Inspira- Journal of Modern Management & Entrepreneurship 35

Volume 02, No. 2, April, 2012, pp.35-38

Current Scenario of Life Insurance industry on

the basis of Premium

Dr. M.C. Gupta∗

Insurance sector in India is one of the booming sectors of the economy and is
growing at the rate of 15-20 per cent per annum. Together with banking services, it
contributes to about 7 per cent to the country's GDP. Insurance sector in India was
liberalized in March 2000 with the passage of the Insurance Regulatory and
Development Authority (IRDA) Bill. Privatization of Insurance eliminated the
monopolistic business of Life Insurance Corporation of India. It helps to introduce
new range of products which covered wide range of risks. It resulted in better
customer services and help improve the variety and price of insurance products. The
entry of new player has speed up the spread of both life and general insurance. It will
increase the insurance penetration and measure of density. Entry of private players
will ensure the mobilization of funds that can be utilized for the purpose of
infrastructure development. The participation of commercial banks into insurance
business helped to mobilization of funds from the rural areas because of the
availability of vast branches of the banks.
The present paper is an attempt to study the current scenario of life insurance
industry on the basis of Premium. For this purpose, growth of life insurance business
and premium income in Indian life insurance industry have been analyzed.
The study is based upon secondary data which has been collected from
annual reports of IRDA, IRDA journal and Life Insurance Today. Besides, a few
websites have also been consulted. The data used in the paper covers the period from
2006-07 to 2011-12.
Growth of Insurance
The potential and performance of the insurance sector is universally assessed
by insurance penetration and insurance density. These two are often used to
determine the level of development of the insurance sector in a country. Insurance
penetration is defined as the ratio of premium underwritten in a given year to the
Gross Domestic Product (GDP). Insurance density is defined as the ratio of premium
underwritten in a given year to the total population (measured in USD for
convenience of comparison).
India is geographically large and has the world's second largest
population.Despite such a huge population, the insurance penetration and density as
compared to the world levels is quite insignificant

∗
Assistant Professor, Department of Accountancy & Business Statistics, University of
Rajasthan, Jaipur.
36 Inspira- Journal of Modern Management & Entrepreneurship : April, 2012

Today indian insurance industry is the 6th largest industry of the world as per
the data publised by Swiss Re during 2010-11.However, during the same period, the
global life insurance premium expanded by 3.2 percent. The share of indian life
insurance sector in global market was 2.69 percent during 2010 as against 2.45 percent
in 2009
Table 1
Insurance Density and Penetration of Indian life Insurance Companies
(in US Dollar)
Year Life
Density (USD) Penetration (%)
2007 40.4 4.0
2008 41.2 4.0
2009 47.7 4.6
2010 55.7 4.4
2011 49.0 3.4
Source: Compiled from various Annual Reports of IRDA from 2006-07 to 20011-12.
Table 1 shows that the Insurance penetration and density, as far as life
density shows that during 2010 it has reached a high volume of business transaction
of 55.7 US dollar, it is preceded by 47.7 US dollar in the previous year 2009 and
gradually the performance was varying almost all the years. Similarly the percentage
of penetration has remarkably increased by every year and it has reached the
maximum of 4.60 percentages during 2009 and there after it sliped to 4.40 per cent in
2010 and further slipping to 3.40 per cent in 2011.
New Life Insurance Business
With the entry of private insurers in life insurance business, it is obvious that
some proportion of new business will go in the hands of private life insurers. An
attempt, therefore, has been made to study the growth of new business in terms of
policies and premium income of Indian life insurance industry. Further, the share of
private insurers and LIC in total new business has also been studied. In First year
premium ( New life insurance busimess) include Reguar premium and Single
premium
Table 2
New Life Insurance Business of Indian life insurance companies
New Life Insurance Business
LIC Private Companies Total
Year No. of No. of No. of Premium
Premium Premium
Policies Policies (In Policies (In (Rs. In
(Rs. In Crore) (Rs. In Crore)
(In Lac) Lac) Lac) Crore)
2007-08 376.13 59996.57 132.61 33715.95 508.74 93712.52
2008-09 359.13 53179.08 150.11 33827.15 509.24 87006.23
2009-10 388.63 71521.90 143.62 38372.01 532.25 109893.91
2010-11 370.38 87012.35 111.14 39385.84 481.52 126398.19
2011-12 357.51 81862.25 84.42 32079.92 441.93 113942.17
Source: Compiled from various Annual Reports of IRDA from 2007-08 to 20011-12.
Current Scenario of Life Insurance industry on the basis of Premium 37

Table 2 reveals that New life insurance premium earned by life insurance
industry increased from Rs. 93712.52 crore in 2007-08 to Rs. 126398.19 crore in
2010-11 but Life insurance industry recorded new life insurance premium income
of 113942.17 crore during 2011-12 as against 126398.19 crore in the previous
financial year, registering a negative growth of 9.85 per cent. Private insurers
increased from Rs. 33715.95 crore in 2007-08 to Rs. 39385.84 crore in 2010-11 but
private insurers recorded a premium income of 32079.92 crore during 2011-12 as
against 39385.84 crore in the previous financial year, registering a negative
growth of 18.54 per cent (26.42 per cent growth in previous year) in their new
insurance business.
LIC increased from Rs. 59996.57 crore in 2007-08 to Rs. 87012.35crore in
2010-11 but it recorded a premium income of 81862.25 crore during 2011-12 as
against 87012.35 crore in the previous financial year, registering a negative
growth of 5.92 per cent (21.65 per cent growth in previous year).
Total new insurance policies of life insurance industry decreased from 508.74 lac
in 2007-08 to 441.93 lac in 2011-12. On the other hand, LIC’s new business policies
decreased from 376.13 lac in 2007-08 to 357.51 lac in 2011-12. However, new
business policies of private life insurers decreased from 132.61 lac in 2007-08 to
84.42 lac in 2011-12.
Total Premium Earned
Total Premium income is the second major source of income of life
insurance industry. Total premium includes first year premium and renewal
premium while in First year premium include Reguar premium and Single
premium
Table 3
Total Life Insurance Business of Indian life insurance companies
Total Premium Earned
LIC Private Companies
Total (Rs.
Total Market Total Market
Year in crore)
Premium Share ( %) Premium Share ( %)
(Rs. in crore) (Rs. in crore)
2007-08 149789.99 74.39 51561.42 25.61 201351.41
2008-09 157288.04 70.92 64503.22 29.08 221791.26
2009-10 186077.31 70.10 79369.94 29.90 265447.25
2010-11 203473.4 69.77 88165.24 30.29 291638.64
2011-12 202889.28 70.68 84182.83 29.32 287072.11
Source: Compiled from various Annual Reports of IRDA from 2007-08 to 20011-12.
Table 3 reveals that total premium earned by life insurance industry increased
from Rs. 201351.41 crore in 2007-08 to Rs. 291638.64 crore in 2010-11 but Life insurance
industry recorded a premium income of 287072.11 crore during 2011-12 as against
291638.64 crore in the previous financial year, registering a negative growth of 1.57 per
cent. Private insurers increased from Rs. 51561.42crore in 2007-08 to Rs. 88165.24 crore
in 2010-11 but private life insurers recorded a premium income of 84182.83 crore
during 2011-12 as against 88165.24 crore in the previous financial year, registering a
38 Inspira- Journal of Modern Management & Entrepreneurship : April, 2012

negative of 4.52 per cent (11.08 per cent growth in previous year) in their premium
income.
LIC increased from Rs. 149789.99 crore in 2007-08 to Rs. 203473.4 crore in
2010-11 but it recorded a premium income of 202889.28 crore during 2011-12 as
against 203473.4 crore in the previous financial year, registering a negative of 0.29 per
cent (9.35 per cent growth in previous year).
The market share of LIC increased marginally from 69.77 per cent in 2010-11
to 70.68 per cent in 2011-12. Accordingly, the market share of private insurers has gone
down marginally from 30.29 per cent in 2010-11 to 29.32 per cent in 2011-12.
Conclusion
From the above discussion it is evident that 2011-12 is crucial year for life
insurance industry because life insurance industry expanded from 2007-08 to 2010-11
in terms of number of new business policies, premium income etc. But in 2011-12 new
business policies and premium income is decreased as compared 2010-11 in all
parameters like new insurance business, total life insurance premium.
In a recent report on the insurance industry, Goldman Sachs pointed out that
insurance companies have been reporting high profit growth for the past two years
despite a slowdown in new premium income, due to the high proportion of lapse
profits.
References
1 IRDA Annual Reports, “Insurance Regulatory and Development Authority”,
Mumbai, 2006 to 20012.
2 IRDA Journal, Various Issues (2000-07 to 2009-12).
3 Life Insurance Today, Various Issues (2000-07 to 2011-12)
4 [Online] Available : www.irdaindia.org
5 [Online] Available : www.irdajournal@irda.gov.in
6 rora, R.S.. “Financial Reforms and Service Sector–A Study of Life Insurance
Industry in India”, In B.B. Tandon and A.K.Vashisht (Eds.), Financial Sector
Reforms–An UnpublishedAgenda for Economic Development: 259-270, New
Delhi: Deep & Deep, 2002.
7 Hifza Malik, (2011), Determinants Of Insurance Companies Profitability: An
Analysis Of Insurance Sector Of Pakistan, Academic Research International,
1(3),315-321.Available:http://www.savap.org.pk/journals/ARInt./Vol.1(3) /2011
(1.3-32).pdf.
8 Chartered Insurance Institute Year Book.
9 Insurance Act, 1938. (Amended up to date)