general insurance market in india
TRANSCRIPT
KRUPANIDHI INSTITUTE OF MANAGEMENT EDUCATION 2009
TABLE OF CONTENTS
Sr.No. Particulars Page No.
1
Executive Summary
2
Introduction
3
Objectives of the Study
4
Methodology
5
A study on Indian General Insurance Industry- Auto Insurance
6
Suggestions & Findings
7
Conclusion
8
Bibliography
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EXECUTIVE SUMMARY
The project is about the study conducted on Indian General Insurance Industry, in
particular with the Auto Insurance segment of general insurance.
It studies the current market how the insurance segment is booming in the last
few years.
How the market has chanced with the new private entrants, what are the major
challenges faced by insurance companies,
The role played by Government in this industry. The marketing strategies used by
the competitors to survive in the market
The opportunities available with the company to progress and to overcome the
challenges faced by them.
The future of this industry is very bright the short term scenario
For the general insurance sector appears to be challenging the long term
prospects definitely present ample opportunities for growth.
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INTRODUCTION:
This project is about the study conducted on the general insurance industry.
In particular with the auto insurance this is a part of general insurance.
This is the detailed study on how auto insurance industry sector functions,
What are the challenges faced by auto insurance industry currently,
Who are the market players in this auto insurance sector?
What is the current market situation about of the auto insurance sector
What are the various market strategies followed by these industries
What are the challenges faced by auto insurance sector
How the companies are taking steps in order can overcome the challenges.
What are the future prospects of auto insurance industry
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OBJECTIVES OF THE STUDY:
The objective of the thesis is:
“To study the Indian general insurance industry particularly with the auto
insurance segment of general insurance , identify areas of excellence and
areas needing improvement; and provide suggestions for such
improvement”.
The aim of this Thesis is to successfully study general insurance sector on
a common platform, analyze their working and performance, marketing
strategies highlight their performance , evaluating the various challenges faced
by them while providing suggestions and recommendations for improvement.
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METHODOLOGY
The data is collected from various articles, documents,
market analysis , published on the internet and also form
booklet of few auto insurance companies
the charts and table are done with the help of MS excel
software
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RELIANCE MONEY
Reliance Money, a Reliance Capital company and part of the Reliance Anil
Dhirubhai Ambani Group is a comprehensive financial services and solution
provider. It is a one-stop-shop, providing end-to-end financial solutions (including
mobile and web-based services). It has the largest non-banking distribution
channel with over 10,000 outlets and 20,000 touch points spread across 5,165
cities/ towns; catering to the diverse needs of over 3 million existing customers.
Reliance Money endeavors to change the way investors transact in financial
markets and avails financial services. It provides customers with access to
Equity, Equity and Commodity Derivatives, Offshore Investments, Portfolio
Management Services, Wealth Management Services, Investment Banking,
Mutual Funds, IPOs, Life and General Insurance products and Gold Coins.
Customers can also avail Loans, Credit Card, Money Transfer and Money
Changing services.
Reliance Capital is one of India's leading and fastest growing private sector
financial services companies, and ranks among the top 3 private sector financial
services and banking groups, in terms of net worth.
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RELIANCE GENERAL INSURANCE
Reliance General Insurance is one of India’s leading private general insurance
companies with over 94 customized insurance products catering to the corporate,
SME and individual customers. The Company has launched innovative products
like India’s first Over-The-Counter health & home insurance policies. Reliance
General Insurance has an extended network of over 200 offices spread across
173 cities in 22 states, a wide distribution channel network, 24x7 customer
service assistance and a full fledged website. It is also India’s first insurance
company to be awarded the ISO 9001:2000 certification across all functions,
processes, products and locations pan-India.
The various general insurance products offered by the company are
Health Insurance
Motor Insurance
Home Insurance
Travel Insurance
Accident Cover
WHAT IS INSURANCE?
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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.
Insurance provides us with protection against unforeseen incidents along with a
felling of security and also keep saving intact for the future.
WHY SHOULD ONE INSURE?
One of the main reasons one should insure is to protect one’s belongings and
assets against financial loss. When one has earned and accumulated property,
protecting it is prudent. The law also requires us to be insured against some
liabilities. That is, in case we should cause a loss to another person, that person
is entitled to compensation. To ensure that we can afford to pay that
compensation, the law requires us to buy liability insurance so that the
responsibility of paying the compensation is transferred to an insurance
company.
Insurance is generally categorized into two divisions:
1. Life Insurance
2. General Insurance
WHAT IS GENERAL INSURANCE?
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Insuring anything other than human life is called general insurance. Examples are
insuring property like house and belongings against fire and theft or vehicles
against accidental damage or theft. Injury due to accident or hospitalization for
illness and surgery can also be insured. Your liabilities to others arising out of the
law can also be insured and is compulsory in some cases like motor third party
insurance.
WHO SHOULD BUY GENERAL INSURANCE?
Anyone who owns an asset can buy insurance to protect it against losses due to
fire or theft and so on. Each one of us can insure our and our dependents’ health
and well being through hospitalization and personal accident policies. To buy a
policy the person should be the one who will bear financial losses if they occur.
This is known as insurable interest.
RISK COVERED UNDER GENERAL INSURANCE
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Non-life insurance companies have products that cover property against Fire and
allied perils, flood storm and inundation, earthquake and so on. There are
products that cover property against burglary, theft etc. The non-life companies
also offer policies covering machinery against breakdown, there are policies that
cover the hull of ships and so on.
Marine Cargo policy covers goods in transit including by sea, air and road.
Further, insurance of motor vehicles against damages and theft forms a major
chunk of non-life insurance business.
Personal insurance covers include policies for Accident, Health etc. Products
offering Personal Accident cover are benefit policies. Health insurance covers
offered by non-life insurers are mainly hospitalization covers either on
reimbursement or cashless basis. The cashless service is offered through Third
Party Administrators who have arrangements with various service providers, i.e.,
hospitals. The Third Party Administrators also provide service for reimbursement
claims. Sometimes the insurers themselves process reimbursement claims.
Insurance of property, it is important that the cover is taken for the actual value
of the property to avoid being imposed a penalty should there be a claim. Where
a property is undervalued for the purposes of insurance, the insured will have to
bear a ratable proportion of the loss
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Accident and health insurance policies are available for individuals as well as
groups. A group could be a group of employees of an organization or holders of
credit cards or deposit holders in a bank etc. Normally when a group is covered,
insurers offer group discounts.
Liability insurance covers such as Motor Third Party Liability Insurance,
Workmen’s Compensation Policy etc offer cover against legal liabilities that may
arise under the respective statutes— Motor Vehicles Act, The Workmen’s
Compensation Act etc. Some of the covers such as the foregoing (Motor Third
Party and Workmen’s Compensation policy) are compulsory by statute. Liability
Insurance not compulsory by statute is also gaining popularity these days. Many
industries insure against Public liability. There are liability covers available for
Products as well.
There are general insurance products that are in the nature of package policies
offering a combination of the covers mentioned above. For instance, there are
package policies available for householders, shop keepers and also for
professionals such as doctors, chartered accountants etc. Apart from offering
standard covers, insurers also offer customized or tailor-made ones.
IMPORTANCE OF GENERAL INSURANCE
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General Insurance covers are necessary for every family. It is important to protect
one’s property, which one might have acquired from one’s hard earned income. A
loss or damage to one’s property can leave one shattered. Losses created by
catastrophes such as the tsunami, earthquakes. Cyclones etc have left many
homeless and penniless. Such losses can be devastating but insurance could
help mitigate them. Property can be covered, so also the people against Personal
Accident. A Health Insurance policy can provide financial relief to a person
undergoing medical treatment whether due to a disease or an injury.
Industries also need to protect themselves by obtaining insurance covers to
protect their building, machinery, stocks etc. They need to cover their liabilities as
well. Financiers insist on insurance. So, most industries or businesses that are
financed by banks and other institutions do obtain covers. But are they obtaining
the right covers? And are they insuring adequately are questions that need to be
given some thought. Also organizations or industries that are self-financed should
ensure that they are protected by insurance.
Most general insurance covers are annual contracts. However, there are few
products that are long-term
HISTORY
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The general insurance industry in India was nationalized and a government
company known as General Insurance Corporation of India (GIC) was formed by
the Central Government in November 1972.
THE GENERAL INSURANCE IS BASICALLY DIVIDED INTO FOLLOWING
CATEGORIES
1. Auto Insurance
2. Health Insurance
3. Marine Insurance
4. Fire Insurance
5. Others
PREMIUM UNDERWRITTEN BY GENERAL INSURANCE -SEGMENT WISE
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2007-08
firemarinemotorhealthothers45.59%
17.59%17.92% 12.43%
6.47%
INDIAN GENERAL INSURANCE INDUSTRY - MARKET OVERVIEW
The Indian insurance sector is rapidly moving towards international
standards of free (risk-based) market pricing and new/innovative product
offerings. Big changes have occurred over the last few years, during which
the sector was opened to private participation, along with foreign direct
investment (FDI) capped at 26%.
India is the 5th largest market in Asia by premium, following Japan, Korea,
China and Taiwan. The country is geographically large and has the world’s
2nd largest population -- 1.13 billion in 2007 – but it also has one of the
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lowest penetration rates for property and casualty insurance in Asia in
terms of premium as a percentage of GDP.
India’s general insurance market witnessed a variety of changes as
deregulation continued at a hectic pace.
The sector achieved double-digit growth and this trend is expected to
persist over the medium term on the back of greater penetration, due
partly in turn to the intense marketing efforts of private insurers. The
removal of pricing controls on fire and engineering lines in 2007, insurers
have discounted their rates by 50% in order to retain or win market share.
Private players continue to capture market share at the expense of public
enterprises on a mix of aggressive distribution and service. The number of
private insurers is growing as various foreign companies have announced
intentions to establish joint ventures.
Rate reductions in the recently de-tariff corporate portfolio (fire &
engineering) has impacted the premium growth, but this is also leading to
the greater sales of existing and new products. With the regulator lifting
the ceiling on foreign ownership to 49%, foreign players participation has
increase both volumes and types of products.
With the increasing number of insurers in the private sector. The industry
forecasts for a continuous growth and rise domestic demand.
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General Insurance Penetration 0.60% of GDP and the Gross Premium has
increased to(2007-08) is Rs.28130 Crores compared to the Gross Premium
(2000-01) of Rs.9620 Crores
With CAGR: 16.6%
IMPACT OF RECESSION ON GENERAL INSURANCE
The slowdown in economic activities in India has led to a sharp reduction in asset
creation in the Indian industries. This along with rigorous cost cutting measures in
all businesses has directly impacted the general insurance (non-life) industry in
the country.
The 16-players industry together collected Rs 30,601 crore as premium
underwritten in 2008-09, up only 9.10 per cent from Rs 28,051 crore in 2007-08.
This was the slowest growth in gross premium underwritten in the last five years.
The general insurance industry’s premium collection grew 22 per cent in 2006-07
and 12 per cent in 2007-08.
The most important reason for the drop in business was that many small and
medium businesses either did not buy insurance covers, like fire insurance, or
went for lower cover to save on premium expenditure. Also the sharp drop in
sales of commercial vehicles, tractors and near stagnation in car sales led to a
big drop in insurance premium underwritten
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Among the private players IFFCO-Tokio did the best with 22 per cent growth in
premium underwritten in 2008-09. Royal Sudaram, Bajaj Allianz are the other two
players to manage a decent growth. Among the government companies only
United India could manage to grow14 per cent, while the other three grew only by
single digit.
One of the major milestones in the Indian general insurance industry has been
the withdrawal of premium pricing restrictions post January 2007.
General insurance companies also made losses because abolition of tariffs has
led to a virtual price war in certain lines of business like Fire and Engineering
insurance. This is evident from the higher claims ratio in both, the fire and motor
segment as well as the higher underwriting losses posted by both the private as
well as public sector companies,
On the whole, while short term scenario for the general insurance sector appears
to be challenging the long term prospects definitely present ample opportunities
for growth
MAJOR CHALLENGES
Awareness
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It is the main problem faced by all the insurance company is lack of awareness
about Risk exposures and about insurance products available to the
customers. In India only 20% of the population is insured. Majority of the
populations who are living in the rural areas and sub urban areas are not aware
of the about risk exposures and about insurance products available in the market
Affordability
In India majority of the population standard of living is low and majority of them
belong to middle class and lower class and they have very little money left after
satisfying basic needs. Uneconomical premium of insurance policy is also a
major constrains
Accessibility
The policies are complex to understand by a layman the procedures are difficult
to obtain policies if done individual .there are a lot of activities and formalities
involved in order to get the insurance policy
Inappropriate / inadequate distribution strategies.
Majority of the population is not aware of the benefits that the insurance company
provides
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And they are also not aware of the various schemes which these companies
introduce
MAJOR PLAYERS IN GENERAL INSURANCE INDUSTRY
PUBLIC SECTOR
Until 2000, the general insurance sector had only four public sector
players, formed after the nationalization of 107 general insurers.
The public enterprises –
Oriental Insurance Company of India (OIC),
National Insurance Company of India (NIC),
New India Assurance Company of India (NIA)
United Insurance Company of India (UII).
They primarily focused on their immediate regions and there was little
competition, leading to a near monopolistic environment.
PRIVATE SECTOR
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The private sector has been steadily growing market share despite the fact
that public sector companies have been around for a lot longer. The
private insurers enjoy considerable operational flexibility, whereas the
public sector companies have been constrained by their traditions and
inability to innovate. There are total 12 players in the private sector.
In the private sector, the major players are –
IFFCO-TOKIO General insurance
Reliance General Insurance Co. Ltd.
ICICI LOMBARD-
TATA AIG- General Insurance
BAJAJ ALLIANCCE,
BHARTI-AXA General insurance
CHOLAMANDALAM ,
FUTURE GENERALI
Royal Sudaram General Insurance
Universal Sompo General Insurance
Shriram General Insurance
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The inherent operational flexibility of the private players – such as through
aggressive pricing -- has allowed them to capture a greater share of large
corporate accounts.
PRIVATE SECTOR’S GROWING INFLUENCE
Market Share – Redistribution
Premium and volume public V/s private
Due to the effectiveness of private marketing strategies, the market share
of public insurers has consistently declined. Given a faster growth rate, the
market share of the private sector is catching that of the public sector and
the two will likely converge over the medium term.
Before the removal of tariffs, fire, engineering and motor own damage
(OD) contributed a much greater proportion of business for private players
than was the case for public firms.
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Fire and engineering now broadly contribute a similar proportion of overall
business for the private and public sectors.
In terms of overall business, the focus has shifted towards the retail
segments of motor and health, where good growth is expected.
Regional Focus
Public insurers have traditionally focused at the regional level with one
each in north, east, west and south India. On account of their public
charters and the absence of competitive pressures, these entities did not
have to actively market their products and just wrote whatever business
came their way.
Operational Flexibility
In public entities there is lack the operational flexibility enjoyed as
compared by the private players. Their limited capacity to innovate has
impacted their ability to tailor and aggressively price products for large
corporations.
The private players by contrast have focused on account-level profitability
for large corporations and have expanded their shares by cross-
subsidizing tariffed products.
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Client Servicing
The public insurers have also been hampered in claims servicing by their
process-oriented approach and limited operational flexibility. They have
been unable to expedite claim settlements through out-of-court
negotiations since a large proportion of their claims pertain to the third
party motor segment, which is subject to adjudication by the Motor
Accident Claim Tribunal. The result is a time-consuming and involved
process.
The situation is not the same with the private player as they enjoy more
operational flexibility which in turn saves a lot of time of both parties
Strong Infrastructure and Systems
Private players are not hindered by their charters or legacy systems and
have constructed technologically advanced infrastructure.
They started with large investments in technology, which helped them to
build robust data management systems. This characteristic enables in turn
quick and effective decision-making for pricing and claims settlements,
attributes vital to building franchises.
On the other hand, public entities have only recently upgraded their
systems and have to grapple with transition issues, such as moving from
paper to paper-less systems. They are encumbered by legacy systems
and fragmented databases, and have not fully used their past claim
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experiences, something which could give them a strong pricing edge in a
de-tariffed environment
.
Focused Underwriting Strategy
The private players, especially during their initial years, have selectively
targeted the more profitable lines of the public sector companies for
growth. They benefit from the experiences of the public sector as well as
their international joint-venture partners. They have drawn talent from
public sector companies.
Superior Claim Paying/Processing Capability
The combination of superior technology and selective underwriting has
allowed the private sector to set high standards for policyholder services,
thereby differentiating themselves from public sector insurers. The claim
settlement performance of the private sector has also been superior
because of the limited amount of third party motor business that they have
underwritten. Such claims normally take a longer time to settle.
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Distribution – Rise of Banc assurance
The Indian general insurance industry has historically been dominated by
the agency channel, through which 75% of total premium income is
sourced. But in recent periods other channels – for example, bank
assurance, brokers, corporate agents, direct marketing and direct sales
channels -- are gaining importance.
Most insurers now have tie-ups with the banks, which act as corporate
agents and are remunerated on a commission basis. For example, ICICI
Lombard sources a major portion of its business from a tie-up with ICICI
Bank. Similarly, Bajaj Allianz General Insurance Company Limited (BAIL,
second largest private player) has tie-ups with large number of banks,
which contribute a big share of its total premium income.
At this time, low cost channels like tele-sales and the internet are still not
developed in India, mainly due to relatively poor knowledge about
insurance products and low internet penetration.
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REGULATORY ENVIRONMENT
Impact of Regulation – Emphasis on Policyholder Protection
IRDA was set up with introduction of the IRDA Act in 1999. Its initial
purpose was to bring about general discipline to the industry. It is
responsible for protecting the interest of policyholders and promoting
efficiency in the insurance business.
To ensure their stability, transparency and financial strength, new entrants
are subject to rigorous scrutiny and the conduct of their business is closely
monitored, particularly in relation to capital adequacy and prudent
investment policies. The regulatory environment to date has attracted
many insurers whose domestic partners are leaders in their chosen fields
and their foreign counterparts are all well-established with considerable
experience in developed and emerging markets.
The regulator has laid down investment guidelines that limit exposure in
certain class of assets and also sets threshold limits for some assets. At
the moment, insurers have to invest a minimum 30% in government
securities, in contrast to some of the more mature markets like the US and
Australia, which do not have such restrictions. Compliance with these
relatively restrictive guidelines could limit insurers’ ability to diversify and
build optimal portfolios.
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The guidelines also stipulate a minimum 10% investment in the social and
infrastructure sector. The investment in un-approved securities has been
limited to 25% of total investment books.
General insurers must maintain a solvency ratio (available solvency
margin/required solvency margin) of 1.5 times, calculated based on net
premium earned and net claims incurred in various segments. Public
sector entities have maintained comfortable solvency margins, supported
by their strong investment portfolios and capitalizations. The private
players, being in a growth phase, may require capital infusions from time
to time to maintain their solvency requirements.
The Indian insurance regulator has set the minimum capital required at a
level to ensure that all insurers -- especially the start-ups -- have enough
funds to meet their claim obligations and to limit their overall writings to the
amounts supported by their capital bases. The need to manage capital to
comply with IRDA’s solvency margin will induce insurers to be more risk
conscious when taking on new business
To ensure an orderly transition towards a deregulated insurance market
and risk-based pricing, IRDA has enacted enabling legislation and issued
guidelines to de-tariff various segments. De-tariffing -- introduced in
January 2007 -- has been well accepted and corrections to prices in
profitable lines have been dramatic and have noticeably impacted
premium growth rates. In fact, the discounting has been so extreme that
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the regulator intervened in September 2007 and capped maximum
discounts at 52.5%
Three Phases of De-Tariffing
India’s general insurance industry has undergone de-tariffing in three
phases:
1994 -- marine cargo, personal accident, health, banker liability and
aviation
2005-06 -- marine hull segment
2007 - Fire, engineering and motor own damage (OD).
However, the de-tariffing did not immediately allow for free pricing.
Instead, insurers were required to follow the “file and use” method,
whereby they were expected to file a charter of proposed rates, which was
then approved by IRDA.
The restrictions on price discounts during the initial periods were intended
to ensure orderly price adjustments. They were removed in January 2008.
The only segment that remains under a tariff regime is the third party
motor business, although there has been a large upward revision in this
area’s premium rates by regulators in recent times. Moreover, commercial
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third party motor business, which has traditionally contributed to adverse
claims ratios, has been moved to a common pool, resulting in loss share
OPPORTUNITIES AVAILABLE
The intense competition brought by deregulation has encouraged
the industry to innovate in all areas; from underwriting, marketing,
policy holder servicing to record-keeping
Aggressive marketing strategies by private sector insurers will buy
consumer awareness of risk and expand the markets for products
Competition in a deregulated environment will allow market forces
to set premiums that are appropriate for exposures and push
insurers to differentiate their products and services
Innovations in distribution and improvements in market penetration
will follow as public and private insurers compete to market their
products
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Allowing insurers to issue their own policy wordings and set their
own rates will enable underwriters to tailor products to meet client
needs
The existence of stringent licensing requirements ensure that only
adequately capitalized and professionally managed companies are
eligible to carry out insurance and reinsurance
The Insurance Regulatory Development Authority of India’s (IRDA)
emphasis on quarterly reporting/monitoring of insurer solvency will
enhance capital adequacy and transparency.
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FUTURE PROSPECTS
Huge market largely untapped especially in Rural & Urban regions can be
targeted to increase the number of insurer in the market
As high as 70% of population is still not covered by insurance. So the
company can conduct mass campaign and educated the people more
about the products and also about the risk covered and the various
benefits which they can avail .The Company can use various medium to
increases the awareness
Increase in standard of living, disposable income, literacy, insurance
awareness throws open huge opportunities on insurance.
High growth in Automobile sector.
Huge strides in Health Care opening up huge Health Insurance potential.
In Rural sector large number of Micro finance institutions, Self Help
Groups are setup who can be the major clients of this industry
The Government initiatives on Mass insurance.
General Insurance would grow at CAGR 17% next 5years.
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The premium is expected to grow from 28,000 crores to 1lakh crore by
2015.
The Large part of growth is expected to come from come from retail and
rural sectors.
More and more number of private players entering into this industry and
along with foreign companies through joint ventures.FDI is also playing a
major role in this industry as government has increased the level of
investment by them.
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AUTO INSURANCE
Auto Insurance often referred to as Vehicle, Motor or Car insurance is
categorized under General Insurance. Vehicle Insurance can be purchased from
an insurance company or an insurer for the purpose of getting the loss
compensated related to automobiles. The main criteria that the insured wants to
get fulfilled by purchasing a Motor insurance are to get compensation against any
traffic accident or liability as a result of an accident or theft of the vehicle.
Under the provisions of the Motor Vehicles Act, it is mandatory that every vehicle
should have a valid Insurance to drive on the road. Any vehicle used for social,
domestic and pleasure purpose and for the insurer's business motor purpose
should be insured. The violation of this act is punishable
Auto insurance is divided into three parts
Two wheeler Insurance
Car-Insurance
Commercial Insurance
There are two types of Auto Insurance,
“Motor Policy A -Act Only Risk” (also known as third party insurance)
"Motor Policy B" (also known as comprehensive insurance policy).
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MOTOR POLICY A- THIRD PARTY INSURANCE COVERS
Motor Policy A or Third party insurance covers unlimited pay compensation for
death or bodily injuries to third Parties and damage to the property of the third
parties other than insured, up to a limit. Under this policy the insured is treated as
the first party, the insuring company the second party and all others would be
third parties. This insurance protects the insured from legal liabilities following an
accident involving his/her vehicle. It does not cover any damage to his/her
vehicle.
The limit of third party property damage is limited to 7.5 lakhs.
Third Party insurance covers Personal Injury and Property damage.
Personal Injury includes
1. Liability for death or injuries to third parties - this means that you are insured
against death or injury (caused by your vehicle) to pedestrians, occupants of
other vehicles, and outsiders other than passengers, for unlimited amounts.
Passengers of private vehicles and pillion riders are also deemed covered.
2. Liability to employees connected with operation of the vehicle- this means you
are insured against death or injury (caused by your vehicle) to the vehicle's
drivers, cleaners, conductors, and coolies...employees used in the operation of
the vehicle.
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3. Liability to passengers carried in the vehicle for hire or reward - this means
that as owner of a taxi, bus or auto-rickshaw, you are insured against death or
injury (caused by your vehicle) to the passengers.
Property damage covers the vehicle itself and you are insured against various
damages that occurs to your vehicle on account of accidents and other instances.
MOTOR POLICY B - COMPREHENSIVE INSURANCE
Comprehensive insurance covers third party liability as well as loss or damage to
the insured vehicle itself by the way of accident, theft etc and some other
specified risks. Normally it is advisable to get the Comprehensive insurance
Policy because it covers insured, vehicle and third party with a single policy.
A Comprehensive Auto Insurance Policy Includes
1. Accident
2. Fire, Explosion, self-ignition, lightning
3. Burglary, house-breaking, theft
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4. Riots & strikes
5. Earthquakes
6. Flood, typhoon, hurricane, storm, cyclones
7. Malicious acts
8. Terrorism
9. Transit by rail/road, air, waterways
10.Also included is the towing charge (up to Rs.1, 500/- for private
vehicles and Rs.2, 500/- for commercial vehicles) incurred due to
accident to the vehicle.
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HOW THE POLICY CAN BE OBTAINED
Approach the insurance company directly
Apply through business partners of insurance companies
The Insurance Policy can be obtained through an insurance agent or
development officer of the insurance company. While giving insurance premium
the insurer has to obtain a cover note from the insurance company and which is
having the validity of 60 days only. Within this period the insurance company
issue policy and which is known as Certificate of Motor Policy. Duplicate
Certificate instead of defaced, mutilated or lost certificates can be obtained on
payment of a prescribed fee and after production of an affidavit to that effect.
PREMIUM
As per the Indian Motor Tariff, published by IRDA, all the vehicles are insured at
a fixed value called the Insured's Declared Value (IDV). IDV is based on the ex-
showroom cost of the vehicle.
On every renewal of policy the IDV is calculated after deducting the prescribed
depreciation. One can extend the coverage for Personal Accident, accessories
etc by paying an additional premium. Presently there is a provision for the
Insuring Company to give some discounts of their own. But by the end of
September 2007, according to a new resolution passed by the IRDA, the
calculation of IDV will take into account the gender of the owner and their age
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also, along with the usual norms of calculation. From April 2007 onwards the
Insurance Industry in India is also under de tariff scenario.
RENEWAL
Usually the Insurance policy is valid for one year. It becomes active soon after
the payment of premium is received by the insurance company and will end
exactly a year later. So the insured must renew the policy before the expiry date.
Any delay in the renewal will make the policy invalid. For every renewal a fresh
certificate should be obtained
NO CLAIM BONUS
The Policy holders who have not made any claim in the previous years will be
rewarded by the insurers by giving a discount of a comprehensive insurance on a
reducing balance basis in the future years. If you are carrying forward a no-claim
bonus on any vehicle, you can get it transferred to a new vehicle of the same
type (four wheeler to four wheeler ). The only condition to avail of this discount is
that you have to sell off your old vehicle. Even if you wish to retain your old
vehicle, you can get around this clause by gifting the old vehicle to a family
member.
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TRANSFER OF INSURANCE POLICY
If you purchase a used vehicle, you can transfer the existing insurance policy to
your name. But, you must inform the insuring company within 2 weeks of
purchasing the vehicle.
CLAIMING PROCEDURE
Comprehensive Insurance Claim
If an accident takes place, you must report to the insurance company as soon as
possible and submit the claim forms. An estimate for repairs /replacements
should also be submitted.
The documents to be submitted are
Claim form
Original / Copy of the insurance policy
Copy of registration certificate of vehicle and driving license of the driver
Copy of the estimated cost of repair given by the garage
FIR or a police report if the accident is major, or a criminal offence, or if it caused
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third-party damage or resulted in injuries
Fire brigade report, if the loss is due to a fire
Submission of relevant documents, the Insurance company will direct a person to
inspect the value of damage/replacement and genuineness of estimate
submitted and according to his report the claim will be settled.
After repair, a final bill of the repair and replacements and the stamped receipt
for payment from the work shop should be submitted to the company to settle
the claim. Only after the inspection of the repaired vehicle that you are allowed
to take the vehicle home. According to the rule of some companies, payment will
be done either directly to the repairer in the form of a cheque or the companies
may recommend preferred auto shops for repair. In case of settlement of claim
either for total loss of the vehicle or for replacement of certain items, such
damaged vehicle or parts thence belongs to the insurance company.
In case, a third party is involved in the accident, a case must be filed immediately with
the police and at the same time a report should also be sent to the insurance company.
If your vehicle has been stolen, file a police complaint and inform the insurer. If you
don't get your vehicle within 90 days, obtain a "non-traceable report’ from the police and
submit to the insuring company to start the claiming process.
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THIRD PARTY INSURANCE CLAIM
In case, a third party is involved in the accident, a case must be filed immediately in the
police station and a report also should be sent to the insurance company at the same
time. Your Insurance Company will pay you
Documents Required for Auto Insurance Claim
For Accident Claims
Claim form duly signed
RC copy of the vehicle
Driving license copy
FIR on a case-to-case basis
Original estimate
Original repair invoice, payment receipt from the service center
For Third Party Claims
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Claim form duly signed
RC copy of the vehicle
Driving license copy
Original policy copy
Original FIR copy
RTO transfer papers duly signed, mentioning that the vehicle cannot be located
directly.
AUTO POLICY OF GOVERNMENT OF INDIA
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VISION
TO ESTABLISH A GLOBALLY COMPETITIVE AUTOMOTIVE INDUSTRY IN
INDIA AND TO DOUBLE ITS CONTRIBUTION TO THE ECONOMY BY 2010
Policy Objectives
This policy aims to promote integrated, phased, enduring and self-sustained
growth of the Indian automotive industry. The objectives are to:-
Exalt the sector as a lever of industrial growth and employment and to
achieve a high degree of value addition in the country.
Promote a globally competitive automotive industry and emerge as a global
source for auto components.
Establish an international hub for manufacturing small, affordable
passenger cars and a key center for manufacturing Tractors and Two-
wheelers in the world.
Ensure a balanced transition to open trade at a minimal risk to the Indian economy
and local industry.
Conduce incessant modernization of the industry and facilitate indigenous
design, research and development.
Steer India's software industry into automotive technology.
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Assist development of vehicles propelled by alternate energy sources.
Development of domestic safety and environmental standards at par with
international standards.
SIAM welcomed the announcement of Auto Policy, and feels that the policy
would serve as a reference document for all stake holders and other
interested parties.
The Auto Policy has spelt out the direction of growth for the auto sector in India and
addresses most concerns of the automobile sector, including-
Promotion of R&D in the automotive sector to ensure continuous technology up
gradation, building better designing capacities to remain competitive.
Impetus to Alternative Fuel Vehicles through appropriate long term fiscal structure to
facilitate their acceptance.
Emphasis on low emission fuel auto technologies and availability of appropriate auto
fuels and encouragement to construction of safer bus/truck bodies - subjecting
unorganised sector also to 16% excise duty on body building activity as in case of
OEMs
The policy has rightly recognised the need for modernising the parc profile of vehicles
to arrest degradation of air quality. The terminal life policy for commercial vehicles and
move toward international taxing policies linked to age of vehicles, are steps in the
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right direction.
SIAM has always been advocating encouragement of value addition within the
country against mere trading activity. However, this aspect has not been fully
addressed. The Auto Policy allows automatic approval for foreign equity investment
upto 100% in the automotive sector and does not lay down any minimum investment
criteria.
The recommendation of promoting passenger cars of length upto 3.8 meters through
excise benefits is not in line with the free market concept and may lead to market
distortion.
However, with the Auto Policy in place, the automotive industry would get further
fillig to become vibrant and globally competitive. The industry would get the required
support from other Ministries and departments of Government of India in achieving
the goals laid down in the auto policy.
CHALLENGES
Premiums rates remain under pressure due to intense competition on the
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more profitable lines
Falling premium income without a corresponding reduction in claims -- is
likely to drive down profits
Public and private sector insurers’ greater reliance on their investment
portfolios to generate sufficient income and gains for net profits would subject
them to the volatility of the financial markets
Private insurers need to raise more capital, otherwise growth could be
constrained since reliance on reinsurance for capital relief is not always
viable or available
Traditional distribution channels, especially tied agents, need to be improved
to match the new product offerings
There is general lack of transparency as financial and operational data for
insurers are not readily available as none of India’s insurers are directly listed
on stock exchanges
Like all developing economies on a fast track, the shortage of trained
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insurance professionals and technicians at all levels cannot be remedied in
the short term
INDIAN AUTO INSURANCE INDUSTRY - MARKET OVERVIEW
The Indian auto insurance sector is rapidly moving towards international
standards, market pricing and new/innovative product offerings. Big changes
have occurred over the last decade.
The major part of the revenue earned by general insurance is from auto
insurance sector
Indian economy is the 12thlargest in the world, with a GDP of $1.25 trillion
and 3rd largest in terms of purchasing power parity.
With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves,
a booming capital market and a rapidly expanding FDI inflows,
it is on the fulcrum of an ever increasing growth
Most auto insurance companies in India have comprehensive policies to help their
customers. Some of them have also tied up with top automobile manufacturers
fast insurance process.
Auto insurance has started special services like 24/7 service by phone and provides
online assistance on all days, including national holidays. Check instant updates
of their claim status through mobile messaging, offers towing facility in
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case of a breakdown or accident.
Auto Insurance is one major sector which has been on a continuous growth
curve since the revival of Indian economy.
The huge population and growing per capita income besides several
other driving factors, has created huge opportunity for the auto insurance
With the entry of private sector players backed by foreign expertise, Indian
Auto insurance market has become more vibrant. Competition in this market is
increasing with private companies entering into this business
Due continuous competition companies are making effort to lure the customers with
new product offerings. Companies are also using Information/communication
technology extensively
and appropriately to reach out to the whole population
MAJOR PLAYERS IN AUTO INSURANCE INDUSTRY
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PUBLIC SECTOR
Oriental Insurance Company of India (OIC),
National Insurance Company of India (NIC),
New India Assurance Company of India (NIA)
United Insurance Company of India (UII) .
PRIVATE SECTOR
HDFC Insurance
Kodak Mahindra General Insurance
Bajaj Allianz General Insurance company
Reliance General Insurance company
SBI General Insurance
IFFCO-TOKIO General insurance
ICICI Lombard General insurance
BHARTI-AXA General insurance
TATA AIG- General Insurance
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OPPORTUNITIES
Continuous growth in Auto industry
Growing demand from semi-urban population
Entry of private players following the deregulation
Rising demand for retirement provision in the ageing population
Rising per capita incomes among the strong middle class, and spreading
affluence
Growing consumer class and increase in spending & saving capacity
Public private partnerships infrastructure development
Dearth of innovative & buyer-friendly insurance products
New players entering into this sector along with FDI investment in this sector.
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FUTURE PROSPECTS
High growth in Automobile sector.
Increase in standard of living, literacy, and insurance awareness throws open huge
opportunities on insurance.
Increase in disposable income of population of middle class society
More and more number of private players entering into this industry and along with
foreign companies through joint ventures.
FDI is also playing a major role in this industry as government has
opened up investment upto 49% from 26%
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FINDINGS
The Indian insurance sector is rapidly growing for last few years.
Big changes have occurred over the last few years, during which the sector
was opened to private participation, along with foreign direct investment.
It also has one of the lowest penetration rates for property and casualty
insurance in Asia in terms of premium as a percentage of GDP.
India’s general insurance market witnessed a variety of changes as
deregulation continued at a hectic pace.
Rate reductions in the recently de-tariff corporate portfolio (fire &
engineering) has impacted the premium growth, but this is also leading to the
greater sales of existing and new products.
The number of private insurers is growing and they continue to capture
market share at the expense of public enterprises on a mix of aggressive
distribution and service.
With the increasing number of insurers in the private sector. The industry
forecasts for a continuous growth and rise domestic demand.
Majority of the revenue is earned by the motor vehicle segment of the general
insurance
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SUGGESTIONS
Create awareness among the people of the various insurance products available
in the market
Capture the untapped population residing in the rural and sub urban parts of the
country
Spread the message of benefits of insurance through mass campaign
The industry needs innovative low cost distribution and servicing
Strategies
The company should hire more agents with more knowledge about the
products with proper training
The company can have an effective Bancassurance /NBFC tie ups so that the
entire Banking infrastructure is utilized for distribution of insurance
products
The insurance policies should be simple & less legalistic, with reasonable price,
hassle free policy issuance and claim process more package policies
The companies should also introduce short term policies
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CONCLUSION
Considering the high level of underwriting losses, going forward adjustment in
premium rates would occur when the industry matures and consolidation takes place.
The ability to price effectively will also imply an increased focus on risk management
by the insurance companies.
The continual entry of new private players coupled with the intense competition sparked
off by the detariffication of general insurance sector has also resulted in strengthening
the bargaining power of the customer and development of customer centric insurance
products.
On the whole, while short term scenario for the general insurance sector appears to be
challenging the long term prospects definitely present ample opportunities for growth.
While the government’s plan to raise FDI cap in insurance companies from 26 to 49 per
cent will lead to more capital flowing in, the untapped market potential holds the
opportunity to grow faster.
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BIBLIOGRAPHY
“Indian Insurance: The Way Forward”- G Srinivasan,
India: The Next Insurance Giant India by PRwire Pvt. Ltd.
www.tourindia.com -Insurance in India
www.moody.com –Indian General insurance outlook
www.IRDA,com
annual report 2007-08 –
www.automobileindia.com - Auto Insurance Companies
www.auto.webindia123.com- auto insurance in India
www.generalinsuranceindia .com
www.siam.com - auto policy govt of India
www.reliancegeral.co.in
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