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Insurance sector in India:challenges and opportunities

1) The document discusses the insurance sector in India, including its history and evolution from the 19th century to present day. 2) It covers the major players like LIC, GIC, and IRDA, and types of insurance policies including life, health, fire, and motor insurance. 3) The current insurance landscape in India is growing rapidly but there remains significant potential for further expansion, as over 75% of the population still lacks insurance coverage.

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INSURANCE SECTOR IN INDIA: TREND & CHALLENGES
What is insurance? The definition of insurance can be made from two points:  Functional definition.  Contractual definition. FUNCTIONAL DEFINITION  Insurance is a co-operative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to insure themselves against the risk
Contractual Definition In the words of justice Tindall, “Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency.”
Policy • The policy contract of insurance is known as the policy. Certain exclusions, or exceptions to property and casualty insurance are stated in the policy. Meaning that there are certain exceptions to coverage, that relieves the insurance company from paying.
Indemnify • Compensation for harm done to one party. • The individual who accepts the compensation is known as the insured, and the person who agrees to indemnify is the insurer.
Beneficiary • This individual is the recipient of the amount to be paid. The maximum amount of compensation that can be received is known as the face value.
Importance • • • • • • • Protection for dependants Savings for Old Age Encourage Savings Initiates Investments Credit worthiness Social Security Tax Benefits
Division of Insurance Sector INSURANCE LIFE INSURANCE GENERAL INSURANCE FIRE INSURANCE MARINE INSURANCE MEDICLAIM MOTOR VEHICLE
Insured Items • There are limitless things that you can insure, in order to keep them protected, but the most important ones are: -Insurance intended to compensate for harm to the insured person’s real property. YOUR HOUSE YOU YOUR BOAT YOUR FAMILY 3 1 2 5 YOUR AWESOME CAR 4
LIFE INSURANCE Life insurance is a written contract between the insured and the insurer, that provides for the payment of the insured sum on the date of the maturity of the contract or on the unfortunate death of the insured, whichever occurs earlier.
GENERAL INSURANCE • General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance.
TYPES OF GENERAL INSURANCE Health insurance Business insurance Automobile insurance Fire insurance • Agricultural Insurance • Credit Insurance • Property Insurance • Mortgage Insurance • Pet Insurance • Interest Rate Insurance • Income Protection
HEALTH INSURANCE
HEALTH INSURANCE Just like one looks to safeguard ones wealth, these policies ensure guarding the insurer's health against any calamities that may cause long term harm to ones life and even hamper ones earning ability for a lifetime. Some examples of this type of policy are mediclaim policy, personal accident, group accident, traffic accident, etc.
Business Insurance Risks of loss of profits/business, goods, plant and machinery are most profound in case of business. Under this head they cover the most widely used policies that cover a business from any loss of the above kind. Some of these policies are burglary insurance, shopkeepers insurance, key-man insurance, marine insurance, public liability insurance, workmen compensation insurance, air transit insurance, fidelity guarantee insurance etc.
Automobile Insurance Auto Policy is required to be taken to cover the risks that arise to the owner, vehicle and third party. This includes the Compulsory Vehicle Policy (In India, by the Motor Vehicles Act, every car owner is required to covered against Act risks) and the Comprehensive Vehicle Policy.
MARINE INSURaNCE
Marine Insurance Contract “Under Mariner Insurance Act, 1963, Marine Insurance Contract is an agreement whereby the insurer undertakes to indemnify the assured, in the manner and to the extent thereby agreed, against losses incidental to Marine adventure.”
SCOPE OF MARINE INSURANCE  HULL INSURANCE: Hull Insurance involves insurance of ships including vessel machinery.  CARGO INSURANCE: Goods and commodities transported by sea is the subject matter of Cargo Insurance.
FIRE INSURANCE FIRE INSURANCE This policy is required to be taken to prevent any loss of profits / property from incidental fire. Eg: fire insurance and fire consequential loss policy.
BANCASSURANCE
“There is no stronger force than an idea whose time has come.” Victor Hugo (19th Century French Novelist)  Banks & Insurers across the World have realized Bancassurance is the distribution channel, which would help them achieve economies of scale and boost their revenues in the 21st Century.
BANCASSURANCE - DEFINITION • The sale of insurance and other similar products through a bank. • This can help the consumer in some situations; for example, when a bank requires life insurance for those receiving a mortgage loan, the consumer could purchase the insurance directly from the bank.
POTENTIAL OF BANCASSURANCE IN INDIA… Banks are major players in the Indian Financial System: -> 67,000 branches(32,000 rural and 14,700 semi urban) -> Enormous retail account base of 450 mn Deposit A/c -> Total deposit base of Rs. 14 trillion (USD 300 bn)  Brick & Mortar Model of Banking Approximately 80% of Banking Transactions are done at the Bank Branches  Very High Trust in the Banking System  Bank Managers looked upon as “Financial Advisors”
FORMS OF BANCASSURANCE ARRANGEMENTS Strategic Alliance: There is a tie-up between a bank and an insurance company. The bank only markets the products of the insurance company. Full Integration: This arrangement entails a full integration of banking and insurance services. The bank sells the insurance products under its brand acting as a provider of financial solutions matching customer needs. Mixed Models: Under this approach, the marketing is done by the insurer's staff and the bank is responsible for generating leads only. In other words, the database of the bank is sold to the insurance company.
Working of insurance
Evolution • Insurance in modern form originated in the Mediterranean during the 13th century. • Marine insurance is the oldest form of insurance followed by life insurance and fire insurance. • The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. • Oriental life Insurance Company was the first insurer and was incorporated at Calcutta in 1818 • Insurance regulation formally began in India through the passing of two acts - Life Insurance companies Act of 1912 - Provident Fund Act of 1912
HISTORY OF INSURANCE IN INDIA Phase Phase I a. Life Insurance b. General Insurance Phase II a.Life Insurance b.General Insurance Phase III Life Insurance and General Insurance 3/6/2014 Period Industry 1818 to 1956 (about 138 yrs) Many (245) private sector companies only, competitive market. 1850 to 1972 (about 122 yrs) Many (107) private sector companies only, competitive market. 1956 to 2000 (about 44 yrs) Nationalization, public sector monopoly, only one company. 1972 to 2000 (about 28 yrs) Nationalization, public sector monopoly, only one company with its four subsidiaries. After 2000 or State Opened to the entry of private domestic and foreign companies, mixed sector of public and private sector units, oligopoly of public sector companies (14 life insurance and 12 general insurance companies) 28
Origin And Growth Of Insurance Sector: # In fiscal 2000-01, the Indian federal government lifted all entry restrictions for private sector investors. # Foreign investment insurance market was also allowed with 26 percent cap. # GIC was converted into India's national reinsure From December,2000. # All the subsidiaries working under the GIC umbrella were restructured as independent insurance companies.
Origin And Growth Of Insurance Sector: # Till end of FY 1999-2000, two state-run insurance companies, namely, Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were the monopoly insurance providers in India. #Under GIC there were four subsidiaries: –National Insurance Company Ltd. –Oriental Insurance Company Ltd. –New India Assurance Company Ltd. –United India Assurance Company Ltd
Life Insurance Companies In India 1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Co. Ltd 3. HDFC Standard Life Insurance Co. Ltd 4. ICICI Prudential Life Insurance Co. Ltd. 5. ING Vysya Life Insurance Company Ltd. 6. Life Insurance Corporation of India 7. Max New York Life Insurance Co. Ltd 8. Met Life India Insurance Company Ltd. 9. Kotak Mahindra Old Mutual Life Insurance Limited 10. SBI Life Insurance Co. Ltd 11. Tata AIG Life Insurance Company Limited 12. Reliance Life Insurance Company Limited. 13. Aviva Life Insurance Co. India Pvt. Ltd. 14. Sahara India Life Insurance Co, Ltd. 15. Shriram Life Insurance Co, Ltd. 16. Bharti AXA Life Insurance Company Ltd. 17. Future Generali Life Insurance Company Ltd. 18. IDBI Fortis Life Insurance Company Ltd. 19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd 20. AEGON Religare Life Insurance Company Limited. 21. DLF Pramerica Life Insurance Co. Ltd. 22. Star Union Dai-ichi Life Insurance Comp. Ltd
Non-Life Insurance companies in India # Bajaj Allianz General Insurance Co. Ltd. # ICICI Lombard General Insurance Co. Ltd. # IFFCO Tokyo General Insurance Co. Ltd. # National Insurance Co. Ltd. # New India Assurance Co. Ltd. # Oriental Insurance Co. Ltd. # Reliance General Insurance Co. Ltd. # Royal Sundaram Alliance Insurance Co. Ltd. # Tata AIG Life Insurance Co. Ltd. # United India Insurance Co. Ltd Reinsurers: # General Insurance Corporation of India.
MAJOR PLAYERS
LIC Products & Plans
Life Insurance Corporation of India (LIC) was formed in September 1956 by an Act of Parliament, LIC Act 1956 with a contribution of Rs. 50 million. The then Finance Minister Mr. C. D. Deshmukh while piloting the bill for nationalization outlined the objectives of LIC thus: “To conduct the business with utmost economy with the spirit of trusteeship; to charge premium no higher than warranted by strict actuarial considerations; to invest the funds for obtaining maximum yield for the policy holders consistent with safety of capital; to render prompt and efficient service to policy holders thereby making Insurance widely popular”. 3/6/2014 35
LIC OF INDIA contd… Presently the LIC has a network of seven zones; 100 divisions and 2,048 branches, personnel exceed seven lakhs employees and over six lakhs agents. Vision: A trans-nationally competitive financial conglomerate of significance to societies and Pride of India. Mission: To explore and enhance the quality of the life of people through financial security by providing products and services of aspired attributes with competitive returns and by rendering resources for economic development. Values: Caring and Courtesy, Initiatives and Innovation, Integrity and Transparency, Quality and Returns, Participation and Relationship, and Trustworthiness and Reliability Culture: Agility (quickness), Adaptability, Collaboration, Commitment, Discipline, Empowerment, Sensitivity, and Excellence. 3/6/2014 36
LIC OF INDIA contd… Objectives • Spread Life Insurance widely and in particular to the rural areas. • Maximise mobilization of people’s savings by making insurancelinked savings adequately attractive. • Deployment of funds to the best of advantage of the investors as well as the community as whole, keeping in view national priorities and obligations of attractive return. • Conduct of business at most economy and with the full realisation that the money belongs to the policyholders. • Act as trustee of the insured public in their individual and collective capacities. 3/6/2014 37
INVESTMENT POLICY OF LIC’s 3/6/2014 38
INVESTMENT POLICY OF LIC’s contd… 3/6/2014 39
1) LIC 2) ICICI 3) HDFC
MARKET SHARE
CURRENT SCENARIO •Growing at the rate of 15-20% annually •75% population has no insurance • Adds 7% to country’s GDP •LIC market share come down to 75% and private insurers increased over 24% •Annuity or pension product have over 33% of market •Unity linked insurance scheme have monopoly
GENERAL INSURANCE CORPORATION (GIC) • Prior nationalization there were 68 Indian insurers (including LIC) and 45 non-Indian insurers did the business. • In Nov. 1972, the general insurance business was nationalized by the General Insurance Business (Nationalized), Act 1972 (GIBNA) and vested in the hand of the GIC and its four subsidiaries viz. 1. National Insurance Co. Ltd., 2. New India Assurance Co. Ltd., 3. Oriental Fire and General Insurance Co. Ltd., and 4. United India Insurance Co. Ltd. • GIC was incorporated as a holding company in 1992. • General Insurance Business is completely owned by the government. • The paid up capital of GIC was fully subscribed by the Government and of four subsidiaries. • It was controlled by a single organization with four subsidiaries. 3/6/2014 43
G I C contd… • GIC’s four subsidiaries: 1. National Insurance Co. Ltd., 2. New India Assurance Co. Ltd., 3. Oriental Fire and General Insurance Co. Ltd., and 4. United India Insurance Co. Ltd. • The Govt of India took over Control, supervision, and policy making is with GIC. • The premium income for GIC comes mainly through the obligatory reinsurance premium on a quota share basis from subsidiaries on their direct business in India (almost 20% of subsidiaries business come to GIC). 3/6/2014 44
IRDA 3/6/2014 45
IRDA’S MISSION To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Composition of Authority under IRDA Act, 1999 As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority. The Authority is a ten member team consisting of a. a Chairman; b. five whole-time members; c. four part-time members, (all appointed by the Government of India) 3/6/2014 46
Current Scenario • In 1993, Malhotra Committee was formed and several Insurance Reforms were made. – – – – – Redesigned the Structure Increased Competition Regulatory body (IRDA) Investments Customer Service
Present scenario • • • • • • • • • • • • • 1. Enormous mismatch in global healthcare financing 2. Developing countrieshave 84% of population & 90% of disease burden 3. By 2020, world population-7.5 billion By 2050, world population 9 billion Most of the growth in developing countries. 4. According to NHA of India 2001-02, sources of finance in health sector Household 68.8% Central Govt. 7.2% State Govt. 14.4% Private Firms 3% Public Firms 2% External Funds 2% Local Govt. 2.2%
(continued) • • • • • • Govt. spending on health care of GDP 0.9% Private spending 4 to 4.5% of GDP Overall Out of Pocket Expense 80% (incentivises supplier induced demand) In Bihar & UP, it is 90% NSS (1995-96) showed that rich consumed public service 3 times > the poor
Comparison of risk pooling and equity of financing methods Financing method Risk pooling Equity General revenue Widest risk pooling Most equitable Social insurance Within the covered population Redistributive within the covered population Group Within a group Redistributive within a group Individual Within an age/sex group Not equitable Community Financing Within a community Redistribution within a community User fees No risk pooling Not equitable Private insurance
CONCLUSION • Growth of Indian economy is an investment driven growth • Opens a wide variety of investment avenues • Companies help to gain knowledge of products and services • Achieve a better standard for near future life
(continued) REASONS- Unable to take treatment.     a. b. c.   Mostly illiterate and poor. First priority is food. Rest later. Prefer traditional / local / home made remedies. Public facilities: far from reach – distance and if managed to reach – poor quality treatment to purchase medicines etc from out side Can’t afford high treatment cost: in Pvt. Hosp. Borrowing money, sale of property–make them poorer.
Market Statistics Life Insurance Funds accounts to 15% of household Savings & may grow upto 20% in future. Insurance Penetration in India is 2.6% of GDP compared to Korea(6.77%) & Singapore(6.38%). India is ranked 19th position in Insurance with a growth of 19% p.a. Non Life Insurance have lower penetration and rural people needs awareness. 620 tn rupees investment is anticipated for infrastructure development in future.
Strategic Policies • • • • • • Identification of Markets Assessment of Risks Penetration and exploitation of markets control over investment and operating costs Finding best prospects Newer Marketing Strategies
SWOT analysis Strengths Weakness •Strong capital and reserve •High administration & management expenses •Technically Skilled Manpower •Vertical organisational structure •Innovative product for different demography •Lower Reliability on Pvt. Players Opportunities Threats •Inflow of global managerial & financial expertise •Cut-throat competition •New Entrants •Liberalization results to wider choices •customers switching to other company •Introduce global innovations and practises
Conclusion • Today most of the insurance companies are recruiting agents who are professionals who can sell their unsought insurance products. • Companies also provide better policies based on customer needs and demands. • In this Competitive market companies provide better service Quality, Pricing, Advertisement and Promotional activities. • CRM is used to retain the customers and communicate with them. • By another 20 yrs 50% of population is expected to have at least one sort of an insurance.
Aviva Life Insurance Company India Limited Life Shield AEGON Religare Life Insurance Company Limited. Decreasing Term Plan Increasing Term Plan Level Term Plan Birla Sun Life Insurance Co. Ltd Birla Sun Life Insurance Premium Back Term Plan Birla Sun Life Insurance Term Plan Birla Sub Life Insurance HNWI Term Plan Bharti AXA Life Insurance Company Ltd. Secure Confident Bajaj Allianz Life Insurance Company Limited Protector New Risk Care Term Care Future Generali India Life Insurance Company Limit Future Care ING Vysya Life Insurance Company Ltd. ING Term Life Plus ING Term Life ICICI Prudential Life Insurance Co. Ltd Life Guard Return of Premium Life Guard Regular Premium Home Assure Loan cover term insurance Life Guard Single Premium IDBI Fortis Life Insurance Company Ltd. Home Assurance Kotak Mahindra Old Mutual Life Insurance Limited Kotak Premium Return Plan Kotak Term / Preferred Term Plan Life Insurance Corporation of India The Convertible Term Assurance Policy Mortgage Redemption New Bima Gold Two Year Temporary Assurance Policy Anmol Jeevan-I Amulya Jeevan-I Max New York Life Insurance Co. Ltd Five Yr Renewable and Convertible Plan (Non - Par) Level Term Plan Met Life India Insurance Company Ltd. MET Suraksha - TROP MET Suraksha Met -MortgageMet-Mortgage Protector Reliance Life Insurance Company Limited. Reliance Simple Term Plan Reliance Special Credit Guardian Plan Reliance Special Term Plan Reliance Credit Guardian Plan Sahara India Life Insurance Co, Ltd. Sahara Kavach Shriram Life Insurance Co. Ltd. Shri Suraksha SBI Life Insurance Co. Ltd SBI Swadhan SBI Shield Tata AIG Life Insurance Company Limited Tata AIG Life LifePlus Tata AIG Life Raksha 10/15/20/25 Tata AIG Life Assure HDFC Standard Life Insurance Co. Ltd Loan Cover Term Assurance Plan Term Assurance Plan Home Loan Protection Plan
Insurance sector in India:challenges and opportunities