INDIA INSURANCE SECTOR

By : Satish Kumar Verma Sweta Avnish Shrankhla Yadav

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.”

Vital Stats of Indian Insurance Industry• As on Sep 2012• 52 Insurance company are currently operating in India.• 24 are in Life Insurance Business• 27 are in General Insurance Business• General Insurance Corporation (GIC) is the sole national reinsurer.

• Life insurance industry recorded a premium income of 2, 87,072 crore during 2011-12 as against 2, 91,639 crore in the previous financial year.

• India ranked 10th among the 156 countries in Life Insurance Business.• Non-life insurance sector witnessed a signifi cant growth of 13.5During 2011 – 12.• India's insurance industry will outpace economic growth and is likely

to reach $350-400 billion in terms of premium income by 2020.

11.08 % 2010-11

Decline of 5 % 2011-12

TYPE OF INSURANCE

TYPES OF INSURANCE

LIFE INSURANCE GENERAL INSURANCE

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.

LIFE INSURANCE

ENDOWMENT POLICY

WHOLE LIFE POLICYACCIDENTAL DEATH

Life Insurance Market Share

Source: Report of IRDA 2012 - 13

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.

GENERAL INSURANCE

MOTOR INSURANCE

PROPERTY INSURANCE

HEALTH INSURANCETRAVEL INSURANCE

DISABILITY INSURANCE

GENERAL 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.

• 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.

Contd..• 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.

• 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.

(General Insurance Premium Income) Statistics

Source: Report of IRDA 2012 - 13

Non Life Insurance Income form Premium

Source: Report of IRDA 2012 - 13

Market Share Non Life Insurance

Source: Report of IRDA 2012 - 13

Sales Channel

Source: Report of IRDA 2012 - 13

HOW INSURANCE PROCESS RUNS??

Prospective Client Insurance Company

Descriptive Briefing of the Policies

Selection of the best suitable scheme

Selling of the Policy with the pre decided premium’s rate

Through AGENT (under writer)

Occurrence of the unnatural event leading to the

payment of insured amount to the Nominee

Redemption of the insurance money after maturity of the Policy

INDIA ON A GROWTH PLATFORM

INDIAN INSURANCE SECTOR HISTORY

• 1818 First life insurance company “Oriental Life Insurance Company (in Calcutta) started by Anita Bhavsar to carter the needs of European community.

• 1850 First general insurance company “Tritan Insurance Company (in Calcutta)

• In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer

• 1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business.

Contd.. Phase Period Industry

Phase Ia. Life Insurance

b. General Insurance

1818 to 1956 (about 138 yrs)

1850 to 1972 (about 122 yrs)

Many (245) private sector companies only, competitive market.

Many (107) private sector companies only, competitive market.

Phase IIa.Life Insurance

b.General Insurance

1956 to 2000 (about 44 yrs)

1972 to 2000 (about 28 yrs)

Nationalization, public sector or State monopoly, only one company.

Nationalization, public sector monopoly, only one company with its four subsidiaries.

Phase IIILife Insurance and General Insurance

After 2000 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)

IMPORTANT MILESTONE IN THE INSURANCE BUSINESS

1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses.

1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India. The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British.

Cont..• 1907: The Indian Mercantile Insurance Ltd. was set up which was the first

company of its type to transact all general insurance business.

• 1957: General Insurance Council, an arm of the Insurance Association of India, framed a code of conduct for guaranteeing fair conduct and sound business patterns.

• • 1968: The Insurance Act improved for regulating investments and set

minimal solvency levels and the Tariff Advisory Committee was set up.• • 1972: The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India. It was with effect from 1st January 1973. 107 insurers integrated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC was incorporated as a company.

MAJOR PLAYERS

MAJOR PLAYERS• Insurance Companies in India Life Insurance Companies:• Aviva Life Insurance • Bajaj Allianz • Life Insurance • Birla Sun-Life Insurance • HDFC Standard Life Insurance • ING Vysya Life Insurance • Life Insurance Corporation • Max New York Life Insurance • MetLife Insurance • Om Kotak Mahindra Life Insurance • Reliance Life Insurance • Sahara India Life Insurance • SBI Life Insurance • TATA AIG Life Insurance

PLAYER’S PROFILE:LIFE INSURANCE

PLAYER’S PROFILE:GENERAL INSURANCE

MARKET SHARE

5%1%

21%

28%

4%

12%

4%

9%

5%2% 3% 4% 2%

MAX NEW YORKSHIRAM LIFEBAJAJ ALLINZICICI PRUDENTIALRELIANCESBI LIFETATA AIGHDFC SLICBIRLA SUNLIFEING VYSYAKOTAK MAHINDRAAVIVAMET LIFE

PRIVATE SECTOR COMPANIES-Several leading private sector companies have entered in the field of insurance sector, both in life and non-life insurance. -There are several MNCs, in Joint Venture with Indian private sector firms, have started operations in a big wayRegd.

No.Date of Regd.

Name of the Company

Who Owns it (in percentage)

101 23.10.00 HDFC Standard Life Standard Life, UK - 18 and HDFC – 82104 15.11.00 Max New York Life New York Life - 26 and Max India – 74105 24.11.00 ICICI Prudential Life Prudential, UK - 26 and ICICI Bank – 74107 10.01.01 Om Kotak Mahindra Old Maruthi, South Africa – 26 and Kotak

Mahindra – 74

109 31.01.01 Birla Sunlife Sun Life of Canada–26 and Birla Capital– 74110 12.02.01 Tata AIG AIG, US – 26 and Tatas – 74111 30.03.01 SBI Life Cardif SA, France – 26 and State Bank of

India – 74

114 02.08.01 ING Vysya ING, Holland–26 and GMR Group, Hyd–54 and ING Vysya Bank–20

CURRENT SCENARIO contd….Regd.

No.Date of Regd.

Name of the Company

Who Owns it (in percentage)

116 03.08.01 Allianz Bajaj Allianz AG, Germany – 26 and Bajaj Auto – 74

117 06.08.01 Metlife Metlife, US–26, Shapoorji Pallonji–30 and J&K Bank–25

121 03.01.02 AMP Sanmar AMP, Australia–26 and Sanmar Group, Chennai–74

122 03.01.02 Aviva Aviva PLC, UK– 26 and Dabur Investments – 74

*** *** Reliance Life*** *** Bharathi AXA127 06.02.04 Sahara India

Insurance

128 07.11.05 Shriram Life Insurance

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

LIC

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”.

•PRINCIPLES AND INVESTMENT POLICY OF LIC’s1. Security of funds, and 2. Maximization of return of investment,• Investment Policy 1.Central Govt. marketable securities being not less

than 20%2.Loans to Housing Bank including above (1) being

not less than 25%3.State Govt. securities including Govt. Guaranteed

marketable securities, inclusive of (2) above being not less than 50%

1.Socially oriented sectors including public sector, co-operative sector house building by policyholders, own house scheme, inclusive of (3) above not less than

75%2.Private corporate sector, loans to policyholders for

construction and acquisition of immovable property 25%

INVESTMENT POLICY OF LIC’s

INVESTMENT POLICY OF LIC’s contd…

LIC Products & Plans

Children Plans

Jeevan Anurag Komal Jeevan CDA Endowment Vesting at 21

Marriage Endowment OrEducational Annuity Plan

CDA Endowment Vesting 18

Jeevan Kishore Jeevan ChhayaChild Career Plan Child Future Plan

Child Fortune Plus

Plans For Handicapped Dependents

Jeevan Aadhar Jeevan Vishwas

The Endowment Assurance Policy The Endowment Assurance Policy-Limited Payment Jeevan Mitra(Double Cover Endowment Plan) Jeevan Mitra(Triple Cover Endowment Plan) Jeevan Anand New Janaraksha PlanJeevan Amrit

   

Endowment Assurance Plans

Plane For High Worth Individuals

Jeevan Shree-I Jeevan Pramukh

The Money Back Policy-20 Years The Money Back Policy-25 Years Jeevan Surabhi-15 Years Jeevan Surabhi-20 Years Jeevan Surabhi-25 Years Bima Bachat

 

Money Back Plans

Special Money Back Plans For Womens

Jeevan Bharati-1

Whole Life Plans

The Whole Life Policy The Whole Life Policy- Limited Payment The Whole Life Policy- Single Premium Jeevan Anand Jeevan Tarang

Two Year Temporary Assurance Policy The Convertible Term Assurance Policy Anmol Jeevan-I Amulya Jeevan-I

Term Assurance Plans

Joint Life Plan

Jeevan Saathi PlusJeevan Saathi

      

Jeevan NidhiJeevan Akshay-VINew Jeevan Dhara-I New Jeevan Suraksha-I

Pension Plan

Wealth PlusMarket Plus IProfit PlusMoney Plus-IChild Fortune PlusJeevan Saathi Plus

Unit Plan

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., and4. United India Insurance Co. Ltd.

G I C contd…• 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.

• GIC’s four subsidiaries:1. National Insurance Co. Ltd.,2. New India Assurance Co. Ltd., 3. Oriental Fire and General Insurance Co. Ltd., and4. United India Insurance Co. Ltd.

• The Govt of India took over Control, supervision, and policy making is with GIC.

G I C contd…

• 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).

GIC TYPES AND STRUCTURE OF BUSINESS

- General insurance policies are not financial claims. - There is no guarantee of renewal of policy on the same terms or

on any terms.- The contract is short-term contract.- The general insurance companies do not collect savings.- Policy claims are unpredictable.- Assets are held in relatively liquid form.- GIC meets the requirements of industrial, manufacturing,

commercial, services, household, and agricultural sectors through wide rage of 115 products, granting insurance coverage.

- GIC has been promoting insurance cover in the field of livestock, poultry, sericulture, horticulture, pump sets, and personal accidents.

PRINCIPLES AND INVESTMENT POLICY GIC 1.Central Govt. securities being not less than 20%

2.State Govt. securities and other government guaranteed securities, including (1) above, being not less than 30%

3.Loans to HUDCO/DDA/GIC-HF and to state govts. For housing and fire fighting equipment, not less than 15%

4.Market sector not more than 55%

I R D A• Insurance Regulatory and Development Authority

Composition of Authority under IRDA Act, 1999• National agency of the Government of India, based in

Hyderabad formed by Indian parliament

POWERS & FUNCTIONS OF IRDA

• Duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.

• Other powers :

• 1. Certificate of registration to the Applicant• 2. Protection of the interests • 3. Adjudication of disputes • 4. Specifying the percentage of premium, Specifying the % • of Life Insurance Business and General Insurance • Business

SWOT ANALYSIS

FUTURE OUTLOOK

HOME INSURANCE GROWTH

HEALTH INSURANCE BOOM

NON LIFE INSURANCE PREMIUM GROWTH

GROWTH PROSPECTS

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

THANK YOU