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Project
T.Y.BBI.
EXECUTIVE SUMMARY
Insurance Sector has not only been playing a leading role within the financial
system in India but also has a significant socio-economic function, making
inroads into the interiors of the economy and is being considered as one of the
fast developing areas in the Indian financial sector too.
The India Life Insurance Industry has been experiencing tremendous activity in
the recent past. The opening up of the insurance markets in 1999 has paved
away to the entry of many private players. Presently there are 26 players in the
life insurance market. However, the industry is highly in the hands of Life
Insurance Corporation of India which held 44% of the market share.
Overall the market share of Private Insurers increased from 2% in the year
2001-02 to nearly 12.78% in the year 2003-04. The new entrants coped with the
challenges of setting up operations, building up the agent force and spreading
the rural and semi urban areas. Moreover, increasingly deregulated and
liberalized environment, innovative distribution and better use of technology
are helping the new breed of private life insurers take market share away from
the erstwhile public sector company.
It has been mobilizing long-term savings through Life-insurance to support
economic growth and also facilitating economic development, insurance cover
to a large segment of people, while the non-life insurance and reinsurance firms
in India are main providers of risk financing for man made disasters and natural
catastrophes.
Therefore, an attempt in this project is highlight the developments of insurance
sector in India in a phased manner and to examine the reasons for the entry of
private and foreign insurance players into Indian insurance market and present
the changing scenario of insurance business in India.
It is also attempted to examine the growth of the Indian insurance sector during
the period of pre and post liberalization and finally to suggest the strategies,
challenges and future possibilities that need to be adopted by Indian insurance
sector in the light of global scenario so as to enhance its market share.
RESEARCH METHODOLOGY:
Primary data collected by personally visiting these leading insurance players. Eg:
LIC, ICICI prudential life insurance.
DATA COLLECTION:
Primary data collected through direct interaction with manager.
Secondary database from different magazines.
First and foremost, accumulating information from newspapers ,
Journals, Magazines, and company webside.
Secondly, taking a sample size and doing a market survey by filling up
questionnaires from manager to find out growth in insurance sectors in last few
years and how LIC is similar/different from other private insurance companies.
services and many more things and analyses the growth in insurance company.
1.1
INTRODUCTIONS
DEFINITIONS:Functional definition
Insurance is a co-operative device to spread the loss caused by a particular risk
over a number of persons who are exposed to it and who agree to insure
themselves against the risk.
General Definition
Insurance has been defined to be that in which a sum of money as a premium is
paid in consideration of the insurers incurring the risk of paying a large sum upon
a given contingency.
In the words of John Magee, Insurance is a plan by themselves which large
number of people associate and transfer to the shoulders of all, risks that attach to
individuals.
Fundamental Definition
In the words of D.S. Hansell, Insurance accumulated contributions of all parties
participating in the scheme.
Contractual Definition
In the words of Justice Tindall, Insurance is a contract in which a sum of money is
paid to the assured as consideration of insurers incurring the risk of paying a large
sum upon a given contingency.
K.E.S SHROFF COLLEGE OF ARTS & COMMERCE
4
These unforeseen events are defined as "risk" and that is why insurance is called a
risk cover. Hence, insurance is essentially the means to financially compensate for
losses that life throws at people - corporate and otherwise.
The principle of insurance works on the concept of a large number of people
exposed to a similar risk making a contribution to a common fund. Those who
suffer losses due to the occurrence of these events are compensated for them from
this fund.
I.
LIFE INSURANCE:
This is provided for the payment of sum money on the death of the insured person
due to natural causes or on the expiry of a certain number of years if the insured
person is then alive. Life insurance aims to compensate the Income Earning
Capacity of the person. In Life Insurance, income earning capacity of the person
is covered. The loss of the income earning capacity can be on the happening of the
following events when the life is assured.
1.
2.
3.
4.
II.
Death.
Sickness (critical illness).
Accident (Death or permanent disability due to accident).
Retirement.
GENERAL INSURANCE:
Insurance other than life fall under general insurance. It covers loss of every other
physical or no possession. The loss may be due to fire, theft, accident etc. The
general insurance is further classified into1.
2.
3.
4.
Fire insurance.
Marine Insurance.
Madiclaim
Vehicle Insurance.
PRODUCTS
K.E.S SHROFF COLLEGE OF ARTS & COMMERCE
9
Insurance Plans:
Childrens Plan
Endowment Plans
Term Assurance
Special Plan:
Jeevan Rekha
Jeevan Anand
Pension Plan:
Joint Life
2.2 HIGHLIGHTS
In terms of Insurance penetration in the world rankings, India stands at No.
43 up from 52 in 00.
Out of 1 billion people in India, only 40 million people are covered by
insurance
The growth in premium income in 2009 has been 5.5% growth over the year
2008. Growth was 3.0% in life insurance and 9.2% in non-life insurance.
Insurance penetration the percentage of premium income to GDP has
moved up from 2.3% in 00-01 to 3.26 in 02-03.
The improvement has been largely on account of the growth in life insurance
business where premium income grew from 1.77% of GDP to 2.59%
The life insurance market in India is highly concentrated in the hands of Life
Insurance Corporation of India (LIC) which held 92% of the market share in
the year 2002-2003.
K.E.S SHROFF COLLEGE OF ARTS & COMMERCE
11
investment and the element of protection. The Economic Value Addition (EVA) has
taken the major concern of the same business.
Marketing after globalization has become: More customer oriented
Mostly better service oriented
More competitive
Better satisfaction, more value addition and strategic development can help any
insurance sector to sustain in the present era.
1. Computerization:Initially, in the late 1950s the insurance companies used Unit Record
Machines (Electro Magnetic Machines) to process data punched into cards.
Computers were introduces in the mid 1960s and by the 1980s the Unit
Phased Machines were phased out and the entire process was computerized.
This brought about greater efficiency and quick service delivery
2. Internet:Today, the internet has completely changed the service delivery process.
Internet is today used to even sell insurance policies. Internet is, in fact,
proving to be one of the widely used distribution networks for selling
insurance policies. Also internet is used for sending premium notices to
policy holders through e-mails
Companies like LIC (www.licindia.com), ICICI (www.iciciprudential.com)
all have websites from which people can get the information about their
products, prices, various schemes, and lots of other information. People can
also purchase the product through this website.
3. Electronic Clearance Service (ECS):Almost all the big organizations today provide the ECS facility to its
customers. A policy holder having an account in any bank which is a
member of the local clearing house can opt for ECS debit to pay premiums.
The advantage here is that once the option is exercised, the policy holder
need not visit a branch for paying the premium or collecting the receipts. On
the day indicated by the policy holder, the premium amount will be directly
debited to the bank account of the policyholder and the receipt will be issued
by the designated branch office.
4. Call Centers and SMS services:Almost all the insurance companies have their own call centres which cater
to the phone based queries of the policyholders. This service is 24x7 and
they have the Interactive Voice Response (IVR) systems at all the branches.
ory requirements to provide reach to rural areas2nd largest financial service in after banking
Total number of lives insured and on books as on March 31, 2
channel
forInsurance
household
savings
capital
formation
al Assets UnderSignificant
Management
of Life
Cos.
as oninto
March
31, 2008Rs. 8,50,000 crores
Life Insurance
I.
The Life Insurance market in India is an underdeveloped market that was only
tapped by the state owned LIC till the entry of private insurers. The penetration
of life insurance products was 19 percent of the total 400 million of the
insurable population. The state owned LIC sold insurance as a tax instrument,
not as a product giving protection. Most customers were under- insured with no
flexibility or transparency in the products. With the entry of the private insurers
the rules of the game have changed.
The 12 private insurers in the life insurance market have already grabbed nearly
II.
III.
products on offer.
The growing popularity of the private insurers shows in other ways. They are
coining money in new niches that they have introduced. The state owned
companies still dominate segments like endowments and money back policies.
But in the annuity or pension products business, the private insurers have
already wrested over 33 percent of the market. And in the popular unit-linked
insurance schemes they have a virtual monopoly, with over 90 percent of the
V.
customers.
The private insurers also seem to be scoring big in other ways- they are
persuading people to take out bigger policies. For instance, the average size of a
life insurance policy before privatisation was around Rs 50,000. That has risen
to about Rs 80,000. But the private insurers are ahead in this game and the
average size of their policies is around Rs 1.1 lakh to Rs 1.2 lakh- way bigger
than the industry average.
3.1 NEW MARKET SCENARIO & INSURANCE:Insurance market in present scenario though is a booming sector, but the market
has changed from simpler to complex, less challenging to more challenging. Going
domestic to international is a very difficult task. Understanding market synergy and
congestion of perception of customer in the insurance field is very difficult. The
Regulatory Board like 'IRDA' is playing a very crucial role for the benefit of the
insurance holder. The premium and interest rate can't be violated for better profit
and development. The market is becoming tougher gradually.
As the days pass off, we are likely to see many more actions in this arena. The
government is also keen to continue with its financial sector reforms. The
insurance industry is now hot and happening! The marketing wizards are breaking
their heads to think for ideas to penetrate new markets, financial wiz-kids wracking
their brains for new product categories and lot more actions are taking place even
behind the scene. But whatever happens, one thing is for sure that the customers
are going to be the greatest beneficiary of this revolution.
Total
2009
2010
Share (%)
LIC
8580.84
7524.56
-12
52.55
ICICI Prudential
1056.45
1,590.27
51
11.11
Bajaj Allianz
731.85
829.24
13
5.79
SBI Life
426.39
1,148.67
169
8.02
HDFC Standard
355.93
490.40
38
3.42
289.74
501.16
73
3.50
Reliance Life
204.10
557.33
173
3.89
174.63
501.53
187
3.50
Total Private
3930.95
6,795.64
73
47.45
Total Market
12511.80
14,320.20
14
100.00
Growth
17.3
China
13.4
India
7.2
Hong Kong
6.1
Israel
5.8
Singapore
5.0
1912, as such kinds of insurance were still in rudimentary form and legislative
controls were not considered necessary.
General insurance on the other hand also has its origins in the United Kingdom.
The firs t general insurance company Triton Insurance Company Ltd. was
promoted in 1850 by British nationals in Calcutta. The first general insurance
company established by an Indian was Indian Mercantile Insurance Company Ltd.
in Bombay in 1907. Eventually, with the growth of fire, accident and marine
insurance, the need was felt to bring such kinds of insurance within t he purview of
the Act of 1912.
While there were a number of attempts to introduce such legislation over the years,
non-life insurance was finally regulated in 1938 through the passing of the
Insurance Act, 1938 (Act of 1938). The Act of 1938 along with various
amendments over the years continues till date to be the 1 definitive piece of
legislation on insurance and controls both life insurance and general insurance. 2
General insurance, in turn, has been defined to include fire insurance Business,
marine insurance 34 businesses and miscellaneous insurance business, whether
singly or in combination with any of them.
2. Nationalization of the Insurance Business in India
On January 19, 1956, the management of life insurance business of two hundred
and fort y five Indian and foreign insurers and provident societies then operating in
India was taken over by the Central Government. The Life Insurance Corporation
(LIC) was formed in Sept ember 1956 by the Life Insurance Corporation Act,
1956 (LIC Act) which granted LIC the exclusive privilege to conduct life
insurance business in India. However, an exception was made in the case of any
K.E.S SHROFF COLLEGE OF ARTS & COMMERCE
23
3.
For example, currently, the LIC has a network of 7 zones, 100 divisions and
over 2,000 branches. LIC has over 550,000 agents and over 100 million lives are
covered. From 1991 onwards, the Indian Government introduced various reforms
in the financial sector paving the way for the liberalization of t he Indian economy.
It was a matter of time before this liberalization affected the insurance sector. A
huge gap in the funds required for infrastructure was felt particularly since much of
these funds could be filled by life insurance funds, being long tenure funds.
Consequently, in 1993, the Government of India set up an eight-member
committee chaired by Mr. R. N. Malhotra, a former Governor of India's apex bank,
the Reserve Bank of India to review the prevailing structure of regulation and
supervision of the insurance sector and to make.
life business to private participation, LIC with its vast network of 2048 branches and
10,02,149 agents remained effectively a monopoly.
However, the new entrants coped with the challenges of setting up operations, building
up the agent force and spreading to the rural and semi-urban areas. In addition, the
industry as a whole also faced a regime of declining interest rates and shrinking
avenues for investment in the face of the overall showdown in the economy.
The entry of the private sector insurance players into the market has made a reasonable
impact on the public sector insurance giant LIC. In the first 11 months ending February
2004, LIC has received first premium income of only Rs.113.71bn. All of its business
earned in 11 months of 2003-.04 financial year has come from 19.34mn policies which
amount for the same period in the Indian Life Insurance Industry.
Overall the total market share of private insurers had 12.78% upto February 2003-04.
ICICI Prudential captured nearly 4.43% of the new business underwritten, followed by
Birla Sunlife and HDFC Standard at 1.90% and 1.15% of the premium underwritten
respectively.
New Life Business Premium for the year 2009-2010 (up to February)
Total Premium underwritten by the Private companies was increased from Rs.
30716.85 lakhs and by LIC was Rs. 159078.35 lakhs to Rs. 1137126.91 lakhs.
Total No. of Policies issued by private companies was 207079 and it remained same
where as LIC policies issued were 2570814 and increased by 07.
The market share based on Premium and Policy of Private companies was 12.78 and
6.25 respectively where as incase of LIC it was 87.22 and 993.75 respectively.
Life Insurance Corporation of India was created on 1st September, 1956, with the
objective of spreading life insurance much more widely and in particular to the
rural areas with a view to reach all insurable persons in the country, providing them
adequate financial cover at a reasonable cost. LIC had 5 zonal offices, 33
divisional offices and 212 branch offices, apart from its corporate office in the year
1956.
Since life insurance contracts are long term contracts and during the currency of
the policy it requires a variety of services need was felt in the later years to expand
the operations and place a branch office at each district headquarter. Reorganization of LIC took place and large numbers of new branch offices were
opened.
From then to now, LIC has crossed many milestones and has set unprecedented
performance records in various aspects of life insurance business. The same
motives which inspired our forefathers to bring insurance into existence in this
country inspire us at LIC to take this message of protection to light the lamps of
security in as many homes as possible and to help the people in providing security
to their families
Life Insurance Corporation of India is a wholly owned undertaking of the
Government of India.
Life Insurance Corporation of India was established by an Act of Parliament on 1st
September, 1956. Its Central Office is located in Mumbai. It also has seven zonal
offices each located in Mumbai(Western Zone), New Delhi (Northern Zone),
Kanpur (North-Central Zone), Bhopal (Central Zone), Chennai (Southern Zone),
Hyderabad(South-Central Zone), and Kolkotta (Eastern Zone).
It has a network of over 2000(2048) branches and more than nine lakh agents.
Over 47 years, LIC has become a household name for providing security for a
lifetime and is synonymous to life insurance in India.
LIC ranks No.1 in the list of top 500 companies on the basis of Net Worth(Rs. 15,
47, 951 million) as well as Net Profit(2,66,277 million)- Dun & Bradstreet (India
500)
MISSION
"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."
Vision
"A trans-nationally competitive financial conglomerate of significance to societies
and Pride of India."
Goals
Help fashioning, within the constraints, its policies, programmes, practices and
products to meet the expectations of the Public. Help the public to appreciate
the performance and the limitations of LIC.
Manager will get a fixed salary and the commission on the policies sold by his
advisor and the commission of the policies which he has already sold. Tiger team
manager is one who gets to sell the policy and get commission, train the advisors
about the product and he is also a paid up employee of the company.
ICICI GROUP
VISION
To be the dominant Life, Health and Pensions player built on trust by world-class
people and service
VALUES
Very member of the ICICI Prudential team is committed to 5 core values: Integrity,
Customer First, Boundary less, Ownership, and Passion. These values shine forth
in all we do, and have become the keystones of our success
2. Compare this to new generation private-sector banks, which took nine years for
20 per cent share in the Indian banking industry. And after seven years in the
industry, in 2000, private mutual funds accounted for just 9 per cent of a market
that had been dominated by the Unit Trust of India.
3. There's another dimension to the insurance numbers game. While the private
insurance companies have attained 13 to 14 per cent share of the overall
insurance market, their share in the key metros (Mumbai and Delhi) is as high as
30 to 40 per cent.
4. "We have to struggle to complete a deal in the metros now, because
policyholders are comparing products and asking for better deals," says S B
Mathur, chairman of the Life Insurance Corporation of India.
5. Private insurance companies are essentially joint ventures with global insurance
companies holding a maximum of 26 per cent stake. The foreign partners are
investing heavily in the Indian market and, thereby, driving sales, because they
see India emerging as one of the biggest markets in the Asian region.
6. "India will become the biggest market for us in the next three to four years,"
predicts Dan Bardin, Prudential Corporation Asia managing director south Asia
and greater China.
7. Private players have certainly done their bit to increase the penetration levels of
insurance, mainly by creating alternative distribution channels--such as
associations with banks, brokers and corporate agents.
8. "Our bancassurance channel--with tie-ups with four banks--contributes almost
70 per cent of our total sales," says Aviva CEO Stuart Purdy.
9. OM Kotak Mahindra Life, which is ranked eighth among private players, is also
leaning towards alternative distribution channels that will contribute to 45 per
cent of total sales, in line with the contribution from its tied agency force.
10.In sharp contrast, most of the LIC's policies continue to be sold through its tiedagency network. The state life corporation acknowledges that it is unable to
maintain its lead in some metros: penetration by the private-sector insurers has
come of age and they are giving the LIC a run for its money.
11.The multi-channel approach adopted by private insurance companies has proved
to be a boon in terms of costing and their ability to capture business. Earlier,
most private insurance companies focused their energies on the top 20 cities.
Today they are moving to smaller cities.
12."The potential in smaller cities is increasing and companies are moving to
smaller cities and towns because these are increasingly becoming more
prosperous with a rise in agricultural income. With the increase in buying power,
this has fuelled growth opportunities for us," says Max New York Life CEO
Anuroop Tony Singh.
13.AMP Sanmar, another private player, has tied up with various chit funds and
transport finance companies in the country, where it is selling life policies on the
back of fixed deposits and bonds. A senior company official cites the example of
Vijayawada where a significant portion of the income is derived from farming
activities.
14."The rural populace is managing their money well and no longer keeping it
under their beds. They have mobile phones and have opened bank accounts.
They are not very different from their urban counterparts when it comes to
purchasing life insurance covers," he points out.
15.And that's making the private sector optimistic about its future in the Indian
insurance market. "We [private insurers] are becoming an alternative to LIC. If a
customer has already bought an LIC plan, his second policy is likely to be
bought by the private insurance sector on account of various reasons--more
specifically flexibility and transparency," says OM Kotak Mahindra Life CEO
Shivaji Dam.
16.Perhaps this partly explains why the LIC has increased its advertising spend
multifold since the insurance sector was privatized. Its ad spend more than
doubled to Rs 81 crore (Rs 810 million) in fiscal 2003, against Rs 37 crore (Rs
370 million) in 1999-2000, prior to the industry being privatized.
17.Of course, the private insurance sector has also been steadily increasing its ad
spend, from Rs 29 crore (Rs 290 million) in fiscal 2001 when the industry
opened up, to Rs 92 crore (Rs 920 million) the following year. In fiscal 2003,
private insurers spent Rs 143 crore (Rs 1.43 billion) on advertising.
18.But it's not the increased spend on advertising alone that has helped private
players in grabbing market share. One of the key differential factors responsible
for their growing market is the 150,000-odd life insurance advisors of the private
insurance companies.
19."The private insurance agents sell better than their counterparts at the LIC. Life
insurance advisors of private sector insurance companies adopt the need-based
selling approach, unlike the LIC's agency force that pushes the number of
policies," says Dam.
20.This also gets reflected in the average sum assured by private insurance
companies being higher than that of the LIC. Policies sold by the private players
tend to be of a higher value.
21.For instance, Birla Sun Life's average premium stands at Rs 24,500, while that
of OM Kotak Mahindra Life is equally high at Rs 20,400. Against this is the
LIC's average premium of Rs 3,200.
22.Of course, there's also a difference in the target client of the private and the
state-run insurance companies. While the private players are targeting the upper
middle-class and high net-worth individuals, the LIC aims for the masses
through its 2,048 branches spread across semi-rural and rural towns.
23.Meanwhile, private insurance companies are capitalizing on global relationships.
"Business deals are often a call away since we capitalize on AIG's global
relationship with multinational companies such as GE and Kodak," says Tata
AIG Life Ian Watts.
24.OM Kotak has gone a step further and tied up with Swiss Life International so
that it can capitalize on the latter's relationship with 300 multinational
subsidiaries and affiliates.
25.But it's not as if LIC has lost out on group insurance. The insurance major's
group business reached new heights in fiscal 2004, recording a 119 per cent
growth in new premium income and 50 per cent increase in the number of lives
covered.
26.Still, new business income for private companies has grown at 146 per cent in
fiscal 2004, compared to the 18 per cent average industry growth in new
premium income for the same period.
27."The key in product sales lies in offering unbundled and transparent products
that give customer value," points out Dam.
28.The biggest draw in insurance in fiscal 2004 was unit-linked plans. Ninety-five
per cent of the policies sold by Birla Sun Life and over 80 per cent of the
436,000 policies sold by ICICI Prudential were unit-linked plans.
29.And even though the LIC was late (January 2004) in pushing its unit-linked
product "Bima Plus", it managed to mop up a premium income of Rs 373 crore
(Rs billion) with the sale of just under 1.7-lakh unit-linked policies, the highest
sales figure in the industry.
30.The advantage with unit-linked plans is that they offer policyholders
transparency in terms of costs, annual returns and bonus calculations. With many
companies guaranteeing the capital investment (some like Birla Sun Life even
guarantee 3 per cent assured returns on its unit-linked plans), the interest in unitlinked plans only increased.
31.And the switch from traditional products to unit-linked plans gained momentum
as the Sensex climbed higher: the returns on such policies are linked to the
equity market.
32."The stock market has helped to a certain extent and has contributed to our
growth and performance," agrees Birla Sun Life CEO Nani Javeri.
33.Aviva has shown a compounded aggregate growth rate of 36 per cent since the
inception of its fund. Returns on OM Kotak's balanced and growth funds stand at
31.79 to 43.25 per cent respectively.
on today, they have been providing service to around 12 crore policy holders and
their track has been well acknowledged as reflected through continual up gradation
of service standards culminating into a world class performance in the area of
claim settlement operations.
It is well acknowledged that LIC has been able to provide appropriate IT support in
furtherance of prompt service to their valued policy holders. The complex task of
conversion of computerization of all the branches with their conversion as Front
Line offices has been completed in a phase manner. In addition to this, the
launching of the IVRS facility, MAN and Wide Area Network operations has
helped the co-operation improve its servicing.
LICs strength lies in:
a. Wide network of branches covering rural areas.
b. A large and well- spread agency organization.
c. An acknowledged record of performance.
d. Adequate yield with high risk cover being offered keeping the policy holders
satisfied in the existing in the economic scenario.
e. Well accepted brand equity throughout the country.
Futuristic Approach
Till today, LIC enjoyed a monopoly. It is now that reality exists in the are of
marketing (i.e. sales and after sales service operations). It will now have to follow
a multi-faceted strategy towards customer retention and also expanding to a new
clientele. With the new face of the market, relationship management seems to be
the new mantra.
At the nucleus of this approach is the concept of Customer Relationship
management. The need is to have a comprehensive review of the business keeping
in view customer expectations.
Customer Orientation
LIC, to be in the reckoning, has to have an efficient feed-back system, so as to
understand what the customer desires in terms of product design, service
procedures, relationship convenience, accessibility, responses in terms of
personalized service, attendance, core and complimentary on an individual basis.
The new players in the market like ICICI, HDFC etc. will definitely be very
aggressive in the open market. LIC has to go ahead with their former customers,
existing customer, in a very gentle and courteous manner, reassuring them of their
better services with persona, attention.
accounts for a growth of 132 per cent over last years first quarter. It has also
crossed Rs 10,000 crore sum assured mark.
As for emerging trends, Mr. Gupta explained that private participation in insurance
as a tax saving tool for comprehensive financial solution, and, product pushing for
need-based solutions required for personal financial review is fast emerging.
The Company recently tied up with the Forbes Six Sigma rated Dabbawalla
organization in Mumbai for a direct marketing exercise. In a Unique effort to
create awareness about a tax saving product, the company attached a creative of a
bitten apple to Mumbais ubiquitous lunchboxes. It worked wonderfully with
Mumbais office-goers and one that translated into substantial business for the
company.
With an annual growth rate of 15-20% and the largest number of life insurance
policies in force, the potential of the Indian insurance industry is huge. Total value
of the Indian insurance market (2004-05) is estimated at Rs. 450 billion (US$10
billion). According to government sources, the insurance and banking services
contribution to the country's gross domestic product (GDP) is 7% out of which the
gross premium collection forms a significant part. The funds available with the
state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP.
Till date, only 20% of the total insurable population of India is covered under
various life insurance schemes, the penetration rates of health and other non-life
insurances in India is also well below the international level. These facts indicate
the of immense growth potential of the insurance sector.
K.E.S SHROFF COLLEGE OF ARTS & COMMERCE
45
The year 1999 saw a revolution in the Indian insurance sector, as major structural
changes took place with the ending of government monopoly and the passage of
the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all
entry restrictions for private players and allowing foreign players to enter the
market with some limits on direct foreign ownership.
Though, the existing rule says that a foreign partner can hold 26% equity in an
insurance company, a proposal to increase this limit to 49% is pending with the
government. Since opening up of the insurance sector in 1999, foreign
investments of Rs. 8.7 billion have poured into the Indian market and 21 private
companies have been granted licenses.
Innovative products, smart marketing, and aggressive distribution have enabled
fledgling private insurance companies to sign up Indian customers faster than
anyone expected. Indians, who had always seen life insurance as a tax saving
device, are now suddenly turning to the private sector and snapping up the new
innovative products on offer.
The life insurance industry in India grew by an impressive 36%, with premium
income from new business at Rs. 253.43 billion during the fiscal year 2004-2005,
braving stiff competition from private insurers. RNCOSs report, Indian
Insurance Industry: New Avenues for Growth 2012 , finds that the
market share of the state behemoth, LIC, has clocked 21.87% growth in business
at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. But this was
still not enough to arrest the fall in its market share, as private players grew by
129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04.
Though the total volume of LIC's business increased in the last fiscal year (20042005) compared to the previous one, its market share came down from 87.04 to
78.07%. The 14 private insurers increased their market share from about 13% to
about 22% in a year's time. The figures for the first two months of the fiscal year
2005-06 also speak of the growing share of the private insurers. The share of LIC
for this period has further come down to 75 percent, while the private players
have grabbed over 24 percent.
There are presently 12 general insurance companies with four public sector
companies and eight private insurers. According to estimates, private insurance
companies collectively have a 10% share of the non-life insurance market.
Though the focus of this market research report is on the potential growth on the
Indian Insurance Sector, it also talks about the market size, market segmentation,
and key developments in the market after 1999. The report gives an instant
overview of the Indian non-life insurance market, and covers fire, marine, and
other non-life insurance. The data is supplied in both graphical and tabular format
for ease of interpretation and analysis. This report also provides company profiles
of the major private insurance companies.
REPORT HIGHLIGHTS
6.1 INTRODUCTION
K.E.S SHROFF COLLEGE OF ARTS & COMMERCE
48
While making a study we very often look for what type of research methodology is
to be used in this type of study. For implementation of a proper research
methodology we have to first understand the meaning of research.
Research is a process with the help of which new concepts arises. It is the increase
in the actual knowledge stock. It can be called as movement from known to
unknown and vice-versa. It is also a continuous process. It is a scientific as well as
systematic process, which includes defining and redefining the problem to develop
hypothesis, to collect and define the information/data, to analysis the information
and bring out the mother of Discovery. An individual makes the effort in research
and society or public takes its benefits because the results are usually generalized.
Data collection:
The word data means any raw information, which is either quantitative or
qualitative in nature, which is of practical or theoretical use. The task of data
collection begins after a research problem has been defined and research design
chalked out. While deciding about the method of data collection, the researcher
should keep in mind that there are two types of data primary and secondary.
1.Primary data: This is those, which are collected afresh and for the first Time, and thus happen to
be original in character. There are many ways of data collection of primary data
like observation method, interview method, through schedules, pantry Reports,
distributors audit, consumer panel etc. The Team Managers and employees of both
the Department were consulted to get information about procedure of both the
online and off line share trading. But the method used by us for the primary data
collection was through questionnaires.
Questionnaire method:
For the collection of primary data I used questionnaire method. A formal list of
questions, which are to be asked, is prepared in a questionnaire and questions are
asked on those bases. There are some merits and demerits of
This method. These as under: Merits: 1.Low cost even when universe is large.
2. It is free from bias of interviewer.
3. Respondents have proper time to answer.
4. Respondents who are not easily approachable can also be reachable.
5. Large samples can be made.
2. Secondary data: These are those data, which are not collected afresh and are used earlier also and
thus they cannot be considered as original in character. There are many ways of
data collection of secondary data like publications of the state and central govt.,
reports prepared by researchers, reports of various associations connected with
business, Industries, banks etc. And the method, which was used by us, was with
the help of reports of the company.
Plan
Percentage
Public
75%
Private
25%
Market view
35
35
30
25
15
20
15
10
5
0
PUBLIC
PRIVATE
People should not only trust public sector but also go for private companies
because the facilities provided by them is far much better. But as it is said that
every coin has two sides we would never know that when a Private company will
collapse so it would be much safer to invest in Public Sector Company rather than
Private Sector Company.
Market View
Agree
81%
Disagree
19%
Chart Title
35
30
25
Axis Title
20
15
10
5
0
YES
NO
Not much of the Private players should be allowed to enter in the market
because people would rather get confused that which company to choose and is
more reliable and after all LIC a Public sector company will slowly loose its
market share and image in the minds of public.
INDIVIDUAL IS
Individual thinking
percentage
Services
45
Advertisement
15
New Scheme
30
Other
10
market vie
45%
40%
35%
30%
25%
market vie
45%
20%
30%
15%
10%
15%
5%
10%
0%
services
other
The basic thing is the fast and better services provided by the private players which
motivates the people to take the policies.
SECTOR
HAS
HELPED
IN
ECONOMIC
DEVELOPMENT?
Economic Development
Yes
65%
No
35%
Sales
Yes
35%
No
65%
The above diagram shows that 65% developments get from private companies. As
it helps to get Employment options and also increase standard of leaving.
0ur services
Others services
Reliance
80%
20%
Max Newyork
60%
40%
HDFC
70%
30%
Birla Sunlife
90%
10%
100%
90%
80%
70%
60%
others
50%
0ur
40%
30%
20%
10%
0%
Reliance
Max Newyork
HDFC
Birla Sunlife
There are many competitors in the market as Reliance, Max Newyork, etc. the
competitors are wont to come up with new ideas ad schemes as they want to stable
in the market. We are right now in good position in the market and get new thing to
maintain the position.
50%
26%
40%
30%
20%
10%
0%
Yes
NO
The growth of insurance sector is rapidly increases the majority people are saying
Yes to growth is necessary for the improvement of insurance.
LIC
ICICI
Services
48%
56%
Products
42%
60%
60%
50%
40%
LIC
30%
ICICI
20%
10%
0%
Services
Products
As the service and product is important part of the insurance companies the LIC
and ICICI are the most preferable for that. The ICICI is having good products and
services than LIC as it is private and thinking for public needs.
CONCLUSION
Competition will surely cause the market to grow beyond current rates,
create a bigger "pie," and offer additional consumer choices through the
introduction of new products, services, and price options. Yet, at the same time,
public and private sector companies will be working together to ensure healthy
growth and development of the sector. Challenges such as developing a common
industry code of conduct, contributing to a common catastrophe reserve fund, and
chalking out agreements between insurers to settle claims to the benefit of the
consumer
will
require
concerted
effort
from
both
sectors.
The market is now in an evolving phase where one can expect a lot of actions in
coming days. The current impediments for foreign participation like 26% equity
cap on foreign partner, ill defined regulatory role of IRDA (Insurance Regulatory
development Authority- the watchdog of the industry) in pension business etc.
are expected to be removed in near future. The early-adopters will then have a
clear advantage compared to laggards in gaining the market share and market
leadership. The will need to make sure right now that all their infrastructure is in
place so that they can reap the benefit of an "unlimited potential."
Bibliography
Websites Referred: www.iciciprudential.com
www.licindia.com
www.scribd.com
www.google.co.in/indian insurance industry
Author
Book Name
Edition
01
Mc GILL
Life-Insurance
2nd
02
Insurance
Industry
3rd
Publisher
Name
Yr
2000
ICFAI
Publication
2005