Professional Documents
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An Overview of Indian Insurance Market
An Overview of Indian Insurance Market
An Overview of Indian Insurance Market
INTRODUCTION
1.1. Introduction 1.2. Definition 1.3. History of Insurance 1.4. Objective of the Study
2. AN OVERVIEW OF INSURANCE
2.1 Introduction 2.2 Principles of Insurance 2.2.1 Principle of Indemnity 2.2.2 Principle of Insurable interest 2.2.3 Principle of Subrogation 2.2.4 Principle of Utmost 2.3 Insurance Contracts 2.4 Classification of Insurance 2.4.1 Life Insurance 2.4.2 Health Insurance 2.4.3 General Insurance
Customer Service
3.3.4.2. Distribution Channel 3.3.4.3. Product Innovation 3.3.4.4. Rural marketing 3.3.4.5. Insurance market and Insurance 3.3.4.6. Mergers and Acquisitions
4.1.4. HDFC standard Life Insurance 4.1.5. ICICI Prudential Life Insurance 4.1.6. ING Vysya Life Insurance 4.1.7. Max New York Life Insurance 4.1.8. Met New York Life Insurance 4.1.9. Kotak Mahindra Old Mutual Life Insurance 4.1.10 SBI Life Insurance 4.1.11 Tata AIG Life Insurance 4.1.12 Reliance Life Insurance 4.1.13 Aviva Life Insurance 4.1.14 Sahara India Life Insurance 4.1.15 Shriram Life Insurance 4.1.16 Bharti AXA Life Insurance
6. CONCLUSION
CHAPTER 1
INTRODUCTION
1.1 INTRODUCTION
Insurance- what is it? Man has always been in search of security and protection from the beginning of civilization. This urge in him to lead to the concept of insurance. The basis of insurance was the sharing of the losses of a few amongst many. Insurance provides financial stability and strength to the individuals and organization by the distribution of loss of a few among many by many by building up over a period of time. Even if we try to control to avoid, control and prevent risk will still exist. Therefore, insurance is the most practical method for handling a major risk. Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. Insurer, in economics, is the company that sells the insurance.
Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. Insurance may be described as a social device to ensure protection of economic value of life and other assets. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance. Insurance is a contract whereby, in return for the payment of premium by the insured, the insurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events. The term "risk" is used to describe the possibility of adverse results flowing from any occurrence or the accidental happenings, which produce a monetary loss.
Insurance is a pool in which a large number of people exposed to a similar risk make contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good. The sharing of risk among large groups of people is the basis of insurance. The losses of an individual are distributed over a group of individuals.
1.1.2 DEFINITION
The legal definition of insurance is that, it is a contract between the insurer and insured whereby, in consideration of payment of premium by the insured the insurer agrees to make good any financial loss the insured may suffer due to consideration of an insurance peril.
The financial definition of insurance is that insurance is a social device in which a group of individual (insured) transfer risk to another party (insurer) in order to combine loss experience, which permits statistical prediction of losses and provides for payments of losses from funds contributed (premiums) by all members who transfer risk.
Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen. Achaemenian monarchs were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony.
When a gift was worth more than 10,000 Derrik (Achaemenian gold coin weighing 8.35-8.42) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices. The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "Whenever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much." A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.
The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. Toward the end of the seventeenth century, London's growing importance as a centre for trade increased demand for marine insurance.
In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes. The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732.
Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system for insurance similar to that which oversees state banks and national banks. In the state of New York, which has unique laws in keeping with its stature as a global business centre, former New York Attorney General Eliot Spitzer was in a unique position to grapple with major national insurance
brokerages. Spitzer alleged that Marsh & McLennan steered business to insurance carriers based on the amount of contingent commissions that could be extracted from carriers, rather than basing decisions on whether carriers had the best deals for clients. Several of the largest commercial insurance brokerages have since stopped accepting contingent commissions and have adopted new business models.
CHAPTER 2
AN OVERVIEW OF INSURANCE
2.1 INTRODUCTION
Insurance in India used to be tightly regulated and monopolized by state-run insurers. Following the move towards economic reform in the early 1990s, various plans to revamp the sector finally resulted in the passage of the Insurance Regulatory and Development Authority (IRDA) Act of 1999. Significantly, the insurance business was opened on two fronts. Firstly, domestic private-sector companies were permitted to enter both life and nonlife insurance business. Secondly, foreign companies were allowed to participate, albeit with a cap on shareholding at 26%. With the introduction of the 1999 IRDA Act, the insurance sector joined a set of other economic sectors on the growth march. During the 2003 financial year1, life insurance premiums increased by an estimated 12.3% in real terms to INR 650 billion (USD 14 billion) while non-life insurance premiums rose 12.2% to INR 178 billion (USD 3.8 billion). The strong growth in 2003 did not come in isolation. Growth in Insurance premiums have been averaging at 11.3% in real terms over the last decade.
Secondly, an insurable interest reduces moral hazard. If an insurable interest is not required, a dishonest person can purchase property insurance on someone elses property and deliberately cause a loss to receive the amount of insurance. In life insurance, an insurable interest requirement reduces the incentive to murder the insured for the purpose of collecting the sum assured .
not have been issued or it would have been issued on different terms. b) False means that the statement isnt true or is misleading c) Reliance means that the insurer relies on the misrepresentation in issuing the policy at a specified premium 2. Concealment: - is intentional failure of the applicant for the insurance to reveal a material fact to the insurer. This is something as non-disclosure. That is the applicant for insurance deliberately withholds material information from the insurer. The contract is voidable at insurers opinion. 3. Warranty: - is a statement of fact or ca promise made by the insured, which is part of the insurance contract and must be true, if the insurer is to be liable under the contract.
2.3.1 OFFER AND ACCEPTANCE: The first requirement of a binding insurance Contract is that there must be an offer and acceptance of its terms. The offer for entering into the contract may generally come from the insured. Insurance contract begins with when one person makes a proposal to exchange something of value with another person. The offer and acceptance can be oral or written. The applicants for insurance fill out the application and pay the first premium. This step constitutes the offer. The agent then accepts the offer on behalf of insurance company
2.3.2 CONSIDERATION:
The next requirement of valid insurance contract is consideration. When a party to an agreement promises to do something, he must get something in return. This is called consideration. The insureds consideration is the payment of premium plus an agreement to abide by the condition specified in the policy. Premium being the valuable consideration must be given for starting the insurance contract.
2.3.3 COMPETENT PARTIES: The next requirement is that each party must be legally competent. This means that both insurer and insured must have legal capacity to enter into a binding contract
2.3.4 FREE CONSENT: Two or more parties are said to be consent when they agree upon something in the same manner. Consent is said to be free when it is not caused by compulsion, undue influence, fraud, misrepresentation, and mistake. As such not only is the consent required but it must also be a free consent. When there is no free consent, except fraud, the contract becomes voidable at the opinion of the party whose consent was so caused.
2.3.5 LAWFUL OBJECT: The contract must be for a legal purpose. An insurance contract that encourages or promotes something illegal or immoral is contrary to the public interest and cant be enforced. An unlawful object of any contract shall make it enforceable at law.
2.4.2HEALTH INSURANCE
A health insurance policy is a safeguard against rising medical costs. A health insurance is a contract between an insurer and an individual or group, in which the insurer agrees to provide specified health insurance at an agreed upon price (premium). It is also known as disability insurance or medical expense insurance. The cost of health case is increasing day by day. The costs will still go up in case of a serious accident or major illness. It is difficult for a typical individual to find financial resources to meet such expenses that some of which may arise suddenly. The demand for health insurances also viewed from other perspectives like: To ensure that no one is deprived of at least the standard former health care. To protect the patient and his family from financial disaster.
2.5 BENEFITS OF INSURANCE 2.5.1 TO SOCIETY Insurance is beneficial to society in the following way-: IT ACCELERATES THE PRODUCTION CYCLE
Adequate capital from the insurance companies accelerates the production cycle in the country. Moreover, insurance cover almost all the risk relating to agriculture, commerce and industry.
2.5.2TO BUSINESS
Insurance is beneficial to business in the following ways -:
ENHANCEMENT OF CREDIT
The business can obtain loan by pledging the policy as collateral for the loan. The insured person are getting more loan due to certainty of payment at their death the amount of loan that can be obtained with such pledging of policy, with the interest thereon will not exceeds the cash value of the policy.
BUSINESS CONTINUATION
In any business particularly partnership business may discontinue at the death of any partner although the surviving partner can restart the business, but in both the cases the business and the partner will suffer economically.
When the owner of a business is free from the botheration of losses, he will certainly devote much time to the business. The carefree owner can work better for maximization of the profits.
the family would suffer a lot. it brings reduced standard of living and the suffering may go to any extent of begging from the relatives , neighbors or friends .
Chapter 3
3.1 INTRODUCTION
In 2003, the Indian insurance market ranked 19th globally and was the fifth largest in Asia. Although it accounts for only 2.5% of premiums in Asia, it has the potential to become one of the biggest insurance markets in the region. A combination of factors underpins further strong growth in the market, including sound economic fundamentals, rising household wealth and a further improvement in the regulatory framework. The insurance industry in India has come a long way since the time when businesses were tightly regulated and concentrated in the hands of a few public sector insurers. Following the passage of the Insurance Regulatory and Development Authority Act in 1999, India abandoned public sector exclusivity in the insurance industry in favour of market-driven competition. This shift has brought about major changes to the industry. The inauguration of a new era of insurance development has
Seen the entry of international insurers, the proliferation of innovative products and distribution channels, and the raising of supervisory standards. By mid-2004, the number of insurers in India had been augmented by the entry of new private sector players to a total of 28, up from five before
liberalization. A range of new products had been launched to cater to different segments of the market, while other channels including the Internet and bank branches supplemented traditional agents. These developments were instrumental in propelling business growth, in real terms, of 19% in life premiums and 11.1% in non-life premiums Between 1999 and 2003.There are good reasons to expect that the growth momentum can be sustained. In particular, there is huge untapped potential in various segments of the market. While the nation is heavily Exposed to natural catastrophes, insurance to mitigate the negative financial consequences of these adverse events is underdeveloped. The same is true for both pension and health insurance, Where insurers can play a critical role in bridging demand and supply gaps. Major changes in both national economic policies and insurance regulations will highlight the prospects of these Segments going forward.
Dominance of the Life Insurance Corporation and the General Insurance Corporation is not going to disappear any time soon.
INSURANCE UNDER THE BRITISH RAJ Life insurance in the modern form was first set up in India through a British Company called the Oriental Life Insurance Company in 1818 followed by the Bombay Assurance Company in 1823 and the Madras Equitable Life Insurance Society in 1829.All of these companies operated in India but did not insure the lives of Indians. They were there insuring the lives of Europeans living in India. Some of the companies that started later did provide insurance for Indians. But, they were treated as "substandard and therefore had to pay an extra premium of 20% or more. The first company that had policies that could be bought by Indians with "fair value" was the Bombay Mutual Life Assurance Society starting in 1871.The first general insurance company, Triton Insurance Company Ltd., was established in 1850. It was owned and operated by the British. The first indigenous general
insurance company was the Indian Mercantile Insurance Company Limited set up in Bombay in 1907.life and non-life).
In 1994, the committee submitted the report and some of the key recommendations included:
3.3.1.1 STRUCTURE
Government stake in the Insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate
3.3.1.2 COMPETETION
Private Companies with minimum paid up capital of Rs.1 bn should be allowed to enter the industry. No Company should deal in both Life and General Insurance through a single entry. Foreign Companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state.
3.3.1.4 INVESMENTS
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).
confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs. 100 crores.
3. To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates;
4. To ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard; 5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery; 6. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players; 7. To take action where such standards are inadequate or ineffectively enforced; 8. To bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation.
Insurance is a federal subject in India. The primary legislation that deals with insurance business in India is: Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999. Insurance Industry has ombudsmen in 12 cities. Each ombudsman is empowered to redress customer grievances in respect of insurance contracts on personal lines where the insured amount is less than Rs. 20 lakhs, in accordance with the Ombudsmen Scheme. Insurance Regulatory & Development Authority (IRDA) duties and powers of IRDA IRDA was constituted by an act of parliament. The Authority is a ten member team consisting of: (a) a Chairman (b) five whole-time members (c) four part-time members (1) Subject to the provisions of Section 14 of IRDA Act, 1999 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 reinsurance business.
(2) Without prejudice to the generality of the provisions contained in subsection (1), 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; (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;
Sahara India Life Insurance Shriram Life Insurance Bharti AXA Life Insurance
imperative in the current scenario. Foreign players are bringing in international best practices in service through use of latest technologies.
said to be "a marathon, not a sprint". This is because of the nature of the business being long term. With merely two years of the industry being
Opened, not surprisingly, the new comers are making losses. The public sector companies, notably the LIC, have gained in strength, thanks to the deepening of the market consequent to the awareness created by the new companies.
With increased competition among insurers, service has become a key issue. Moreover, customers are getting increasingly sophisticated and tech-savvy. People today dont want to accept the current value propositions, they want personalized interactions and they look for more and more features and add ones and better service
The time has already come for the government of India to evaluate the performance of private companies vis--vis their declared objective of opening up the industry.
CHAPTER 4
4.1 LIFE INSURANCE PLAYERS IF INDIAN INSURANCE MARKET 4.1.1 LIFE INSURANCE CORPRATION OF INDIA (LIC)
The Life Insurance Corporation of India (LIC), a public sector enterprise, is the largest insurance company in India, selling insurance products and related services. In March 2001, LIC had a total asset base of Rs.1936.2 billion and a total premium income of Rs.342.07 billion. By April 2002, the total sum assured fewer than 23.2 million policies stood at Rs.1925.7 billion. LIC had a variety of insurance plans to cater to various categories of people and their diverse needs. The company offered life insurance and group insurance. LIC has its mission to Explore and enhance the quality of life of people through financial security by providing products and services of
aspired attributes with competitive returns, and by rendering resources for economic development."
HDFC i.e HOUSING DEVELOPMENT AND FINANCIAL CORPORATION. HDFC Standard Life is a joint venture between HDFC of India and Standard Life of UK. The new company, HDFC Standard Life, was one of the first to be awarded a license in the recently deregulated Indian market and one of the first to open its doors for business and issue policies.
HDFC Standard Life Insurance Company Ltd. is one of India's leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), India's leading housing finance institution and a Group Company of the Standard Life, UK. HDFC as on March 31, 2007 holds 81.9 per cent of equity in the joint venture.
ICICI began its operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nationwide team comprises of over 735 offices, over 243,000 advisors; and 22 Bancassurance partners.
ICICI Prudential was the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg Survey of 'Most Trusted Brands'.
Company has a customer base of over 4, 50,000 & is headquartered at Bangalore. In 2005, ING Vysya Life earned a total income in excess of Rs. 400 crore and also has a share capital of Rs. 440 crore.
LTD.
Max New York Life Insurance Company Ltd. is a joint venture between New York Life, a Fortune 100 company and Max India Limited, one of India's leading multi-business corporations. The company has positioned itself on the quality platform. In line with its vision to be the most admired life insurance company in India, it has developed a strong corporate governance model based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself as a trusted life insurance specialist through a quality approach to business. In line with its values of financial responsibility, Max New York Life has adopted prudent financial practices to ensure safety of policyholder's funds. The
Company's paid up capital is Rs. 807 crore, which is more than the norm laid down by IRDA.
MetLife products to their employees, enabling those employees to provide protection and security for themselves and their families.
1000 crore and a paid up capital of Rs 500 crores. SBI owns 74% of the total capital and Cardif the remaining 26%. State Bank of India enjoys the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,500 branches across the country, arguably the largest in the world. Cardif is a wholly owned subsidiary of BNP Paribas, which is the Euro Zones leading Bank. BNP Paribas is one of the oldest foreign banks with a presence in India dating back to 1860
Broking, life and general insurance, proprietary investments, private equity and other activities in financial services. Reliance Capital Limited (RCL) is a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act, 1934.Reliance Capital sees immense potential in the rapidly growing financial services sector in India and aims to become a dominant player in this industry and offer fully integrated financial services. Reliance Life Insurance is another step forward for Reliance Capital Limited to offer need based Life Insurance solutions to individuals and Corporate.
Aviva is UKs largest and the worlds fifth largest insurance Group. It is one of the leading providers of life and pensions products to Europe and has substantial businesses elsewhere around the world. With a history dating back to 1696, Aviva has a 40 million-customer base worldwide. It has more than 377 billion of assets under management. In accordance with the government regulations Aviva holds a 26 per cent stake in the joint venture and the Dabur group holds the balance 74 per cent share.
Shriram Life Insurance Company Ltd is a joint venture between the Chennai-based Shriram Group and the South African insurance major Sanlam. The company launched its operations in India in December 2005. Shriram Life has set a target of achieving a premium income of Rs 110 crore during the first year of operations. While focussing largely on the strong network of over 65,000 agents and distribution network of more than 550 branches.
wealth management needs with our product and service offerings, we continue to bring 'life confidence' to customers spread across India. Whatever your plans in life, you can be confident that Bharti AXA Life will offer the right financial solutions to help you achieve them.
4.2 GENERAL INSURANCE PLAYERS OF INDIAN INSURANCE MARKET 4.2.1 GENERAL INSURANCE CORPORATION OF INDIA
The entire general insurance business in India was nationalised by General Insurance Business (Nationalisation) Act, 1972 (GIBNA). The Government of India (GOI), through Nationalisation took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business.General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA. It was incorporated on 22 November 1972 under the Companies Act, 1956 as a private company limited by shares. GIC was formed for the purpose of superintending,
controlling and carrying on the business of general insurance . After a process of mergers among Indian insurance companies, four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited, (2) The New India Assurance Company Limited, (3) The Oriental Insurance Company Limited, and (4) United India Insurance Company Limited.
The Oriental Insurance Company Ltd. " earlier known as " The Oriental Fire & General Insurance Co. Ltd" was incorporated at Bombay on 12th September, 1947. The Company was a wholly owned subsidiary of the Oriental Government Security Life Assurance Company limited and was
Formed to carry out General Insurance business. The Company was promoted by Sir Purushothamdas Thakurdas, Chairman of Oriental Government Security Life Assurance Company Ltd., which was transacting life insurance business for nearly 75 years. The Oriental Insurance Company Ltd. " earlier known as " The Oriental Fire & General Insurance Co. Ltd" was incorporated at Bombay on 12th September, 1947. The Company was a wholly owned subsidiary of the Oriental Government Security Life Assurance Company limited and was formed to carry out General Insurance business.
companies. Established by Sir Dorab Tata in 1919, New India is the first fully Indian owned insurance company in India. New India is a pioneer among the Indian Companies on various fronts, right from insuring the first domestic airlines in 1946 to satellite insurance in 1990. The latest addition to the list of firsts is the insurance of the INSAT2E.
CHAPTER 5
p-21 table
has steadfastly made available over 95% of its investment to Indian government liabilities. It can be seen that the companies have so far refrained from investing in equities or overseas. Recently, however, the LIC has taken a more aggressive stance in boosting its equity investment, both through private placements and secondary market purchases in the stock exchanges. In financial year 2003-2004, it recorded equity investment profit of INR 2,400 crore.
p-22 table
p-25 table
NAME OF THE COMPANY LIC ICICI PRUDENTIAL BIRLA SUN LIFE BAJA ALLIANZ SBI LIFE HDFC STANDARD TATA AIG MAX NEW YORK AVIVA OM KOTAK MAHINDRA ING VYASA AMP SANMAR METLIFE
MARKET SHARE (in %) 82.3 5.63 2.56 2.03 1.80 1.36 1.29 0.90 0.79 0.51 0.37 0.26 0.21
Tables both
Table 6.1
Fig 7.1
CHAPTER 6
CONCLUSION
CONCLUSION Insurance in India started without any regulations in the nineteenth century. It was a typical story of a colonial era: a few British insurance companies dominating the market serving mostly large urban centers. After the independence, the Life Insurance Company was nationalized in 1956, and then the general insurance business was nationalized in 1972. Only in 1999 private insurance companies were allowed back into the business of insurance with a maximum of 26 per cent of foreign holding (World Bank Economic Review 2000). The entry of the State Bank of India with its proposal of bank assurance brings a new dynamics in the game. On July 14, 2000 Insurance Regulatory and Development Authority bill was passed to protect the interest of the policyholders from private and foreign players. The following companies are entitled to do insurance business in India. The private insurance joint ventures have collected the premium of Rs.1019.09 crore with the investment of just Rs.3,000 crore in three years of liberalization. The private insurance players have significantly improving their market share when compared to 50 years Old Corporation (i.e.LIC). As per the figures compiled by IRDA, the Life Insurance Industry recorded a total premium underwritten of Rs. 10,707.96 crore for the period under
review. Of this, private players contributed to Rs.1, 019.09 crore, accounting for 10 percent.
Life Insurance Corporation of India (LIC), the public sector giant, continued to lead with a premium collection of Rs.9,688.87 crore, translating into a market share of 90 per cent. In terms of number of policies and schemes sold, private sector accounted for only 3.77per cent as compared to 96.23 per cent share of LIC (The Economic Times, 21 March, 2004). The ICICI Prudential topped among the private players in terms of premium collection. It recorded a premium of Rs. 364.9 crore and a market share of 25 per cent, followed by Birla Sun Life with a premium under- written Rs.170 crore and a market share of 15 percent, HDFC Standard with 132.7 crore and Max New York Life with Rs.76.8 crore with a market share of approximately 15 per cent each. Unlike their counterpart in the life insurance business, private non-life insurance companies have not yet started addressing the retail market. All is set to change in the coming years. Like in the banking sector, non-life insurance companies will soon have no choice but to focus on individual buyers. In case of private non-life insurance players, that their market share rose to 14.13 per cent, recording a growth of 70.75 per cent on an annual basis, while the market share of public sector stood at 85.87 per cent, registering a
marginal growth of 6.34 per cent. The overall market has recorded a growth of 12.32 per cent by the end of January 2004.
Among the private non-life insurance players, ICICI Lombard topped the list with a premium collection of Rs.403.62 crore in one year period with a market share of 3.05 per cent and with an annual 131.6 per cent, followed by Bajaj Allianz with a premium of Rs.385.02 crore and 2.91 per cent market share and Tata AIG with 300.49 crore premium and 2.27 per cent market share with an annual growth rate of 62.60 per cent. Among the public sector players, New India garnered a market share of 24.38 per cent, Rs.3, 229.49 crore premium and an annual growth rate of 0.38 per cent, followed by National with a market share of 21.43 per cent, Rs.2, 839.11 crore premium and an annual growth rate of 19.88 per cent, United India with a market share of 19.47 per cent (Rs.2, 578.83 crore premium) and Oriental with a market share of 18.25 per cent, Rs.2, 417.17 crore premium and an annual growth rate of 1.86 per cent. It is significant to note that HDFC Chubb and Cholamandalam have registered annual growth rates of 4030.26 per cent and 1101.20 per cent respectively, whereas New India has registered it as 0.38 per cent. If this trend continues, private insurer would dominate the public sector like New India Insurance Corporation. It is obviously reflect the insurance sector has facing the challenges with foreign
counter parties as well as private counter parties and lot more opportunities are prevailing to penetrate the insurance business among the uncovered people and area of India. .