Insurance Sector


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This presentation gives an brief introduction about the growth of insurance sector in India. It also give description about the major players existing in the finance market of insurance.

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Insurance Sector

  1. 1. <ul><li>UdaysinghMeena
  2. 2. Udaybharathareddy
  3. 3. uditKhandelwal
  4. 4. Udit Kumar
  5. 5. Uditnarayansingh</li></ul>1<br />Insurance Industry <br />
  6. 6. Insurance<br />2<br />We face a lot of risks in our daily lives. Some of these lead to financial losses. Insurance is a way of protecting against these financial losses. For a payment (premium), an insurance company will take the responsibility of compensating your financial losses <br />
  7. 7. Introduction and Overview<br />3<br />Insurance Sector<br />
  8. 8. Insurance Introduction<br />4<br />What is “insurance”?<br />Why do we need it?<br />How has the insurance industry and the law of insurance evolved?<br />
  9. 9. What is “Insurance”?<br />5<br />Commercial mechanism for transferring risk and spreading loss<br />Economic Concept of Insurance: <br /> 1. Insurer offers policy to cover specified risks<br /> 2. Insurer collects policy premiums from customers<br /> 3. Insurer invests premiums<br /> 4. Insurer pays money to insured customers in the event of losses covered by policy.<br />
  10. 10. What is “Insurance”<br />6<br />Theoretically, everybody comes out ahead (so long as losses do not exceed returns of invested premiums; and all parties honor their contractual obligations).<br />Theoretically, the insurance industry bridges private interests and public good.<br />
  11. 11. Why do we need insurance?<br />7<br />
  12. 12. Why do we need insurance?<br />8<br />
  13. 13. Insurance Law<br />9<br />Sources of Insurance Obligations<br />Policy/Insurance Agreement<br />Common Law (contract theories; tort theories)<br />Statutes<br />Regulations<br />The law of insurance is multi-layered. The prudent researcher will consider each of the layers when approaching a research problem.<br />
  14. 14. Historical context provides insight and <br />perspective into today’s insurance industry<br />10<br />The History of Insurance<br />
  15. 15. The History of Insurance<br />11<br />3000 B.C.E. Mesopotamian merchants assess “risk surcharges” in transactions with caravan operators and traders to protect their capital.<br /> 1750 B.C.E. Code of Hammurabi formalizes concepts of “bottomry” and “respondentia” (protection against loss of hull and cargo, respectively) – the underpinnings of maritime insurance.<br />
  16. 16. History of Insurance<br />12<br />1574 Queen Elizabeth I grants to Richard Candler the right to establish an insurance office in the Royal Exchange Building for the preparation and registration of policies.<br />1601 Britain’s Parliament enacts the Assurances Act of 1601 creating an assurance commission for resolving policy disputes. 43 Eliz. 1 c. 12.<br />
  17. 17. History of Insurance<br />13<br />1666 Great Fire of London. Shortly thereafter, Nicholas Brabon opens the first fire insurance office in England. It eventually becomes The Phoenix Assurance Company. Over the next two decades, more fire insurance companies start up.<br />
  18. 18. History of Insurance<br />1690s Fire insurance companies form the first professional fire brigades.<br />14<br />
  19. 19. Lloyd’s of London<br />Late 1600s Edward Lloyd’s Coffee House. Seafarers, merchants and insurers meet for insurance business and coffee.<br />
  20. 20. Lloyd’s of London<br />1688 Edward Lloyd starts a shipping newspaper and reads out shipping news from a pulpit in his coffee house; attracts even more shipowners and insurers<br />16<br />
  21. 21. History of Insurance<br />1751 Benjamin Franklin and other capitalists start the Philadelphia Contributorship, the first successful fire insurance company in America.<br />
  22. 22. History of Insurance<br />18<br />Mid-18th Century Many insurance companies are more likely than banks to have substantial cash reserves. Insurance companies function as lending institutions.<br />Mid-18th Century Insurance underwriting is prosperous industry in America. Lloyd’s of London also draws a significant share of Colonial America’s underwriting business (capitalization).<br />
  23. 23. Rise of Risk Management<br />1906 S.F. Earthquake<br />Lloyd’s underwriter, Cuthbert Heath, orders agents to “pay all claims in full regardless of policy terms”. Lloyd’s pays $50 Million in claims.<br />
  24. 24. Rise of Risk Management<br />Public confidence in insurance industry soars; industry booms; risk management innovations; new types of insurance emerge.<br />20<br />
  25. 25. Lloyd’s of London<br />Today, Lloyd’s of London is an insurance icon<br />Not an insurance company, but an exclusive insurance market<br />
  26. 26. Pre to Post Liberalization<br />22<br />Changing Customer Expectations in Insurance Sector<br />
  27. 27. Comparisons of factors influencing Insurance market <br />23<br />
  28. 28. Pre Purchase Process : LIFE<br />24<br />
  29. 29. Awareness of New Products- LIFE<br />25<br /><ul><li>Though most SEC A & some SEC B customers have generally heard of change in product offering after liberalization but unable to provide any details.
  30. 30. Only some customers have mentioned new products such as
  31. 31. Products with multiple riders-medical, accident, waiver of premium rider
  32. 32. Pension/retirement benefit plans
  33. 33. Flexi premium plans – product with single premium and short time premium option
  34. 34. Some customers exposed to new products perceive new products similar to old ones and do not offer any additional advantage.</li></ul>“ New policies are like old wine in new bottle”<br />
  35. 35. Purchase Process : LIFE<br />26<br />
  36. 36. Post Purchase Process : LIFE<br />27<br />
  37. 37. Changing Customer Expectations - LIFE<br />28<br />Role of IRDA<br /><ul><li>Educate public on regulatory safeguards, investment guidelines and plough back of profits (several people had expressed concern about security of their money, credibility of private insurance company’s investment of funds in foreign markets and repatriation of profits to foreign countries)
  38. 38. Inform public on Social and Rural obligations of private players (several people believed that only LIC was responsible for insuring the poor)</li></li></ul><li> Changing Trends in Savings Pattern<br />29<br />* When the respondents were asked where they would invest their extra income, if any, the top responses were recorded as above<br />
  39. 39. Other Non-life Policies (Health, Property, Accident)<br />30<br /><ul><li>Awareness of Tata AIG, ICICI Lombard, Cholamandalam, Bajaj Allianz and Royal Sundaram among private companies
  40. 40. No respondent interviewed had taken insurance from any private company
  41. 41. Respondents did not feel the need to take a separate accident insurance policy, as most of them perceived it to be covered under life insurance
  42. 42. Companies regular in sending notice for renewal of policy (pre and post liberalisation)
  43. 43. Instances of paying premium by credit card observed (post liberalisation)
  44. 44. Customers satisfied with both company and agent (pre and post liberalisation)</li></li></ul><li>31<br /> Claim Settlement Process – NON-LIFE<br />Vehicle Insurance<br />Accident Claim<br /><ul><li>Surveyor comes unannounced and after several days, customer unable to meet him and explain his case face to face
  45. 45. Company approves claim for amount much less than repair estimate submitted
  46. 46. Agent often does not take responsibility to facilitate process of claim settlement
  47. 47. Owner has to pay repair bill and only then claim payment from company
  48. 48. Claim settlement takes from 1 to 3 months</li></ul>Theft or Total Loss<br /><ul><li>Claim settlement process lengthy and cumbersome – FIR, RC, road tax and other documents to be submitted.
  49. 49. In theft cases, company awaits non-recovery closure of case by police before settling claim. For this reason claim settlement takes months. General perception is that amount paid is lower than market value</li></li></ul><li>32<br /> Claim Settlement Process – NON-LIFE<br />Health Insurance (only one case encountered)<br /><ul><li>Hospital bill has to be paid by insured and this causes heavy financial burden
  50. 50. Claim process involves much paper work - first customer has to send request to company for sending claim form, then he puts together all bills in original, doctor’s medical prescriptions and hospital discharge certificate giving history of illness and treatment and sends these documents along with claim form
  51. 51. Several queries from company on pre-existence of disease, settlement process cumbersome and time consuming</li></ul> No claim settlement encountered in Property and Accident Insurance<br />
  52. 52. 33<br /> Changing Customer Expectations – NON-LIFE<br />Motor Vehicle Insurance<br /><ul><li>Renewal notice should be received regularly from company/agent
  53. 53. Collection centres should be set up for depositing renewal cheque
  54. 54. Premium payment at petrol pumps
  55. 55. Accident/Total Loss claims should be settled for full estimated value
  56. 56. Claim should be settled in 30 days
  57. 57. Inclusion / Exclusion clauses should be explained at the time of issuing </li></ul> policy to avoid problems at time of claim settlement<br />Health Insurance<br /><ul><li> Non hospitalisation cases should also be entitled for claim settlement
  58. 58. Pre-existing diseases should be detected through rigorous medical check-up at policy issue stage, company should not reject claim for this reason later
  59. 59. Direct payment by company to hospital through TPA arrangement
  60. 60. Issue Medi-Card so that patient can be admitted in hospital without having </li></ul> to deposit heavy admission fee<br />
  61. 61. 34<br /> Non Policy Holders (Life)<br />Reasons for not taking Insurance<br /><ul><li>Low liquidity in insurance
  62. 62. Low returns in insurance compared to other investments
  63. 63. No assured regular source of income of respondent
  64. 64. Lack of knowledge about insurance process & how it works</li></ul>Future intention & inclination towards taking Insurance<br /><ul><li>Among non-policy holders, SEC A generally not interested in insurance, prefer other Investments for better returns (bank deposits)
  65. 65. SEC B & C undecided as yet, may consider insurance in future for family security reasons, only from LIC ( likely to be money back)</li></li></ul><li>General Insurance<br />35<br />Insurance other than ‘Life Insurance’ falls under the category of General Insurance. General Insurance comprises of insurance of property against fire, burglary etc <br />
  66. 66. General Insurance<br />36<br /> The non-life insurance sector is on an upswing! The non-life insurance industry in India has grown by over 16 % p.a. over the last 5 years. There is a vast business potential that lies untapped, as more and more cities enter the development phase….<br />
  67. 67. Indian insurance industry<br />Major players of general insurance market<br />37<br />Conduct<br />
  68. 68. Big Companies of General Insurance <br />38<br />Bajaj Allianz<br />ICICI Lombard<br />Tata Aig<br />National insurance<br />New India Assurance<br />Oriental insurance<br />
  69. 69. Bajaj Allianz<br />39<br />Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Auto Limited and Allianz SE. Both enjoy a reputation of expertise, stability and strength<br />Bajaj Allianz today has a network presence in over 200 towns spread across the length and breadth of the country. From Surat to Siliguri and Jammu to Thiruvananthapuram, all the offices are interconnected with the Head Office at Pune. <br />
  70. 70. Bajaj Allianz<br />40<br />Dealing in these sectors:-<br />Travel Insurance<br />Health Insurance<br />Corporate Insurance<br />Motor Insurance<br />
  71. 71. ICICI - Lombard<br />41<br />ICICI Lombard General Insurance Company Limited is a 74:26 joint venture between ICICI Bank Limited and the Canada based $ 26 billion Fairfax Financial Holdings Limited. ICICI Bank is India&apos;s second largest bank <br />Lombard Canada Ltd, a group company of Fairfax Financial Holdings Limited, is one of Canada&apos;s oldest property and casualty insurers. ICICI Lombard General Insurance Company received regulatory approvals to commence general insurance business in August 2001.<br />
  72. 72. ICICI - Lombard<br />42<br />Dealing in three sector:-<br />Health Insurance<br />Motor Insurance<br />Home Insurance<br />
  73. 73. Health insurance<br />43<br />A health insurance policy will provide a cover to you and your family against sudden medical contingency or bodily injury.<br />
  74. 74. Motor Insurance <br />44<br />Motor insurance protects you and your vehicle against every comprehensible risk related to your vehicle – theft or damage to it, death of the driver and passengers in an accident, and damage caused by your vehicle to another person or property. <br />
  75. 75. Home insurance<br />45<br />It is imperative that you secure your home from natural and man-made catastrophes. <br />The maximum coverage is up to Rs. 1,00,000 for up to 6 months. The cover is available only if you are insuring the structure of your home. <br />
  76. 76. TATA-AIG<br />46<br />Tata AIG General Insurance Company Ltd. is a joint venture company, between Tata Sons  and American International Group <br />Tata AIG General Insurance Company, which started its operations in India on January 22, 2001 offers the complete range of general insurance for automobile, home, personal accident, travel, energy, marine, property and casualty, as well as several specialized financial lines.<br />
  77. 77. TATA - AIG<br />47<br />Dealing in three sector:-<br />Individual <br />Small business <br />Corporate<br />
  78. 78. Individual<br />48<br />“Every stage of life, you are open to immense risk and immense opportunity and Tata AIG has the ideal bouquet of insurance products for each of those risks and opportunities.”<br />
  79. 79. Small business<br />49<br />Tata AIG offers a comprehensive risk solution through various Multiline Package Policies:-<br />Society Policy<br />Office Policy<br />Manufacturing Unit – Package Policy<br />
  80. 80. Corporate<br />50<br /> &quot;From blue chips to local marketers, whatever the size of your business, Tata AIG has the insurance you are looking for.”<br />Accident & Health<br />Travel<br />Energy<br />Property<br />Marine<br />
  81. 81. National Insurance Company Limited<br />51<br />National InsuranceCompany Limited was incorporated in 1906 with its Registered office in Kolkata. Consequent to passing of the General Insurance Business Nationalisation Act in 1972, 21 Foreign and 11 Indian Companies were amalgamated with it and National became a subsidiary of General Insurance Corporation of India (GIC) which is fully owned by the Government of India<br />
  82. 82. National Insurance Company Limited<br />52<br />It deals in these policies:-<br />Personal line Insurance<br />Rural Line Insurance <br />Industrial Line Insurance <br />Commercial Line Insurance <br />
  83. 83. Contribution of LifeInsurance Sector in theindian Economy<br />53<br />Performance<br />
  84. 84. STRUCTURE OF INSURANCE INDUSTRY<br />54<br />Historical Perspective<br />(i) Prior to 1956 242 companies operating<br />(ii) 1956 – 2001 Nationalisation – LIC Monopoly player Government control<br />(iii) 2001 -- Opened up sector<br />
  85. 85. Present Structure of Insurance Industry<br />55<br />• (i) (a) LIC – Fully owned by Government<br /> (b) Postal Life Insurance<br />
  86. 86. Present Structure of Insurance Industry (contd...)<br />56<br />• (ii) Private players -<br />1. Bajaj Allianz Life Insurance Co. Ltd.<br />2. Birla Sun Life Insurance Co. Ltd. (BSLI)<br />3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE)<br />4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)<br />5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA)<br />6. Max New York Life Insurance Co. Ltd. (MNYL)<br />
  87. 87. Private players –(contd…)<br />57<br />7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE)<br />8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd.<br />9. SBI Life Insurance Co. Ltd. (SBI LIFE)<br />10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)<br />11. AMP Sanmar Assurance Co. Ltd. (AMP SANMAR)<br />12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA)<br />13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)<br />14. ShriramSunlam<br />
  88. 88. Present Structure of Insurance Industry (contd...)<br />58<br />(iii) Other likely players – <br />PNB Life Insurance<br />Reliance Life Insurance<br />AxaBharti Enterprises<br />
  89. 89. CONTRIBUTION TO INDIAN ECONOMY<br />59<br />Life Insurance is the only sector which garners long term savings<br />Spread of financial services in rural areas and amongst socially less privileged<br />Long term funds for infrastructure<br />Strong positive correlation between development of capital markets and insurance /pension sector<br />Employment generation<br />
  90. 90. Aggregation of Long Term Savings<br />60<br />(i) Total Assets of Life Insurance Companies<br />2002 – 2003 2,80,450 cr<br />2003 – 2004 3,52,608 cr<br />2004 – 2005 4,23,000 cr<br />(ii) Total Premium generated<br />2002 – 2003 57,708 cr<br />2003 – 2004 66,278 cr<br />2004 – 2005 79,000 cr<br />2005 – 2006 94,000 cr<br />2006 – 2007 1,12,000 cr<br />2007 – 2008 1,33,000 cr<br />
  91. 91. Aggregation of Long Term Savings<br />61<br />(iii) Industry is growing @ 19 p.a.<br />(iv) Life Insurance funds account for 15% of household savings.<br />(v) The industry has the potential to increase the share to 20%.<br />
  92. 92. Spread of financial services in rural areas and amongst socially underprivileged<br />62<br />• IRDA Regulations provide certain minimum business to be done<br /> (i) in rural areas<br /> (ii) in the socially weaker sections<br />• Life Insurance offices are spread over nearly 1400 centres.<br />• Presence of representative in every tehsil – deeper penetration in rural areas.<br />
  93. 93. Spread of financial services in rural areas and amongst socially underprivileged<br />63<br />• Insurance agents numbering over 6.24 lakhs in rural areas.<br />• Policies sold in rural areas (2004-05) – <br />No. of policies - 55 lakhs<br /> Sum assured - 46,000 crores<br />• Social security - No. of lives covered <br />2003-0417.4 lakhs<br /> 2004-05 42.1 lakhs<br />
  94. 94. Long term funds for infrastructure<br />64<br />• For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential.<br />• Estimates of funds required for development of infrastructure vary widely.<br />• An investment of 6,19,600 crore is anticipated in the next 5 years (Source : SSKI India)<br />• Tenure of funding required for infrastructure normally ranges from 10 to 20 years.<br />• Major portion of these funds are routed through debt/private equity participation.<br />
  95. 95. Long term funds for infrastructure(contd...)<br />65<br />• Part funding through Central Government/State Government budgetary allocations. Insurance companies invest in Central/State Government approved securities which ultimately also used for infrastructure projects.<br />• As per IRDA norms, the pattern of investment of life insurance companies’ funds are<br />(i) In Central Government, State Government and other approved securities – not less than 50%<br />(ii) Infrastructure – 15%<br />
  96. 96. Long term funds for infrastructure(contd...)<br />66<br />• Investment in the infrastructure projects is a natural fit for life insurance companies who have long duration funds. Average Term of Life Policies is 23 years.<br />• Has investments of over Rs.40,000 cr in infrastructure.<br />• It is expected life insurance sector be able to generate approximately Rs.15,000 cr for infrastructure investment in 2006-2007 with amount increasing every year.<br />
  97. 97. Development of Capital Markets/Economic Growth<br />67<br />•Industry also contributes in economic development through investments in capital market. Present level of investments is over Rs. 40,000 crore. (Mark to Market basis around 80,000 crores).<br />•Annual Investment of around 9000 crores in capital markets.<br />•Contribution to Five Year Plans <br /> 9th Plan 2,30,900 crores<br /> Last Two Years 1,70,900 crores<br />•<br />
  98. 98. Development of Capital Markets/Economic Growth<br />68<br />Helps inculcate a sense of security by protecting earning of people in case of untimely death.<br />Benefits to Policy Holders<br /> 2002 – 2003 20,800 cr<br /> 2003 – 2004 24,200 cr<br /> 2004 – 2005 28,700 cr<br />
  99. 99. EMPLOYMENT GENERATION<br />69<br />• Life insurance industry provides increased employment opportunities.<br />• Employees in insurance sector as on 31st March, 2005 is around 2 lakhs.<br />• Many agents depend on insurance for their livelihood – No. of agents on 31st March 2004 – 15.59 lakhs<br />•Brokers, corporate agents, training establishments provide extra employment opportunities.<br />• Many of these openings are in rural sectors<br />
  100. 100. SPECIAL FEATURES<br />70<br />Capital Intensive Industry<br /> 2002 – 03 2003 – 04<br />(i) Total Income 1631 cr 4053 cr<br />(ii) Capital employed 2219 cr 3239 cr<br />(Data excludes LIC)<br />
  101. 101. GROWTH POTENTIAL<br />71<br />At present insurance penetration in India is quite low – 2.26% of GDP.<br />In Korea the penetration stands at 6.77%, <br />In Singapore – 6.38%.<br />
  102. 102. PHASE OF TRANSITION<br />72<br />• Life Insurance industry is under the phase of infancy after 50 years of monopoly<br />• Competition from within and other sectors of financial market<br />• Needs environmental support till it reaches a comfort zone<br />
  103. 103. Ficci Conference<br />“Indian Insurance Industry: New Avenues For Growth”<br />New Delhi, 19 October 2004 <br />73<br />Indian Insurance Sector<br />
  104. 104. INDIA INSURANCE INDUSTRY STATUS<br />74<br />India Has Come A Long Way In The Last Four Years<br />2000<br />2000<br />4<br />1<br />CAGR: 23%<br />CAGR: 16%<br />27.5<br />9.4<br />~1.2%<br />~0.4%<br />~280<br />~100<br />Several new products and channels<br />Life<br />Non-Life<br />2004<br />2004<br />14<br />14(1)<br />Number of players<br />Premium income <br />(Rs &apos;000 Cr)<br />63<br />17<br />Insurance premium<br />as % of GDP<br />2.3%<br />0.62%<br />Insurance premium<br />per capita (Rs)<br />590<br />160<br />(1) Includes 4 nationalised companies<br />Source: IRDA, Swiss Re<br />
  105. 105. 75<br />13<br />10<br />5<br />0<br />-5<br />-10<br />-13<br />INDIA&apos;S COMPARATIVE ECONOMIC POSITION IS IMPROVINGRelative to Developed and Developing Economies<br />Twelfth largest economy in the world (2002)<br />Real GDP (USD Bn)<br />High, steady growth among different economies<br />GDP CAGR from 1993 to 2002<br />% GDP growth<br />10290<br />4280<br />India&apos;s Average GDP growth (93-02)<br />Max<br />Average<br />Min<br />China<br />HK<br />Mexico<br />UK<br />USA<br /> India<br />(83-02)<br />S Korea<br />Taiwan<br />Thailand<br />Malaysia<br />Brazil<br />Japan<br /> India<br />(93-02)<br />Stable and low inflation rates<br />Average inflation rate from 1999-2002<br />Stable BoP position (2002)<br />Current account surplus as a % of GDP<br />-0.2%<br />Russia<br />Poland<br />Taiwan<br />China<br />Mexico<br />Indonesia<br />Philippines<br />India &apos;02<br />Note: Real GDP estimates<br />Source: EIU, World Bank, Analyst reports, Literature review<br />
  106. 106. ... INSURANCE IS POISED FOR GROWTH<br />Example: Life insurance penetration increases with affluence<br />Three avenues for growth<br />Insurance premium<br /> as % GDP<br />Threshold for insurance pick-up<br />Addition of new customers<br />Existing customers buy more<br />Extension to new geographies<br />1<br />2<br />INDIA<br />3<br />1,000<br />100<br />10,000<br />100,000<br />GDP per capita in USD (log scale)<br />PPP adjusted GDP per capita higher by a factor of ~5-6; lower income categories not shown<br />Source: Swiss Re; NCAER <br />76<br />
  107. 107. 77<br />OVERALL HOWEVER INSURANCE STILL UNDER PENETRATED ...<br />... But still remains # 19 in insurance terms...<br />... with some product categories nascent<br /><ul><li>Pension scheme
  108. 108. Annuity scheme
  109. 109. Health insurance
  110. 110. Disability and critical illness insurance
  111. 111. Professional liability
  112. 112. Crop insurance
  113. 113. Income protection
  114. 114. Credit insurance</li></ul>Premium income ($ Bn)<br />1<br />11<br />19<br />
  115. 115. AS A FULLER PRODUCT LIST COME ON OFFER LATENT DEMAND WILL GET RELEASED<br />78<br />Pre 2000<br />Today<br />Tomorrow<br />Endowment and money back policy - ~98% to total premium income<br />Products with guaranteed returns, limited, if any term<br />Products viewed as necessary evil for tax-breaks<br />Personal non-life insurance products (except motor) virtually nil<br />Corporates buying Non life<br />Variety of products with riders covering disability,critical illness, accidents etc.<br />Increasing acceptance of variable returns and pure term products<br />Unit linked products<br />New products emerging to cater to personal needs:<br /><ul><li>Health
  116. 116. Travel (overseas/domestic)
  117. 117. Household articles
  118. 118. Building (structure/content)
  119. 119. Mobile insurance
  120. 120. Credit insurance
  121. 121. ...</li></ul>Pension scheme<br />Annuity scheme<br />Income protection<br />Increased term<br />Home building – structure and contents (penetration in India ~1% v/s ~70% in UK)<br />Health insurance (penetration in India 1-2% v/s 10% in UK)<br />Corporate and professional liability<br />Life<br />Non<br />Life<br />
  122. 122. CUSTOMER AWARENESS IS KEY<br />79<br />Low penetration of personal non life products...<br />... due to low awareness for several <br />types of insurance<br />% customers having bought<br />insurance in metros<br />% customers with unaided awareness of different types of insurance in metros<br />Source: Survey of about 306 customers across Delhi, Mumbai and Kanpur conducted in 2002 <br />
  123. 123. Threat of new entrants<br />Power of suppliers<br />power of buyers<br />Availability of substitutes<br />Competitive rivalry<br />Porter&apos;s 5 Forces Analysis<br />
  124. 124. 1-Threat of New Entrants. <br /><ul><li>. The average entrepreneur can't come along and start a large insurance company. The threat of new entrants lies within the insurance industry itself. Some companies have carved out niche areas in which they underwrite insurance. These insurance companies are fearful of being squeezed out by the big players.
  125. 125. Another threat for many insurance companies is other financial services companies entering the market. What would it take for a bank or investment bank to start offering insurance products? In some countries, only regulations that prevent banks and other financial firms from entering the industry. If those barriers were ever broken down, like they were in the U.S. with the Gramm-Leach-Bliley Act of 1999, you can be sure that the floodgates will open.</li></li></ul><li>2-Power of Suppliers.<br />The suppliers of capital might not pose a big threat, but the threat of suppliers luring away human capital does. If a talented insurance underwriter is working for a smaller insurance company (or one in a niche industry), there is the chance that person will be enticed away by larger companies looking to move into a particular market.<br />
  126. 126. 3-Power of Buyers<br />The individual doesn&apos;t pose much of a threat to the insurance industry. Large corporate clients have a lot more bargaining power with insurance companies. Large corporate clients like airlines and pharmaceutical companies pay millions of dollars a year in premiums. Insurance companies try extremely hard to get high-margin corporate clients<br />
  127. 127. 4-Availability of Substitutes<br />This one is pretty straight forward, for there are plenty of substitutes in the insurance industry. Most large insurance companies offer similar suites of services. Whether it is auto, home, commercial, health or life insurance, chances are there are competitors that can offer similar services. In some areas of insurance, however, the availability of substitutes are few and far between. Companies focusing on niche areas usually have a competitive advantage, but this advantage depends entirely on the size of the niche and on whether there are any barriers preventing other firms from entering.<br />
  128. 128. 5-Competitive Rivalry. <br /><ul><li> The insurance industry is becoming highly competitive. The difference between one insurance company and another is usually not that great. As a result, insurance has become more like a commodity - an area in which the insurance company with the low cost structure, greater efficiency and better customer service will beat out competitors. Insurance companies also use higher investment returns and a variety of insurance investment products to try to lure in customers. In the long run, we're likely to see more consolidation in the insurance industry. Larger companies prefer to take over or merge with other companies rather than spend the money to market and advertise to people. </li></li></ul><li>86<br />Thank You<br />