Insurance Sector In India
Evolution Of Insurance In India
Among top insurance markets
•India is ranked 10th among 156 countries in the life insurance business, with a share of 2.3 per cent during FY12.
•India is ranked 19th among 156 countries in the non-life premium income, with a share of 0.62 per cent in FY12.
Insurance Sector In India
- Oriental Life Insurance Company, 1818.
- Bombay Mutual Life Assurance Society, 1870.
- Triton Insurance Company Ltd., 1850.
- Life insurance Companies Act, 1912.
- Insurance Act, 1938.
Pre Liberalisation
Classification Of Insurance
1850-1910
Foreign insurers had a large market share ; mostly 40% share of the Insurance Market.
1930-1947
The Insurance Act, 1938, introduced state controls on insurance, including mandatory investments in approved securities, but regulation remained ineffective.
1950-1970
- The government has dismayed that companies were speculating in shares, and giving loans regardless of security.
- All Life insurance companies were nationalized to form LIC to protect policy holders from Mismanagement.
1991 Onwards
The Insurance sector has been opened up to the private players due to
LIBERALIZATION and DE-REGULATION.
1970-1990
- Non Life Insurance business was nationalized to form GIC.
- Operational flexibility and initiative has been adopted so that both customers service and work culture is improved.
Insurance can mainly be classified into Two:
1. Life Insurance
2. Non-Life Insurance or General Insurance
The Insurance sector is Managed by both Public as well as Private Firms.
1850-1991
Insurance Sector In India
Post Liberalisation
Introduction Of Insurance
Impact
Reforms
Insurance is the method of protecting from risks which an individual anticipates.
The definition of insurance can be made from two aspects:
- Functional Aspect
- Contractual Aspect
- A remarkable improvement in the Indian insurance industry
- Liberalization witnessed dynamic changes and phenomenal growth in life insurance businesses.
- Due to IRDA 1999, India abandoned public sector exclusivity in the insurance industry in favor of market-driven competition.
- The insurance business in India was opened on two fronts.
- Firstly, domestic private-sector Companies were permitted to enter life insurance business.
- Secondly, foreign Companies were allowed to participate, with a shareholding at 26%.
- Today the life insurance sector in India comprises of more than Rs33,633 crores of deployed capital Over Rs16, 18,544 crores of managed assets Investments in infrastructure exceeding Rs2,20,866 crores .
- The Government of India appointed a committee under the chairmanship of Shri. R. N. Malhotra to recommend insurance sector reforms.
- The Committee, which submitted its report in 1994, recommended among after things, that the insurance sector in India be thrown open to the private sector.
- The Government of India accepted the recommendations and allowed private players to offer insurance cover to Indian citizens
Structure
- Government of India’s stake to be brought down to 50 per cent.
- Government of India should take over the holdings of GIC and its subsidiaries
- Increase of the capital base of LIC and GIC to Rs. 200 crores each.
Thank You
References
Competition
Customer Service
- Private companies to enter with a minimum paid up capital of Rs. 1 billion.
- No company should deal in both Life and General Insurance through a single entity.
- Postal Life Insurance should be allowed to operate in the rural market
- LIC should pay interest on delays in payments beyond 30 days.
- Insurance companies must be encouraged to set up unit linked pension plans.
- Computerisation of operations and updating of technology to be carried out.
Malhotra Committee Recommendations
- www.scribd.com
- http://timesofindia.indiatimes.com/
- http://www.financialexpress.com/
- http://businesstoday.intoday.in/
- www.ibef.org
- www.wikipedia.com
- Insurance Principles and Practice, By M.N Mishra and S.B Mishra.
Regulatory Body
Investments
Establishment of a strong and effective insurance regulatory.
- Mandatory Investments of LIC Life Fund in government securities to be reduced from 75 per cent to 50 per cent.
- GIC and its subsidiaries are not to hold more than five per cent in any
By:
Bhavana P.-06
Laxmi-18
Namita-21
Nidhi-22
Nikita O.-24
Pooja-26
Advantages of Insurance In India
Recent News
- Income guaranteed through annuities
- Risk guard
- Mortgage recovery
- Strong demand among people
- Tax Incentives on Insurance products
- Public sector banks will become insurance brokers.
- Indian Insurance Industry to grow 15 pct in FY14: ICRA report.
- The total Life insurance premium collected in the last fiscal year has shrunked i.e. from Rs 291,639 crore in FY2011-12 to Rs 287,072 crore in FY2012-13.
- The overall insurance sector is falling for last two consecutive years now.
Disadvantages of Insurance In India
- Inconsistent premiums
- Insufficient funds
- Expiration of term insurance
- Language of premium
Favorable Policy measures AID the sector 2013-14
Notable Trends In The Insurance Sector
Approval of Increase in FDI limit and revival package
Tax Incentives
Insurance products are covered under the exempt, exempt, exempt (EEE) method of taxation. This translates to an effective tax benefit of approximately 30 per cent on select investments (including life insurance premiums) every financial year
- Increase in FDI limit will help companies raise capital and fund their expansion plans
- Revival package by government will help companies get faster product clearances, tax incentives and ease in investment norms
Life insurance companies allowed to go public
Union Budget 2013–14
- The proposed Insurance (Amendment) Bill is expected to empower IRDA to introduce regulations for promoting sustainable growth, providing the flexibility to frame regulations and increase the FDI limit to 49 per cent.
- The government has also extended Rashtriya Swasthya Bima Yojana (RSBY) to cover unorganised sector workers in hazardous mining and associated industries
- IRDA recently allowed life insurance companies that have completed 10 years of operations to raise capital through initial public offerings (IPOs).
- Companies will be able to raise capital if they have embedded value of twice the paid up equity capital.
Mounting focus on EV over profitability
Emergence of New Distribution Channels
Case Study
- New distribution channels like bank assurance, online distribution and NBFCs have widened the reach and reduced costs.
- Firms have tied up with local NGOs to target lucrative rural markets.
Large insurers continue to expand, focussing on cost rationalisation and aligning business models to realise reported embedded value (EV), and generate value from future business rather than focus on present profits.
Growing market share of private players
Launch of innovative products
- The life insurance sector has witnessed the launch of innovative products such as Unit Linked Insurance Plans (ULIPs)
- Other traditional products have also been customised to meet specific needs of Indian consumers
- In the life insurance segment, share of the private sector in total premiums increased to 29.3 per cent in FY12 from 2.0 per cent in FY03
- In the non-life insurance segment, share of the private sector increased to 42.9 per cent in FY13* from 14.5 per cent in FY04
Life Insurance
General Insurance
Regulatory Framework With Reference To INSURANCE Sector.
Life Insurance Corporation of India
New India Assurance Co. Ltd
History Of NIA in India
2000 onwards
1970-1999
- Established by Sir Dorab Tata in 1919
- New India is the first fully Indian owned insurance company in India.
- With a wide range of policies New India has become one of the
largest non-life insurance companies, not only in India,
but also in the Afro-Asian region.
- Monopoly of GIC and its subsidiary i.e. NIA.
- Only Regional Focus by the insurance company.
- There were allegations of unfair trade practices. The Government of India therefore decided to nationalize insurance business
- Insurance Regulatory and Development Authority Act 1999.
- Removed exclusive privilege of GIC and subsidiaries to carry on general insurance in India.
- GIC supervisory role over the subsidiaries ended and they were made four independent companies.
- The intense competition brought about by deregulation has encouraged the industry to innovate in all areas.
- Aggressive marketing strategies by private sector insurers have buoyed consumer awareness of risk and expanded the markets for products.
- Innovations in distribution and use of information technology have followed as public and private insurers compete to market their products.
- It has been rated “A” (Excellent) for six consecutive years.
- Its Gross Direct Premium increased from USD 1,406.2 million in FY09 to USD 2101.4 million in FY12 at a CAGR of 16 percent.
Post Liberalisation
Pre Liberalisation
- Monopoly-LIC
- Consumer faith on LIC was high.
- LIC sold traditional plans of secured nature.
- The customer’s thought about what will they get in return drove LIC towards endowment and cash back plans.
- Life Insurance Corporation of India (LIC) is an Indian state-owned insurance group and investment company headquartered in Mumbai. It is the largest insurance company in India with an estimated asset value of 1560481.84 crore (US$250 billion). As of 2013 it had total life fund of Rs.1433103.14 crore with total value of policies sold of 367.82 lakh that year.
- The company was founded in 1956 when the Parliament of India passed the Life Insurance of India Act that nationalised the private insurance industry in India. Over 245 insurance companies and provident societies were merged to create the state owned Life Insurance corporation.
- Competition-new private players.
- Hired lots of agents and insurance sales officers.
- Commission
- Duping customers
- ULIPS(unit linked insurance plans)
- Agents in LIC were not so aggressive.
- LIC lost a lot of market share.
- Stock markets took a dive and ULIPS went low level.
- Distrust for private insurance players and ULIPS customers.
- LIC regained its lost share and again is the major player in the life insurance.