INTRODUCTION:
Insurance = Collective bearing of Risk. Basic Human trait is to be averse to the idea of risk taking. Insurance, whether life or non-life, provides people with a reasonable degree of security and assurance that they will be protected in the event of a calamity or failure of any sort.
Five environmental variables that affect all industriesCustomers Competitors Government Technology and
R O T C E S
Globalization -are forcing rapid
changes in the service sector. In addition, there are four factors of particular importance to service providerschange in how quality is perceived cost control customer services and
ORIGIN AND GROWTH OF INSURANCE SECTOR: Insurance in modern form originated in the Mediterranean during the 13th century. (The earliest references to insurance- found in Babylonia, the Greeks and the Romans). Marine insurance is the oldest form of insurance followed by life insurance and fire insurance. The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. A higher premium was charged for Indian lives than the non-Indian lives (considering to be more riskier for coverage).
ORIGIN AND GROWTH OF INSURANCE SECTOR: Oriental life Insurance Company was incorporated at Calcutta in 1818, followed by Bombay Life Assurance Company in 1823 and Triton Insurance Company for General Insurance in 1850. By 1938 there were 176 insurance companies. Insurance regulation formally began in India through through the passing of two acts
the Life Insurance companies Act of 1912 and the Provident Fund Act of 1912.
However the first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict state control over insurance business in the country.
ORIGIN AND GROWTH OF INSURANCE SECTOR: The business of India Insurance grew at a faster place as competition amongst the Indian companies intensified. The decision of nationalization of life insurance business took place in 1956 when 245 Indian and foreign insurance provident societies were first merged and then nationalized. It paved the way towards the establishment of one nationalized monopoly corporation called Life Insurance Corporation (LIC)
ORIGIN AND GROWTH OF INSURANCE SECTOR: Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization and self-reliance in heavy industries. General Insurance followed suit and 1968; The Insurance Act was amended to allow for social control over the general insurance business. Subsequently in 1973, non-life insurance business was nationalized and the General Insurance Business (Nationalization) Act, 1972 was promulgated.
ORIGIN AND GROWTH OF INSURANCE SECTOR: Till Till end of o f FY 1999-2000, two state-run insurance companies, namely, Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were the monopoly insurance providers in India. Under GIC there were four subsidiaries
National Insurance Company Ltd. Oriental Insurance Company Ltd. New India Assurance Company Ltd. United India Assurance Company Ltd.
ORIGIN AND GROWTH OF INSURANCE SECTOR: In fiscal 2000-01, the Indian federal government lifted all entry restrictions for private sector investors. Foreign investment insurance market was also allowed with 26 percent cap. GIC was converted into India's national reinsure from December, 2000 All the subsidiaries working under the GIC umbrella were restructured as independent insurance companies.
INSURANCE SECTOR REFORMS
In 1993, Malhotra Committeeheaded by former Finance Secretary and RBI Governor R.N. Malhotra- was formed To evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector.
INSURANCE SECTOR REFORMS he reforms were aimed at: Creating a more efficient and competitive financial system suitable for the requirements of the economy Keeping in mind the structural changes currently underway and Recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms.
Structure Government should take over the holdings of GIC and its subsidiaries. All the insurance companies should be given greater freedom to operate.
S N O I Competition T A Private Companies with a min paid up capital of D Rs.1bn should be allowed to enter the sector. N No Company should deal in both Life and General E Insurance through a single entity. M M Foreign companies may be allowed to enter the O industry in collaboration with the domestic C companies. E R Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state.
Regulatory Body The Insurance Act should be changed. An Insurance Regulatory Regulatory body should be set up. Controller of Insurance- a part of the Finance Ministry- should be made independent.
S N O I T Investments A Mandatory Investments of LIC Life Fund in D government securities to be reduced from 75% to N 50%. E M GIC and its subsidiaries are not to hold more than 5% in any company M O Customer Service C LIC should pay interest on delays in payments E R beyond 30 days. Must be encouraged to set up unit linked pension plans. Computerization of operations and updating of
S N O I T A D N E M M O C E R
The Committee: Emphasized that in order to improve the customer services and increase the coverage of insurance policies, industry should be opened up to competition. Felt the need to exercise exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Felt the need to provid p rovide e greater autonomy to insurance companies in order to improve their performance and enable them to act a ct as independent companies with economic motives. Proposed setting up an independent regulatory bodybody- The Insurance Regulatory
1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928 - The Indian Insurance Companies Act C I L enacted to enable the government to collect statistical information about both life and non N I life insurance businesses. businesses. S E 1938 - Earlier legislation consolidated and N amended to by the Insurance Act with the O objective of protecting the interests of the T S insuring public. E L I 1956 - 245 Indian and foreign insurers and M provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the
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.
C I G N I S E N O T S E L I M
MILESTONES IN GIC 107 insurers amalgamated and grouped into four companies viz.: The The The The
National Insurance Company Ltd. New India Assurance Company Ltd. Oriental Insurance Company Ltd. United India Insurance Company Ltd.
GIC incorporated as a company.
Life Insurers: Allianz Bajaj Life Insurance Co. Ltd. AMP Sanmar Assurance Co. Ltd. Birla Sun Life Insurance Co. Ltd. S R Dabur CGU Life Insurance Company Pvt. Ltd. O HDFC Standard Life Insurance Co. Ltd. T U ICICI Prudential Life Insurance Co. Ltd. B I ING Vysya Life Insurance Co. Pvt. Ltd. R T Life Insurance Corporation of India. N O Max New York Life Insurance Co. Ltd. C Metlife India Insurance Co. Pvt. Ltd. Om Kotak Mahindra Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. Tata Tata AIG A IG Life Li fe Insurance Insura nce Co. C o. Ltd.
Non-Life Insurers: Bajaj Allianz General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. IFFCO Tokyo Tokyo General Insurance Insuran ce Co. Ltd. Lt d. S R National Insurance Co. Ltd. O T New India Assurance Co. Ltd. U Oriental Insurance Co. Ltd. B I R Reliance General Insurance Co. Ltd. T Royal Sundaram Alliance Insurance Co. Ltd. N Tata AIG A IG Life Li fe Insurance Insura nce Co. C o. Ltd. O Tata C United India Insurance Co. Ltd Reinsurers: General Insurance Corporation of India.
CONTRIBUTION TO GROWTH: Currently, the insurance sector size is estimated at Rs.500 billion. On account of intense marketing strategies adopted by private insurance players, the market market share of state owned own ed insurance companies like GIC, LIC and others have come down to 70% in last 4-5 years from over 97%. The private insurance players despite the sector is still regulated has been offering rate of return (RoR) (RoR) to its policy holders which is estimated at about 35% as against 20% of domestic insurance companies.
CONTRIBUTION TO GROWTH: LIC and GIC have limited number of policies to offer to their subscribers Private insurance companies offer many policies and the premium amount as well as the maturity period is much competitive as against those of government insurance companies. The private sector insurance players have started exploring the rural markets in which until recently, the state owned companies had the monopoly. India’s life insurance premium, as a percentage of GDP is 1.8%
FUTURE OF THE SECTOR: Indian insurance sector is likely to register unprecedented growth of 200% and attain a size of Rs. 2000 billion by 2009-10 A private sector insurance business will achieve a growth rate of 140% as a result of aggressive marketing technique being adopted by them against 35-40% growth rate of state owned insurance companies. In rural markets, the share of private insurance players would increase substantially as these have been able to generate a faith among their rural
INSURANCE SECTOR - EMERGING AREAS:
Demand for Pension Plans Two relatively modern trends affect life insurance business in India significantly: Joint Family System and elderly are increasingly having to fend for themselves
Separateness of Banking and Insurance
Bancassurance
Role of Information Techno-logy Using Postal Network Creating Insurance awareness Innovative Products
