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.

2. Udaybharathareddy

3. uditKhandelwal

4. Udit Kumar

5. Uditnarayansingh1 Insurance Industry

6. Insurance 2 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

7. Introduction and Overview 3 Insurance Sector

8. Insurance Introduction 4 What is “insurance”? Why do we need it? How has the insurance industry and the law of insurance evolved?

9. What is “Insurance”? 5 Commercial mechanism for transferring risk and spreading loss Economic Concept of Insurance: 1. Insurer offers policy to cover specified risks 2. Insurer collects policy premiums from customers 3. Insurer invests premiums 4. Insurer pays money to insured customers in the event of losses covered by policy.

10. What is “Insurance” 6 Theoretically, everybody comes out ahead (so long as losses do not exceed returns of invested premiums; and all parties honor their contractual obligations). Theoretically, the insurance industry bridges private interests and public good.

11. Why do we need insurance? 7

12. Why do we need insurance? 8

13. Insurance Law 9 Sources of Insurance Obligations Policy/Insurance Agreement Common Law (contract theories; tort theories) Statutes Regulations The law of insurance is multi-layered. The prudent researcher will consider each of the layers when approaching a research problem.

14. Historical context provides insight and perspective into today’s insurance industry 10 The History of Insurance

15. The History of Insurance 11 3000 B.C.E. Mesopotamian merchants assess “risk surcharges” in transactions with caravan operators and traders to protect their capital. 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.

16. History of Insurance 12 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. 1601 Britain’s Parliament enacts the Assurances Act of 1601 creating an assurance commission for resolving policy disputes. 43 Eliz. 1 c. 12.

17. History of Insurance 13 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.

18. History of Insurance 1690s Fire insurance companies form the first professional fire brigades. 14

19. Lloyd’s of London Late 1600s Edward Lloyd’s Coffee House. Seafarers, merchants and insurers meet for insurance business and coffee.

20. Lloyd’s of London 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 16

21. History of Insurance 1751 Benjamin Franklin and other capitalists start the Philadelphia Contributorship, the first successful fire insurance company in America.

22. History of Insurance 18 Mid-18th Century Many insurance companies are more likely than banks to have substantial cash reserves. Insurance companies function as lending institutions. 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).

23. Rise of Risk Management 1906 S.F. Earthquake Lloyd’s underwriter, Cuthbert Heath, orders agents to “pay all claims in full regardless of policy terms”. Lloyd’s pays $50 Million in claims.

24. Rise of Risk Management Public confidence in insurance industry soars; industry booms; risk management innovations; new types of insurance emerge. 20

25. Lloyd’s of London Today, Lloyd’s of London is an insurance icon Not an insurance company, but an exclusive insurance market

26. Pre to Post Liberalization 22 Changing Customer Expectations in Insurance Sector

27. Comparisons of factors influencing Insurance market 23

28. Pre Purchase Process : LIFE 24

30. Only some customers have mentioned new products such as

31. Products with multiple riders-medical, accident, waiver of premium rider

32. Pension/retirement benefit plans

33. Flexi premium plans – product with single premium and short time premium option

34. Some customers exposed to new products perceive new products similar to old ones and do not offer any additional advantage.“ New policies are like old wine in new bottle”

35. Purchase Process : LIFE 26

36. Post Purchase Process : LIFE 27

40. No respondent interviewed had taken insurance from any private company

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. Companies regular in sending notice for renewal of policy (pre and post liberalisation)

43. Instances of paying premium by credit card observed (post liberalisation)

45. Company approves claim for amount much less than repair estimate submitted

46. Agent often does not take responsibility to facilitate process of claim settlement

47. Owner has to pay repair bill and only then claim payment from company

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. Several queries from company on pre-existence of disease, settlement process cumbersome and time consuming No claim settlement encountered in Property and Accident Insurance

53. Collection centres should be set up for depositing renewal cheque

54. Premium payment at petrol pumps

55. Accident/Total Loss claims should be settled for full estimated value

56. Claim should be settled in 30 days

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. Direct payment by company to hospital through TPA arrangement

60. Issue Medi-Card so that patient can be admitted in hospital without having to deposit heavy admission fee

62. Low returns in insurance compared to other investments

63. No assured regular source of income of respondent

66. General Insurance 36 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….

67. Indian insurance industry Major players of general insurance market 37 Conduct

68. Big Companies of General Insurance 38 Bajaj Allianz ICICI Lombard Tata Aig National insurance New India Assurance Oriental insurance

69. Bajaj Allianz 39 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 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.

70. Bajaj Allianz 40 Dealing in these sectors:- Travel Insurance Health Insurance Corporate Insurance Motor Insurance

71. ICICI - Lombard 41 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's second largest bank Lombard Canada Ltd, a group company of Fairfax Financial Holdings Limited, is one of Canada's oldest property and casualty insurers. ICICI Lombard General Insurance Company received regulatory approvals to commence general insurance business in August 2001.

72. ICICI - Lombard 42 Dealing in three sector:- Health Insurance Motor Insurance Home Insurance

73. Health insurance 43 A health insurance policy will provide a cover to you and your family against sudden medical contingency or bodily injury.

74. Motor Insurance 44 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.

75. Home insurance 45 It is imperative that you secure your home from natural and man-made catastrophes. 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.

76. TATA-AIG 46 Tata AIG General Insurance Company Ltd. is a joint venture company, between Tata Sons and American International Group 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.

77. TATA - AIG 47 Dealing in three sector:- Individual Small business Corporate

78. Individual 48 “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.”

79. Small business 49 Tata AIG offers a comprehensive risk solution through various Multiline Package Policies:- Society Policy Office Policy Manufacturing Unit – Package Policy

80. Corporate 50 "From blue chips to local marketers, whatever the size of your business, Tata AIG has the insurance you are looking for.” Accident & Health Travel Energy Property Marine

81. National Insurance Company Limited 51 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

82. National Insurance Company Limited 52 It deals in these policies:- Personal line Insurance Rural Line Insurance Industrial Line Insurance Commercial Line Insurance

83. Contribution of LifeInsurance Sector in theindian Economy 53 Performance

84. STRUCTURE OF INSURANCE INDUSTRY 54 Historical Perspective (i) Prior to 1956 242 companies operating (ii) 1956 – 2001 Nationalisation – LIC Monopoly player Government control (iii) 2001 -- Opened up sector

85. Present Structure of Insurance Industry 55 • (i) (a) LIC – Fully owned by Government (b) Postal Life Insurance

86. Present Structure of Insurance Industry (contd...) 56 • (ii) Private players - 1. Bajaj Allianz Life Insurance Co. Ltd. 2. Birla Sun Life Insurance Co. Ltd. (BSLI) 3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE) 4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU) 5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA) 6. Max New York Life Insurance Co. Ltd. (MNYL)

87. Private players –(contd…) 57 7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE) 8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd. 9. SBI Life Insurance Co. Ltd. (SBI LIFE) 10. TATA AIG Life Insurance Co. Ltd. (TATA AIG) 11. AMP Sanmar Assurance Co. Ltd. (AMP SANMAR) 12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA) 13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE) 14. ShriramSunlam

88. Present Structure of Insurance Industry (contd...) 58 (iii) Other likely players – PNB Life Insurance Reliance Life Insurance AxaBharti Enterprises

89. CONTRIBUTION TO INDIAN ECONOMY 59 Life Insurance is the only sector which garners long term savings Spread of financial services in rural areas and amongst socially less privileged Long term funds for infrastructure Strong positive correlation between development of capital markets and insurance /pension sector Employment generation

90. Aggregation of Long Term Savings 60 (i) Total Assets of Life Insurance Companies 2002 – 2003 2,80,450 cr 2003 – 2004 3,52,608 cr 2004 – 2005 4,23,000 cr (ii) Total Premium generated 2002 – 2003 57,708 cr 2003 – 2004 66,278 cr 2004 – 2005 79,000 cr 2005 – 2006 94,000 cr 2006 – 2007 1,12,000 cr 2007 – 2008 1,33,000 cr

91. Aggregation of Long Term Savings 61 (iii) Industry is growing @ 19 p.a. (iv) Life Insurance funds account for 15% of household savings. (v) The industry has the potential to increase the share to 20%.

92. Spread of financial services in rural areas and amongst socially underprivileged 62 • IRDA Regulations provide certain minimum business to be done (i) in rural areas (ii) in the socially weaker sections • Life Insurance offices are spread over nearly 1400 centres. • Presence of representative in every tehsil – deeper penetration in rural areas.

93. Spread of financial services in rural areas and amongst socially underprivileged 63 • Insurance agents numbering over 6.24 lakhs in rural areas. • Policies sold in rural areas (2004-05) – No. of policies - 55 lakhs Sum assured - 46,000 crores • Social security - No. of lives covered 2003-0417.4 lakhs 2004-05 42.1 lakhs

94. Long term funds for infrastructure 64 • For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential. • Estimates of funds required for development of infrastructure vary widely. • An investment of 6,19,600 crore is anticipated in the next 5 years (Source : SSKI India) • Tenure of funding required for infrastructure normally ranges from 10 to 20 years. • Major portion of these funds are routed through debt/private equity participation.

95. Long term funds for infrastructure(contd...) 65 • 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. • As per IRDA norms, the pattern of investment of life insurance companies’ funds are (i) In Central Government, State Government and other approved securities – not less than 50% (ii) Infrastructure – 15%

96. Long term funds for infrastructure(contd...) 66 • 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. • Has investments of over Rs.40,000 cr in infrastructure. • 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.

97. Development of Capital Markets/Economic Growth 67 •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). •Annual Investment of around 9000 crores in capital markets. •Contribution to Five Year Plans 9th Plan 2,30,900 crores Last Two Years 1,70,900 crores •

98. Development of Capital Markets/Economic Growth 68 Helps inculcate a sense of security by protecting earning of people in case of untimely death. Benefits to Policy Holders 2002 – 2003 20,800 cr 2003 – 2004 24,200 cr 2004 – 2005 28,700 cr

99. EMPLOYMENT GENERATION 69 • Life insurance industry provides increased employment opportunities. • Employees in insurance sector as on 31st March, 2005 is around 2 lakhs. • Many agents depend on insurance for their livelihood – No. of agents on 31st March 2004 – 15.59 lakhs •Brokers, corporate agents, training establishments provide extra employment opportunities. • Many of these openings are in rural sectors

100. SPECIAL FEATURES 70 Capital Intensive Industry 2002 – 03 2003 – 04 (i) Total Income 1631 cr 4053 cr (ii) Capital employed 2219 cr 3239 cr (Data excludes LIC)

101. GROWTH POTENTIAL 71 At present insurance penetration in India is quite low – 2.26% of GDP. In Korea the penetration stands at 6.77%, In Singapore – 6.38%.

102. PHASE OF TRANSITION 72 • Life Insurance industry is under the phase of infancy after 50 years of monopoly • Competition from within and other sectors of financial market • Needs environmental support till it reaches a comfort zone

103. Ficci Conference “Indian Insurance Industry: New Avenues For Growth” New Delhi, 19 October 2004 73 Indian Insurance Sector

104. INDIA INSURANCE INDUSTRY STATUS 74 India Has Come A Long Way In The Last Four Years 2000 2000 4 1 CAGR: 23% CAGR: 16% 27.5 9.4 ~1.2% ~0.4% ~280 ~100 Several new products and channels Life Non-Life 2004 2004 14 14(1) Number of players Premium income (Rs '000 Cr) 63 17 Insurance premium as % of GDP 2.3% 0.62% Insurance premium per capita (Rs) 590 160 (1) Includes 4 nationalised companies Source: IRDA, Swiss Re

105. 75 13 10 5 0 -5 -10 -13 INDIA'S COMPARATIVE ECONOMIC POSITION IS IMPROVINGRelative to Developed and Developing Economies Twelfth largest economy in the world (2002) Real GDP (USD Bn) High, steady growth among different economies GDP CAGR from 1993 to 2002 % GDP growth 10290 4280 India's Average GDP growth (93-02) Max Average Min China HK Mexico UK USA India (83-02) S Korea Taiwan Thailand Malaysia Brazil Japan India (93-02) Stable and low inflation rates Average inflation rate from 1999-2002 Stable BoP position (2002) Current account surplus as a % of GDP -0.2% Russia Poland Taiwan China Mexico Indonesia Philippines India '02 Note: Real GDP estimates Source: EIU, World Bank, Analyst reports, Literature review

106. ... INSURANCE IS POISED FOR GROWTH Example: Life insurance penetration increases with affluence Three avenues for growth Insurance premium as % GDP Threshold for insurance pick-up Addition of new customers Existing customers buy more Extension to new geographies 1 2 INDIA 3 1,000 100 10,000 100,000 GDP per capita in USD (log scale) PPP adjusted GDP per capita higher by a factor of ~5-6; lower income categories not shown Source: Swiss Re; NCAER 76

108. Annuity scheme

109. Health insurance

110. Disability and critical illness insurance

111. Professional liability

112. Crop insurance

113. Income protection

114. Credit insurancePremium income ($ Bn) 1 11 19

116. Travel (overseas/domestic)

117. Household articles

118. Building (structure/content)

119. Mobile insurance

120. Credit insurance

121. ...Pension scheme Annuity scheme Income protection Increased term Home building – structure and contents (penetration in India ~1% v/s ~70% in UK) Health insurance (penetration in India 1-2% v/s 10% in UK) Corporate and professional liability Life Non Life

122. CUSTOMER AWARENESS IS KEY 79 Low penetration of personal non life products... ... due to low awareness for several types of insurance % customers having bought insurance in metros % customers with unaided awareness of different types of insurance in metros Source: Survey of about 306 customers across Delhi, Mumbai and Kanpur conducted in 2002

123. Threat of new entrants Power of suppliers power of buyers Availability of substitutes Competitive rivalry Porter's 5 Forces Analysis

126. 3-Power of Buyers The individual doesn'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

127. 4-Availability of Substitutes 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.