Insurance Sector in

India
Presented By:
Onkar Mohole (67)
Paras Verma (71)
Shamkant Sonawane(92)
Soham Joshi (97)
Suhas Jambhale(102)
Yashwant Thakur(118)
Rahul Patil (121)
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 Contents
What is Insurance?
Global Picture
Scenario in India
Life Insurance Segment
Non-Life Insurance Segment
Growth Trends
Policy & Regulatory framework
Opportunities

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 What is Insurance?
 Commercial mechanism for transferring risk and spreading
loss
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 Insurance can be described as
 “Praying for the best …
 …being PREPARED for the WORST”
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 Economic Concept of Insurance:
 1. Insurer offers policy to cover specified risks
 2. Insurer collects policy premiums from customers
 3. Insurer invests premiums
 4. Insurer pays money to insured customers in the
event of losses covered by policy
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 Global Picture

 Taiwan tops avg. expenditure of GDP on Insurance with

13.2%
 High Growth potential in India

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Advantage India

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 Market in India
 The insurance industry in India is at an early stage
with low penetration and high potential
 Number of players increased from 1 in 1999 to 22 in
2009
 IRDA established in 1999 under the Ministry of
Finance
 23 players, 1 from the public sector and 22 from the
private sector(2010)
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 Growth in Indian Market
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 The total premium of the insurance industry has
grown at a CAGR of 24.6 per cent from 2002–03 to
2008–09 to reach US$ 52.6 billion in 2008–09

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 Growth in Indian Market

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 Herfindahl - Hirschman Index
( HHI )
Calculated by squaring the market share of each firm
competing in a market, and then summing the resulting numbers
Varies between 0(Perfect Competition) and 10000(Monopoly)

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 Major
Players

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 Market
Concentration ratio used to show the extent
of market control of the largest firms in the
industry and to illustrate the degree to
which an industry is oligopolistic
Four-Firm Concentration Ratio measures the
total market share of the 4 largest firms in
an industry
Four-Firm Concentration ratio for Life
Insurance sector: 86% and 59% for Non-
Life Insurance sector
Market: Oligopoly
Product Type: Differentiated
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 Life Insurance Segment
 Group insurance products —endowments, term insurance,
annuities, whole life insurance, riders
 Individual insurance products —Unit Linked Insurance
Plans (ULIPs), pension funds, guaranteed life
products
 There are 23 players, 1 from the public sector and 22
from the private sector, as of January 2010
§
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 Life Insurance Segment
 Premium income has grown at a high CAGR of 25.8 %
between 2002–03 and 2008–09
 The number of policies issued grew at a CAGR of 12.3 %
between 2002–03 and 2008–09
 There is increased insurance penetration due to a
growing consumer class, rising insurance awareness and
increasing domestic savings and investments

US $ Billion

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 Non - Life Insurance Segment
 Segments include auto, health, fire, marine and
engineering, among others
 Auto insurance had the largest share in the non-life
insurance segment in 2008–09 (43.2 per cent)
 There are 22 players, out of which 7 are public sector
players and 15 private sector players, as of January
2010
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 Non - Life Insurance Segment
 Premium income grew at a CAGR of 17.6 per cent
between 2002–03 and 2008–09.
US $ Billion

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 Demand Elasticity

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 Growth Drivers
 There is a high demand for insurance products due
to a growing middle class, increasing working
population, rising household savings and
increasing purchasing power
 The increasing literacy rate, specially in rural
India, has spread awareness about the need for
insurance Working population assessment
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 Employment Opportunities
 Insurance industry
provides increased
employment opportunities
 Brokers, corporate agents,
training establishments
provide extra employment
opportunities
 Many of these openings are
in rural sectors
 The life insurance sector
employed 0.3 million
people directly and 2.9
million people as
individual agents in 08–
09
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 Network Distribution

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 Key Trends for Growth
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 Key Trends for Growth
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§ Emergence of new distribution channels, such
as brokers and e-channels, has increased
outreach
§ The non-life insurance sector has witnessed
personal/retail line products pick up on
the back of increasing income levels and
changing life styles
§ Rise in sale of passenger cars, fuelling
demand for auto insurance
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 Key Trends for Growth
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§ Fast progressing medical technology and
increasing demand for better healthcare has
resulted in rising demand for health insurance
§ Regulatory initiatives to promote health
insurance include:
 IRDA has set up a separate department for
health insurance
 The government is set to raise budgetary
support of US$ 28.33 billion for the health
sector during the Eleventh Plan
 International players and life insurers have
entered this segment
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 Policy and regulatory
framework
 IRDA was formed in 1999 as a regulatory body to govern the
Indian insurance sector
 A company, to operate as an insurance company in India,
must be incorporated under the Companies Act, 1956, and
possess the certificate of the memorandum of association
and articles of association
 Capital requirement —paid up equity share capital should
be at least US$ 208.3 million for insurance business
 International players can operate in India only through a
joint venture with a domestic firm and are classified
under private sector insurers
 FDI up to 26 per cent is permitted in the insurance sector
 IRDA does not allow foreign reinsurance companies to open
branches in India. This proposal is currently under
consideration in the Parliament
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 Barriers to Insurance in
India
 26 % cap on Foreign Direct Investment
in insurance companies
This restriction will hamper the growth
prospects of private companies, as growth
requires more capital allocation
Local partners may be unable to match the
requirement
Intent of the current government to raise the
foreign equity ownership cap to 49% has
been made clear, it has yet to result in
action
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 Barriers to Insurance in
India
 Set tariffs and conditions dominate
non - life insurance in India
74% of the market GWP is regulated by
tariff; the Tariff Advisory Committee
It decides on price, terms and conditions
This prevents insurance companies from
offering product or price differentiation
 Reinsurance monopoly
A monopoly in market, being the only domestic
reinsurer in India
The state-owned General Insurance Corporation
(GIC), has traditionally close ties to the
primary insurers of the public sector
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 SWOT Analysis
Strengths Weakness
Good current market Slow to respond the

Premium rates are changing needs

increasing and so Buying insurance is a

commission
Opportunities cumbersome
Threats process
Increasing variety of Products and services are

products
Technology is improving almost similar forof
Unpredictability
IT bringing new dimension competitors
paperless transactions disasters
to sector
Mobile insurance could be a Increasing expenses and
hit profit margins will hit
Busy life demanding more hard on smaller agencies
flexible and customized and insurance companies
policies

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 References
www.irda.gov.in
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www.insuranceinstituteofindia.com
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www.dget.nic.in/mes/curricula/InsuranceSector
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www.finblog.in
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www.iirmworld.org.in
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 Thank You

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