Need Of Insurance.
Relevance Of Insurance In Infrastructure.
History Of Insurance Sector.
IT In Insurance
Challenges & Opportunity.
Insurance is defined as an agreement between
two parties whereby one of them is called insurer,
agrees to protect the known insured, against a loss
which may arise on the happening of on event.
The document containing the agreement is called
Need Of Insurance
All types of activities are subject to risks
of loss or damage due to unforeseen events
which are beyond control of common
people or businessmen.
Loss or damage may arise due to fire,
theft,natural calamities like flood or
earthquake and so on.
Hence the need of insurance arises.
Relevance Of Insurance In
The insurance sector is an integral part of the nation’s
Insurance sector generates Long term funds for infrastructure :
Investments of insurance companies have been largely in
bonds which are floated by GOI, PSUs, state governments,
local bodies etc.
It provides the mode of infrastructural In 2008–09, the
insurance industry contributed US$ 15.7 billion to
Risk management for strategic advantage-
Expansion in the insurance industry has necessitated specialized
risk management, business continuity planning and asset liability
Rising contribution to GDP-
Premium income as a percentage of GDP has increased from 3.3
per cent in 2002–03 to 7.6 per cent in 2008–09.
Wide range of insurance products available-
Insurance companies are providing a wide range of products to
meet the diverse requirements of the Indian population.
Mode of employment-
Life insurance industry provides increased employment
Like it employed around 2 lakhs during 31st March, 2005 and
0.3 million people directly and 2.9 million people as individual
agents in 2008–09.
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.
History Of The Insurance Sector
The business of life insurance in India in its existing form
started in India in the year 1818 with the establishment of
the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance
business in India are:
1912: The Indian Life Assurance Companies Act enacted as
the first statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to
enable the government to collect statistical information
about both life and non-life insurance businesses.
The General insurance business in India, on the other hand,
can trace its roots to the Triton Insurance Company Ltd., the first
general insurance company established in the year 1850 in
Calcutta by the British.
Some of the important milestones in the general insurance
business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first
company to transact all classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring fair
conduct and sound business practices.
1972: The General Insurance Business (Nationalisation) Act,
1972 nationalized the general insurance business in India with
effect from 1st January 1973.
The Malhotra committee formed in 1993 granted
some reforms in the India insurance industry. The
main idea behind forming this committee was to
assess the function of the industry and to set the road
of the future for the industry.
The committee recommended the set up of the
Insurance Regulatory and Development Authority Act
(IRDA Act) of 1999 paved the way for establishment of
Insurance Regulatory and Development Authority
(IRDA) in 2000.
IRDA was formed by an act of the Indian Parliament
(known as the IRDAAct, 1999) as the regulatory body to
govern the Indian insurance sector.
The main aim of IRDA was to protect the concerns of
insurer as well as the insured and to adopt new policies to
keep up the growth of insurance in India.
As per IRDA:
1. A company, to operate as an insurance company in India,
must be incorporated under the Companies Act, 1956, and
possess the certificate of the memorandum of association
and articles of association.
2. International players can operate in India only through a
joint venture with a domestic firm and are classified
under private sector insurers.
3. FDI up to 26 per cent is permitted in the insurance sector.
Protection Of The Interest Of Policy Holders
IRDA has notified Protection of Policyholders Interest
Regulations 2001 to provide for: policy proposal
documents in easily understandable language; claims
procedure in both life and non-life; setting up of
grievance redressal machinery; speedy settlement of
claims; and policyholders' servicing.
The insurers are required to maintain solvency
margins so that they are in a position to meet their
obligations towards policyholders with regard to
payment of claims.
• It is obligatory on the part of the insurance
companies to disclose clearly the benefits, terms
and conditions under the policy.
•All insurers are required to set up proper
grievance redress machinery in their head office
and at their other offices.
TYPES OF INSURANCE
Life Insurance: In this policy, the insurance company
pays in case of the demise of the policy holder or at the
time of the maturity of the policy. Now a days a new
policy has been launched by LIC in which you will be
covered under the insurance policy even after the
maturity of the policy
Property Insurance: This insurance helps you to
prevent the losses against theft, fire, burglary or any
natural calamity like Earthquake, Floods etc. based on
the points mentioned in the policy.
Travel Insurance: Loss of personal belongings while
traveling, medical coverage, delays in the travel are all part of
the travel insurance policy.
Any financial loss due to accident of a vehicle is covered
under the auto insurance policy.
Health Insurance consists of a package of various types of
insurance related to health.
APPLICATION OF INFORMATION
TECHNOLOGY IN INSURANCE SECTOR
Customers are getting increasingly sophisticated and tech-
People today don’t want to accept the current value
propositions, they want personalized interactions and they look
for more and more features and add ones and better service
Personalization helps organizations to reach their customers
with more impact and to generate new revenue through cross
selling and up selling activities.
For this many organizations are incorporating knowledge
database of content that typically include a search engine and
lets the customers locate the all document and information
related to their queries of request for services
The insurance industry in India is at an early stage with low
penetration and high potential.
The total premium of the insurance industry has grown at a
CAGR of 24.6 per cent from 2002–03 to 2008–09 to reach
US$ 52.6 billion in 2008–09.
The number of insurance players has increased from four
and eight in life and non-life sectors, respectively, in 2000 to
23 and 22, respectively, as on January 2010.
Source: “Annual reports FY00–09, ” Insurance
Regulatory and Development Authority website,
Overview of the life insurance
Premium income has grown at a high CAGR of 25.8
per cent between 2002–03 and 2008–09.
The number of policies issued grew at a CAGR of 12.3
per cent. between 2002–03 and 2008–09.
There are 23 players, 1 from the public sector and 22
from the private sector, as of January 2010.
There is increased insurance penetration due to a
growing consumer class, rising insurance awareness
and increasing domestic savings and investments.
Sources: “Annual report FY00-09,” Insurance Regulatory and Development Authority website,
www.irdaindia.org, accessed 06 January 2010; Life Insurance Council website, www.lifeinscouncil.org,
accessed January 2010
A wide range of life insurance products are available. These include:
•Group insurance products —endowments, term insurance, annuities, whole life
• Individual insurance products —Unit Linked Insurance Plans (ULIPs), pension funds,
guaranteed life products
Overview of the non-life insurance segment
Premium income grew at a CAGR of 17.6 per cent between
2002–03 and 2008–09.
There are 22 players, out of which 7 are public sector players
(including 1 reinsurer) and 15 private sector players, as of
Segments covered include auto, health, fire, marine and
engineering, among others
Auto insurance had the largest share in the non-life insurance
segment in 2008–09 (43.2 per cent).
Health segment recorded a growth of 21.3 per cent in 2008–09 (a
growth of 9.3 per cent over 2005–06).
Public sector companies have a dominant share in the marine
Growth factors for insurance sector
There is a high demand for insurance products due to a
growing middle class, increasing working population, rising
household savings and increasing purchasing power
Favourable government and regulatory initiatives are expected
to increase the contribution of the insurance industry to the
overall economic development of the country.
Penetration levels set to increase
The increasing literacy rate, specially in rural India, has
spread awareness about the need for insurance.
Between 2006 and 2026, the working population (25–60
years) is expected to increase from 675.8 million to 795.5
million giving rise to a favourablemarket for insurance
Fast progressing medical technology and increasing demand
for better healthcare has resulted in rising demand for health
insurance. Regulatory initiatives to promote health insurance
IRDA has set up a separate department for health insurance.
The government is set to raise budgetary support of US$ 28.33
billion for the health sector during the Eleventh Plan.
International players and life insurers have entered this
Emergence of new distribution channels, such as
bancassurance, brokers and e-channels, has increased outreach.
Rise in sale of passenger cars, fuelling demand for
Challenges facing Insurance Industry
Threat of New Entrants: The
insurance industry has been budding
with new entrants every other day.
Therefore the companies should carve
out niche areas such that the threat of
new entrants might not be a hindrance.
There is also a chance that the big
players might squeeze the small new
• Power of Buyers: No individual is a big threat to the
insurance industry and big corporate houses have a lot
more negotiating capability with the insurance companies.
Big corporate clients like airlines and pharmaceutical
companies pay millions of dollars every year in premiums.
Availability of Substitutes: There exist a lot of
substitutes in the insurance industry. Majorly, the large
insurance companies provide similar kinds of services –
be it auto, home, commercial, health or life insurance.
High potential demand for insurance products
Lower penetration of the health insurance sector
Growing pension sector
Rising demand from semi-urban
and rural population for