.India insurance industry growth in last few yearsThe life insurance companies have performed the best when it comes to growth with an increaseof almost 70% in new premium that has been collected in the initial 5 months of 2012.As per IRDA data, in April-August 2010 the insurance companies earned $11.73 billion in newpremium - in the corresponding period in the previous year the amount stood at 6.9 billiondollars.LIC, a state held insurer, had been the biggest profit maker at that time with an addition of 88%to their existing business. The privately owned insurers together had seen a leap of 34% to theirpolicy sales.ICICI Prudential earned 576.60 million dollars at that time. During April-August 2009 SBI Lifehad earned $379.20 million in sales of new policies and that figure went up to $531.87 million inthe corresponding period in 2010 making it an increase of 40%. HDFC Standard Life alsoexperienced a good growth of 54% in new sales.IRDA data shows that between April and October 2010 the general insurance industryexperienced a year-on-year growth of 22.76% with regards to underwritten gross premium.The total value of that premium was 5.29 billion dollars while the same figure stood at $4.31billion in April-October 2009. For the public sector companies the year-on-year growth rate was21.09 percent between April-October 2010 and April-October 2009.In the same period the privately held insurers saw an increase of 25.19 percent in terms ofpremium collected. Among the publicly owned entities, New India Insurance was one of thebetter performers with a premium income of 916.77 million dollars in April-October 2010.
  2. 2. At the same period in 2009 they had earned 770.25 million dollars which implies a growth rateof 19.04%. The IRDA Summary Report of Motor Data of Public and Private Sector Insurers2009-10 states that in the same period almost 28.4 million policies were sold and the aggregateworth of premium collected was $2.31 billion.The health insurance sector, according to the RNCOS research report named "Booming HealthInsurance in India" posted unprecedented growth rates in 2008-09 and 2009-10. The report alsoestimates that between the 2009-10 and 2013-14 the sector would see a compound annual growthrate (CAGR) of at least 25%.India insurance industry - market share of leading companiesThe following table shows the market share of top insurers in India in the period till April 2011:Company Approximate market shareLIC 50%ICICI 10%SBI 5%Bajaj 4%Reliance 5%HDFC 6%Birla 4%Max New York 3%Tata 2%Met Life 1%Kotak 2%Others 8%In terms of policies sold following are the top insurers in India:Company Policies sold till December 2011 (approximate figure)LIC 20404281
  3. 3. Future Generali Life 100143ICICI Prudential 785938Met Life 98904Reliance Life 698109Star Union Dai-ichi 82037Bajaj Allianz 640483Shriram Life 73490Birla Sunlife 589855Bharti AXA Life 69151SBI Life 491927AegonReligare 47332Max New York 405662IDBI Federal 45833HDFC Standard 397408Canara HSBC OBC Life 44899Tata AIG 199275DLF Pramerica 43299Kotak Life Insurance 199614IndiaFirst 38498Aviva 100216Sahara Life 36228Edelweiss Tokio 1968India insurance industry - some key findings
  4. 4. Following are some important findings from World Bank regarding the condition of insuranceindustry in India: Between 2005 and 2010 the yearly GDP growth was approximately 8.56% At the same time, the ratio of gross savings to GDP was 33% Middle class saw the quickest growth The life expectancy rate of people went up and urban development happened at almost 54%. In 2010 rate of premium growth came down to 4.2% and compared to global standards the premium share was pretty low Major operational issues for insurers were expenditure control, claims settlement procedures, improving investment yields, and capital requirements In the 2010-11 fiscal the life insurance industry grew by 4.20% while the general insurance industry increased by 8.10%. During that time the paid-up capital (private total) for the life insurance sector was INR 236.57 billion while the paid-up capital (industry total) was INR 236.63 billion. In 2010-11 the paid-up capital (private total) for the general insurance sector was INR 39.56 billion while the paid-up capital (industry total) was INR 67.06 billion. In 2010-11 the operating costs of privately owned life insurers was INR 159.62 billion while the total life insurance industry expense was INR 329.42 billion. In the same time the privately owned general insurers spent INR 39.32 billion from an industry total of INR 106.20 billion. In 2010-11 the privately held life insurers paid benefits and claims worth INR 312.51 billion while the industry aggregate was INR 1425.24 billion. At the same time the private general insurers paid benefits and claims worth INR 99.37 billion while the industry total was INR 295.36 billion.India insurance industry compositionAs per IRDA, the composition of the Indian insurance industry by March 2011 could bementioned as such:General insuranceCategory Number of organizationspublicly owned general insurers 4private insurers completely owned by an Indian business 1organizationspecialized general insurers 2private insurers JV with international insurers 14
  5. 5. Specialized health insurers 3Life insuranceCategory Number of organizationspublicly owned life insurers 1private insurers JV with international insurers 21private insurers completely owned by an Indian business 2organizationIndia insurance product compositionFollowing is an approximate representation of the product composition of Indias insuranceindustry:General insuranceProduct PercentageEngineering 4Motor OD 27.63Motor TP 14.94Health 22.58Aviation 1.08Liability 2.40Personal accident 2.63Fire 10.91Marine 5.97Others 7.37
  6. 6. Life insuranceProduct PercentageNon linked life individual 21.70Non linked gen annuity group 4.33Non linked gen annuity individual 0.85Non linked pension group 4.22Non linked pension individual 0.25Non linked health 0.09Linked insurance 55.01Riders 0.01Linked life group 13.54India insurance industry major problemsFollowing are some of the major problems plaguing the insurance industry in India: Focus on actuarial pricing Regulatory misunderstanding Investment regulations Solvency regulation Claims settlement procedures Data clarity Distribution channel issuesIndia insurance industry contribution to GDPExperts are of the opinion that around the world the insurance industry contributes around 4.5%to national GDPs. They have questioned the logicality of opinions that in India the contributioncan be higher saying that there are other important sectors like education, defense, and healththat cannot be undermined in this context.They have ruled out possibilities that the sector can contribute 10% to Indias GDP. TheChairman of IRDA, Hari Narayan has ruled out any such possibility asking if Indias GDPgrowth will be that much in the next few years ahead.
  7. 7. The IRDA states that in India land and gold are more preferred as forms of investment. Narayanfeels that if the insurance sector is to do well in terms of contribution to GDP then more peopleshould be convinced about its capability to provide good ROI (return on investment).Why are more people taking insurance policies?One of the major reasons for an increasing number of people availing insurance policies in Indiais the growing level of awareness. People nowadays value their lives, their health, and theirfamilies even more than before given the tough economic circumstances and so want to makesure that everything is fine even if they are not there.Yet another reason for the growing popularity of insurance policies is the benefit of taxexemption that is provided to family oriented and individual plans. Majority of the privateinsurers also provide lucrative returns and are now being availed by a section of the Indiansociety with greater disposable earnings.There is an aspect of psychological comfort attached to the insurance policies as well - wheneveran insurance is availed the policyholder can be more or less assured of a safe future for thatparticular part of his or her life.Top Insurance PoliciesFollowing are the featured insurance policies of various insurers in India:Company ProductLIC JeevanVaibhavICICI Prudential ICICI PruiCareReliance General Insurance Reliance Private Car Insurance Reliance Travel Care for StudentsBajaj Allianz CashRich Family Floater Health Guard Plan Car InsuranceHDFC Life Click2Protect HDFC LIFE SMART WOMAN PLANTata AIG Insurance Tata AIG Motor Insurance Tata AIG Travel Insurance Tata AIG Wellsurance FamilyKotak Life Insurance Kotak Assured Protection Plan Kotak Assured Income Plan
  8. 8. Kotak Assured Investment PlanAviva Aviva Health Secure Aviva i-LifeFuture Generali Future Generali Smart Life Future Generali Health SurakshaMetLife Retirement Plans Met Monthly Income PlanStar Union Dai-ichi Life Insurance SurakshaKavachShriram Life Insurance ShriLife Wealth Plus Money Back ShriramUjjwal Life SPBharti AXA Bharti AXA Life eProtectAegonReligare iTermIDBI Federal Termsurance Wealthsurance Childsurance Lifesurance Healthsurance Incomesurance Loansurance Homesurance Bondsurance MicrosuranceCanara HSBC OBC Life Insurance Dream Smart Plan Grow Smart Plan Future Smart Plan Secure Smart Plan Smart Sanchay PlanDLF Pramerica Life Insurance Income Rakshak DLF Pramerica Family Income DLF Pramerica Family First DLF Pramerica U-ProtectIndiaFirst Life Insurance IndiaFirstMahaJeevan PlanSahara Life Insurance Sahara Vatsalya-JeevanBima
  9. 9. Apollo Munich Health Insurance OptimaRESTOREStar Health Insurance Family Health Optima Star Unique Health Senior Citizen Health InsuranceIFFCO TOKIO General Insurance Auto Protector Policy Individual Medishield PolicyNew India Assurance Householders Policy Motor Insurance Policy Overseas Mediclaim Policy Fire & Machinery Policy Industrial All Risk Policy Shopkeepers PolicyOriental Insurance Orientals Motor Insurance Policy Happy Family Floater SchemeNational Insurance Car InsuranceCholamandalam MS General Chola MS Private CarInsurance Chola MS Student Travel Chola MS Family HealthlineHDFC Ergo Travel Insurance HDFC Ergo Health SurakshaUniversal Sompo General Householders Insurance PolicyInsurance Shopkeepers Insurance Policy Motor Insurance Policy Individual Health BillsL&T Insurance my:healthMedisure Prime Insurance