INSURANCE SECTOR

Pooja. Mishra

Priya. Singh

Nisha. Thapa
 What is INSURANCE?
• 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

potential loss, from one entity to another, in exchange for a
premium.

• 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 SECTOR:
History
>The history of the Indian insurance sector dates back to 1818, when
the Oriental Life Insurance Company was formed in Kolkata. A new era
began in the India insurance sector, with the passing of the Life
Insurance Act of 1912.

>The Indian Insurance Companies Act was passed in 1928. This act
empowered the government of India to gather necessary information
about the life insurance and non-life insurance organizations operating
in the Indian financial markets.

>The Triton Insurance Company Ltd formed in 1850 and was the first of
its kind in the general insurance sector in India.

>Established in 1907, Indian Mercantile Insurance Limited was the first

company to handle all forms of India insurance.
 Types of Insurance

Life insurance
Non - Life Insurance
(general insurance)

Property (eg.Builders risk insurance)

Aviation(eg.Private aircraft insurance)
Marine (eg. Marine hull insurance)
Miscellaneous (eg.Purchase insurance)
 Why do we
need
insurance???
Lost
House
due to
Floods
Need a
Treatment,
its
URGENT!!!!
Lost !!!!
 IRDA
To protect the interests of the policyholders, to regulate,
promote and ensure orderly growth of the insurance
industry and for matters connected therewith or incidental
thereto.

>The Insurance Regulatory and Development Authority Act

of 1999 brought about several crucial policy changes in the
insurance sector of India.
>It led to the formation of the Insurance Regulatory and
Development Authority (IRDA) in 2000.
>The goals of the IRDA are to safeguard the interests of
insurance policyholders, as well as to initiate different
policy measures to help sustain growth in the Indian
insurance sector.
The Insurance Regulatory and Development Authority
(IRDA) is a national agency of the Government of India,
based in Hyderabad.

>It was formed by an act of Indian Parliament known as

IRDA Act 1999, which was amended in 2002 to incorporate
some emerging requirements.

>In 2010, the Government of India ruled that the Unit

Linked Insurance Plans (ULIPs) will be governed by IRDA,
and not the market regulator Securities and Exchange Board
of India.

>It has maintained a website where detail information

about IRDA can be referred and understood
www.irdaindia.org
Insurance companies in India

>IRDA has till now provided registration to 12 private life

insurance companies and 9 general insurance companies.

>If the existing public sector insurance companies are

considered then there are presently 13 insurance
companies in the life side and 13 companies functioning
in general insurance business.

>General Insurance Corporation has been sanctioned as

the "Indian reinsurer" for underwriting only reinsurance
business
The SWOT analysis of Whole
Insurance sector is as follows:-
1.Strength-Very good policies of life coverage.

2.Weaknesses:-unable to convince the people about the

products. There are not much advisors for the insurance
companies

3.Oppourtunities:-Untapped rural sector and small

towns

4.Threats:-growing competition from larger MNC's.

 SWOT Analysis of RELIANCE GENERAL
INSURANCE
Strengths

RGIC is second among private players after ICICI Lombard GI

•India’s first insurance company to be awarded the ISO 9001:2000
certification
•Net worth has increased up to Rs.4.94 billions doubled from last year’s
Rs.2.59 billions
•Excellent outreach with a large distribution network
•Reserves and Surplus has increased five times to Rs.4.998 billion from
Rs.1.04 billion previous year 2007
•RGIC has been able to give highest ROI of 11.27% in last five years.
•RGIC commands 17% of the Private Sector Share & 7% share of the
General Insurance Industry
Weaknesses

•Earning per share is Rs. -15.92 (previous year Rs.0.16)

•Sudden expansion this year by establishing more than 125
branches has increased operations and administration expenses
due to which losses incurred.
•There is no technical support of the foreign principals as RGIC is
not having any foreign tie-up as other players have.
•All the inner facts and factors known to the family member cum
competitor company headed by Mukesh Ambani.
•Overdependence on fellow subsidiaries for various supplies
Opportunities

De-tariff
–IRDA removed controls on pricing in General Insurance business
with effect from 1st January, 2008

•The industry is going to be freed from product

wordings and policy wordings

•Can become market leader as presently it is no. 2

position

•General insurance industry in India has grown at

15% CAGR in terms of gross premium collection
Threats

>New Entrants
– Future General India Life Insurance Company Limited -Sep.
2007
– IDBI Fortis Life Insurance Company Ltd. –Dec 2007
– Bharti Axa General Insurance Company Ltd. -June 2008

> Many foreign bank giants are going to enter Indian

market. They have very large portfolio of various
verticals and products with them

> New tie-ups by the competitors viz.

– Online travel portal clear trip ties up with Tata AIG to offer
travel insurance
– ICICI Prudential has pact with Suvidha Infoserve
 THE GLOBAL GROWTH
Global insurance premiums grew by 9.7% reached $3.3
trillion by 2006.

The profits of property and casualty insurance industry actually

rose by $3.2 billion, or 5.5 %, to $30.6 billion during the first
half of 2007.

North America was the most important region with premium

income of $1,217 billion in 2006.

Followed by the EU (at $1,198 billion) & Japan (at $492

billion.)

The United States & Japan alone accounted for a half of world
insurance premiums.
The volume of UK insurance business totaled $295 billion
or 9.1% of global premiums by 2006.

 Emerging markets accounted for over 85% of the world’s

population but generated only 10% of premium.

The ISO results indicate a growth rate in net written

premiums of just 0.1 % during the first half of 2007, down
substantially from the 2.7 % increase during calendar year
2006.

The 0.1 % increase in premium growth, if maintained

through 2007, would represent the lowest growth rates for
the during the past 40 years
 “Indian Insurance Industry: New Avenues for
Growth 2012”,
The potential of the Indian insurance industry is huge. HOW???
….. It has an annual growth rate of 15-20% &
…..the largest number of life insurance policies in force.

Total value of the Indian insurance market (2004-05) is at Rs.

450 billion (US$10 billion).

Insurance & Banking Services’ contribution to the country's

gross domestic product (GDP) is 7%

The funds available with the state-owned Life Insurance

Corporation (LIC) for investments are 8% of GDP.
Insurance can be
summed up as
“Praying for the best …
…being PREPARED
for the WROST”.
THANK YOU