Privatization in Insurance
Types of Insurance
Growing up of Insurance Sector
Major driving factord
Top players of Insurance sector
Insurance and Salary
Challenges and Opportunity
Insurance is a co-operative device of distributing losses,
falling on an individual or family over a large number of
persons, each bearing a nominal expenditure & feeling
secured against heavy loss.
Insurance business has emerged as one of the prominent
financial services during recent times, particularly in
developing countries where it could not grow before
globalization. But it is very difficult to trace
Insurance = Protection against Risk
Insurance has always been a politically sensitive
subject in India.
Within less than 10 years of independence, the Indian
government nationalized private insurance
in 1956 to bring this vital sector under government
to raise much needed development funds.
Since then, state-owned insurance companies have
grown into monoliths, lumbering and often inefficient
but the only alternative. They have been criticized for
their huge bureaucracies, but still have millions of
policy holders as there is no alternative.
Privatization in insurance
The Narasimha Rao government (1991-96) which unleashed liberal changes
in India's rigid economic structure could not handle this political hot potato.
Ironically, it is the coalition government in power today which has declared
its intention of opening up insurance to the private sector. Ironical because
this government is at the mercy of support from the left groups which have
been the most vociferous opponents of any such move.
All segments of the financial sector had been opened to private players with
better product, services & social objective
International players are eyeing the vast
potential of the Indian market and are
already making plans to come in.
Types of Insurance
Privatization has brought in lot of surprises for insurance
sector. In India, insurance sector is at the booming stage as
only 40% of the population is insured. Private organizations
are striving hard and hard to develop the sector.
Government is also supporting the insurance sector to
increase the Gross Domestic Product ratio from the sector
which is now about 1.4% only.
Grown up insurance sector
The insurance industry has grown by 83 per cent since the
opening up of the sector.
- C S Rao, chairman (IRDA)
• Insurance premium income has risen to Rs 82,415 crore in 2003-04, against
45,000 crore in 2000-01.
• premium income in the life insurance sector to rise further by 15-16 per cent
and non-life insurance premium by 14 per cent in 2005-06.
• The health insurance sector is expected to grow by 10-15 per cent.
• foreign direct investment is increased to 49 per cent from the current 26 per
cent, the industry can expect greater entry of players.
Indian insurance sector is likely to register unprecedented
growth of 200% and attain a size of Rs. 2000 billion by 2009-
10, in which a private sector insurance business will achieve a
growth rate of 140% as a result of aggressive marketing
technique being adopted by them against 35-40% growth rate
of state owned insurance companies.
On account of intense marketing strategies adopted by private
insurance players, the market share of state owned insurance
companies like GIC, LIC and others have come down to 70%
in last 4-5 years from over 97%.
The private insurance players despite the sector is still
regulated has been offering rate of return (RoR) to its policy
holders which is estimated at about 35% as against 20% of
domestic insurance companies.
LIC and GIC have limited number of policies to offer to their
subscribers while in case of private insurance companies, their
policy numbers are many more and the premium amount as
well as the maturity period is much competitive as against
those of government insurance companies.
The Chamber has projected that in rural markets, the share of
private insurance players would increase substantially as these
have been able to generate a faith among their rural
Growth of top 10 private insurance
companies of India:
ICICI Prudential Life Insurance Co Ltd is the biggest private life
insurance company in India. It experienced growth of 58%.
Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52%
and its market share went up to 6.98% in 2007-08 form 5.66% in
SBI Life Insurance Co Ltd in terms of new number of policies
sold, the company ranked 6th in 2007-08. its growth is 87% over
Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76
crore and its market share went up to 2.96% from 1.23% a year
HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680
crore in FY2007-08, registering a year-on-year growth of 64%.
Birla Sun Life Insurance Co Ltd market share of the company
increased from 1.22% to 2.11% in 2007-08. The company moved
to the 7th position in 2007-08.
Max New York Life Insurance Co Ltd has reported growth of 73%
in 2007-08. Total new business generated was Rs 641.83 crore as
against Rs 387.51 crore.
Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08,
the company reported growth of 80%, moving from the 11th
position to 9th. It captured a market share of 1.19% in 2007-08.
Aviva Life Insurance Company India Ltd ranking dropped to 10th
in 2007-08 from 9th last year. It has presence in more than 3,000
locations across India via 221 branches and close to 40
Major Driving Factor
Growing Demand from Semi-Urban Population.
Rising demand for retirement provision in the ageing
The opening of the pension sector and the establishment
of the new pension regulator.
Rising per capita incomes among the strong middle class,
and spreading affluence.
Public private partnerships infrastructure development.
Growing consumer class and increase in spending &
Top Players of Insurance Sector
Following are the top players of the insurance
sector offering most competitive packages to their
Life Insurance Corporation
New York Life
Insurance and Salary
Due to privatization in
insurance sector growth
options have been changed.
From basic salary with
compensation systems have
been grown to increased
salaries, incentives, perks,
The average salary
increase for the year 2006
Insurance due to
process of privatization will
lead to `green field' area of
The banks and capital markets
were integrated with
insurance, which, in turn, was
vital to sustain and grow the
Trade and finance had no
geographical limits and,
hence, the need to align with
the international scenario in
Risk coverage & security.
Entry of privatization
New product & technology
CRM policy increases sales
Modern marketing approach
Challenges & Opportunities
Inflow of Funds
Ineffective distribution and marketing strategies
adopted by LIC
Limited advertising initiatives