LIFE INSURANCE INDUSTRY IN INDIA - AN

OVERVIEW
T.S.VIJAYAN

Chairman, LIC of India

President, Insurance Institute of India

THEME OF THE PRESENTATION

Future challenges in Life Insurance Business in

India

• India is the seventh largest country in the world with a

population of around 1100 million.
• India is the second most populous country in the world,
next only to China.
• It has 28 states and 7 Union Territories with distinct
cultural backgrounds.
• India is known for its diversity with multi varied socio-
economic conditions and languages. It has many

geographical features and a rich history .

• India is the largest democratic country in the world with a

strong judicial framework .

• The middle class segment is 250 million strong. It has
aspirations and is ambitious.

• India has the 4th largest economy based on Purchasing

Power Parity.

• Indian GDP is growing at an average of 9% over the last

few years.

• The total individual policies serviced by all life companies

in India are around 270 millions of which LIC alone has
around 250 million.

• Total premium of all life companies is only about 4% GDP.

• It still leaves a lot of potential for the life companies to

grow and prosper in India.

• Since Independence, in 1947 India had followed a

socialistic pattern of economy, wherein government
intervention and investment were high.
• Even then there was a strong private sector participation

since the time of Independence .

The history of Life Insurance in India

• The birth and growth of the Insurance sector in India is

quite breath taking.

• In the year 1818 the Oriental Life Insurance Company was

started at Kolkata.

• In 1912 the Indian Life Assurance Companies Act was

enacted as the first statute to regulate the Life Insurance
Business.

• In 1938 the earlier legislation was consolidated and

amended to become the Insurance Act with the objective
of protecting the interests of the insuring public.
• In 1956, the LIC of India was formed under the LIC
Act,1956 with a capital contribution of Rs. 5 crores i.e $
1.2 million at current rates from the Government of India,

nationalising 245 life insurance companies .

 • In 1999, the Insurance Regulatory and Development
Authority popularly known as IRDA was created by an act
of the Parliament to regulate all insurance companies and
businesses in India.
• IRDA has evolved into an effective regulator and it has
facilitated the entry and growth of private players in the
insurance sector.
• Since then the growth of the insurance industry in India
has never been the same again.

• Life Insurance is a sun rise industry in India.

• Many major international players are operating in
collaboration with Indian partners. The Joint Ventures are
backed by strong capital base and latest technology.
• The sector was opened up for private players in the year

.
2000 Currently there are 19 companies operating in
India in addition to LIC of India.
• I am proud to state that LIC is the dominant player.

LIC Highlights
Assets as on 31.03.2008 : $ 185 billion

No. of policies : 250 million

No. of employees : 1,13,000

No. of agents : 1.2 million

 • After opening up of the sector the life insurance industry
has grown leaps and bounds. The industry has earned $
45 billion total premium income during the F.Y 2007-08.

• The life insurance companies are the largest institutional

investors in India.

• The life insurance companies have brought in huge

capital for investment and expansion. They have
generated good employment opportunities, both direct
and in-direct.

• The latest technology is being introduced by all the

companies thereby improving the servicing standards .

• Innovative and market driven products are being offered

by all the companies.
• All companies are building the distribution channels with
strong tied agency network.
• Alternate distribution channels are also being developed in
order to strengthen the overall process of procuration of
business and deliver of service.
• India has a total of 2.5 million agents of which 50% are
with LIC alone.
• There is a sharp increase in the remuneration of life
insurance professionals
 Challenges : Many

• Professionals and experts are in short supply. Man power

requirement has increased manifold.

• Increase in salaries to employees leading to high levels of

attrition. Retention of employees is a major challenge.

• India being a vast country and with huge population, is a

challenge for the life companies.

• Designing products for the people of various economic

strata is a daunting task indeed .

• Prosperity of all companies depends upon their capability

to innovate and include all sections of the society into
their business portfolio.
• Micro Insurance and financial inclusion will be major
challenges for all the companies.
• There is a shift from traditional endowment policies to
unit linked policies.
• There is a shift from long term policies to short term.

• Customers are expecting higher returns and thereby a

strong emphasis on unit linked plans.

• When stock markets are volatile can the life insurance

companies overcome the turbulence? Are they equipped
to tide over the storm?

• One of the key drivers of the Indian economy has been

the dramatic increase of the urban population .

• Urban India today is already more populous than the

entire United States. By 2025, it will exceed the current
population of the European Union.

• Apart from this, the real potential lies in the rural India
where prosperity is on the rise

• Go Rural is the slogan for most of the companies in India

today.
 Key Issues
• Building institutions for development of self regulation for better market
conduct
• Development professionalism and organizing research for industry to
develop on scientific lines
• Ensuring profitability and return to stakeholders by cost competitive

policies .

Thank You