Background and Brief History of LIFE INSURANCE

The story of insurance is probably as old as the story of mankind. The same instinct that
prompts modern businessmen today to secure themselves against loss and disaster existed
in primitive men also. They too sought to avert the evil consequences of fire and flood and
loss of life and were willing to make some sort of sacrifice in order to achieve security.
Though the concept of insurance is largely a development of the recent past, particularly
after the industrial era – past few centuries – yet its beginnings date back almost 6000
years.

Life Insurance in its modern form came to India from England in the year 1818. Oriental Life
Insurance Company started by Europeans in Calcutta was the first life insurance company on
Indian Soil. All the insurance companies established during that period were brought up with
the purpose of looking after the needs of European community and Indian natives were not
being insured by these companies. However, later with the efforts of eminent people like
Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But
Indian lives were being treated as sub-standard lives and heavy extra premiums were being
charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian
life insurance company in the year 1870, and covered Indian lives at normal rates.

Some of the important milestones in the life insurance business in India are:
1818: Oriental Life Insurance Company, the first life insurance company on Indian soil
started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started
its business.
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.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are taken over by the central
government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a
capital contribution of Rs. 5 crore from the Government of India.
Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8
zonal offices, 992 satellite offices and the Corporate office. LIC’s Wide Area Network covers
109 divisional offices and connects all the branches through a Metro Area Network. LIC has
tied up with some Banks and Service providers to offer on-line premium collection facility in
selected cities. LIC’s ECS and ATM premium payment facility is an addition to customer
convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at
Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many
other cities. With a vision of providing easy access to its policyholders, LIC has launched its
SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the
customer. The digitalized records of the satellite offices will facilitate anywhere servicing
and many other conveniences in the future.
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in April
2000 has fastidiously stuck to its schedule of framing regulations and registering the private
sector insurance companies.
What is Life Insurance

Life insurance is a contract that pledges payment of an amount to the person assured (or his
nominee) on the happening of the event insured against.

The contract is valid for payment of the insured amount during:

• The date of maturity, or
• Specified dates at periodic intervals, or
• Unfortunate death, if it occurs earlier.
Among other things, the contract also provides for the payment of premium periodically to
the Corporation by the policyholder. Life insurance is universally acknowledged to be an
institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the
timely aid of the family in the unfortunate event of death of the breadwinner.
By and large, life insurance is civilization’s partial solution to the problems caused by death.
Life insurance, in short, is concerned with the hazards that stand across the life-path of
every person:
1. That of dying prematurely leaving a dependent family to fend for itself.
2. That of living till old age without visible means of support.
3. Temporary needs/threats, regular savings, investments, retirement, tax relief and
liquidity.
Life Insurance Vs Other Savings
Protection:
Savings through life insurance guarantee full protection against risk of death of the saver.
Also, in case of demise, life insurance assures payment of the entire amount assured (with
bonuses wherever applicable) whereas in other savings schemes, only the amount saved
(with interest) is payable
Aid To Thrift:

Life insurance encourages 'thrift'. It allows long-term savings since payments can be made
effortlessly because of the 'easy instalment' facility built into the scheme. (Premium
payment for insurance is either monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme popularly known as SSS, provides a convenient
method of paying premium each month by deduction from one's salary.
In this case the employer directly pays the deducted premium to LIC. The Salary Saving
Scheme is ideal for any institution or establishment subject to specified terms and
conditions.
Liquidity:
In case of insurance, it is easy to acquire loans on the sole security of any policy that has
acquired loan value. Besides, a life insurance policy is also generally accepted as security,
even for a commercial loan.
Tax Relief:
Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is
available for amounts paid by way of premium for life insurance subject to income tax rates
in force.
Assessees can also avail of provisions in the law for tax relief. In such cases the assured in
effect pays a lower premium for insurance than otherwise.
Money When You Need It:
A policy that has a suitable insurance plan or a combination of different plans can be
effectively used to meet certain monetary needs that may arise from time-to-time.
Children's education, start-in-life
or marriage provision or even periodical needs for cash over a stretch of time can be less
stressful with the help of these policies.
Alternatively, policy money can be made available at the time of one's retirement from
service and used for any specific purpose, such as, purchase of a house or for other
investments. Also, loans are granted to policyholders for house building or for purchase of
flats (subject to certain conditions).
Who Can Buy A Policy?

Any person who has attained majority and is eligible to enter into a valid contract can insure
himself/herself and those in whom he/she has insurable interest.

Policies can also be taken, subject to certain conditions, on the life of one's spouse or
children. While underwriting proposals, certain factors such as the policyholder’s state of
health, the proponent's income and other relevant factors are considered by the
Corporation.
Overseas Operations of LIC
INTERNATIONAL OPERATIONS / ASSOCIATES

INTERNATIONAL OPERATIONS
LIC Fiji
LIC Mauritius
LIC United Kingdom
LIC Representative Office, Singapore
LIC (International) B.S.C (C), Bahrain
LIC (Nepal) Ltd
LIC (Lanka) Ltd
Saudi Indian Company for Co-op. Insurance, KSA.
Kenindia Assurance Co. Ltd., Kenya.
LIC Mauritius Offshore Ltd.
LIC Singapore Offshore Ltd.
LIC Co-ordinating Office in India

ASSOCIATES

LIC HFL Financial Services Ltd

LIC Housing Finance Ltd.
LICHFL Care Homes Ltd.
LIC Mutual Fund AMC Ltd.
LIC Cards Services Ltd.
LIC Pension Fund Limited

History of Women since ages:

The status of women in India has been subject to many great changes over the past few
millennia.

From equal status with men in ancient times through the low points of the medieval period
to the promotion of equal rights by many reformers, the history of women in India has been
eventful.

Ancient India:

Scholars believe that in ancient India, the women enjoyed equal status with men in all fields
of life. However, some others hold contrasting view.] Works by ancient Indian grammarians
such as Patanjali and Katyayana suggest that women were educated in the early Vedic
period. Scriptures such as Rig Veda and Upanishads mention several women sages and
seers, notably Gargi ( The ancient Hindu Vedic texts mention a number of women.
Gargi, a prophetess and philosopher is among them. She was the daughter of the wise man,
Vachaknu. She composed several hymns that question the origin of all things)and Maitreyi.
( Maitreyi lived about the same time as Gargi, another well known philosopher of
India)

Medieval Period:

The Indian woman's position in the society further deteriorated during the medieval period.
when Sati among some communities, child marriages and a ban on widow remarriages
became part of social life among some communities in India. The Bhakti movements
( Mirabai, Akkamahadevi, Molla etc) tried to restore women's status and questioned some of
the forms of oppression

Independent India:

Women in India now participate in all activities such as education,sports,

politics, media, art and culture, service sectors, science and technology, etc.
Indira Gandhi, who served as Prime Minister of India for an aggregate period
of fifteen years is the world's longest serving woman Prime Minister.

The Hindu personal laws of mid-1956s (applied to Hindus, Buddhists, Sikhs and
Jains) gave women rights to inheritance. However, the sons had an independent
share in the ancestral property, while the daughters' shares were based on the
share received by their father. Hence, a father could effectively disinherit a
daughter by renouncing his share of the ancestral property, but the son will
continue to have a share in his own right. Additionally, married daughters, even
those facing marital harassment, had no residential rights in the ancestral home.
After amendment of Hindu laws in 2005, now women have been provided the
same status as that of men.
As we move to the 21st century, the traditional Indian women simultaneously experiences a
metamorphic change in her roles and status, both at the work place and at home. Now the
women in India are not confined to home.
In today’s Indian society, traditional, modern, and egalitarian values co-exist. It is this
decade that one notices the emergence of new values which are manifested in a variety of
ways. A number of women are taking up unconventional, challenging professions such as
engineering, artitechture, research , aviation, management, journalism entrepreneurship
and so on.

Why women should get life insurance?

Life insurance means protection against risks in life. It is important for a man, so is
for a woman, even though she is not considered a breadwinner in a conventional
manner. In today’s world, a woman’s contribution to the finances of a family cannot
be ignored. But women are seen to be holding themselves back when it comes to
buying life insurance. Life insurance can be an emergency fund and help meet one’s
objectives. Most men are aware of this; it is the time for women to know this and get
themselves insured.
For Example.,Amita, 30, has been looking at getting some insurance policies. She
is a working mother with a young child of 2 years. Her husband is a businessman and
looking at their financial position she realises that there has to be adequate planning
done so that there are no bumps on the way. Her main concern is about the ability to
look at the requirement for insurance and the manner in which she will be able to
protect her family. She is also wondering as to whether taking some woman-specific
policy will be of any help.

Highlights
○ Term insurance for adequate cover at a low cost
○ Policies with regular cash flow to meet children’s needs
○ Cash accumulation through insurance for retirement

Since Amita is married and having a child, life insurance becomes an absolute necessity for
her. But she does not know what amount of coverage will be adequate for her, and hence
will require enough knowledge as well as clarity of goals to get the right amount of
coverage. Several factors like her age, salary, and family status will have to be considered to
determine the coverage amount.

Insurance Industry Analysis

This millennium has seen insurance come a full circle in a journey extending to nearly 200
years. The process of re-opening of the sector had begun in the early 1990s and the last
decade and more has seen it been opened up substantially. In 1993, the Government set up
a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose
recommendations for reforms in the insurance sector.The objective was to complement the
reforms initiated in the financial sector. The committee submitted its report in 1994
wherein , among other things, it recommended that the private sector be permitted to enter
the insurance industry. They stated that foreign companies be allowed to enter by floating
Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the

Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous
body to regulate and develop the insurance industry. The IRDA was incorporated as a
statutory body in April, 2000. The key objectives of the IRDA include promotion of
competition so as to enhance customer satisfaction through increased consumer choice and
lower premiums, while ensuring the financial security of the insurance market

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%.
Together with banking services, insurance services add about 7% to the country’s GDP. A
well-developed and evolved insurance sector is a boon for economic development as it
provides long- term funds for infrastructure.

Today there are 23 Life Insurance Companies including LIC operating in India, as per IRDA
web site.

The Life Insurance is governed by The Insurance Act, 1938 and the IRDA Act, 1999.

According to IRDA, the insurers in the year 2009-2010 sold 10.55 million new policies with
LIC selling 8.52 million and private companies 2.03 million policies. In the year March 2010,
LIC held 65% market share in terms of new business income collection with the private
sector contributing the remaining 35% share in 2009-10.

Top Leading Companies:

Today in India more multinational companies have come forward in the insurance field. ICICI
Prudential, Om Kotak Mahindra, Birla Sun-Life, Tata AIF Life, Reliance, HDFC Standard Life-
Insurance Co., Max New York Life, SBI Life Insurance, ING Vysa Life etc. are the top
companies in the private sector. For the non-life Insurance section the major private players
are ICICI Lombard, Royal Sundaram, Cholamandalam, IFFCO Tokyo, Tata AIG etc. All the
Insurance companies come under the Insurance Regulatory and Development Authority
(IRDA) which is established to regulate, promote and ensure orderly growth of Life and
General insurance industry in India.
The ratio of life insurance premium to GDP in India is currently about 4 per cent, much lower
than developed market levels of 6 to 9 per cent. In several segments of the population,
penetration is lower than potential. For example, in urban areas, penetration of life insurance
in the mass market is about 65 per cent, and it is considerably less in the low-income
unbanked segment. In rural areas, life insurance penetration in the banked segment is
estimated to be about 40 per cent, while it is marginal at best in the unbanked
segment.

Industry Structure
The following are the list of 23 Life Insurance Companies in India. The list is published by
IRDA.
• Bajaj Allianz Life Insurance Company Limited
• Birla Sun Life Insurance Co. Ltd
• HDFC Standard Life Insurance Co. Ltd
• ICICI Prudential Life Insurance Co. Ltd.
• ING Vysya Life Insurance Company Ltd.

• Life Insurance Corporation of India

• Max New York Life Insurance Co. Ltd
• Met Life India Insurance Company Ltd.
• Kotak Mahindra Old Mutual Life Insurance Limited
• SBI Life Insurance Co. Ltd
• Tata AIG Life Insurance Company Limited
• Reliance Life Insurance Company Limited.
• Aviva Life Insurance Co. India Ltd.
• Sahara India Life Insurance Co, Ltd.
• Shriram Life Insurance Co, Ltd.
• Bharti AXA Life Insurance Company Ltd.
• Future Generali Life Insurance Company Ltd.
• IDBI Fortis Life Insurance Company Ltd.
• Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd
• AEGON Religare Life Insurance Company Limited.
• DLF Pramerica Life Insurance Co. Ltd.
• Star Union Dai-ichi Life Insurance Co. Ltd.
The Sales and distribution channels of the various companies vary as per their
demographic distribution, the marketing force ( officials) and the products
offered, and the pricing of the products.
LIC is the largest player with 64% share in the market as on Mar-2010.
Below is a list of the Top 10 insurance companies in India, as of Dec-2010.

LIC (Life Insurance Corporation of India)

The undisputed leader of insurance in India LIC is ranked as the best insurance company in
India. The history of LIC goes back to the history of insurance in the country. The company
accounts for a total market share of 64% in the insurance industry in India. .

ICICI Prudential Life Insurance Co Ltd

Among the Top 10 insurance companies in India ICICI Prudential Life Insurance Co Ltd is the
largest private life insurance company in the country. A joint venture between ICICI Bank
and Prudential plc this company commenced operations in 2000. Currently the company
holds a total market share of 8.93% in the Indian insurance industry.

Bajaj Allianz Life Insurance Co Ltd

Bajaj Allianz Life Insurance Co Ltd also figures in the list of the Top 10 insurance companies
in India. A joint venture between global automobile giants Bajaj Auto Allianz AG's this
company is ranked second (after LIC) in the number of policies sold. Presently the company
accounts for a total market share of 7.36%.

SBI Life Insurance Co Ltd

Ranked 6th in the year 2007-08 SBI Life Insurance Co Ltd is a joint venture between State
Bank of India and BNP Paribas Assurance. The company today stands as one of the most
trusted insurance brands after LIC and has shown phenomenal growth over a period of two
years.

Reliance Life Insurance Co Ltd

Reliance Life Insurance Co Ltd is a part of Reliance Anil Dhirubhai Ambani Group and is
among India's leading private insurance companies. Currently the company stands at
number five in terms of new business premium and accounts for a a total market share of
2.96% 4th in number of new policies sold in 2007-08.

HDFC Standard Life Insurance Co Ltd

HDFC Standard Life Insurance Co Ltd is one of the Top 10 insurance companies in India. This
company is a joint venture between Housing Development Finance Corporation Limited and
Standard Life plc. The company currently holds a total market share of 2.88% in the Indian
insurance industry.

Birla Sun Life Insurance Co Ltd

Incorporated in the year 2000 Birla Sun Life Insurance Co Ltd in the last decade has
witnessed phenomenal. Currently the market stands at number seven in the list of the top
ten insurance companies in India.

Max New York Life Insurance Co Ltd

Known for its extensive product portfolio Max New York Life Insurance Co Ltd is a joint
venture between Max India Limited and New York Life International a fortune 500 company.
Currently it is among the best insurance and most trusted insurance companies in India
today.

Kotak Mahindra Old Mutual Life Insurance Ltd

Another important insurance company in India Kotak Mahindra Old Mutual Life Insurance Ltd
is one of the fastest growing private insurance companies today. The company is said to
have doubled its branches from 74 to 150 since the year 2008 to 2010.

Aviva Life Insurance Company India Ltd

 Aviva Life Insurance Company India Ltd among the top ten insurance companies in India
today is a joint venture between Dabur, and Aviva plc. Presently located in more than places
in the country the company has a record for selling one of the largest number of life
insurance plans. total premium of R5,710.54 crore (R4,972.23 crore) with a growth of
14.85% and with a market share of 5.5%.
Market Share of Top 3 Life Insurance Cos. as on Dec-2010.

LIC of India 64%

ICICI 8.93%
Prudential
Life Ins Co
Ltd.

Bajaj Allianz 7.36%

Life Insurance
Co Ltd

Market Share of Life Insurers as on

31.03.2010, as per IRDA WEBSITE.
.
Environmental Analysis
Political Factors & Legal & Regulatory
Factors:
Post Liberalization Policies regarding Insurance

Under the recommendation of Malhotra Committee the Insurance Regulatory And

Development Authority was set up to monitor and control the Insurance industry Some of

the initiatives taken by the government after Insurance sector reforms are:
• Government to have not more than 50 per cent stake in insurance companies.
• Insurance sector to be opened up for private companies and any number of
insurance enterprises can operate.
• Private players with minimum paid up capital of Rs.1 billion should be given
opportunity to do business.
• Foreign companies can enter Indian market through joint ventures with Indian
companies. 1

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EXECUTIVE SUMMARY OF INSURANCE

Insurance sector in India is one of the booming sectors of the economy and is

growing at the rate of 15-20 per cent annum. Together with banking services, it contributes

to about 7 per cent to the country's GDP. Insurance is a federal subject in India and

Insurance industry in India is governed by Insurance Act, 1938, the Life Insurance

Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance

Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts.

The origin of life insurance in India can be traced back to 1818 with the

establishment of the Oriental Life Insurance Company in Calcutta. It was conceived as a

means to provide for English Widows. In those days a higher premium was charged for

Indian lives than the non-Indian lives as Indian lives were considered riskier for coverage.
The Bombay Mutual Life Insurance Society that started its business in 1870 was the first

company to charge same premium for both Indian and non-Indian lives. In 1912, insurance

regulation formally began with the passing of Life Insurance Companies Act and the

Provident Fund Act.

By 1938, there were 176 insurance companies in India. But a number of frauds

during 1920s and 1930s tainted the image of insurance industry in India. In 1938, the first

comprehensive legislation regarding insurance was introduced with the passing of Insurance

Act of 1938 that provided strict State Control over insurance business.

Insurance sector in India grew at a faster pace after independence. In 1956,

Government of India brought together 245 Indian and foreign insurers and provident

societies under one nationalised monopoly corporation and formed Life Insurance

Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of

Rs.5 crore.

The (non-life) insurance business/general insurance remained with the private sector

till 1972. There were 107 private companies involved in the business of general operations

and their operations were restricted to organised trade and industry in large cities.
The General Insurance Business (Nationalisation) Act, 1972 nationalised the
general insurance business in India with effect from January 1, 1973. The 107 private
1

insurance companies were amalgamated and grouped into four companies: National

Insurance Company, New India Assurance Company, Oriental Insurance Company and

United India Insurance Company. These were subsidiaries of the General Insurance

Company (GIC).

In 1993, the first step towards insurance sector reforms was initiated with the

formation of Malhotra Committee, headed by former Finance Secretary and RBI Governor

R.N. Malhotra. The committee was formed to evaluate the Indian insurance industry and

recommend its future direction with the objective of complementing the reforms initiated in

the financial sector.

2

INTRODUCTION OF INSURANCE INDUSTRY

 Insurance in India can be traced back to the Vedas. For instance, yogakshema, the

name of Life Insurance Corporation of India's corporate headquarters, is derived from the

Rig Veda. The term suggests that a form of "community insurance" was prevalent around

1000 BC and practiced by the Aryans.

Burial societies of the kind found in ancient Rome were formed in the Buddhist

period to help families build houses, protect widows and children. Bombay Mutual Assurance

Society, the first Indian life assurance society, was formed in 1870. Other companies like

Oriental, Bharat and Empire of India were also set up in the 1870-90s. It was during the

swadeshi movement in the early 20th century that insurance witnessed a big boom in India

with several more companies being set up.

As these companies grew, the government began to exercise control on them. The

Insurance Act was passed in 1912, followed by a detailed and amended Insurance Act of

1938 that looked into investments, expenditure and management of these companies'

funds.

By the mid-1950s, there were around 170 insurance companies and 80 provident

fund societies in the country's life insurance scene. However, in the absence of regulatory

systems, scams and irregularities were almost a way of life at most of these companies. As a

result, the government decided nationalizes the life assurance business in India. The Life

Insurance Corporation of India was set up in 1956 to take over around 250 life companies.
3
Industry Structure
Insurance Companies:

IRDA has so far granted registration to 12 private life insurance companies and 9

general insurance companies. If the existing public sector insurance companies are

included, there are currently 13 insurance companies in the life side and 13 companies

operating in general insurance business. General Insurance Corporation has been approved

as the "Indian reinsurer" for underwriting only reinsurance business. Particulars of the life

insurance companies and general insurance companies including their web address is given

below:
4

LIFE INSURERS
Websites
Public Sector
Life Insurance Corporation of India
www.licindia.com
Private Sector
Allianz Bajaj Life Insurance Company Limited
www.allianzbajaj.co.in
Birla Sun-Life Insurance Company Limited
www.birlasunlife.com
HDFC Standard Life Insurance Co. Limited
www.hdfcinsurance.com
ICICI Prudential Life Insurance Co. Limited
www.iciciprulife.com
ING Vysya Life Insurance Company Limited
www.ingvysayalife.com
Max New York Life Insurance Co. Limited
www.maxnewyorklife.com
MetLife Insurance Company Limited
www.metlife.com
Om Kotak Mahindra Life Insurance Co. Ltd.
www.omkotakmahnidra.com
SBI Life Insurance Company Limited
www.sbilife.co.in
TATA AIG Life Insurance Company Limited
www.tata-aig.com
AMP Sanmar Assurance Company Limited
www.ampsanmar.com
Dabur CGU Life Insurance Co. Pvt. Limited
www.avivaindia.com
5
GENERAL INSURERS
Public Sector
National Insurance Company Limited
www.nationalinsuranceindia.com
New India Assurance Company Limited
www.niacl.com
Oriental Insurance Company Limited
www.orientalinsurance.nic.in
United India Insurance Company Limited
www.uiic.co.in
Private Sector
Bajaj Allianz General Insurance Co. Limited
www.bajajallianz.co.in
ICICI Lombard General Insurance Co. Ltd.
www.icicilombard.com
IFFCO-Tokio General Insurance Co. Ltd.
www.itgi.co.in
Reliance General Insurance Co. Limited
www.ril.com
Royal Sundaram Alliance Insurance Co. Ltd.
www.royalsun.com
TATA AIG General Insurance Co. Limited
www.tata-aig.com
Cholamandalam General Insurance Co. Ltd.
www.cholainsurance.com
Export Credit Guarantee Corporation
www.ecgcindia.com
HDFC Chubb General Insurance Co. Ltd.
REINSURER
General Insurance Corporation of India
www.gicindia.com
BACKGROUND OF INSURANCE INDUSTRY
 In India, insurance has a deep-rooted history. It finds mention in the writings of Manu

(Manus mr ithi ), Yagnavalkya (D harm as as tr a ) and Kautilya (Ar thas as tr a ). The

writings talk in terms of pooling of resources that could be re-distributed in

6

times of calamities such as fire, floods, epidemics and famine. This was probably a pre-

cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of

insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has

evolved over time heavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the

Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829,

the Madras Equitable had begun transacting life insurance business in the Madras

Presidency. 1870 saw the enactment of the British Insurance Act and in the last three

decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire

of India (1897) were started in the Bombay Residency. This era, however, was dominated by

foreign insurance offices which did good business in India, namely Albert Life Assurance,

Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for

hard competition from the foreign companies.

In 1914, the Government of India started publishing returns of Insurance Companies

in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to

regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable

the Government to collect statistical information about both life and non-life business

transacted in India by Indian and foreign insurers including provident insurance societies. In

1938, with a view to protecting the interest of the Insurance public, the earlier legislation

was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions

for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there

were a large number of insurance companies and the level of competition was high. There

were also allegations of unfair trade practices. The Government of India, therefore, decided

to nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance

sector and Life Insurance Corporation came into existence in the same year. The LIC
absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies— 245 Indian and

foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was

reopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in
the west and the consequent growth of sea-faring trade and commerce in the 17th
7

century. It came to India as a legacy of British occupation. General Insurance in India has its

roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by

the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first

company to transact all classes of general insurance business. 1957 saw the formation of

the General Insurance Council, a wing of the Insurance Associaton of India. The General

Insurance Council framed a code of conduct for ensuring fair conduct and sound business

practices.
In 1968, the Insurance Act was amended to regulate investments and set
minimum solvency margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalisation) Act,

general insurance business was nationalized with effect from 1st January, 1973. 107 insurers

were amalgamated and grouped into four companies, namely National Insurance Company

Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the

United India Insurance Company Ltd. The General Insurance Corporation of India was

incorporated as a company in 1971 and it commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending to

nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and

the last decade and more has seen it been opened up substantially. In 1993, the

Government set up a committee under the chairmanship of RN Malhotra, former Governor of

RBI, to propose recommendations for reforms in the insurance sector. The objective was to

complement the reforms initiated in the financial sector. The committee submitted its report

in 1994 wherein, among other things, it recommended that the private sector be permitted

to enter the insurance industry. They stated that foreign companies be allowed to enter by

floating Indian companies, preferably a joint venture with Indian partners.

A brief 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.8

1928: The Indian Insurance Companies Act enacted to enable the government to collect

statistical information about both life and non-life insurance businesses.

•
1938: Earlier legislation consolidated and amended to by the Insurance Act
with the objective of protecting the interests of the insuring public.
•

1956: 245 Indian and foreign insurers and provident societies taken over by the central

government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a

capital contribution of Rs. 5 crore from the Government of India.

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.

•
1968: The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.
•

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general

insurance business in India with effect from 1st January 1973.

•

107 insurers amalgamated 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 incorporated as a company.
9

PRESENT SCENARIO OF INSURANCE INDUSTRY

India with about 200 million middle class household shows a huge untapped

potential for players in the insurance industry. Saturation of markets in many developed
economies has made the Indian market even more attractive for global insurance majors.

The insurance sector in India has come to a position of very high potential and

competitiveness in the market. Indians, have always seen life insurance as a tax saving

device, are now suddenly turning to the private sector that are providing them new products

and variety for their choice.

Consumers remain the most important centre of the insurance sector. After the entry

of the foreign players the industry is seeing a lot of competition and thus improvement of

the customer service in the industry. Computerisation of operations and updating of

technology has become imperative in the current scenario. Foreign players are bringing in

international best practices in service through use of latest technologies

The insurance agents still remain the main source through which insurance products

are sold. The concept is very well established in the country like India but still the increasing

use of other sources is imperative. At present the distribution channels that are available in

the market are listed below.

•
Direct selling
•
Corporate agents
•
Group selling
•
Brokers and cooperative societies
•
Bancassurance

Customers have tremendous choice from a large variety of products from pure term

(risk) insurance to unit-linked investment products. Customers are offered unbundled

products with a variety of benefits as riders from which they can choose. More customers

are buying products and services based on their true needs and not just traditional

moneyback policies, which is not considered very appropriate for long- term protection and

savings. There is lots of saving and investment plans in the

10

market. However, there are still some key new products yet to be introduced - e.g.
health products.
 The rural consumer is now exhibiting an increasing propensity for insurance

products. A research conducted exhibited that the rural consumers are willing to dole out

anything between Rs.3,500 and Rs.2,900 as premium each year. In the insurance the

awareness level for life insurance is the highest in rural India, but the consumers are also

aware about motor, accidents and cattle insurance. In a study conducted by MART the

results showed that nearly one third said that they had purchased some kind of insurance

with the maximum penetration skewed in favor of life insurance. The study also pointed out

the private companies have huge task to play in creating awareness and credibility among

the rural populace. The perceived benefits of buying a life policy range from security of

income bulk return in future, daughter's marriage, children's education and good return on

savings, in that order, the study adds.

11

FEATURES OF INSURANCE INDUSTRY

Insurance Policy India provides the clients with the details required for the

coverages in the policy, date of commencement of the policy and their adopting

organizations. It plays a important role in the Indian insurance sector.

The Insurance Policy India is regulated by certain acts like the Insurance Act (1938), the Life

Insurance Corporation Act(1956), General Insurance Business Nationalization) Act(1972),

Insurance Regulatory and Development Authority IRDA) Act(1999). The insurance policy

determines the covers against risks, sometime opens investment options with insurance

companies setting high returns and also informs about the tax benefits like the LIC in India.

There are two types of insurance covers:

1. Life insurance
2. General insurance
Life insurance – this sector deals with the risks and the accidents affecting the life of
the customer. Alongside, this insurance policy also offers tax planning and investment
returns. There are various types of life Insurance Policy India:
a. Endowment Policy
b. Whole Life Policy
c. Term Life Policy
d. Money-back Policy
e. Joint Life Policy
f. Group Insurance Policy
General Insurance – this sector covers almost everything related to property,
vehicle, cash, household goods, health and also one's liability towards others. The
major segments covered under general Insurance Policy India are:
a. Home Insurance
b. Health Insurance
c. Motor Insurance
d. Travel Insurance
12

Some of the well known Insurance Policy India are:

Social Security Group Scheme – a scheme covering the age group of 18-60 years
and an insurance of Rs.5000 for natural death and of Rs.25000 on due to accidental
death.
Shiksha Sahyog Yojana – a scheme providing an educational scholarship of Rs.300
per quarter per child is given for a period of four years.
Jan Arogya Bima Policy – a scheme for the adults upto the age of 45 years is Rs. 70
and for children it is Rs. 50. The limit coverage is fixed at Rs.5000 per annum.
Mediclaim Insurance Policy – a scheme covering the age group from 5-80 years
with a tax benefit of up to Rs 10,000.
Jana Shree Bima Yojana – this is a coverage of Rs 2,000 on natural death and Rs
50,000 for accidental death. The premium amount is fixed at Rs. 200 for single
member.
Videsh Yatra Mitra Policy – a scheme covering medical expenses during the period
of overseas travel.
Bhagya Shree Child Welfare Bima Yojana – a scheme covering one girl child in a
family upto the age of 18 whose parents age does not exceed 60 years, with a
premium of Rs.15 per annum.
Raj Rajeshwari Mahila Kalyan Yojana – a scheme providing protection to woman
in the age group of 10 to 75 years with an insurance of Rs. 25,000 and premium Rs.15
per annum.
Ashray Bima Yojana – a scheme covering workers in case of loss of jobs.

Personal Accident Insurance Scheme for Kissan Credit Card – a scheme covering all the KCC

holders up to an age of 70 years. Insurance coverage includes 50,000 for accidental death

and 25,000 for partial disability.

The functions of Insurance can be bifurcated into two parts:

1. Primary Functions

2. Secondary Functions

3. Other Functions
13
The primary functions of insurance include the following:
Provide Protection - The primary function of insurance is to provide protection

against future risk, accidents and uncertainty. Insurance cannot check the happening of the

risk, but can certainly provide for the losses of risk. Insurance is actually a protection against

economic loss, by sharing the risk with others.

Collective bearing of risk - Insurance is a device to share the financial loss of few

among many others. Insurance is a mean by which few losses are shared among larger

number of people. All the insured contribute the premiums towards a fund and out of which

the persons exposed to a particular risk is paid.

Assessment of risk - Insurance determines the probable volume of risk by evaluating
various factors that give rise to risk. Risk is the basis for determining the premium
rate also.
Provide Certainty - Insurance is a device, which helps to change from uncertainty to
certainty. Insurance is device whereby the uncertain risks may be made more certain.
The secondary functions of insurance include the following:
Prevention of Losses - Insurance cautions individuals and businessmen to adopt

suitable device to prevent unfortunate consequences of risk by observing safety

instructions; installation of automatic sparkler or alarm systems, etc. Prevention of losses

cause lesser payment to the assured by the insurer and this will encourage for more savings

by way of premium. Reduced rate of premiums stimulate for more business and better

protection to the insured.

Small capital to cover larger risks - Insurance relieves the businessmen from
security investments, by paying small amount of premium against larger risks and
uncertainty.
Contributes towards the development of larger industries - Insurance provides

development opportunity to those larger industries having more risks in their setting up.

Even the financial institutions may be prepared to give credit to sick industrial units which

have insured their assets including plant and machinery.

The other functions of insurance include the following:
Means of savings and investment - Insurance serves as savings and investment,
insurance is a compulsory way of savings and it restricts the unnecessary expenses by
14

• Source of earning foreign exchange - Insurance is an international business. The

country can earn foreign exchange by way of issue of marine insurance policies and
various other ways.
• Risk Free trade - Insurance promotes exports insurance, which makes the foreign
trade risk free with the help of different types of policies under marine insurance
cover.

The state controlled Insurance companies like LIC and GIC faced stiff competition from

private insurance companies post reforms. The monopoly of the national Insurance

companies came to an end. The private Insurance companies were able to exploit the

shortcomings in the state run Insurance companies. The private insurance companies

launched a variety of new insurance products like health care, pension plans, annuity plans,

income protection, market linked products which were welcomed by the end customers. The

business for the private sector boomed in both urban and rural sector alike.

Bodies that regulate the sector:

For better regulation purpose of the insurance sector the government has established
following bodies;
1. IRA: Insurance Regulatory Authority.
2. IRDA: Insurance Regulatory and Development Authority.
3. TAC: Tariff Advisory Committee.

1. IRA: INSURANCE REGULATORY AUTHORITY:

The IRA, under the chairmanship of Rangachary, was set-up in January 1996. The IRA

Bill has to be passed by parliament to make the IRA a statutory body. Comprehensive

legislation aimed at reviewing the insurance Act of 1938 and repealing the life insurance

corporation Act of 1956 have to be passed.

The IRA is also preparing an internal rating system to screen all applications,
as entry will be in phases. The joint venture status of life insurance companies (with majority
holding of the domestic partner) is likely to be approved by the parliament. Consensus also
seems to be emerging on the minimum of Rs.1 bn capital stipulations for new insurance
companies.

The IRA has stipulated a minimum rural presence for all companies. The exhaustive

guidelines have been issued for the appointment of intermediaries (brokers, agents,

surveyors and actuaries).

Feature of IRA:
1. The Bill allowed for up to 26% foreign equity participation in the insurance sector.
2. The current India monopoly companies were required to bring down their equity holding
to 26% within a period of 10 years.

Government pronouncement:
1. IRA will be sole Authority, which will be responsible for awarding of, licenses i.e. little or no
government or political interference in licensing process.
2. No restriction on the number of licenses.
3. No composite license for life insurance business.
4. Licensing to be only on national basis (no city by city approach)
5. IRA allowed for up to 26% foreign equity participation in the life insurance sector.
6. The current Indian monopolies companies are required to bring down their equity holding
to 26% within a period of 10 years.

IRA proposals:

1. New player should start their business within 15-18 months.

2. Trafficking of licenses not to be permitted.

3. IRA to seek business plan with 5-year protection for all applicants.

4. A system of direct brokers to be introduced.

5. IRA to vet top management appointments.

18

2. IRDA: INSURANCE REGULATORY AND DEVELOPMENT

AUTHORITY:-

The Insurance Regulatory and Development Authority, constituted under the IRDA

Act, 1999, provide for the establishment of an authority to protect the interest policyholders,

to regulate, promote and ensure orderly growth of the life insurance industry.
Business Requirement:-

A company will not be issued a license unless the IRDA is satisfied with the sound

financial condition, the general character of management, the volume of business, the

capital structure, earning prospects for the insurers and that the interests of the general

public will be served if registration is granted to the insurer.

Foreign insurance companies have been allowed to have a maximum 26% share

holding. No life insurance company can be registered under the Act unless they have a paid

up capital of Rs.100 crores. Every life insurer shall deposit with the reserve bank of India one

percent of the total gross premium written in India in any financial year, not exceeding Rs.10

crores.
 This amount would not be susceptible to any assignment or charge nor would it be

available for the discharge of any liabilities other than liabilities arising out of policies issued,

so long as any such liabilities remain undercharged.

Investment of Assets:-
Every insurer is required to invest, and keep invested, assets equivalent to not
less than the net liabilities as follows:
a. 25 % in government securities,
b. a least 25% of the said sum in government securities or other approved securities and
c. the balance in any approved investment rated as “very stron” or more by reputed rating
agencies, which include various debt instruments on which dividend on its ordinary shared
for the five years immediately preceding or for at least five out of the six or seven years
immediately preceding have been paid and which have priority in payment over ordinary
shares of the company in winding up.

The IRDA may in the interest of the policyholder’s directions relation the time,

manner and other conditions and investments of assets to be held by an insurer. The IRDA

may also direct the insurer to realize the investment, if it sees the investments to be

unsuitable or undesirable. The Act prohibits an insurer from directly or indirectly investing

policyholder funds outside India.

Further, every insurer has to always maintain an excess of the value of his assets

over the amount of his liabilities of not less than Rs. 50 crores in the case of an insurer

carrying of life insurance business. If at any time an insurer does not maintain the required

solvency margin, he is required to submit a financial plan, as per directions issued by the

IRDA, indicating a plan of action to correct the deficiency within three months.

In order to ensure that the company does not risk the money of the policyholder’s,

the Act provides that an insurer who does not comply with the aforesaid provisions may be

deemed to be insolvent and may be would up by the court.

Insurers are required to get an actuary to investigate the financial conditions of the

life insurance business including a valuation of liabilities every year in order to ensure

continual compliance
In order to maintain transparency in its dealings, insurers would have to keep
separate account relating to funds of shareholders and policyholders.
3. TARIFF ADVISORY COMMITTEE:

The tariff advisory committee established under the Act is empowered to control and

regulate the rates, terms, and etc. that may be offered by insurers in respect of any risk or

of any category of risks. It is provided that in fixing, amending or modifying such rates etc.
the committee shall try to ensure as far as possible that there is no unfair discrimination

between risk of essentially the same hazard and also that consideration is given to past and

prospective loss experience. Every insurer is required to make payment to the TAC of the

prescribed annual fees.

20

TAX POLICY AND INSURANCE SECTOR:

Another factor, which affects the insurance sector, is the tax policy. The tax reforms

in India are such that it encourages the citizens to invest in the insurance sector.

The tax policy of the government is particular relevant for life insurance which is a

long-term contract and inculcates among the policyholders the habit of saving. Taxation of

returns on investment influences, investment decisions and high rates of taxation will

discourage the desire to save. Already in India there are complaints that the rates of return

on life policies are not what they could be. Therefore tax incentives play a vital role in

determining the attractiveness of such policies. Such tax breaks are available in many

countries and have helped in the development of their life sector. In western countries the

gain from the proceeds of a life insurance policy is paid free of tax. Provided the policy

satisfies certain qualifying conditions. Non-qualifying policies get basic rate tax relief, though

higher rate taxpayers may still have to pay tax on the gain, although at a reduced rate. The

insurance companies can use such tax concessions rate. The insurance companies can use

such tax concessions to design products for different categories of taxpayers.

The other factors, which affect the insurance sector, are the employment law,
and government stability. These are the factors, which affect the insurance industry
21

KEY SUCCESS FACTORS

In order to succeed in any of the business it is very necessary to make and follow the

strategies. Strategies are very important for any of the business. Following are the general

strategies, which are recommending to the insurance sector. One approach is to focus upon

product quality, which will instill confidence in minds of the customers that they would be

offered best product from out of the several available products.

The other approach, is to focus on the customers need, would involve a heavy

investment in developing relationships with policyholders. Under this approach, one can
expect a range of products and services designed to give the customer what he specially

desires.

The third approach is of greater market segmentation under which the population

should be divided into several homogeneous groups and product, and services would be

targeted towards such selected markets. The effort would be to “tie” clients to their

company- by customized combination of coverage, easy payment plan, risk management

advice, and convenient quick claim handling.

Porter Generic Strategies:

One of the expert Michel porters has identified three internally consistent generic

strategies, which can be used singly or in combination: overall cost leadership is clearly

under stable. In a differentiation strategy, a company seeks to be unique in its industry

along some dimensions that are widely valuable by the customer. May be the lowest cycle

time for settling a claim under say, a med claim policy could be differentiating factor. In a

cost focus, a company seeks a cost advantage in its target segment, while in differentiation

focus; a company seeks a differentiation target.

Marginal Different Product:

Another strategy would be for the companies to design products that will make

comparison-shopping difficult. They could offer a wide variety of covers with marginal

differences and varying prices, whose terms and conditions are difficult to compare for

consumers who may not have sufficient experience in purchasing insurance and who would

find it difficult to make a clear choice. If the consumer is offered a unique policy, he will have

no alternative coverage with which can be

22

compared. Given the combination policy, which can offer protection against a number
of losses, the consumer will find comparison even more difficult.
Designing New Strategies:

The existing insurance companies cannot be satisfied with concentrating on the

consolidation of their existing markets, but have to achieve further growth and penetration.

They must, therefore, concentrating on strengthening existing points of service, designing

new channel of distribution, direct contact with their ultimate customers, and front line

employee empowerment. They also need to refresh their marketing set up. The new comers,
on the other hand give priority to tapping the market, left unexploited by the public sector

companies.
Move towards Rural Market:

It is one of the most important suggestions; data says that rural market is still

uncovered by this sector. We believe that the sector should move towards tie rural market.

Insurance penetration can be achieved by tapping the neglected Rural Markets. There is

vast potential for insurance growth in the rural sector. A recent survey by foundation for

research, training and Education in insurance (FORTE) suggests that insurance can be sold

profitably to rural communities in India. The survey reveals that

•
There is distinct hierarchy of needs in rural areas.
•
Rural people find security in groups the saving habit is very strong in rural
areas.
•
Average saving across the most important socio-economic strata comes to 30-
35% of annual income or Rs.13,500 annually, which is significant.
•
There is high level of awareness about life insurance and fairly high-level
about 36% already own life insurance.
•
51% of these who own life insurance would like to buy more.
•
Amongst the savers, a significant percentage does not save through formal
financial modes or institutions.
23

Rural buyers of insurance prefer a half yearly mode of premium payment to coincide with

the time of the harvest. Thus there are very much chances for any of the companies to work

over this scenario. So we believe and suggest all the players to move towards the rural

areas.
Motivation of sales force:

A life insurance company should constantly be involved in the process of motivating

the sales force in the turbulent times. The following strategies are recommending;
 B u i l d i n g r e l a t i o n s h i p i s r e a l
p e r k . O n e s h o u l d b e s u r e t o
b u i l d i n n e t w o r k i n g
times for agents during the program-in addition to entertainment and
education.
 W e b s h o u l d b e f r e q u e n t l y u s e d
f o r c r e a t i n g g i f t i d e a s .
 H o l d s a l e s c o n t e s t s i n t h e
f o r t h q u a r t e r . I t i s t h e b e s t
t i m e s t i m o t i v a t e s a g e n t s
who wants to qualify for a trip.
 C o n s i d e r a c o n t r a s t w i t h i n t h e
c o n t e s t ‘ f o r - t o p - t i e r
p r o d u c e r s ; a d d i t i o n a l
rewards for additional milestones that are met, such as air and guest room
upgrades.
Use of Internet:

The present scenario is such that the products sold with the help of Internet. The

technological advancement is such that force the companies to take such steps. Still the full-

fledged use of Internet is not done in our country. As suggestion earlier the Internet based

life insurance will help the companies to reduce the transaction cost and time. At the time it

can improve the quality of service to its customers, which is the mission of the company.
24

ENVIRONMENTAL ISSUES
Political Factors Affecting Life Insurance Industry:

Within India political ambitions and rise of communalism, fissiparous tendencies are

on the rise and may well continue for quite some time to time. Therefore, it expected that

the insurance companies might consider offering political risk coverage also. The only area

where Indian insurers consider giving cover is with regard to customs duty change under

certain conditions.

Certain type of political risk at the international level has serious implications for

exporters. The term ‘political risk’ has a wider connotation than commonly understood or

assumed. It covers events arising not just from politics, but risks in the course of

international transactions. In this connection, it may be noted that export credit insurance

has evolved out of uncertainties relating to international trade, particularly due to problems

arising out of foreign legal jurisdiction, political changes and currency exchange difficulties

faced by many developing countries.

Economical Factors Affecting Life Insurance Industry

Interest rate at bank and interest rate of P.F variation very much affect to life

insurance industry, because people always attract by higher return. Therefore, they do not

prefer lower return policy. Unemployment also affects insurance industry, because the

unemployment people will not have earning, so saving also affect to life insurance sector
Life insurance industry will directly affected by Earthquake, Monsoon, and Natural calamity.

Because of these events turns into lots of death, so the life insurance companies have to

pay claim against policy. Infant mortality rate and maternity mortality rate are also affecting

to life insurance. Typical Indian want luxurious product against low income, so that they

prefer installment or annuity (EMI), so that they may not have extra saving to invest in life

insurance.
Socio-Cultural FACTORS affecting Life Insurance Industry:
The basic social factors that affect the life insurance sector are as under: -

Population

Life style
25


Educational level

Level of earning

Societal benefits These are the major social factors, which
affect the life insurance sector. We will discuss all of them in brief.
 P o p u l a t i o n :

Growth in the population is a major factor pushing up the demand. It is also going to

exert a special influence on the life insurance market in other ways. Apart from exerting

pressure on demand for goods and services, and through that, ill effects of uncontrolled

growth of population also could spur the growth of demand. For example, overcrowding in

public places of entertainment, public support, or too many vehicles on the road can result

in hazards like stampedes and pollution, which require covers and still are not sold on a

large scale today. Thus the positive as well as the negative aspects of population growth are

going to spur demand.

 L i f e s t y l e :

The peculiar lifestyle of a country or an age also influences the insurance business.

Change therein produces different demands for life insurance. For e.g. All over the world,

family size is shrinking and the fact that in decades to come, both presents are more

frequently likely to work outside the home will mean that there could be a greater possibility

of property loss. Similarly, a larger number of vehicleson the roads for people commuting to
their jobs or business would mean larger incidence of accidents. This will increase the

demand for life insurance products.

Of course, there is also the other possibility that wherever it is possible, some people

will try to spend a part of their time working at home either because they would like to be

with their families or because they find it more convenient. Activities like life insurance and

financial services are particularly well suited for such arrangements.

In recent times, there has been a surge in the high end business of the LIC. For

instance, as against 90 policies each worth more than Rs 10 million in 1999-2000, the

number was as high as 900 policies in the next year. Or again, the number of jeevan shri

policies jumped from 88,000 to a total of 2,33,000 policies in the same period.
26

 L e v e l o f e d u c a t i o n :

India is one of the developing countries: the level of education is very low here. The

literacy rate is very poor. More than 50% of the population is still uneducated or more or less

not educated. Thus the people are not able to understand the concept of the life insurance.

Among the educated people the quality of the education is still a big question mark. Thus

the awareness is not created and it has become a big challenge for the industry. Thus one of

the factors, which affect the life insurance sector, is low level of education.
 L e v e l o f e a r n i n g :

Another factor, which affects the life insurance sector, is the level of earning. In India

the rule of 80-20 is working. The 80% of the total population is having the 20% of the wealth

and the 20% of the total population is having 80% of total wealth. Thus the richer are richer

and poorer are poorer. Due to this the life insurance sector is affected very much.
 S o c i e t a l b e n e f i t s :

In view of the fact that large sections of India have inadequate life insurance cover,

an important social responsibility of the government relates to spreading it far and wide. In

addition, the government attempts to extent life insurance with certain social obligations in

view in both urban and the rural areas through such means special schemes for the weaker

sections, and by tilting of the life insurance companies’ investments in favour of social

developments.
 The social changes emerging in the country provide opportunities for insurers to sell

financial services products such as family health care programmed, retirement plans

disability insurance, long-term care for senior citizens and different employee benefit plans

The population in the age group 15-55 is usually regarded as the insurable

population, since this can be considered as the main “active” age group ( in the sense of

working, earning. And supporting others), and beyond this range life risk may be considered

to be not worth insuring.

27

There is one opinion, which suggests that in our country the age group 15-55 as the

base is not totally suitable. Due to various factors including the unemployment problem, real

earning starts from around the age of 25 for salaried persons. For others, particularly small

entrepreneurs, traders and businessman, the starting age is a little higher. Only in the

affluent sector of society life insurance can be taken before personal earning starts. Thus,

number wise life insurance below the age of 25 is not so significant (although amount wise it

need not be so). On the other hand, people over the age of 50 rarely apply for fresh life

insurance, mainly because in India the normal retirement age is around 60 years. Also, a

high percentage of the population in the lower income group does not remain “insurable”

after the age of 50. thus, in our country the practical age range for insurable population

actually narrows down to 25 to 50.

Technological Factors Affecting Life Insurance Industry:

Internet as an intermediary in the current Indian market customer is not aware about

the intrinsic value of insurance. He thinks of insurance only in the mount of March as a tax

saving measure. The security provide by an insurance cover is rarely thought about. In such

a scenario Internet can be an effective medium for educating the consumers about

insurance. It serves as a single window for disseminating product, process and procedural

information to the consumers.

Product development and target marketing through the Internet: with increase in the

number of insurance companies there will be a need for market segmentation and

subsequently product designed for each of them. In such a scenario Internet can be a
effective channel for pushing product specific information to a particular market segment.

Consumer feedback about a particular product as well as suggestions for different types or

covers can also be generated through the Internet.

 M a i n t a i n i n g t h e d a t a b a s e

The most important facto that is affecting the insurance industry is the marinating

the database of the customers. The insurance industry having a huge list of the customers.

In order to maintain it in manual format it is really the work of stupidity. With the

change in time the computers has taken the work of this things. Thus with the development

of the technology it has becoming possible to maintain such huge

28

database very easily. A person can switch over to the computer and get the details of the

customer very easily. Thus maintaining the database has really become easy due to the

development in technology.
 E - b u s i n e s s i n s u r a n c e i n
I n d i a : -

The Internet has played a vital role in transforming the business of the 21st century.

Computers are now being used extensively for creating a storing data, information with the

help of complex and sophisticated technological tools in every kind of business. This change

having been widely accepted, the advantages are numerous such as fast processing

improved. Efficiency, cost reduction among several other benefits. However, with every

positive change, there is an evil attached and technology is no exception. In technical is an

evil attached and technology is no exception. In technical terms, increased sophistications of

technology brings with it, an increased factor of risk involved. The risk can be of various

attributes, for example, the risk of data being lost due to a virus attack, the theft of

important and confidential information and so on, which ultimately results in losses for the

business entity. With this change in the business process, insurers have to devise new

methods for assessing, underwriting and servicing claims for the so-called e-business

insurance.

Insurers face challenges to ascertain risks, in order to quantify them because such

risks don’t have any past data, which makes it all the more difficult for actuaries. Moreover,
what financial impact a particular risk can have is very difficult to be determined. For

example, if some hackers obtain credit card information of few customers, it’s a loss for

banks, their credibility, customers and also their brand. Will an insurance policy cover all of

this is million dollars question hence; the difficulty is to design a cover first of all, which

really answers the needs of customers. But even after designing and pricing such products

with difficulty, the challenge to underwrite and handle claims for such policies remains

existent.
29

DOMESTIC PLAYERS
Top 10 Players in Insurance Companies in India
Life Insurance Corporation of India

Life Insurance Corporation (LIC) came into existence on 1st September 1956 through

the amalgamation of 154 Indian insurance companies, 16 non-Indian companies and 75

provident. The amalgamation was achieved with the help of Life Insurance Act passed by the

Parliament in the same year. The LIC was created with the goal of reaching all the insurable

people in the country and providing them financial coverage at a reasonable price. In the

year 1956, LIC had 5 zonal offices, 33 divisional offices and 212 branch offices. With time

there was a need for a branch office at every district headquarter and many branches were

opened, which raised the pace of the organization.

LIC now has 2048 fully computerized branch offices, 100 divisional offices, 7 zonal

offices and the corporate office. At present, online premium collection facility is being

offered in selected cities as LIC has tied up with some banks and service providers. For

providing customer satisfaction the organization has introduced various schemes such as

ECS, ATM premium payment facility, IVRS, Info centers which are set up in various cities

including Mumbai, Bangalore, Chennai, Kolkata, New Delhi, Pune and many more. It has also

come up with SATELLITE SAMPARK offices providing easy access to policyholders. LIC has

crossed many milestones and set standards for itself fostering unmatched performance.
Objectives
•
Holding the money with obligation and using it in the best possible manner in
the interests of the policyholder and the community.
•
Bringing attractive savings plans and making them easily accessible to the
policyholders.
•
Giving attractive returns to the people and keeping in mind national priorities.
•
Being trustworthy to the customers and develop the spirit of corporate social
responsibility.
30

Bajaj Allianz General Insurance Company Limited

Bajaj Allianz General Insurance Company Limited is a joint venture between
Bajaj Auto Limited and Allianz AG of Germany.

Bajaj Allianz General Insurance came into existence on 2nd May 2001, when it got

certification of Registration from the Insurance and Regulatory Development Authority. Bajaj

Auto has a share of 74%, whereas Allianz has the remaining 26%. In the very first year, the

company made a strong position for itself in the industry and was reckoned amongst the top

private insurers. The premium income of the company as on 31st March 2006 was Rs. 1285

crores, whereas the profit after tax made was Rs. 52 crores. Bajaj Allianz has a Pan India

network covering over 100 towns from Jammu to Thiruvananthapuram and aims to spread

its operations in many other cities.

The vision of the organization is to be the first choice for customers, and provide job

satisfaction to the employees and create shareholder value. The organization strives to

excel in its products and services, providing total customer satisfaction.

Bajaj Allianz serves customers in all areas of General and Health Insurance as well as

Risk Management. It has in-depth knowledge of the local market and extensive distribution

network with expertise, stability and experience. It has a capital base of Rs.147 crores, and

is allowed to serve both the General and Health insurance.

It has achieved iAAA rating, by ICRA Limited and has the highest claims- paying

ability and a stable position in the market. In a 2006 survey, Business World has rated it

among the Most Respected Companies, putting it at No.2 position in Insurance sector.
The Company provides the following products under general insurance:
•
Travel Insurance
•
Asset Insurance
•
Health Insurance
•
Corporate Insurance
31
ICICI Prudential Life Insurance Company

ICICI Prudential is a joint venture between ICICI bank and Prudential plc, both having

strong operations in their respective countries. ICICI bank is one of the leading banks in India

providing quality financial services and Prudential is an international financial service

provider headquartered at United Kingdom. ICICI and Prudential have respective shares of

74% and 26%. The Company started operating in December 2000. Currently, total capital

with the company is Rs. 18.15 billion.

ICICI Prudential was the first insurance company in India to receive a National Insurer

Financial Strength rating of AAA (Ind.) from Fitch ratings. It has been given the honour of

being among the Most Trusted Brands in the industry by Economic Times for 3 consecutive

years. It has a network of 450 branches, over 1,50,000 insurance advisors and 18 banc

assurance partners.

As the organization grows and develops, it keeps introducing new range of products

and services and enhancing the quality of plans and solutions given to the customers. The

distribution network is one of the best, and is spreading across the length and breadth of the

country. As on December 31, 2006, it had made imprints in over 360 cities and towns in

India. It has over 1,75,000 advisors across the country, serving clients with full commitment.

It has tied up with ICICI Bank, Bank of India, Federal Bank, Lord Krishna Bank, some co-

operative banks, NGOs, MFIs and corporates for making inroads into the rural areas.
ICICI Lombard General Insurance About the various player of life
insurance sector:

ICICI Lombard General Insurance Company Limited is a joint venture between ICICI

Bank Limited and Fairfax Financial Holdings Limited. ICICI bank is India's second largest

bank; Fairfax is Canada-based, engaged in general insurance, reinsurance, insurance claims

management and investment management. ICICI Lombard General Insurance Company

commenced its operations in general insurance business in August 2001.

ICICI Lombard is India's number one private insurance company; it is also the
first general insurance company to be given certification of ISO 9001:2000. The
32

company provides simple and fast documentation, fast claims settlement, online
policy issuance, and comprehensive product line.
 It has also been given iAAA rating by ICRA for having highest claims paying ability. In

the very first year of operations, it was able to reach financial breakeven and achieve

underwriting breakeven in the second year. Security is provided through encryption and it is

the first company to provide digitally signed documents. It has been honored as the most

Customer Responsive Company by the Economic Times. Times of India has designated it as

the Best Housing Insurance in the Smart Living Awards by 360 degrees. It has also been

awarded Gold Shield for "Excellence in Financial Reporting". It is among the top three

companies to be awarded the "General Insurance Company of the Year" at the 10th Asia

Insurance Industry Awards.

Birla Sun Life Insurance Company Limited

Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between Aditya

Birla Group and Sun Life Financial Inc. BSLI started functioning in March 2001 after getting

the certificate of registration from IRDA.

Birla Sun Life Insurance Company Limited introduced unit Linked Life Insurance

Solutions in India. Within a short span of time it was able to establish itself as a leading

player in the Private Life Insurance Industry. It has been innovative and come up with

customer-centric products to provide safety and services. The company has web-enabled IT

systems for better customer services and a strong distribution channel which is easily

approachable. The company shows corporate governance and a high degree of transparency

in all business practices. It has professional knowledge and global expertise of Aditya Birla

Group.
Birla Sunlife Insurance has been providing first class financial solutions to its
customers and has been amongst the top three private sector life insurance companies.

Its mission is to be amongst the top players in the eyes of customers and the first

choice of insurance and retirement solutions to individuals and groups. These innovative

solutions are linked with global and technical expertise and are deployed by a multi channel

distribution network and enhanced technology.

The company aims at keeping all people associated with it - customers, clients,
stakeholders and employees- happy and fully satisfied. It wants to provide value
33

added products and services to the customers, job satisfaction to employees and
highest returns to the shareholders.
Qualities like integrity, commitment, passion, and speed are the core values of
the company. The products offered by the company are:
TATA AIG General Insurance

Tata AIG General Insurance Company Ltd. is a joint venture between Tata Sons and

American International Group, Inc. (AIG). The Tata Group is holding 74 per cent stake and

the rest 26 percent is held by AIG. The company has got the expertise, knowledge and

strength of both the organizations.

Tata AIG General Insurance Company was founded on January 22, 2001. It offers

general insurance in various categories, such as automobile, home, personal accident,

travel, energy, marine, property and casualty and specialized financial solutions.

Jamsetji Tata founded Tata Group in 1860s. It has an estimated turnover of around

US $ 14.25 billion. It has spread its operations in various fields such as steel, power, hotels,

airlines, software services, communications, etc. Some of its major projects have been Tata

Tea, Tata Steel, Tata Chemicals, Titan, Tanishq, Voltas, Westside and Tata Motors. Its

imprints are made on the telecommunication and technology sector. Regarding

telecommunications, it is the largest international long distance service provider.

Approximately two- third of the equity of Tata Sons is held by a host of national institutions

in science and technology, medical services and performing arts. By combining the ethical

values with business acumen and fulfilling its commitment to the nation, it has become one

of the largest groups in India.

American International Group, Inc. (AIG) is the leading international player in

insurance and financial services. Its network spreads across 130 nations. AIG member

companies serve all types of customers, be it commercial or individual. AIG is among the

leading insurers and the largest underwriter of insurance. Aircraft leasing, financial products

and trading are some of the services offered by AIG. AIG has a global expertise of fulfilling

the customer-centric needs. It has specialized investment management capabilities in

equities, fixed income, alternative investments and real estate. AIG's stock has been listed

in the New York Stock Exchange as well as stock exchanges in London, Paris, Switzerland

and Tokyo.
34
 The organization caters to individuals, small businesses and corporates. Individual

plans include motor, home, accident & health and travel insurance, whereas corporate plans

include accident & health, travel, energy, property, marine and liability plans.
New India Assurance Company

Sir Dorab Tata founded New India Assurance Company on 23rd July 1919. It has 1068

offices comprising of 26 regional offices, 393 divisional offices and 648 branches with more

than 21,000 employees.It is one of the largest Non- Life insurers in Afro- Asia and the first

one to cross Rs. 5,000 crores of Gross Premium. It has a global network expanding in

countries like Japan, U.K., Middle East, Fiji and Australia. Its international operations started

in 1920 and have spread across 24 countries having a network of 19 branches, 12 agencies,

2 associate companies and 2 subsidiary companies. The company contributes 80% of total

overseas premium in India.The company has a highly qualified staff, which excel in both

expertise and knowledge and are trained to provide satisfaction to the customers. It is the

only company able to establish strong relationships overseas and has a record of successful

trading outside India. The performance has been outstanding and the company has been

able to maintain a strong position in the market.

It has been the pioneer in various fields such as:
•
Setting up an Aviation Insurance Department in 1946.
•
Handling the complete insurance requirements of the Indian Shipping Fleet.
•
Introduced its own Training School.
•
Pioneering the concept of 'Model Office Training'.
•
Creating department in Engineering insurance.
•
Satellite insurance.

The company wants to develop itself as the best general insurance company in the

industry. It is concerned about the society and community, and provides financial security at

reasonable prices. The company gives utmost importance to customer needs and there is

transparency in its operations. Some of the policies and schemes introduced by the

company are:
35

•
Public Liability Policy
•
Jewellers Block Policy
•
Pravasi Bharatiya Bima Yojana Policy
•
Universal Health Insurance Scheme
•
Fire Policy
IFFCO Tokio General Insurance

IFFCO Tokio General Insurance is a customer-centric company aiming to be easily

accessible and approachable to all sections of society. It offers products and services that

provide quality at reasonable cost. The organization has the deep knowledge of IFFCO and

thus developed a business plan that has both stability and integrity.

It has set global standards for itself and is the only private general insurance

company in India to make 5 consecutive years of experience. ITGI has been one of the few

companies to show underwriting profits within four years of operations. The company

focuses on delivering creative solutions to its customers. IFFCO Tokio General Insurance has

273 employees present in 68 cities, dedicated to give full satisfaction to the customers. It is

the first company to underwrite mega policies for a fertilizer and automobile client.
The Oriental Insurance Company Ltd.

The Oriental Insurance Company Ltd. (OICL) is one of the general insurance

companies under the support of the General Insurance Corporation (GIC) of India. It came

into existence in the year 1947 and is one of the oldest organizations in India. It caters to all

sections and sectors ranging from MNCs to rural sector. The headquarters of the company

are situated at Delhi and it has 21 Regional Offices, 311 Divisional Offices and 635 Branch

offices.

It has a team of hard working employees, having the talent to take the company to

new heights. Also the company shows concern for both the employees and customers. It

provides special covers for large projects like power plants, steel plants and chemical plants.
36

It believes in actively participating in economic growth by being a dynamic

organization catering to the society with full commitment and efficiency. The main

objectives of the company are to serve the insurance needs of the entire community,
provide services at reasonable cost, make optimum utilization of the funds, maintaining

global standards, minimization of losses and retention of business.

HDFC Standard Life Insurance Company Limited

HDFC Standard Life Insurance Company Limited is one of the first companies to be

licensed by IRDA to operate in the Insurance sector. The company came into existence on

14th August 2000. Both Crisil and ICRA have honored it with AAA Ratings. Similarly Moody's

and Standard and Poors have also honoured it AAA ratings. HDFC holds 81.4% share in HDFC

and the remaining 18.6% stake is with Standard Life. It integrates the strong expertise and

stability of Standard Life and HDFC.

It is one of the most trusted companies; it is easily accessible and
approachable, offering value services to its customers.
The company aims to provide:
•
Innovative products to cater to different needs of different customers
•
Customer service of the highest order
•
Use of technology to improve service standards
•
Value for money for customers
•
Increasing market share
•
Professionalism in carrying out business
The values ingrained in the company are to provide financial security to
policyholders, maintain trust and keep innovating to establish it as a unique player.
37

GOVERNMENT REGULATIONS
Insurance Regulatory and Development Authority (IRDA):

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in

Parliament in December 1999. The IRDA since its incorporation as a statutory body in April

2000 has fastidiously stuck to its schedule of framing regulations and registering the private

sector insurance companies.

The other decisions taken simultaneously to provide the supporting systems to the

insurance sector and in particular the life insurance companies were the launch of the

IRDA’s online service for issue and renewal of licenses to agents.

 The approval of institutions for imparting training to agents has also ensured that the

insurance companies would have a trained workforce of insurance agents in place to sell

their products, which are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a

framework of globally compatible regulations. In the private sector 12 life insurance and 6

general insurance companies have been registered.

Duties, Power and Functions of IRDA:
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA.

1. Subject to the provisions of this Act and any other law for the time being in force, the

Authority shall have the duty to regulate, promote and ensure orderly growth of the

insurance business and re-insurance business.

2. Without prejudice to the generality of the provisions contained in sub section.
The powers and functions of the Authority shall include
a)
Issue to the applicant a certificate of registration, renew, modify,
withdraw, suspend or cancel such registration;
b)

Protection of the interests of the policy holders in matters concerning assigning of

policy, nomination by policy holders, insurable interest, settlement of insurance claim,

surrender value of policy and other terms and conditions of contracts of insurance;.
38

c)
Specifying requisite qualifications, code of conduct and practical
training for intermediary or insurance intermediaries and agents.
d)
Specifying the code of conduct for surveyors and loss assessors.
e)
Promoting efficiency in the conduct of insurance business
f)
Promoting and regulating professional organizations connected with
the insurance and re-insurance business.
g)
Levying fees and other charges for carrying out the purposes of this
Act.
h)

Calling for information from, undertaking inspection of, conducting enquiries and

investigations including audit of the insurers, intermediaries, insurance intermediaries and

other organizations connected with the insurance business;

Insurance Regulatory and Development Authority (IRDA) Act:
 The Insurance Regulatory and Development Authority Act was introduced to end the

monopoly of State-owned companies and to invest in the Insurance Regulatory Authority

power to control the insurance sector.

These powers inter aria are:

 I m p o s i t i o n o f p r u d e n t i a l

n o r m s s u c h a s s o l v e n c y

m a r g i n s , c a p i t a l a d e q u a c y ;

 R e q u i r e m e n t s a n d

i n v e s t m e n t g u i d e l i n e s f o r

i n s u r a n c e c o m p a n i e s ;

 G r a n t o f l i c e n s e s t o n e w

c o m p a n i e s , a n d c a n c e l l a t i o n ,

s u s p e n s i o n a n d
withdrawal of licenses given to insurance companies;

 R e g u l a t i o n o f f u n d

i n v e s t m e n t b y i n s u r a n c e

c o m p a n i e s ;

 M a i n t e n a n c e o f s o l v e n c y

m a r g i n s ;

 A d j u d i c a t i o n o f d i s p u t e s
b e t w e e n i n s u r e r s a n d

i n t e r m e d i a r i e s ; a n d

 T a r i f f f i x i n g .

As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development

Authority (IRDA, which was constituted by an act of parliament) specify the composition of

Authority the Authority is a ten member team consisting of

a. A Chairman;
39

b. Five whole-time members;

c. Four part-time members, (All appointed by the Government of India)
Regulatory Issues:

The IRDA Bill lies down that the Indian promoter must dilute the stake in the private

insurance firms from 74 per cent to 26 per cent in ten years. The bill stipulates tough

solvency margins -- Rs 500 million for life insurance firms, Rs 500 million or a sum

equivalent to 20 per cent of net premium income for general insurance and Rs 1 billion for

reinsurance business.

The insurer has to maintain separate accounts relating to fund of shareholders and

policyholders. The funds of policyholders should be retained within the country but does not

cover repatriation of profits and dividends. Insurance companies under the new regime will

have to have exposure to rural and social sectors. Foreign investment in insurance, the bill

states, is crucial to financing infrastructure and better insurance cover.

The key to success in opening up the insurance sector in India is regulation. An

example of how poor regulation can destroy a market is the mutual fund industry. A

combination of improper marketing practice has resulted in a loss of investor faith in that

industry. Incidentally, the insurance industry in India itself has gone through the same

phase.

One of the reasons for nationalization of the insurance industry (LIC in 1956 and GIC

in 1973) was the mismanagement and malpractice of erstwhile private players. But if the

statements of IRA officials are anything to go by, the new regulations are expected to be on
the right track. N I Rangachary, chairman, IRA, has already provided the timetable for the

changes once the Bill is passed. The IRA has already indicated that it will have tough norms

for new participants.

This is the most compelling reason why private sector (and foreign) companies,

which will spread the insurance habit in the societal and consumer interest, are urgently

required in this vital sector of the economy.

With the nation's infrastructure in a state of imminent collapse, India couldn't have

afforded to be lumbered with sub-optimally performing monopoly insurance companies and

therefore the passage of the Insurance Regulatory & Development

40

Authority Bill on December 2, 1999 heralds an era of cautious optimism where stakes are

high for all parties concerned. For the Govt. of India, Foreign Direct Investment (FDI) must

pour in as anticipated; for foreign insurers, investments must start yielding returns and for

the domestic insurance industry - their market penetration should remain intact. On the

fringe, the customer is pondering whether all the hype created

on liberalization willactually benefit him.
Regulatory Body:

 T h e I n s u r a n c e A c t s h o u l d b e

c h a n g e d

 A n I n s u r a n c e R e g u l a t o r y

b o d y s h o u l d b e s e t u p

 C o n t r o l l e r o f I n s u r a n c e

( C u r r e n t l y a p a r t f r o m t h e

F i n a n c e M i n i s t r y ) s h o u l d
be made independent
Investments:
•
Mandatory Investments of LIC Life Fund in government securities to
be reduced from 75% to 50%
•
GIC and its subsidiaries are not to hold more than 5% in any company
(There current holdings to be brought down to this level over a period of time)
41

FISICAL REGULATIONS
Tax policy and Insurance Sector:

Another factor, which affects the insurance sector, is the tax policy. The tax reforms

in India are such that it encourages the citizens to invest in the insurance sector.

The tax policy of the government is particular relevant for life insurance which is a

long-term contract and inculcates among the policyholders the habit of saving. Taxation of

returns on investment influences, investment decisions and high rates of taxation will

discourage the desire to save. Already in India there are complaints that the rates of return

on life policies are not what they could be. Therefore tax incentives play a vital role in

determining the attractiveness of such policies. Such tax breaks are available in many

countries and have helped in the development of their life sector. In western countries the

gain from the proceeds of a life insurance policy is paid free of tax. Provided the policy

satisfies certain qualifying conditions. Non-qualifying policies get basic rate tax relief, though

higher rate taxpayers may still have to pay tax on the gain, although at a reduced rate. The

insurance companies can use such tax concessions rate. The insurance companies can use

such tax concessions to design products for different categories of taxpayers.

The other factors, which affect the insurance sector, are the employment law,
and government stability. These are the factors, which affect the insurance industry
Tariff Advisory Committee:

The tariff advisory committee established under the Act is empowered to control and

regulate the rates, terms, and etc. that may be offered by insurers in respect of any risk or

of any category of risks. It is provided that in fixing, amending or modifying such rates etc.

the committee shall try to ensure as far as possible that there is no unfair discrimination

between risk of essentially the same hazard and also that consideration is given to past and

prospective loss experience. Every insurer is required to make payment to the TAC of the

prescribed annual fees.

42
INTERNATIONAL SCENARIO

Life insurance not plays an important role in national economy but also in

international economy. Marine cargo insurance provides risk coverage for shippers and the

banks, which finance international trades. This role becomes all the more important in the

context of an active government policy to encourage exports. Indian life insurer operates in

more than 30 countries through agencies, branches, associates companies. These

operations earn foreign exchange.

The insurance business is concerned with North America, Western Europe, Japan

and Oceania. Together these region’s accounts for about 91 % of the world annul remium.

By region’s North America and western Europe are growing moderately while oceanic, Latin

America, eastern Europe and Africa display growth above lone –term trends to a global

context globalization of life insurance helps companies practices underwriting discipline in

one regions globalization of the insurance industry received a big boost.

Countries
Insurance Penetration
(premium as a% of GDP)
Insurance Density (Per
Capita Premiums in
USD)
United Kingdom
12.71
3028.5
Japan
8.70
3165.1
United States
4.48
1611.4
South Africa
14.04
392.9
Australia
6.04
1193.5
South Korea
9.89
935.6
India
1.77
7.6
China
1.12
9.5
Malaysia
2.13
86.4
Indonesia
0.54
4.0
Brazil
0.36
12.9
43

India and the World Market:

Unfortunately, the progress achieved by the life insurance industry in India, it

compares unfavorably not just with the developed countries. But also even with the

developing world. The global market for the life insurance is estimated to be around $

1412.3 billions.
44

PORTERS FIVE-FORCE ANALYSIS

 Porters fives forces model is an excellent model to use to analyse a particular

environment of an industry. So for example, if we were entering the PC industry, we would

use porters model to help us find out about:

1. Competitive Rivalry

2. Power of suppliers

3. Power of buyers

4. Threats of substitutes

5. Threat of new entrants.

The above five main factors are key factors that influence industry performance,

hence it is common sense and practical to find out about these factors before you enter the

industry. Lets look at them below.

Competitive rivalry

A starting point to analysing the industry is to look at competitive rivalry. If entry to

an industry is easy then competitive rivalry will likely to be high. If it is easy for customers to

move to substitute products for example from coke to water then again rivalry will be high.

Generally competitive rivalry will be high if:

•
There is little differentiation between the products sold between customers.
•
Competitors are approximately the same size of each other.
•
If the competitors all have similar strategies.
•
It is costly to leave the industry hence they fight to just stay in ( exit barriers)
Power of suppliers

Suppliers are also essential for the success of an organisation. Raw materials are

needed to complete the finish product of the organisation. Suppliers do have power. This

power comes from:

•
If they are the only supplier or one of few suppliers who supply that particular
raw material.
45

•
If it costly for the organisation to move from one supplier to another (known
also as switching cost).
•
If there is no other substitute for their product.
Power of buyers
Buyers or customers can exert influence and control over an industry in certain
circumstances. This happens when:
•
There is little differentiation over the product and substitutes can be found
easily.
•
Customers are sensitive to price.
•
Switching to another product is not costly.
Threat of substitutes

Are there alternative products that customers can purchase over your product that

offer the same benefit for the same or less price? The threat of substitute is high when:
•
Price of that substitute product falls.
•
It is easy for consumers to switch from one substitute product to another.
•
Buyers are willing to substitute.
Threat of new entrant
The threat of a new organisation entering the industry is high when it is easy
for an organisation to enter the industry i.e. entry barriers are low.

An organisation will look at how loyal customers are to existing products, how

quickly they can achieve economy of scales, would they have access to suppliers, would
46

Government legislation prevents them or encourages them to enter the

industry. Legislation prevents them or encourages them to enter the industry.
47
MARKET SHARE OF INSURANCE INDUSTRY
50

Life Insurance Industry grows 49 per cent in April

New Delhi: The life insurance industry clocked 49 per cent growth in new businesses,

while general insurance players saw 16 per cent increase in April, the first month of the

current financial year.

Strong performance by Life Insurance Corporation, ICICI Prudential and SBI Life

helped the 16 player-strong life insurance industry to mop up Rs 2,982 crore in April this

year compared with Rs 1,996 crore collected in the same month last year, according to data

compiled by the Insurance Regulatory and Development Authority.

The country’s largest life insurer, LIC, saw new premiums grow 57 per cent to Rs

2,134 crore in April by selling 15,89,684 policies against Rs 1,355 crore a year ago. It had a

market share of 71.56 per cent in April.

Insurers
Premium (Rs cr)
ICICI Prudential
271.00
Bajaj Allianz
124.00
SBI Life
90.00
HDFC Standard
70.00
Max New York Life
69.00
Tata AIG
48.00
51

Aviva
39.00
Reliance Life
33.00
Birla Sunlife
28.00
Kotak Mahindra Old Mutual
26.00
ING Vysya
22.00
Met Life
19.00
Shriram Life
4.50
Sahara Life
1.70
Bharti Axa Life
0.72
LIC

LIC (Life Insurance Corporation of India) still remains the largest life insurance

company accounting for 64% market share. Its share, however, has dropped from 74% a

year before, mainly owing to entry of private players with innovative products and better

sales force.
ICICI Prudential Life Insurance Co Ltd

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in

India. It experienced growth of 58% in new business premium, accounting for increase in

market share to 8.93% in 2007-08 from 6.97% in 2006-07.

Bajaj Allianz Life Insurance Co Ltd

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market

share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second

(after LIC) in number of policies sold in 2007-08, with total market share of 7.36%.
SBI Life Insurance Co Ltd
 SBI Life Insurance Co Ltd in terms of new number of policies sold, the company

ranked 6th in 2007-08. New premium collection for the company was Rs 4,792.66 crore in

2007-08, an increase of 87% over last year.

Reliance Life Insurance Co Ltd
52

Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market

share went up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium

and 4th in number of new policies sold in 2007-08.

HDFC Standard Life Insurance Co Ltd

HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08,

registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th among

the insurance companies and 5th amongst the private players.

Birla Sun Life Insurance Co Ltd

Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22%

to 2.11% in 2007-08. The company moved to the 7th position in 2007-08 from 8the a year

before, pushing down Max New York Life insurance company.

Max New York Life Insurance Co Ltd

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007- 08. Total

new business generated was Rs 641.83 crore as against Rs 387.51 crore. The company was

pushed down to the 8th position from 7th in 2007-08.

Kotak Mahindra Old Mutual Life Insurance Ltd

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company

reported growth of 80%, moving from the 11th position to 9th. It captured a market share of

1.19% in 2007-08. Last year the company doubled its branch network to 150 from 74.
Aviva Life Insurance Company India Ltd

Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th

last year. It has presence in more than 3,000 locations across India via 221 branches and

close to 40 banc assurance partnerships. Aviva Life Insurance plans to increase its capital

base by Rs 344 crore. With the fresh investment, total paid-up capital of the insurer would

go up to Rs 1,348.8 crore.
Current Market Share of LIFE INSURANCE COMPANIES
 LIC still remains the largest life insurance company accounting for 64% market

share. Mainly owing to entry of private players with innovative products and better sales

force.
53

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market

share went up to 6.98% in 2007-08. The company ranked second (after LIC) in number of

policies sold in 2007-08, with total market share of 7.36%.

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance
company in India. Accounting for increase in market share to 8.93% in 2007-08.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the company

ranked 6th in 2007-08. New premium collection for the company was Rs.4,792.66 crore in

2007-08, an increase of 87% over last year.

Reliance Life Insurance Co Ltd Total collected was Rs.2,792.76 crore and its
MARKET SHARE went up to 2.96% from 1.23% a year back.

HDFC Standard Life Insurance Co Ltd with an income of Rs.2,680 crore in FY2007-08,

registering a year-on-year growth of 64%. Its MARKET SHARE is 2.88% and it ranks 6th

among the insurance companies and 5th amongst the private players.Birla Sun Life

Insurance Co Ltd market share of the company increased from

1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08 from
8the a year before.

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007- 08. Total

new business generated was Rs.641.83 crore as against Rs.387.51 crore. The company was

pushed down to the 8th position from 7th in 2007-08.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company

reported growth of 80%, moving from the 11th position to 9th. It captured a market share of

1.19% in 2007-08.

Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th

last year. It has presence in more than 3,000 locations across India via 221 branches and

close to 40 bancassurance partnerships. Aviva Life Insurance plans to increase its capital

base by Rs.344 crore. With the fresh investment, total paid-up capital of the insurer would

go up to Rs.1,348.8 crore.
54
55

SWOT ANALYSIS
Strength
•
Risk protection is provided by this sector only.
•
Insurance having currently good market.
•
Tax exemption.
•
The variety of products is increasing.
•
Insurance to build close relationship with customers.
Weakness
•
Unable to convenience the people about the products.
•
Insurance companies instability
•
Limited working capital
•
Products or services similar to competitors.
56

Opportunities
•
Technology is improving paperless transaction are available.
•
Busy life, customer need flexible and customizable policies.
•
Like mobile banking mobile insurance could be a hit.
•
New innovations in technology-measuring weather variables.
Threats
•
Weather cycles.
•
New substitute product emerging.
•
Increasing expenses and lower profit margins with hard on the smaller
agencies and insurance companies.
•
Government regulations on issues like health care terrorism can quickly
change the direction on insurance.
57

CONCLUSION

Insurance sector in India is one of the booming sectors of the economy and is

growing at the rate of 15-20 per cent annum. One of the key service industry in India would

be health and education Insurance sector in India grew at a faster pace after independence.

In 1956, Government of India brought together 245 Indian and foreign insurers and
provident societies under one nationalised monopoly corporation and formed Life Insurance

Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of

Rs.5 crore.

The (non-life) insurance business/general insurance remained with the private sector

till 1972. There were 107 private companies involved in the business of general operations

and their operations were restricted to organised trade and industry in large cities. The

insurance sector in India has come to a position of very high potential and competitiveness

in the market. Indians, have always seen life insurance as a tax saving device.
58

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India and the World Market: Unfortunately, the progress achieved by the life
insurance industry in India, it compares unfavorably not just with the developed countries.
But also even with the developing world. The global market for the life insurance is
estimated to be around $ 1412.3 illions.

Country Insurance Penetration

as a %age of GDP

UK 12.71
JAPAN 8.70

USA 4.48

SOUTH AFRICA 14.04

AUSTRALIA 6.04

SOUTH KOREA 9.89

INDIA 1.77

CHINA 1.12

MALAYSIA 2.13

INDONESIA 0.54

BRAZIL 0.36

INTERNATIONAL SCENARIO
Life insurance not plays an important role in national economy but also in

international economy. Marine cargo insurance provides risk coverage for shippers and the

banks, which finance international trades. This role becomes all the more important in the

context of an active government policy to encourage exports. Indian life insurer operates in

more than 30 countries through agencies, branches, associates companies. These

operations earn foreign exchange.

The insurance business is concerned with North America, Western Europe, Japan

and Oceania. Together these region’s accounts for about 91 % of the world annul remium.

By region’s North America and western Europe are growing moderately while oceanic, Latin

America, eastern Europe and Africa display growth above lone –term trends to a global
context globalization of life insurance helps companies practices underwriting discipline in

one regions globalization of the insurance industry received a big boost.

Insurance Regulatory and Development Authority (IRDA) Act:

The Insurance Regulatory and Development Authority Act was introduced to end the

monopoly of State-owned companies and to invest in the Insurance Regulatory Authority

power to control the insurance sector.

These powers inter aria are:

 Imposition of prudential norms such as solvency margins, capital adequacy;

 Requirements and investment guidelines for insurance companies;

 Grant of licenses to new companies, and cancellation, suspension and

withdrawal of licenses given to insurance companies;

 Regulation of fund investment by insurance companies;

 Maintenance of solvency margins;

 Adjudication of disputes between insurers and intermediaries; and

 Tariff fixing

Economical Factors Affecting Life Insurance Industry :

 Interest rate at bank and interest rate of P.F variation very much affect to life

insurance industry, because people always attract by higher return. Therefore, they do not

prefer lower return policy. Unemployment also affects insurance industry, because the

unemployment people will not have earning, so saving also affect to life insurance sector

Life insurance industry will directly affected by Earthquake, Monsoon, and Natural calamity.

Because of these events turns into lots of death, so the life insurance companies have to

pay claim against policy. Infant mortality rate and maternity mortality rate are also affecting

to life insurance. Typical Indian want luxurious product against low income, so that they

prefer installment or annuity (EMI), so that they may not have extra saving to invest in life

insurance.
Socio-cultural factors Affecting Life Insurance Industry

The basic social factors that affect the life insurance sector are as under: -
➢ Population
➢ Life Style
➢ Educational level
➢ Educational level
➢ Societal benefits

Population:

Growth in the population is a major factor pushing up the demand. The Population of

India as on It is also going to exert a special influence on the life insurance market in other

ways. Apart from exerting pressure on demand for goods and services, and through that, ill

effects of uncontrolled growth of population also could spur the growth of demand. For

example, overcrowding in public places of entertainment, public support, or too many

vehicles on the road can result in hazards like stampedes and pollution, which require

covers and still are not sold on a large scale today. Thus the positive as well as the negative

aspects of population growth are going to spur demand.

Life style:

The peculiar lifestyle of a country or an age also influences the insurance business.

Change therein produces different demands for life insurance. For e.g. All over the world,

family size is shrinking and the fact that in decades to come, both presents are more

frequently likely to work outside the home will mean that there could be a greater possibility

of property loss. Similarly, a larger number of vehicleson the roads for people commuting to

their jobs or business would mean larger incidence of accidents. This will increase the

demand for life insurance products.

Of course, there is also the other possibility that wherever it is possible, some people

will try to spend a part of their time working at home either because they would like to be

with their families or because they find it more convenient. Activities like life insurance and

financial services are particularly well suited for such arrangements.

In recent times, there has been a surge in the high end business of the LIC. For instance, as

against 90 policies each worth more than Rs 10 million in 1999-2000, the number was as

high as 900 policies in the next year. Or again, the number of jeevan shri policies jumped

from 88,000 to a total of 2,33,000 policies in the same period.

Level of education:

India is one of the developing countries: the level of education is very low here. The

literacy rate is very poor. More than 50% of the population is still uneducated or more or less

not educated. Thus the people are not able to understand the concept of the life insurance.

Among the educated people the quality of the education is still a big question mark. Thus

the awareness is not created and it has become a big challenge for the industry. Thus one of

the factors, which affect the life insurance sector, is low level of education.

Level of earning:

Another factor, which affects the life insurance sector, is the level of earning. In India

the rule of 80-20 is working. The 80% of the total population is having the 20% of the wealth

and the 20% of the total population is having 80% of total wealth. Thus the richer are richer

and poorer are poorer. Due to this the life insurance sector is affected very much.

Societal benefits:

In view of the fact that large sections of India have inadequate life insurance cover,

an important social responsibility of the government relates to spreading it far and wide. In

addition, the government attempts to extent life insurance with certain social obligations in

view in both urban and the rural areas through such means special schemes for the weaker

sections, and by tilting of the life insurance companies’ investments in favour of social

developments.

The social changes emerging in the country provide opportunities for insurers to sell

financial services products such as family health care programmed, retirement plans

disability insurance, long-term care for senior citizens and different employee benefit plans.
 The population in the age group 15-55 is usually regarded as the insurable

population, since this can be considered as the main “active” age group ( in the sense of

working, earning. And supporting others), and beyond this range life risk may be considered

to be not worth insuring.

There is one opinion, which suggests that in our country the age group 15-55 as the

base is not totally suitable. Due to various factors including the unemployment problem, real

earning starts from around the age of 25 for salaried persons. For others, particularly small

entrepreneurs, traders and businessman, the starting age is a little higher. Only in the

affluent sector of society life insurance can be taken before personal earning starts. Thus,

number wise life insurance below the age of 25 is not so significant (although amount wise it

need not be so). On the other hand, people over the age of 50 rarely apply for fresh life

insurance, mainly because in India the normal retirement age is around 60 years. Also, a

high percentage of the population in the lower income group does not remain “insurable”

after the age of 50. thus, in our country the practical age range for insurable population

actually narrows down to 25 to 50.

Technological Factors Affecting Life Insurance Industry:

Internet as an intermediary in the current Indian market customer is not aware about

the intrinsic value of insurance. He thinks of insurance only in the mount of March as a tax

saving measure. The security provide by an insurance cover is rarely thought about. In such

a scenario Internet can be an effective medium for educating the consumers about

insurance. It serves as a single window for disseminating product, process and procedural

information to the consumers.

Product development and target marketing through the Internet: with increase in the

number of insurance companies there will be a need for market segmentation and

subsequently product designed for each of them. In such a scenario Internet can be a
effective channel for pushing product specific information to a particular market segment.

Consumer feedback about a particular product as well as suggestions for different types or

covers can also be generated through the Internet.

 Maintaining the database

The most important facto that is affecting the insurance industry is the marinating

the database of the customers. The insurance industry having a huge list of the customers.

In order to maintain it in manual format it is really the work of stupidity. With the

change in time the computers has taken the work of this things. Thus with the development

of the technology it has becoming possible to maintain such huge database very easily. A

person can switch over to the computer and get the details of the customer very easily.

Thus maintaining the database has really become easy due to the development in

technology.

E-business insurance in India: -

The Internet has played a vital role in transforming the business of the 21st century.

Computers are now being used extensively for creating a storing data, information with the

help of complex and sophisticated technological tools in every kind of business. This change

having been widely accepted, the advantages are numerous such as fast processing

improved. Efficiency, cost reduction among several other benefits. However, with every

positive change, there is an evil attached and technology is no exception. In technical is an

evil attached and technology is no exception. In technical terms, increased sophistications of

technology brings with it, an increased factor of risk involved. The risk can be of various

attributes, for example, the risk of data being lost due to a virus attack, the theft of

important and confidential information and so on, which ultimately results in losses for the

business entity. With this change in the business process, insurers have to devise new

methods for assessing, underwriting and servicing claims for the so-called e-business

insurance.

Insurers face challenges to ascertain risks, in order to quantify them because such

risks don’t have any past data, which makes it all the more difficult for actuaries. Moreover,
what financial impact a particular risk can have is very difficult to be determined. For

example, if some hackers obtain credit card information of few customers, it’s a loss for

banks, their credibility, customers and also their brand. Will an insurance policy cover all of

this is million dollars question hence; the difficulty is to design a cover first of all, which

really answers the needs of customers. But even after designing and pricing such products

with difficulty, the challenge to underwrite and handle claims for such policies remains

existent

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats

SWOT analysis is an important tool for auditing the overall strategic position of a business
and its environment.
Once key strategic issues have been identified, they feed into business objectives,
particularly marketing objectives. SWOT analysis can be used in conjunction with other tools
for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis. It is also a
very popular tool with business and marketing students because it is quick and easy to
learn.
The Key Distinction - Internal and External Issues
Strengths and weaknesses are Internal factors. For example, a strength could be your
specialist marketing expertise. A weakness could be the lack of a new product.
Opportunities and threats are external factors. For example, an opportunity could be a
developing distribution channel such as the Internet, or changing consumer lifestyles that
potentially increase demand for a company's products. A threat could be a new competitor
in an important existing market or a technological change that makes existing products
potentially obsolete.
it is worth pointing out that SWOT analysis can be very subjective - two people rarely come-
up with the same version of a SWOT analysis even when given the same information about
the same business and its environment. Accordingly, SWOT analysis is best used as a guide
and not a prescription. Adding and weighting criteria to each factor increases the validity of
the analysis.
Areas to Consider
Some of the key areas to consider when identifying and evaluating Strengths, Weaknesses,
Opportunities and Threats are listed in the example SWOT analysis below:
Strengths:

1. Actuarial Skills of the experienced staff and the agents.

2. Knowledge of local language.
3. Established popular Brand Name and had become a synonym for Life Insurance.
The leading brands are 4.Skilled Underwriters at branch level.

5. Assignment of policy at branch level.

6.Grant of loan against the policy at branch level.

7. Minimum paper work/formalities.

8.Pan India presence with a network of 2000+ branches+992 satellite offices.

9.Loyalty embedded in the name and good rapport of the agents with the policy holders.

10.Large Product Portfolio for diversified needs.

11.Economies of scale at all levels.

12.Experienced management with Govt.support.

13. Highest no. of claim settlements.

14. Lower fixed costs.

15.Customer Retention.

16. Wide Publicity thru Television , print media and hoardings and usage of creative slogans.

Weaknesses:
1.Low Communication and Marketing Skills of employees.

2.Poor quality of service and lethargic attitude of staff.

3.Delay in settlement of claims & slow decision making process.

4.Internal Problems between Top Management and Line Staff.

5. Exclusive privilege to market life insurance knocked down by IRDA act.

6.Reduction of Govt. Ownership

7.Large Service Gaps.

8. Mediocre Top Bosses.

9.Unable to tap Gen-Y customers.

10. Weak Distribution Channels.

Opportunities:

1. Entry of new players with business models and products.

2. Increased use of technology to ensure to enhance customer satisfaction.
3. Large untapped market.
4. Pension Market.
5. Group Insurance Market Like-BPO, and Employee Organisations etc.
6. Health Insurance.
7. Large Real Estate Portfolio.
8. Changes in population age structures.
9. Large customer data base.
Threats:

1.Increased adoption of IT by private players.

2.New Insurers targeting corporate houses and HNIs to gain quick market share and
recognition.

3.Poor delegation, Lack of Knowledgeable and effective operational control.

4.Delayed decision making.

5. Red-tapism-excessive paper work, rigid conformity to formal rules.

6.Aggressive marketing by new entrants.

7.Online and telemarketing by new entrants-New Distribution Channels.

8.Changing Customer Tastes.

Competitor Analysis:

Competitor Analysis is an important part of the strategic planning process. This revision note
outlines the main role of, and steps in, competitor analysis
Why bother to analyse competitors?
Some businesses think it is best to get on with their own plans and ignore the competition.
Others become obsessed with tracking the actions of competitors (often using underhand or
illegal methods). Many businesses are happy simply to track the competition, copying their
moves and reacting to changes.
Competitor analysis has several important roles in strategic planning:
• To help management understand their competitive advantages/disadvantages relative to
competitors
• To generate understanding of competitors’ past, present (and most importantly) future
strategies
• To provide an informed basis to develop strategies to achieve competitive advantage in
the future
• To help forecast the returns that may be made from future investments (e.g. how will
competitors respond to a new product or pricing strategy?
Questions to ask
What questions should be asked when undertaking competitor analysis? The following is a
useful list to bear in mind:
• Who are our competitors? (see the section on identifying competitors further below)
• What threats do they pose?
• What is the profile of our competitors?
• What are the objectives of our competitors?
• What strategies are our competitors pursuing and how successful are these strategies?
• What are the strengths and weaknesses of our competitors?
• How are our competitors likely to respond to any changes to the way we do business?
Sources of information for competitor analysis
Davidson (1997) describes how the sources of competitor information can be neatly grouped
into three categories:
• Recorded data: this is easily available in published form either internally or externally.
Good examples include competitor annual reports and product brochures;
• Observable data: this has to be actively sought and often assembled from several
sources. A good example is competitor pricing;
• Opportunistic data: to get hold of this kind of data requires a lot of planning and
organisation. Much of it is “anecdotal”, coming from discussions with suppliers, customers
and, perhaps, previous management of competitors.
The table below lists possible sources of competitor data using Davidson’s categorisation:
Recorded Data Observable Data Opportunistic Data
Annual report & accounts Pricing / price lists Meetings with suppliers
Press releases Advertising campaigns Trade shows
Newspaper articles Promotions Sales force meetings
Analysts reports Tenders Seminars / conferences
Regulatory reports Patent applications Recruiting ex-employees
Government reports Discussion with shared distributors
Presentations / speeches Social contacts with competitors
In his excellent book [Even More Offensive Marketing], Davidson likens the process of
gathering competitive data to a jigsaw puzzle. Each individual piece of data does not have
much value. The important skill is to collect as many of the pieces as possible and to
assemble them into an overall picture of the competitor. This enables you to identify any
missing pieces and to take the necessary steps to collect them.
What businesses need to know about their competitors
The tables below lists the kinds of competitor information that would help businesses
complete some good quality competitor analysis.
You can probably think of many more pieces of information about a competitor that would
be useful. However, an important challenge in competitor analysis is working out how to
obtain competitor information that is reliable, up-to-date and available legally(!).

What businesses probably already know their competitors

Overall sales and profits
Sales and profits by market
Sales by main brand
Cost structure
Market shares (revenues and volumes)
Organisation structure
Distribution system
Identity / profile of senior management
Advertising strategy and spending
Customer / consumer profile & attitudes
Customer retention levels

What businesses would really like to know about competitors

Sales and profits by product
Relative costs
Customer satisfaction and service levels
Customer retention levels
Distribution costs
New product strategies
Size and quality of customer databases
Advertising effectiveness
Future investment strategy
Contractual terms with key suppliers
Terms of strategic partnerships

Gap Analysis:
 Latent Market Potential The available untapped market. Only

Public should be more educated for life insurance for investment

User/Usage gap purpose-eg.ULIP plans, pension plans etc.

Unable to attract Gen-Y customers.

Image Gap

Promotional Gap More opportunity for delivery thru alternate channels.

Penetration in to rural areas. More tie-ups with financial giants.

Distribution Gap
Non-availability of products for low income group.
Price Gap
Poor post sales service, no follow-up, and no pro-active approach.

Product Gap & Service More Innovative products/value added products to be created.
Gap New tech, new age products.
Competitor Gap Unable to penetrate to available virgin markets

Product

PRODUCTS AND PRODUCT MIX

Life insurance – this sector deals with the risks and the accidents affecting the life of
the customer. Alongside, this insurance policy also offers tax planning and investment
returns. There are various types of life Insurance Policy India:
a. Endowment Policy
b. Whole Life Policy
c. Term Life Policy
d. Money-back Policy
e. Joint Life Policy
f. Group Insurance Policy

Some of the well known Insurance Policy India are:

Social Security Group Scheme – a scheme covering the age group of 18-60 years
and an insurance of Rs.5000 for natural death and of Rs.25000 on due to accidental
death.
Shiksha Sahyog Yojana – a scheme providing an educational scholarship of Rs.300
per quarter per child is given for a period of four years.
Jan Arogya Bima Policy – a scheme for the adults upto the age of 45 years is Rs. 70
and for children it is Rs. 50. The limit coverage is fixed at Rs.5000 per annum.
Mediclaim Insurance Policy – a scheme covering the age group from 5-80 years
with a tax benefit of up to Rs 10,000.
Jana Shree Bima Yojana – this is a coverage of Rs 2,000 on natural death and Rs
50,000 for accidental death. The premium amount is fixed at Rs. 200 for single
member.
Videsh Yatra Mitra Policy – a scheme covering medical expenses during the period
of oversBhagya Shree Child Welfare Bima Yojana – a scheme covering one girl child in a

family upto the age of 18 whose parents age does not exceed 60 years, with a
premium of Rs.15 per annum.
Raj Rajeshwari Mahila Kalyan Yojana – a scheme providing protection to woman
in the age group of 10 to 75 years with an insurance of Rs. 25,000 and premium Rs.15
per annum.
Ashray Bima Yojana – a scheme covering workers in case of loss of jobs.

Personal Accident Insurance Scheme for Kissan Credit Card – a scheme covering all the KCC

holders up to an age of 70 years. Insurance coverage includes 50,000 for accidental death

and 25,000 for partial disability.

The functions of Insurance can be bifurcated into two parts:

1. Primary Functions

2. Secondary Functions

3. Other Functions

ansoff's product / market matrix

Introduction
The Ansoff Growth matrix is a tool that helps businesses decide their product and market
growth strategy.
Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend
on whether it markets new or existing products in new or existing markets.

The output from the Ansoff product/market matrix is a series of suggested growth strategies
that set the direction for the business strategy. These are described below:
Market penetration
Market penetration is the name given to a growth strategy where the business focuses on
selling existing products into existing markets.
Market penetration seeks to achieve four main objectives:
• Maintain or increase the market share of current products – this can be achieved by a
combination of competitive pricing strategies, advertising, sales promotion and perhaps
more resources dedicated to personal selling
• Secure dominance of growth markets
• Restructure a mature market by driving out competitors; this would require a much more
aggressive promotional campaign, supported by a pricing strategy designed to make the
market unattractive for competitors
• Increase usage by existing customers – for example by introducing loyalty schemes
A market penetration marketing strategy is very much about “business as usual”. The
business is focusing on markets and products it knows well. It is likely to have good
information on competitors and on customer needs. It is unlikely, therefore, that this
strategy will require much investment in new market research.
Market development
Market development is the name given to a growth strategy where the business seeks to sell
its existing products into new markets.
The product portfolio of the major players in the industry are given below:

There are many possible ways of approaching this strategy, including:

• New geographical markets; for example exporting the product to a new country
• New product dimensions or packaging: for example
• New distribution channels
• Different pricing policies to attract different customers or create new market segments
Product development
Product development is the name given to a growth strategy where a business aims to
introduce new products into existing markets. This strategy may require the development of
new competencies and requires the business to develop modified products which can appeal
to existing markets.
Diversification
Diversification is the name given to the growth strategy where a business markets new
products in new markets.
This is an inherently more risk strategy because the business is moving into markets in
which it has little or no experience.

For a business to adopt a diversification strategy, therefore, it must have a clear idea about
what it expects to gain from the strategy and an honest assessment of the risks.
The following diagram will illustrate the need of the hour
,

Does Marketing create value for customers.

1. Cinema theatres, beauty parlours, children’s parks, Child care centres, women
clubs, gyanecologists, lady corners, maternity hospitals, matrimony sites, etc.
2. The product should be a pace player.
3. The product should also a KISS product.

strategic planning - the link with marketing

Introduction
Businesses that succeed do so by creating and keeping customers. They do this by providing
better value for the customer than the competition.
Marketing management constantly have to assess which customers they are trying to reach
and how they can design products and services that provide better value (“competitive
advantage”).
The main problem with this process is that the “environment” in which businesses operate is
constantly changing. So a business must adapt to reflect changes in the environment and
make decisions about how to change the marketing mix in order to succeed. This process of
adapting and decision-making is known as marketing planning.
Where does marketing planning fit in with the overall strategic planning of a
business?
Strategic planning is concerned about the overall direction of the business. It is concerned
with marketing, of course. But it also involves decision-making about production and
operations, finance, human resource management and other business issues.
The objective of a strategic plan is to set the direction of a business and create
its shape so that the products and services it provides meet the overall business
objectives.
Marketing has a key role to play in strategic planning, because it is the job of marketing
management to understand and manage the links between the business and the
“environment”.
Sometimes this is quite a straightforward task. For example, in many small businesses there
is only one geographical market and a limited number of products (perhaps only one
product!).
However, consider the challenge faced by marketing management in a multinational
business, with hundreds of business units located around the globe, producing a wide range
of products. How can such management keep control of marketing decision-making in such
a complex situation? This calls for well-organised marketing planning.
What are the key issues that should be addressed in strategic and marketing
planning?
The following questions lie at the heart of any marketing and strategic planning process:
• Where are we now?
• How did we get there?
• Where are we heading?
• Where would we like to be?
• How do we get there?
• Are we on course?
Why is marketing planning essential?
Businesses operate in hostile and increasingly complex environment. The ability of a
business to achieve profitable sales is impacted by dozens of environmental factors, many of
which are inter-connected. It makes sense to try to bring some order to this chaos by
understanding the commercial environment and bringing some strategic sense to the
process of marketing products and services.
A marketing plan is useful to many people in a business. It can help to:
• Identify sources of competitive advantage
• Gain commitment to a strategy
• Get resources needed to invest in and build the business
• Inform stakeholders in the business
• Set objectives and strategies
• Measure performance

Marketing the other products with the statement.

• Wide Network with marketing field staff.
• E-marketing and digital organisation.
• To become transparent.
• To become more customized( products specific for ladies with concessions, groups,
new employed people, more business camps)
• Establishing new branches in economic clusters-organic growth.
• Identifying the potential customers and clusters for expansion.
• Identifying the unmet needs of the customers.
• More segmentation and positioning by using customized products.
• Identify the loyal and long standing customers and make them feel important and
feel proud.
• Build new loyal customers from new investment zones.
• Catch them young strategy.(Gen-Y customers)
• Maintain, retain, capture and nurture.
• Ask suggestions from policy holders.
• Have a tunnel view in service and a bird’s eye view in designing the product.
• Help in time and serve in time.
• The product and service should have distinctive competence.
• Innovate new products & new services if the Product Life Cycle is short.
• Increase the competency level of all the staff through continuous training.
• Always take feed back at all levels, this will save time.
• Better communication with internal and external customers.
• Make use of Cinema Halls for local advertisement. Prepare small documentaries.
• Since LIC is already settled well , a conglomerate diversification such as ULIP
products, Basic Banking services, Mutual Funds etc, Wealth Management, Housing
Finance, LIC cards.
• Tie up with major banks like Corporation Bank , with LIC holding 27% stake .

• The new entity, LIC Cards Services Ltd, will leverage LIC and Corporation Bank’s
strong brand and extensive branch, ATM, and sales distribution network to make the
credit cards venture rolling without any hassles.
• Conducting awareness camps at Educational Institutional institutions for building the
brand, in the heart of GEN-Y young students.
• Issue of cards for policy holders.