SUMMER PROJECT
General Insurance Policies taken by the Government
•
•
Introduction Insurance in India
Brief history of the Insurance I nsurance sector •
The General Insurance Corporation of India
Malhotra Committee
Mukherjee Committee IRDA Bill •
Policies prov vided by the government Social Policies Health policies Rural policies Travel insurance policies Pravasi Bhartiya Bima Yojana
•
Success of the above policies
•
Challenges and weak points of these policies
•
Opportunities
•
Further offerings to be made
•
Conclusion
Introduction Insurance may be described as a social device to reduce or eliminate eliminate risk of life and property. property. Unde Underr the the plan plan of insu insura ranc nce, e, a larg largee numb number er of peo peopl plee asso associ ciat atee them themse selv lves es by shar sharin ing g risk risk,, atta attach ched ed to indi indivi vidu dual al.. The The risk risk,, which which can can be insured against include fire, the peril of sea, death, incident, & burglary. Any risk contingent upon these may be insured against at a premium commensurate with the risk involved. Insurance is actually a contract between 2 parties
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whereby one party called insurer undertakes in exchange for a fixed sum called premium to pay the other party happening of a certain event. 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. With the help of insurance, large number of people exposed to a similar risk makes contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good.
Insurance in India The The insu insura rance nce sect sector or in Indi Indiaa has has come come a full full circ circle le from from bein being g an open open competitive market to nationalization and back to a liberalized market again. Tracing Tracing the developments developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.
A brief history of the Insurance sector The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. , 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central central government and nationaliz nationalized. ed. LIC formed by an Act of Parliament, Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the the Trit Triton on Insu Insura ranc ncee Comp Compan any y Ltd., Ltd., the the firs firstt gener general al insu insura rance nce comp compan any y established in the year 1850 in Calcutta by the British.
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Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company. Source: www.tourindia.com
INDIAN INSURANCE INDUSTRY:
Insurers Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:
Life Insurers: •
Life Insurance Corporation of India (LIC)
General Insurers: •
General Insurance Corporation of India (GIC) (with effect from Dec'2000, a National Reinsurer)
GIC had four subsidiary companies, namely (with effect from Dec'2000) these subsidiaries have been de-linked from the parent company and made as independent insurance companies. 1. The Oriental Insurance Company Limited 2. The New India Assurance Company Limited,
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3. National Insurance Company Limited 4. United India Insurance Company Limited. The entire general insurance business in India was nationalized by General Insurance Business (Nationalization act), 1972(GIBNA). The Government of India (GOI), through nationalization took over the shares of 55 Indian insurance companies and the undertaking of 52 insurers carrying on general insurance business. General Insurance Corporation of India was formed in the pursuance of Section 9 (1) of GIBNA. It was incorporated on 22 November 1972 under the companies act, 1956as a private company limited by shares.GIC was formed for the purpose of superintending, controlling and carrying on the business of the general insurance. As soon as GIC was formed, GOI transferred all the shares it held of the general insurance companies to GIC. Simultaneously, the nationalized undertakings were transferred to Indian insurance companies. 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 (4) United India Insurance company limited The next landmark happened on 19 April 2000, when the insurance regulatory and development authority act, 1999 (IRDAA) came into force. This act also introduced amendment to GIBNA and the insurance act 1938. An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying of general insurance in India. In November 2000, GIC is renotified as the Indian Reinsurance and through administrative instruction, its supervisory role over subsidiaries was ended. With the general insurance business (nationalization) Amendment Act 2002 came into force from March 21 2002 GIC ceased to be the holding company of its subsidiaries. There ownership was vested with Government of India. General Insurers Public o o o o o
National Insurance New India Assurance Oriental insurance United India Insurance Agriculture Insurance Company of India Ltd
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Private o o o o o o o o o o
Bajaj Allianz General Insurance ICICI Lombard General Insurance IFFCO-Tokio General Insurance Reliance General Insurance Royal Sundaram Alliance Insurance TATA AIG General Insurance Cholamandalam General Insurance Export Credit Guarantee Corporation HDFC Chubb General Insurance Star Health and Allied Insurance Company Ltd
The General Insurance Corporation of India Although efforts were made to maintain an open market for the general insurance industry amending the Insurance Act of 1938 from time to time, malpractice escalated beyond control. Thus, the general insurance industry was nationalized in 1972. The General Insurance Corporation (GIC) was set up as a holding company. It had four subsidiaries: New India, Oriental, United India and the National Insurance companies (collectively known as the NOUN). It was understood that these companies would compete with one another in the market. It did not happen. They were supposed to setup their own investment portfolios. That did not happen either. It began to happen after29 years. The GIC has a quarter of a million agents. It has more than 2,500 branches, 30million individual and group insurance policies and assets of about USD 1,800 million at market value (at the end of 1999). It has been suggested that the GIC should close 20-25% of its nonviable branches (Patel, 2001). The GIC has so far been the holding company and re-insurer for the state-run insurers. It reinsured about 20% of their business. Two Committee Reports: One Known, One Unknown Although Indian markets were privatized and opened up to foreign companies in a number of sectors in 1991, insurance remained out of bounds on both counts. The government wanted to proceed with caution. With pressure from the opposition, the government (at the time, dominated by the Congress Party) decided to set up a committee headed by Mr. R. N. Malhotra (the then Governor of the Reserve Bank of India).
Malhotra Committee Liberalization of the Indian insurance market was recommended in a report released in 1994 by the Malhotra Committee, indicating that the market should
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be opened for private-sector competition, and ultimately, foreign private-sector competition. It also investigated the level of satisfaction of the customers of the LIC. Curiously, the level of customer satisfaction seemed to be high. The union of the LIC made political capital out of this finding. The following are the purposes of the committee. (a) To suggest the structure of the insurance industry, to assess the strengths and weaknesses of insurance companies in terms of the objectives of creating an efficient and viable insurance industry, to have wide coverage of insurance services, to have a variety of insurance products with a high quality service, and to develop an effective instrument for mobilization of financial resources for development. (b) To make recommendations for changing the structure of the insurance industry, for changing the general policy framework etc. (c) To take specific suggestions regarding LIC and GIC with a view to improve the functioning ofLIC and GIC. (d) To make recommendations on regulation and supervision of the insurance sector in India. (e) To make recommendations on the role and functioning of surveyors, intermediaries like agents etc. in the insurance sector. (f) To make recommendations on any other matter which are relevant for development of the insurance industry in India. The committee made a number of important and far-reaching recommendations. (a) The LIC should be selective in the recruitment of LIC agents. Train these people after the identification of training needs. (b) The committee suggested that the Federation of Insurance Institute, Mumbai should start new courses and diploma courses for intermediaries of the insurance sector. (c) The LIC should use an MBA specialized in Marketing (a similar suggestion for the GIC subsidiaries).(c) It suggested that settlement of claims were to be done within a specific time frame without delay. (d) The committee has several recommendations on product pricing, vigilance, systems and procedures, improving customer service and use of technology.(f) It also made a number of recommendations to alter the existing structure of the LIC and the GIC. (g) The committee insisted that the insurance companies should pay special attention to the rural insurance business. (h) In the case of liberalization of the insurance sector the committee made several recommendations, including entry to new players and the minimum capital level requirements for such new players should be Rs. 100 crores(about USD 24 million). However, a lower capital requirement could be considered for a co-operative sectors' entry in the insurance business. (i) The committee suggested some norms relating to promoters’ equity and equity capital by foreign companies, etc.
Mukherjee Committee Immediately after the publication of the Malhotra Committee Report, a new committee (called the Mukherjee Committee) was set up to make concrete plans for the requirements of the newly formed insurance companies. Recommendations of the Mukherjee Committee were never made public. But, from the information that filtered out it became clear that the committee
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recommended the inclusion of certain ratios in insurance company balance sheets to ensure transparency in accounting. But the Finance Minister objected. He argued (probably on the advice of some of the potential entrants) that it could affect the prospects of a developing insurance company.
Insurance Regulatory Act (1999) After the report of the Malhotra Committee came out, changes in the insurance industry appeared imminent. Unfortunately, instability in Central Government, changes in insurance regulation could not pass through the parliament. The dramatic climax came in 1999. On March 16, 1999, the Indian Cabinet approved an Insurance Regulatory Authority (IRA) Bill that was designed to liberalize the insurance sector. The bill was awaiting ratification by the Indian Parliament. However, the BJP Government fell in April 1999. The deregulation was put on hold once again. An election was held in late 1999. A new BJP-led government came to power. On December 7, 1999, the new government passed the Insurance Regulatory and Development Authority (IRDA) Act. This Act repealed the monopoly conferred to the Life Insurance Corporation in 1956 and to the General Insurance Corporation in 1972.The authority created by the Act is now called IRDA. It has ten members. New licenses are being given to private companies (see below). IRDA has separated out life, non-life and reinsurance insurance businesses. Therefore, a company has to have separate licenses for each line of business. Each license has its own capital requirements (around USD24 million for life or non-life and USD48 million for reinsurance).
Some Details of the IRDA Bill On July 14, 2000, the Chairman of the IRDA, Mr. N. Rangachari set forth a set of regulations in an extraordinary issue of the Indian Gazette that detail of the regulation. Regulations
The first covers the Insurance Advisory Committee that sets out the rules and regulation. The second stipulates that the "Appointed Actuary" has to be a Fellow of the Actuarial Society of India. Given that there has been a dearth of actuaries in India with the qualification of a Fellow of the Actuarial Society of India, this becomes a requirement of tall order. As a result, some companies have not been
8
able to attract a qualified Appointed Actuary (Dasgupta, 2001). The IRDA is also in the process of replacing the Actuarial Society of India by a newly formed institution to be called the Chartered Institute of Indian Actuaries (modeled after the Institute of Actuaries of London).Curiously, for life insurers the Appointed Actuary has to be an internal company employee, but he or she may be an external consultant if the company happens to be anon-life insurance company. Third, the Appointed Actuary would be responsible for reporting to the IRDA a detailed account of the company. Fourth, insurance agents should have at least a high school diploma along with training of 100 hours from a recognized institution. More than a dozen institutions have been recognized by the IRDA for training insurance agents Fifth, the IRDA has set up strict guidelines on asset and liability management of the insurance companies along with solvency margin requirements. Initial margins are set high (compared with developed countries). The margins vary with the lines of business (for example, fire insurance has a lower margin than aviation insurance). Sixth the disclosure requirements have been kept rather vague. This has been done despite the recommendations to the contrary by the Mukherjee Committee recommendations. Seventh, all the insurers are forced to provide some coverage for the rural sector. (1) In respect of a life insurer, (a) five percent in the first financial year; (b) seven percent in the second financial year; (c) ten percent in the third financial year; (d) twelve percent in the fourth financial year; (e) fifteen percent in the fifth year (of total policies written direct in that year). (2) In respect of a general insurer, (a) two percent in the first financial year; (b) three percent in the second financial year; (c) five percent thereafter (of total gross premium income written direct in that year). Three days before the deadline that the IRDA had set upon itself (October 25, 2000), it issued three companies with license papers: (1) HDFC Standard Life. This will be jointly set up by India's Housing Development Finance Company - the largest housing finance company in India and the Scotland based Standard Life. (2) Sundaram Royal Alliance Insurance Company . It is a partnership created by Sundaram Finance and three other companies of the TVS Group of Chennai (Madras) and the London based Royal & Sun Alliance.
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(3) Reliance General Insurance . This company is fully owned by Mumbai based Reliance Industries which has operations in textile, petrochemicals, power and finance industries.
There are three other companies with "in principal" approvals: (1) Max New York Life . It is a partnership between Delhi based pharmaceutical company Max India and New York Life; the New York based Life Insurance Company. (2) ICICI Prudential Life Insurance Company . This is a joint venture between Mumbai based Industrial Credit & Investment Corporation and the London based Prudential PLC. (3) IFFCO Tokio General Insurance Company. It is a joint venture between Indian Farmers' Fertilizer Cooperative and Tokio Marine and Fire of Japan.
To date (end of April 2001), the following companies have thus been granted licenses: ICICI -Prudential, Reliance General, Reliance Life, Tata-AIG General, HDFC Standard Life, Royal-Sundaram, Max-New York Life, IFFCO-Tokio Marine, Birla-SunLife, Bajaj-Allianz General, Tata-AIG Life, ING-Vyasa, Bajaj-Allianz Life, SBI Cardiff Life
INSURER MARKET SHARE (%)
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Bajaj Allianz General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. IFFCO Tokio General Insurance Co. Ltd. National Insurance Co.Ltd. United India Insurance Co. Ltd. The New India Assurance Co. Ltd. The Oriental Insurance Co. Ltd. Reliance General Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd Tata AIG General Insurance Co. Ltd. Cholamandalam MS General Insurance Co. Ltd. HDFC-Chubb General Insurance Co. Ltd. Export Credit Guarantee Corporation Ltd. Agriculture Insurance Co. of India Ltd.
6.15 8.04 4.00 17.11 17.11 20.15 17.02 0.75 2.17 2.89 1.22 0.89 2.50 n.a.
Policies provided by the government As stated earlier government general insurance companies provide policies in different areas of general insurance. Before going to the policies there are some stats provided by IRDA which show the gross premium underwritten for the month of February and March, 2007. In these stats there are gross premium underwritten of both private and public general insurance companies. We can see that the gross total premium of public companies is almost double of private insurance companies. In private sector the leader is ICICI- Lombard followed by Bajaj-Allianz and Reliance General, where in Public sector the leader is New India Insurance. 'GROSS PREMIUM UNDERWRITTEN FOR AND UPTO THE MONTH OF FEBRUARY, 2007
Premium 2006-07
INSURER
For the month
Up to the month
11
Premium 2005-06 For the Up to the month month
Growth over the Correspondi ng Period of Previous year
48.52
542.66
33.78
407.04
33.32
50.68
686.96
49.91
540.16
27.18
91.33
803.59
14.61
144.67
455.46
74.39
1070.28
67.96
779.11
37.37
201.78
2803.34
113.83
1468.47
90.90
147.18
1621.44
97.87
1164.91
39.19
13.96
170.17
17.10
177.18
-3.96
24.07
282.71
14.87
209.14
35.18
Cholamandala m
379.45
4505.60
377.34
4198.39
7.32
New India
319.76
3428.21
269.06
3201.88
7.07
National
256.67
3158.48
229.23
2837.74
11.30
United India
290.87
3595.88
265.11
3196.32
12.50
Private Total
651.91
7981.15
409.93
4890.68
63.19
Public Total
1246.75
14688.17
1140.74
13434.33
9.33
Grand Total
1898.66
22669.32
1550.67
18324.01
23.71
Royal Sundaram Tata-AIG RelianceGeneral IFFCO-Tokio ICICI-Lombard Bajaj Allianz HDFC CHUBB
Oriental
Source: IRDA
Performance in February 2007 The second month of the detariffed regime in the current calendar year shows that the premium growth rate in February 2007 is an impressive 22.4 percent, though it falls short of the January 2007 growth of 25.6 percent. The new players have achieved a market share of about 35 percent in the February premium G V
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Rao volumes, though this falls a little short of the 37 percent market share they had recorded in January 2007. The market grew its February renewal premium from Rs.1551 crore to Rs.1899 crore. The established players have contributed Rs.106 crore to the increase, while the new players have added Rs.242 crore. National Insurance, as was seen in its January 2007 performance; is the leading player in its group, adding Rs.51 crore to the accretion. Among the new players, ICICI-Lombard leads with an accretion of Rs.88 crore followed by Reliance with Rs.76 crore. Other players that have made significant accretions to February 2007 premium are: Bajaj-Allianz with Rs.49 crore, United India with Rs.28 crore and Oriental with Rs.26 crore. New India, as it did in January 2007, has slowed its growth momentum, by keeping its accretion in February to Rs.2 crore; in January 2007 its premium accretion was Rs.8 crore. The premium growth trends of the first two months of the calendar year show that among the new players the growth pursuing players are ICICI-Lombard, Reliance and Bajaj-Allianz. Among the established players the growth-hunt is led by National Insurance followed by Oriental and United India.
Performance up to February 2007 The premium achievement up to February 2007 is Rs.22, 669 crore, with the established players having recorded Rs.14, 688 crore and the new players Rs.7981 crore. To put this performance in perspective, one should highlight that for the financial year 2005/06 the premium was Rs.20, 360 crore, with the established players having completed Rs.14, 997 crore and the new players Rs.5360 crore. The growth rate up to February 2007 is 23.7 percent, down by 0.2 percent from the level at January 2007. ICICI—Lombard leads the growth list with a massive ac cretion of Rs.1334 crore followed by Reliance with Rs.648 crore and Bajaj-Allianz with Rs.456 crore. Oriental with Rs.400 crore and United India with Rs.322 crore are the others on the growth path.
'GROSS PREMIUM UNDERWRITTEN FOR AND UPTO THE MONTH OF MARCH, 2007
Premium 2006-07
INSURER
Premium 2005-06
For the Up to the month month
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For the Up to the month month
Growth over the Corresponding
Period of Previous year
Royal Sundaram
57.37
600.03
52.31
459.35
30.63
Tata-AIG
54.61
741.56
72.23
612.39
21.09
RelianceGeneral
108.64
912.23
17.66
162.33
461.96
IFFCO-Tokio
80.05
1150.32
116.96
896.11
28.37
ICICI-Lombard
200.11
3003.45
123.53
1592.00
88.66
Bajaj Allianz
183.16
1804.60
119.65
1284.57
40.48
HDFC CHUBB
19.99
190.16
28.59
205.77
-7.59
Cholamandalam
34.74
314.59
15.37
222.21
41.57
New India
515.62
5024.15
534.90
4791.51
4.86
National
382.67
3810.88
350.63
3523.67
8.15
United India
349.15
3509.95
316.21
3154.78
11.26
Oriental
344.32
3940.53
347.07
3527.13
11.72
Private Total
738.67
8716.94
546.30
5434.73
60.39
Public Total
1591.76
16285.51
1548.81
14997.09
8.59
Grand Total
2330.43
25002.45
2095.11
20431.82
22.37
Source: IRDA
Below are the policies which are provided by the government in context of general insuranceRajrajeshwari Mahila Kalyan Yojana Policy Policy called ‘Raj Rajeshwari Mahila Kalyan Yojana’ offering security to women in the age group of 10 to 75 years irrespective of their occupation w as introduced
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w.e.f. 19th October, 1998. Specially designed to protect the welfare of women mainly in rural and semi-urban areas. Insurer: National Insurance Company End user: Women of rural and semi-urban areas.
Scope of Cover DEATH 1. Of Husband in case of married women Compensation Rs.25, 000/- to the wife. (Death of married women not covered) 2.
Of unmarried Women Rs.25, 000/- to the nominee, legal heir.
3.
Death of married woman not covered.
PERMANENT TOTAL DISABLEMENT OF THE INSURED WOMEN ONLY 1.
Permanent Total Disablement Rs.25, 000/-
2.
Loss of one limb of one eye or loss of two limbs or both eyes Rs.25, 000/-
3.
Loss of one limb/sight in one eye Rs.12, 500/-
DEATH OR DISABILITY BY ACCIDENT WOULD INCLUDE death and P.T.D. arising out of: 1.
Slipping /falling off mountainous terrain.
2.
Biting by (a) Insects (b) Snakes, (c) Animals
3. Drowning/Washing away by (a) Floods, (b) Landslides, (c) Rockslides (d) Earthquake, (e) Cyclone, (f) Other Convulsions of nature/calamities 4.
Murder
5.
Terrorist activities
6.
Any other accidental causes
DEATH IN CASE OF WOMEN (it also includes death and or P.T.D.)
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Caused by 1.
Surgical Operations such as
2.
Sterilization
3.
Caesarian
4.
Hysterectomy
5.
Cancer Operations arising from removal of breasts
6. Child Birth, not beyond a period of seven days from the date of surgical operations. Age: 10 years to 75 years Premium Rating
@ Rs.15/- per woman per annum for Basic Cover @ Rs.23/- per woman per annum for Combined cover. Rajrajeshwari Mahila Kalyan Policy is provided by all the subsidiary government companies- Oriental Insurance, New India Assurance, United India Insurance, National India Insurance in all the states o f the country.
Bhagyashree Child Welfare Policy Insurer :
National Insurance Company Schools, colleges and any other educational institutions can avail of this scheme for the benefit of the girl students studying there. End user :
Policy provides protection to the girl child in the event of death of either or both the parents.
Scope of Cover 1. For child in the age group of 0 to 18 years; and age of parents below 60 years. 2.
Fixed sum insured of Rs.25, 000/- premium Rs.15/- p.a.
3. Insurance protection is not for the girl child but for her parents; however, benefit will accrue to the child.
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4. Death of parent/s would include death arising out of or traceable to slipping and/or falling from mountainous terrain; biting by insects, snakes and/or animals; drowning or washing away in floods, landslides, rockslides, earthquake, cyclone and/or natural calamities; rape, murder and terrorist activities covered; any other accidental causes; 5.
Death of mother of the child caused by surgical operations such as
a)
Sterilization
b)
c)
Caesarean, Removal of uterus and removal of breast/s due to cancer,
d) At the time of child birth are also covered provided that death occurs within a period of seven days from the date of operation; Death by Rape attempts. 6. In case of death of either or both the parents due to an accident as above, sum Insured will be deposited in the name of the insured girl child and she will get benefit as under:
Age 1 to 5 years
6 to 11 years
12 to 17 yrs
18 years
Benefit Rs. 1,200 p.a.
Rs. 1,200 p.a.
Rs. 2,400 p.a.
Payable to surviving parents or guardian for looking after the need of the child surviving parent or guardian if the girl is admitted in school and expenses are incurred on her education surviving parent or guardian if the girl child is admitted in school and the expenses are incurred on her education Balance in credit to the insured girl child
7. In the event of discontinuation of studies between 6 and 17 years, the Scholarship will not be paid; instead, on completion of 18 years the Balance amount in here credit will be paid to her as lump sum. 8. In the case of death of the girl child before attaining the age of 18 years, Balance amount standing to the credit of the girl child would be paid to the surviving parent or guardian.
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Note: One girl child below the age of 18 in a family could be covered. Policies can be issued individually or as a group.
UNIVERSAL HEALTH INSURANCE SCHEME –For BPL Families Oriental Insurance Company has been nominated by Govt. of India to provide Universal Health Insurance Scheme to the people who are below poverty line in the States of Delhi, Haryana, Himachal, J & K, Punjab, Rajasthan, U.P., Uttranchal & Chandigarh (UT). Scope of Cover: This policy has three covers as under:
1. Medical reimbursement: The Policy provides reimbursement of hospitalization expenses uptoRs.30; 000/- to an individual/family with sub limits (Maximum per illness Rs.15000/-. The benefit of the family will operate on floater basis i.e. the total reimbursement of Rs.30; 000/- can be availed of individually or collectively by members of the family. 2. Personal Accident Cover: Coverage for Death of the Earning Head of the family due to accident: Rs.25, 000/-. 3. Disability Cover: If the earning head of the family is hospitalized due to an accident/illness a compensation of Rs.50/- per day will be paid per day of hospitalization up to a maximum of 15 days after awaiting period of 3 days. Age limit: 3 months to 65 years. Category Premium Subsidy by Payable GOI For an individual Rs.165/-per annum Rs. 200/For a family up to 5 Rs.248/- per annum Rs. 300/-(Including the first 3dependant children) For a family up to 7 Rs.330/- per annum Rs. 400/-(Including the first 3dependent children and dependent parents)
Main Exclusions:
1. All pre-existing diseases and diseases contracted during the first 30days from the commencement date of the policy. 2. Some of the diseases such as Cataract, Benign Prostatic Hypertrophy, Hysterectomy, Hernia, Hydrocele, Piles, Sinusitis, and Congen ital Internal Disease are not covered in the first year of the policy. 3. Corrective, cosmetic or aesthetic dental surgery or treatment. 4. Cost of spectacles, contact lens and hearing aid.
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Claim Settlement: The Claims are to be settled by a Third Party Administrator (TPA) mentioned in the schedule or by the Insurance Company and to be made cashless as far as possible through listed hospitals.
Rural Policies Rural policies provide wide policies to the rural areas. They cover a vast area of the rural areas. These policies are provided by all the four subsidiary companies and are applicable in all the states of the country. They are as following-
CATTLE INSURANCE Cattle Insurance was governed under Market Agreement as devised by GIC and the rates, terms, conditions etc. all were applicable to all the four Insurance Companies. However, w.e.f May 2003, it is no longer under Market Agreement. This policy covers indigenous cross bred and exotic cattle owned by private owners, various financial institutions, dairy farms, cooperatives, corporate dairies etc. The word cattle include Milch, Cows and Buffaloes calves and heifers, stud bulls, bullocks and he-buffaloes and mithuns. Age group is specified for all the animals. The evaluation of the animal is done by a veterinary surgeon.
CALF HEIFER REARING INSURANCE SCHEME The coverage under this policy is meant for calves/heifers from one day to 32 months. The valuation depends upon the age of the cow and is fixed according the age of the calf. All terms and conditions applicable to cattle are applicable here also. Minimum coverage is taken from 12 months however this is not an annual policy.
SHEEP AND GOAT INSURANCE This scheme is also governed under Market Agreement. Policy provides indemnity to indigenous cross-bred and exotic sheep and goat against death due to accident (including fire, lightening, flood, cyclone, famine, strike, riot and civil commotion) and disease. Earthquake and landslide covers are also provided. Standard and common exclusions apply as per Cattle Policy. Animals are identified by means of small brass buttons ear tags. Animals under scheme category enjoy certain benefits in premium rate and claim procedure.
CAMEL INSURANCE
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The camels are covered against death due to accident or disease as per Standard Cattle Insurance Policy. The maximum S.I. is restricted to Rs.3000/-.
PIG INSURANCE All indigenous, cross-bred and exotic pigs are covered however under scheme category exotic animals are not covered. The age group is from 4 months to 3 years. The coverage is against death due to accident or disease. Exclusions as per Cattle Policy apply here also. Permanent total disablement, breeding and furrowing risks are not covered. Vaccination in applicable diseases is compulsory. Evaluation depends upon the age of the animal. Animals are identified by means of small brass buttons ear tags.
HORSE, MULE, DONKEY, PONY, YAK INSURANCE The Coverage is as per Standard Cattle Policy. However the age group is restricted to 2 years to 8 years.
POULTRY INSURANCE This is also governed by Market Agreement, amongst all the four subsidiary companies. The policy shall provide indemnity against death of birds due to accident (including fire, lightning, flood, cyclone, strike, riot and civil commotion and terrorism) or diseases contracted or occurring during the period of insurance. The word Poultry includes layers, broilers and hatchery birds, which are exotic and cross-bred. Indigenous and non-descript birds will not be insured. All
GRAMIN ACCIDENT INSURANCE APPLICABILITY The Insurance can be granted to any person between the age group of 10 to 70 years irrespective of his occupation, income etc. BENEFITS (A) Death due To Accident Rs. 10,000/(B) Total irrecoverable loss of use of 2 limbs or Rs. 10,000/- one eye and one limb due to accident (C) Total irrecoverable loss of one eye or one limb Rs. 5,000/(D) Permanent total disablement due to accident Rs.10, 000/EXCLUSIONS Company shall not be liable for:
i. Compensation under more than one of the sub clauses (A), (B), (C) & (D) in respect of same injury/disablement.
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ii. Payment of compensation in respect of injury/disablement directly or indirectly arising out of or contributed to by or traceable to any disability existing on the date of issue of the policy. iii. Death/injury/disablement of the insured from: (a) Intentional self injury, suicide or attempted suicide. (b) Whilst under the influence of intoxicating liquor or drugs. (c) Directly of indirectly caused by insanity. (d) Arising or resulting from the insured committing any breach of law with criminal intent. iv. Compensation arising out of war and allied perils. v. Death or bodily injury arising out of ionizing radiation or contamination by radioactivity from any source whatsoever. Policy is available on long-term basis also and is also subject to group discount and long-term discount.
JANATA PERSONAL ACCIDENT POLICY Brief Description:
We all in our day to day life are exposed to the risks of accidents. Despite all possible precautions accident do occur. This may result into disablement or loss of limbs or sometimes even death. To give relief to the insured or its family, this scheme was devised. Covered Risks:
This policy provides compensation in the event of death or permanent disablement or loss of limbs or sight in eyes. Major Exclusions:
Intentional self injury, suicide or attempted suicide, Accident while the insured in under the influence of intoxicating liquor or drugs, loss caused by insanity, loss due to breach of law with criminal intent, War and allied perils, nuclear radiation.
HUT INSURANCE APPLICABILITY – This insurance applies only to those huts used for dwellings and constructed in rural areas with financial assistance from Banking/ Cooperative / Government Institutions. It can also apply to a selected area or cluster of huts for which proposal should be referred to H.O.
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SCOPE OF COVER – Against loss or damage due to fire, (including fire resulting from explosion and short circuiting), lightning, and explosion of boiler or gas used for domestic purpose only, earthquake, flood, inundation, storm, tempest, cyclone and other allied perils, riot and strike damage, malicious damage, aircraft and impact damage.
SUM INSURED – The maximum sum insured will be Rs.6000/-of which Rs.5000/- can be for structure and Rs.1000/- for contents. However, it should be noted that the sum insured on the structure should be so fixed that it is not more than 20% of the financed or subsidy amounts or market value of structure whichever is less, not exceeding Rs.5000/-. PREMIUM – Rs.3/- per thousand on the sum insured. However, under a policy the premium should not be less than Rs.30/-
Above mentioned rural policies are designed by government to cover the risk of the rural population. These policies are specially designed to provide the risk coverage in all the states of the country. There is a wide range of rural policies which are offered by Oriental Insurance, New India Assurance, National Insurance & United India Insurance.
KISAN CREDIT CARD-PAIS This is a Personal Accident Insurance Master Policy covering all the Kisan Credit Card holders. This will include the holders of KCC issued by the District Central Co-op. Banks, RRBs and commercial Banks throughout India. This scheme will cover all the KCC holders against Death or Permanent disability resulting from accidents caused by external, violent and visible means and occurring within the geographical jurisdiction of India. This policy will cover the KCC holders up to the age of 70 years and whose names are declared by the Banks and in respect of whom the premium is paid by the Bank to the Insurance Company for a maximum benefit of Rs.50, 000/- in case pf (i) Accidental Death, (ii) Permanent total disability (iii) Loss of two limbs or two eyes or one limb and one eye and Rs.25, 000/- in case of loss of one limb or one eye (subject to exclusion). The Master Policy shall remain valid for a period of three years effective from April 2001 and any modification/alteration shall be made at the end of three years after review of the premium and claims experience. If the claim experience exceeds 70%, the premium shall be suitably loaded. The policy can be issued for one year or three years period by charging Rs.15/- for annual policy and Rs.45/for three years period. Service Tax is waived for this policy. The participating Banks will pay premium to designated Insurance Company on Flagship Company basis.
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Health policies Insurer: General Insurance Corporation through its four subsidiaries: Oriental Insurance, New India Assurance, National Insurance Company, United India Insurance.
Group Mediclaim Policy Brief Description:
Mediclaim Insurance is a cover which takes care of medical expenses following Hospitalization/Domiciliary Hospitalization of the Insured in respect of the following situations: (A) In case of a sudden illness (B) In case of an accident (C) In case of any surgery which is required in respect of any disease which has arisen during the policy period. The major benefit for taking a Group Mediclaim policy is that the insured gets a Group discount; hence the premium per person is lower. Covered Risks:
This cover is a hospitalization cover and reimburses the medical expenses incurred in respect of covered disease /surgery while the insured was admitted in the hospital as an in patient. The cover also extends to pre- hospitalization and post- hospitalization for periods of 30 days and 60 days respectively Major Exclusions:
Any pre-existing disease, any expense incurred during first 30 days of cover except injury due to accident, all expenses incurred in respect of any treatment relating to pregnancy and child birth. Treatment for Cataracts, Benign prostatic hypertrophy, Hysterectomy, Menorrhagia or Fibromyoma, Hernia,Fitula of anus,Piles, Sinusitis, Asthma, Bronchitis, All Psychiatric or Psychosomatic disorders are excluded from the scope of the cover.
Personal Accident - Group Brief Description:
We all in our day to day life are exposed to the risks of accidents. Despite all possible precautions accidents do occur. This may result into disablement or loss of limbs or sometimes even death. To cater to this need insurers has devised an insurance cover, known as Personal Accident Insurance. This policy provides compensation in the event of insured sustaining injuries, solely and directly from an accident caused by violence, visible and external means, resulting into death or disablement be it temporary or permanent. This policy is also available to a
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Group of Persons and is known as Group Personal Accident Policy. This policy can be granted for restricted hours of Duty and not for all the 24 hours of the days and nights) at a reduced premium also. The Central Government bears the entire premium cost in respect of the scheme. During the year 1998-99, a total number of 8,128 claims involving an amount of Rs. 1.84 crores were settled. Covered Risks:
This policy provides compensation in the event of insured sustaining injuries, solely and directly from an accident. Major Exclusions :
Intentional self injury, suicide or attempted suicide, Death or disablement resulting from child birth and pregnancy; Accident while the insured is under the influence of intoxicating liquor or drugs; War and allied pe rils.
Jan Arogya Bima Policy Brief Description:
This policy provides for Hospitalization and Domiciliary hospitalization for a premium as low as Rs 70/- for a adult male or female and Rs 50/- for each dependent son/daughter not exceeding 25 years of age. The benefits are up to Rs 5000/- per person per annum without any inner limits. This insurance is available to persons between the age of 5 years and 70 years. Children between the age of 3 months and 5 years of age can be covered provided one or both the parents are covered concurrently. The scheme which is primarily meant for the larger segment of the population, who cannot afford the high cost of medical treatment, was introduced w.e.f. 12th August, 1996. Covered Risks:
This cover is a hospitalization cover and reimburses the medical expenses incurred in respect of covered disease /surgery while the insured was admitted in the hospital as an in patient. The cover also extends to pre- hospitalization and post- hospitalization for periods of 30 days and 60 days respectively Major Exclusions:
Any pre-existing disease, any expense incurred during first 30 days of cover except injury due to accident, all expenses incurred in respect of any treatment relating to pregnancy and child birth. Treatment for Cataracts, Benign prostatic hypertrophy, Hysterectomy, Menorrhagia or Fibromyoma, Hernia,Fitula of anus,Piles, Sinusitis, Asthma, Bronchitis, All Psychiatric or Psychosomatic disorders are excluded from the scope of the cover. Health policies are one of the most popular policies of government general insurance sector. These policies provide a big amount of premium to the
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insurance companies. Health insurance as it is different from other
segments of insurance business is more complex because of serious conflicts arising out of adverse selection, moral hazard, and information gap problems. Health insurance is typically annual and has to be renewed yearly. Policy, which is not renewed in time lapses and a new policy, has to be taken out.
Travel Insurance Policies Suhana Safar (Domestic Travel policy) Suitability This policy is suitable for persons who go on a holiday with family. The policy is also useful for employees who avail leave travel schemes provided by their employers. Salient Features The policy is a Personal Accident policy covering accident benefits for a capital sum insured of Rs.1 lakh for each member of the family while in travel within the country.
The plan covers domestic travel by Rail, Road, Waterways or Air within the country for a period of 60 days. The plan also covers travel by use of own conveyance. The policy covers loss or damage (due to fire, Storm, tempest, hurricane, flood, inundation, riot, strike, terrorism, malicious damage, accident, theft or burglary) of accompanied baggage up to a certain limit. The compensation provided for loss of each article is limited to Rs.500, unless specifically declared. The policy also provides for emergency expenses up to Rs.1000 incurred in connection with an accident.
Premium No. of persons
1
2
3
4
5
6
7
8
Premium in Rs.
80
140
190
240
280
320
360
400
In case of more than 8 persons, an additional premium @ Rs.40 per head.
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Service tax @ 5% extra. Requirements Completed proposal furnishing the date of journey in particular. Value of each piece of baggage should be declared, if same exceeds Rs.500. Recommendations While in travel, one is more exposed to personal accidents, and he/she can be covered for Rs.1 lakh sum insured, without reference to any other Personal Accident policies; age or income.
Overseas Mediclaim Policy Suitability Any Indian resident traveling abroad can take this policy. In some countries however, it is compulsory for visitors to have medical insurance cover. A corporate frequent traveler can take a single policy for 1 year Salient Features There are two types of plans under the Overseas Mediclaim Policy: 1. Overseas Mediclaim Insurance -A(World wide travel excluding USA and Canada) 2. Overseas Mediclaim Insurance - B (World wide travel including USA and Canada.) 3. Overseas Mediclaim Insurance - E (For corporate Frequent Traveler providing world wide coverage)
OMP -E is an annual policy issued for one year. The insured is covered for a maximum of 180 days abroad, irrespective of number of visits. However maximum number of days under each visit is limited to 60 days. Requirements Completed proposal form after passport and Visa (where necessary) is obtained in case of the proposer being hypertensive, ECG reports from cardiologist should be filed and basing on the same, the pre-existing condition may be excluded from the scope of benefits Recommendations It is mandatory in some Western countries for a visitor to their country to be covered by a Health Insurance Policy. In its absence, he may run the risk of repatriation or quarantining in the airport itself
Medical treatment is expensive overseas and can become a major financial problem in case of any emergency/ accident For a small premium paid in Indian currency, payment of claim in foreign currency of the country in which a claim arises is disbursed. Besides, the
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foreign currency allowances allowed by the host Country can be conserved as the premium is paid in Rupees in home country The Claim procedure is very simple. The policy document that the insured carries with him contains full details of the claim settling agencies. The insured has to just get in touch with the Agency and they take over the responsibility of dealing with the respective Hospitals/Authorities who then undertake to settle the bills directly with the hospitals. All of the above policies are implemented in all the states of the country and are determined by IRDA. All the four subsidiary companies of GIC- Oriental insurance company ltd., New India Assurance company ltd., United India Insurance Corporation ltd. and National Insurance Company ltd. follow the schemes that are determined by the IRDA.
Pravasi Bharatiya Bima Yojana, 2006 Pravasi Bhartiya Bima Yojana (PBBY-2003), which was notified on November 13, 2003 as a compulsory Insurance Scheme for the emigrants going abroad for employment, has now been upgraded as the Pravasi Bhartiya Bima Yojana, 2006 (PBBY-2006) to provide broader coverage to the emigrant workers. The PBBY, 2006 has been notified on January 25, 2006, and it has come into effect from February 1, 2006. SALIENT FEATURES OF THE PRAVASI BHARTIYA BIMA YOJANA, 2006 o
o
o
The Pravasi Bhartiya Bima Yojana, 2006 provides for an insurance cover of a minimum sum of Rs. 5.00 lakhs payable to the nominee/legal heir in the event of death or permanent disability of any Indian emigrant who goes abroad for employment purpose after obtaining emigration clearance from the concerned Protector of Emigrants (POE). In the case of death, besides the cost of transporting the dead body, the cost incurred on the one-way airfare of one Attendant shall also be reimbursed by the Insurance Company. If a worker is not received by the employer on his arrival to the destination abroad or there is any substantive change in Employment Contract to his disadvantage or if the employment is pre-maturely terminated within the period of employment for no fault of the emigrant, the Insurance Company shall reimburse one way economy class airfare provided the grounds of repatriation are certified by the concerned Indian Mission/Post.
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o
o
o
o
o
o
o
o
In cases where the repatriation is arranged by the Indian Mission/Post, the Insurance Company shall re-imburse the actual expenses to the concerned Indian Mission/Post. The Insured person shall be reimbursed actual one way economy class airfare by the Insurance Company if he falls sick or is declared medically unfit to commence or continue working and the service contract is terminated by the Foreign Employer within twelve months of taking the insurance. The Insurance Policy shall be valid for a minimum period of two years or the actual period of contract, whichever is longer. The Insurance Policy shall also provide medical cover of a minimum of Rs. 50,000/- as cash-less hospitalization and/or reimbursement of actual medical expenses of the insured emigrant workers on grounds of accidental injuries and/or sickness/ailments/diseases occurring during the period of insurance whether in India or in the country of his employment. An insured person shall be covered for a minimum sum of Rs. 25,000/in connection with the legal expenses incurred by him in any litigation relating to his/her employment. The Insurance Policy shall also provide maternity benefits, subject to a minimum cover of Rs. 20,000/- in case of women emigrants. In case of medical treatment in the country of employment, the maternity benefits would be provided if the requisite documents are certified by the concerned Indian Mission/Post. The family of emigrant worker in India consisting of spouse and two dependent children up to twenty one years of age shall be entitled to hospitalization cover in the event of death or permanent disability of the insured person for a maximum amount or Rs. 25,000/- per annum. The Insurance Companies shall charge fair and reasonable premium. Service tax will be charged as applicable.
List of Approved Companies
Company
Date of approval
The United India Insurance Co. Ltd.
13.02.2006
The Oriental Insurance Co. Ltd.
13.02.2006
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The New India Assurance Co. Ltd.
16.02.2006
The National Insurance Co. Ltd.
28.02.2006
Beneficiaries of Pravasi Bharatiya Bima Yojana (PBBY) 2003 can also opt for Pravasi Bhartiya Bima Yojana, 2006 Going through the state government general insurance there are only four states where state government is also providing the insurance policies. These states are Maharashtra, Kerala, Gujarat and Rajasthan. In all the other states the general insurance government policies are provided by the GIC and its four subsidiary companies.
Success of the above policies In the non-life segment, the established players control 65% of the market. So it is their monthly performance that determines how the market as a whole would perform. In Accident Insurance Business, private sector players have almost 53% market share with ICICI Lombard as the lead player. Public sector players constitute about 47% market value with New India as the leading player followed by United India. Indian general insurance companies in government sector are providing better policies to the customers. Many of the policies are very popular among the customers. Policies like Raj Rajeshwari Mahila Kalyan Yojana Policy, Bhagyashree Child welfare Policy, National swasthya bima policy are a big fund of money generation for insurance companies. These policies are fully supported by the government. In different states of the country various type of policies are popular and they have a different percent of share in overall income of Indian general insurance sector. All of these policies are successfully implemented in all the states of the country. These policies are specially designed to provide risk assurance to the policy holders. In union territories also these policies are successfully implemented and working with a good profit. These policies provide a helping hand to the person who faces problem due to some unforeseen event or accident. Going through the marketing aspect the insurance company has to prepare the product in determining its success in the market. General insurance industry records 24.1% growth
The general insurance industry has recorded a 24.1% increase in premium collection at Rs 16,577.7 crore in the first eight months of the fiscal against Rs 13,350.1 crore during same period previous year, according to data compiled by
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Insurance
Regulatory
and
Development
Authority
(IRDA).
The market share of new players continued to stay at 35% in the current fiscal, up from 26% last year. While 35% was contributed by the eight private players and remaining 65% came from the four public sector players — New India, Oriental Insurance, National Insurance and United India. Market leader New India grew business by 10% to Rs 3,337.1 crore in April November, the highest premium collection by any company during the period. Clocking 13.6% growth, Oriental Insurance collected Rs 2,647.8 crore in premium, while National Insurance witnessed a mere 5.06% growth in business at Rs 2,311.6 crore during the period. United India increased premium collection by 12.3% to Rs 2,093 crore. GENERAL insurance industry grew by 16% in 2005-06 as private insurers continued their robust performance, while public sector players New India Assurance and Oriental Insurance improved their show. Despite continuous fall in business of government owned National Insurance, the 12 non-life insurers collected Rs 20,378 crore in first year premium in the last fiscal compared to Rs 17,531 crore collected in 2004-05 , according to data compiled by regulator IRDA. New India Assurance collected Rs 4,762 crore in premium and continued to lead the non-life sector by cornering 23.36% of the market. National Insurance was at the second spot by collecting Rs 3,524 crore in premium, a decline of 7%, but had a market pie of 17.29. Oriental Insurance mopped up Rs 3,518 crore in premium income after logging 16.6 % growth in business to corner a market share of 17.26%. Another PSU insurer United India grew business by a modest 6.8% to collect Rs 3,147 crore in premium and had 15.44% of the market. The government policies are popular among the masses especially in the rural areas. The four subsidiary companies of government are one of the leading one in general insurance sector. Government companies gather a big share in the market. In this context health policies are one of the most popular policies. These policies are implemented in all over India. Health is the biggest source of premium in the insurance sector. 1. Govt. business is a big ticket since it involves the masses. With almost negligible social security level prevalent in our country, these are generally welfare measures adopted by the states for a section of the population e.g. Below Poverty Line, Artisans, employees etc. States being the largest employment generators, the no. of employees is substantial and therefore, the volume of business is huge.
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2. The policies provided by the government are basically provided as a source of political mileage for the party in power to convince the mass. 3. Since these policies are provided by the government and basically at the national level ,so they cover a wide area with a huge population which gives the policies a better stage to explore and cover a big part of the market.
Challenges and Weak points of Government policies The policies which are offered by the government are being implemented from several years. But after the liberalization the scene is changing. Now new companies are entering the general insurance sector, most of them come from large corporate groups. Due to the entry of these private sector units the government policies are loosing there depth in market and day-by-day they have to face challenges from there strong competitors. The highest paid employees of the public sector, the estimated half-a-million employees of the nationalized insurance companies, are characterized by small productivity, utter ignorance of the basic principles of the insurance business, endemic corruption, gross indiscipline and sheer laziness. Dominating the inevitably weak management of the nationalized insurance companies, the militant and strongly unionized employees of the nationalized monopoly insurance companies have transformed Indian insurance from volume-driven into class-based business. The government insurance companies, despite meeting their social objectives of going into the deepest interiors of the country, have lagged behind in meeting customer expectations in products and services. There are some challenges which are faced by the Government general insurance policies areStrong Competitors- The biggest challenge faced by the government policies are that they have to compete from the competitors who enough strong. ICICI Lombard, Reliance General Insurance, Kotak Insurance and some more insurance companies are offering the policies which are very effective in comparison to the government policies. An industry where everyone focuses on increasing market share and aggressiveness greatly increases pressure on profitability. The presence of a host of new players in the sector has resulted in a shift in approach and the launch of innovative products, services and valueadded benefits. Foreign majors have entered the country and announced joint ventures in non-life areas. Major foreign players include, Aviva, Tokyo Marine,
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Allianz, Lombard General, AIG, AMP and Sun Life among others. Innovative products, smart marketing and aggressive distribution have enabled fledging private insurance companies to sign up Indian customer faster than anyone expected. According to estimates, private insurance companies collectively to have a 10% share of the non-life insurance market. Weak IT infrastructure- Many a times the insurance claims are
rejected due to some small technical reasons. This leads to disputes. Most of the time the conditions and various points included in insurance policy contracts is not negotiable and these are binding on consumers. There is no analysis on what fair practice is and what unfair practice is. Given that insurance companies are large and almost monopoly setting the consumers is treated as secondary and they do not have opportunity to negotiate the terms and conditions of a contract. Many times insurance companies do not strictly follow the conditions in all cases and this create confusion and disputes. Negligence of rural sector- Rural India is a target market for many players in the financial sector, and insurance companies are no exception. While public sector insurance companies boast that they have already captured this area, the extent of penetration of the insurance majors into rural India is not yet clear. Rural market in India is neglected as most of the policies are designed to meet the needs of the urban population and they are not properly promoted in rural market. Most products being offered today to rural market are very often urban products, offered to the rural market with some tweaking in features. There is major challenge for insurance companies and policy makers to increase the awareness levels among rural population, so that they may view insurance policies as a risk management tool. Traditionally rural households have addressed their risk protection in various forms: from the joint family, investing in gold, land and other assets. Most insurance policies that rural customers are familiar with have been sponsored or subsidized by the government, the legacy of this past is that rural people do not fully see insurance as a risk sharing mechanism through contributions in premium. There is need for sufficient investment by public institutions to bring about a change in the perception of Insurance as a risk mitigation instrument and enhance the awareness levels on various insurance products and how they work in principle. The field staff and the agents of the GIC and its four wholly owned subsidiary companies have seldom bothered to venture out into the rural hinterland to sell crop or any other personal line insurance. Given the woeful lack of penetration of the rural market by the GIC subsidiaries, it is hardly surprising that a growing number of farmers across the country are resorting to the extreme remedy of suicide when their usually uninsured crops fail. High rate of premium- Most of the policies that are offered by the government are made for the middle class group but the premium rates are quite high which
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do not meet the affordability of the customers. Low premium rates in one area necessitate higher premium elsewhere. Returns are low- There are number of government policies provided in market which are said to be designed for the welfare of the customers and often it is claimed that these policies are made to make the life easier of the customers but most of the time the returns is not provided to them in way they are expressed. In most of the cases the returns are low which do not meet the expectations of the customers. Insurance awareness- In this era of globalization where in other countries insurance is a big source of financial structure, in our country there is still not much awareness about the insurance policies specially of general insurance policies. In India the general public is not much aware of different general policy and there terms. In villages and small town there is need of creating awareness to expand the general insurance sector specially government business. Political view- Most of the policies that are provided by the government are implemented to gain political mileage for the party in power. These policies are implemented but they do not provide the cover most of the time as they are promised. There is a need for improvement here. The customers must be provided by the policies which is really issued for there welfare and also for the welfare of the society. Corruption is also a big obstacle in the government insurance business.
Above are the challenges which are coming in way of the government general insurance business. After the liberalization there can be seen an intense decrease in the profitability and business of the government general insurance policies. The new private companies are providing the policies which appear to be a big threat to the government policies, so there is need to face the above challenges and try to overcome them to regain its position in the insurance sector. Cross Border Experience Cross-country experience shows that nowhere in the world have the entries of foreign firms threatened the position of domestic companies. Whether it is Malaysia, where the insurance sector has been open for more than 50 years and foreign companies account for about 10 per cent of market penetration or it is Indonesia, Thailand, China or the Philippines, where the market has been opened more recently, the total market share of foreign companies is less than 10 per cent except in Indonesia where it is about 20 per cent. Closer home, we have the experience of the banking sector where despite the presence of 42 foreign banks, their share in total banking assets is less than 10 per cent.
Today hardly 20 per cent of the population in India is insured and insurance premium (life as well as non-life) account for just 2 per cent of GDP as against the G-7 average of 9.2 per cent. Consequently, the fear that new companies will
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displace public companies is misplaced. There is room for more for not only the existing companies but also for any number of competitors. In China, insurance premium accounted for just over 1 per cent of China's GDP in 1995 but in the four years since the market has been liberalized (albeit partially), spending on insurance has grown at a compound annual rate of 33 per cent. It is not just foreign companies alone that have grown but also the national PICC as well. The story is no different in S Korea. There, the opening of the sector saw the Big Six domestic players, who initially controlled the entire market, increase their business from 7 to 37 trillion won by 1997. Meanwhile foreign companies were not able to capture more than a miniscule 0.7 per cent of the market. Opportunities-
Insurance sector is a major contributor to the financial savings of the household sector in the country, which are further channelized into various investment avenues. As per the Annual Report 2003-04 of IRDA, contribution of insurance funds to the financial savings was 14.9 per cent in 2003-04, viz 2.2 per cent of the GDP at current market price. The premium underwritten has grown from Rs 45,677.57 crore in 2000-01 to Rs.83, 645.11 crore in 2003-04. After liberalization of insurance sector, the private insurers have introduced innovative product and tailor made products which are absolutely sit to rural population. Efforts at increasing consumer awareness and putting the regulatory framework for protection of policyholder’s interest have been made both the industry and regulatory level. Global market conditions have also resulted in driving down premium rates/charges in respect of certain products and in improving the quality of services offered by the insurer. Finally, insurance sector has been penetrating in India, thus the proposed seminar has quite relevant to the society. Indian insurance is on the threshold of deep and fundamental changes. Floodgates of competition opened up by the privatization of insurance industry did throw a challenge to the well-protected nationalized sector and it seems they have picked up the gauntlet. GIC, both is trying to reposition them by having reengineering done on the structure and operations of their respective organizations.
It must be emphasized that the opening of the insurance market is far from a bad thing for nationalized insurers. With a strong presence, a wide network and considerable brand equity, they are in a good position to tap the very same segments profitably, while improving their product and service offerings. The Indian company should Leverage information technology to service large numbers of customers efficiently and bring down overheads. Technology can complement or supplement distribution channels cost-effectively. It can also help improve customer service levels considerably.
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Besides this, other areas can be focused to grow and survive in the Indian Market Understanding Customer needs: Use data warehousing, management and mining to gauge the profitability and potential of various customer and product segments and ensure effective cross selling. Understanding the customer better will allow insurance companies to design appropriate andcustomized products, determine pricing correctly and increase profitability. High-level Training and Development: Ensure high levels of training and development not just for staff but also for agents and distribution organizations. Existing organizations will have to train staff for better service and flexibility, while all companies will have to train employees to cope with new products and an intensive use of information technology. Alliance&Tieup: The importance of alliances and tie-ups means that companies will have to integrate related but separate providers into their systems to ensure seamless delivery. Agent Relationship: Build strong relationships with intermediaries such as agents. Market Segmentation: They must segment the market carefully to arrive at the appropriate products and pricing and should cater the needs of every individual. Revamped Marketing Strategy: Worldwide, insurance products move along a continuum from pure service products to pure commodity products then they could be sold through the medical shops, groceries, novelty stores etc. Once commodization, popularity and awareness of the products are attained then the products can move to remote channels such as the telephone or direct mail. In the UK for example, retailer Marks & Spencer now sells insurance products. At this point, buyers look for low price. Brand loyalty could shift from the insurer to the seller. Trust and Faith: Being government owned subsidiary, people of India have real faith and are confident in parting their valuable savings with Nationalized Insurance Companies. So, there is a big opportunity for the government companies to regain their goodwill and reproduce their policies in the interest of the general public.
Further Offerings to be madeThere exists huge scope of investment in the insurance sector in India. India has an enormous middle-class that can afford to buy life, health and disability and
35
pension plan products. Further, insurance is one of the most important tax saving instrument in the country. The changing scenario, the strategy of the government owned four public sector General Insurance Companies is crucial to the market as the four public players have a major hold. For instance, the four players collected a premium of Rs 1427.9 crores. GIC has already identified the areas that need to be activated and given a shape through the four subsidiary companies. Foremost is the area of providing health insurance services. A change in the GIC Act will enable the corporation to float a joint venture company for health insurance. Other areas that the GIC is looking at are savings-linked insurance products and use of alternate distribution channels including bancassurance. Also in progress is the co-ordination of all foreign operations of the group. Banc assurance Bancasssurance has a bright future for the distribution of insurance products. So far banc assurance has grown fairly well with banks taking advantage of their extensive branch networks that give the insurers access to a large client base. In order to participate in banc assurance activities, a number of banks have registered as corporate agents. This means that they may distribute insurance products for an insurer through their extensive branch networks in return for the payment of commission. So government has a better option to widen its service area and product efficiency. Insurer Bank Direct Marketing and Internet Until recently most direct business was promoted by development officers who were remunerated by insurers partly by salary and partly by commission. These officers were being phased out in anticipation of brokers and other intermediaries taking over much of their business. Out of a total population of 1.07 billion, just over 21 million people are estimated to be Internet users in India. Most insurers do not regard the Internet as a major distribution channel for some while. This area is one of the most demanding areas in the insurance industry, which is one of the basic reason of the decline of government policies. So, there is a need of bringing the net based work system in the business through which there a lot can be offered in the general insurance sector. Marketing strategies to compete against private players The biggest reason for the decline of the government general insurance business is the marketing strategies applied by the private players. These companies they are working with either foreign partners or with large corporate, so they know how to sell their products in an effective way to the customers. These companies produce the policies with an attractive offer, a better market coverage, advanced use of IT, a wide nation-wide network.
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These are some of the marketing strategies that are applied by the private insurance companies; government should work in these areas which is also the demand of the time. In this era customers need the product which is presented to them in an attractive way and also stands on their expectations. Most of the policies that are provided by the government are not implemented in a better way. But the term of effective marketing is one of the biggest factor and area of improvement in government business. Capturing the scope in Health Insurance Health insurance expenditure in India is roughly 6% of GDP, much higher than most other countries with the same level of economic development. Of that, 4.7% is private and the rest is public. What is even more striking is that 4.5% are out of pocket expenditure (Berman, 1996). There has been an almost total failure of the public health care system in India. This creates an opportunity for the new insurance companies. Thus, private insurance companies will be able to sell health insurance to a vast number of families who would like to have health care cover but do not have it. In India, approximately 80% of the total health expenditure comes from self-paid category as against government’s contribution of 20-30 %. A majority of private hospitals are expensive for a normal middle class family. The opening up of the insurance sector to private players is expected to give a shot in the arm of the healthcare industry.
Health insurance will make healthcare affordable to a large number of people. Currently, in India only 2 million people (0.2 % of total population of 1 billion), are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. General Insurance Company has never aggressively marketed health insurance. Moreover, GIC takes up to 6 months to process a claim and reimburses customers after they have paid for treatment out of their own pockets. General insurance companies of public sector are planning 15-20% increase in the premiums of health insurance policy. The increase in the premium will depend on the age of the person seeking the insurance cover. Widen the possibilities in rural policies A major issue is that of product innovation for rural contexts. Non-life general insurance has products to suit crop, agricultural equipment, weather risks and so forth. However, many of these products are on an experimental basis and not pure commercial products. Rural India is a target market for many players in the financial sector, and insurance companies are no exception. Public sector insurance companies boast that they have already captured this area; the extent of penetration of the insurance majors into rural India is not yet clear. Most of the policies are said to help the rural customers but there is still no improvement in the rural situation. So, in this area there is a need of making the policies which
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are realistic in the rural conditions and are made to meet the needs of the customers in rural area.
ConclusionThe problem with the public sector today is that this is doing a lot of third party insurance, which is a loss making business. In this era of globalization there is a basic need of products which are the most profitable and more friendly to the customers. There are many policies which are provided by the government and very successful among the masses. But still in India about 80% of human beings and major natural resources have yet not been insured in globalization era. Floodgates of competition opened up by the privatization of insurance industry did throw a challenge to the well-protected nationalized sector and it seems they have picked up the gauntlet. GIC is trying to reposition itself by having reengineering done on the structure and operations of their respective organizations. Over the past three years, around 40 companies have expressed interest in entering the sector and many foreign and Indian companies have arranged anticipatory alliances. The threat of new players taking over the market has been overplayed. As is witnessed in other countries where liberalization took place in recent years we can safely conclude that nationalized players will continue to hold strong market share positions. Existing government players will have to explore new distribution and marketing channels. Potential buyers for most of this insurance lie in the middle class. Government insurers must segment the market carefully to arrive at appropriate products and pricing. Recognizing the potential, in the past three years, the nationalized insurers have already begun to target niches like pensions, women or children. So, this can be said that there is a lot of scope for the government insurance policies in country today and also there can be offered a lot which will help in maximizing the profit and market share of these policies.
Bibliography: Directorate of Insurance (Maharashtra) – Mr. L.M.Khan (Director) General Insurance Corporation of India www.google.com www.oicl.co.in
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