Post on 27-Apr-2015
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Concept Of InsuranceConcept Of Insurance History Of InsuranceHistory Of Insurance Insurer’s Business ModelInsurer’s Business Model Insurance Sector In IndiaInsurance Sector In India Company ProfileCompany Profile Research MethodologyResearch Methodology Main Competitors Of LICMain Competitors Of LIC ComparisonComparison Findings And ConclusionFindings And Conclusion Bibliography Bibliography
Concept Of InsuranceConcept Of Insurance
Human life is subject to riskHuman life is subject to risk Loss of Human life means loss of incomeLoss of Human life means loss of income Risk has element of unpredictabilityRisk has element of unpredictability The concept of insurance is that the losses The concept of insurance is that the losses
of a few are made good by contribution of a few are made good by contribution from many. It is based on the law of large from many. It is based on the law of large numbers. It stemmed from the need of man numbers. It stemmed from the need of man to find a solution for mitigation of losses. It to find a solution for mitigation of losses. It also reflects the nature of man to find a also reflects the nature of man to find a solution collectively.solution collectively.
History Of InsuranceHistory Of Insurance History of insurance refers to the development of History of insurance refers to the development of
a modern laws and market in insurance against a modern laws and market in insurance against risks. In some sense we can say that insurance risks. In some sense we can say that insurance appears simultaneously with the appearance of appears simultaneously with the appearance of human society.human society.
It has its origins in ancient RomeIt has its origins in ancient Rome As European civilization progressed, its social As European civilization progressed, its social
institutions and welfare practices also got more institutions and welfare practices also got more and more refined and more refined
Insurance as we know it today owes its existence Insurance as we know it today owes its existence to 17th century England. to 17th century England.
Insurance in India can be traced back to the Vedas Insurance in India can be traced back to the Vedas Bombay Mutual Assurance Society, the first Indian Bombay Mutual Assurance Society, the first Indian
life assurance society, was formed in 1870. life assurance society, was formed in 1870.
Insurer’s Business ModelInsurer’s Business Model Profit = earned premium + investment Profit = earned premium + investment
income - incurred loss - underwriting income - incurred loss - underwriting expenses.expenses.
Insurers make money in two ways:Insurers make money in two ways: (1) Through underwriting, the process by (1) Through underwriting, the process by
which insurers select the risks to insure and which insurers select the risks to insure and decide how much in premiums to charge for decide how much in premiums to charge for accepting those risks accepting those risks
(2) By investing the premiums they collect (2) By investing the premiums they collect from insured parties.from insured parties.
Most complicated aspect of the insurance Most complicated aspect of the insurance business is the underwriting of policies. business is the underwriting of policies.
Insurance Sector In Insurance Sector In IndiaIndia
Some of the important milestones in the life Some of the important milestones in the life insurance business in India are:insurance business in India are:
1818:1818: Oriental Insurance company first insurance company in Oriental Insurance company first insurance company in India.India.
1870:1870: Bombay mutual life assurance company first Indian Bombay mutual life assurance company first Indian Insurance company. Insurance company.
1912:1912: The Indian Life Assurance Companies Act enacted as the The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.first statute to regulate the life insurance business.
1928:1928: The Indian Insurance Companies Act enacted to enable The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life the government to collect statistical information about both life and non-life insurance businesses.and non-life insurance businesses.
1938:1938: Earlier legislation consolidated and amended to by the Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the Insurance Act with the objective of protecting the interests of the insuring public.insuring public.
1956:1956: 245 Indian and foreign insurers and provident societies 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.contribution of Rs. 5 crore from the Government of India.
ContCont……
The overall business growth has been more than 36%.The overall business growth has been more than 36%. By the mid-1950s, there were around 170 insurance By the mid-1950s, there were around 170 insurance
companies and 80 provident fund societies in the companies and 80 provident fund societies in the country's life insurance scene. However, in the country's life insurance scene. However, in the absence of regulatory systems, scams and absence of regulatory systems, scams and irregularities were almost a way of life at most of these irregularities were almost a way of life at most of these companies. As a result, the government decided companies. As a result, the government decided nationalise the life assurance business in India. The nationalise the life assurance business in India. The Life Insurance Corporation of India was set up in 1956 Life Insurance Corporation of India was set up in 1956 to take over around 250 life companies.to take over around 250 life companies.
Upto year 2001 private sectors were not allowed to Upto year 2001 private sectors were not allowed to enter in Life insurance business. Lic was having 100% enter in Life insurance business. Lic was having 100% market share but after 2001 IRDA allows private market share but after 2001 IRDA allows private sector to enter into insurance business.sector to enter into insurance business.
Death
Disability
Accident
Sickness
Old age
Misc
Accident
Motor
Marine
Fire
ContCont……
The IRDA which is Insurance The IRDA which is Insurance Regulatory and Development Regulatory and Development Authority has Provided three levels Authority has Provided three levels in the Insurance sector.in the Insurance sector.
Insurance Company (insurer)Insurance Company (insurer) Insurance BrokerInsurance Broker Insurance Agent.Insurance Agent.
LegislationLegislation (as on 1.4.2000): (as on 1.4.2000): Insurance is a federal subject in Insurance is a federal subject in India. The primary legislation that India. The primary legislation that deals with insurance business in deals with insurance business in India is: India is:
Insurance Act, 1938, and Insurance Act, 1938, and Insurance Regulatory & Insurance Regulatory & Development Authority Act, Development Authority Act, 1999.1999.
ContCont……
SR.no. Reg. no Date of reg. Name of the company
1 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.
2 104 15.11.2000 Max New York Life Insurance Co. Ltd.
3 105 24.11.2000 ICICI Prudential Life Insurance Company Ltd.
4 107 10.01.2001 Kotak Mahindra Old Mutual Life Insurance Limited
5 109 31.01.2001 Birla Sun Life Insurance Company Ltd.
6 110 12.02.2001 Tata AIG Life Insurance Company Ltd.
7 111 30.03.2001 SBI Life Insurance Company Limited .
8 114 02.08.2001 ING Vysya Life Insurance Company Private Limited
9 116 03.08.2001 Bajaj Allianz Life Insurance Company Limited
10 117 06.08.2001 Metlife India Insurance Company Ltd.
11 121 03.01.2002 Reliance Life Insurance Company Limited.
12 122 14.05.2002 Aviva Life Insurance Co. India Pvt. Ltd.
13 127 06.02.2004 Sahara India Insurance Company Ltd.
14 128 17.11.2005 Shriram Life Insurance Company Ltd.
15 130 14.07.2006 Bharti AXA Life Insurance Company Ltd.
16 133 04.09.2007 Future Generali India Life Insurance Company Limited
17 135 19.12.2007 IDBI Fortis Life Insurance Company Ltd.
18 136 08.05.2008 Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.
19 138 27.06.2008 Aegon Religare Life Insurance Company Ltd.
20 140 27.06.2008 DLF Pramerica Life Insurance Company Ltd.
21 142 Star Union Dai-ichi Life Insurance Co. Ltd.,
Life InsuranceLife Insurance
It is insurance on human beingIt is insurance on human being Human life cannot be valuedHuman life cannot be valued Monetary sum determined based on Monetary sum determined based on
loss of future incomeloss of future income Individual can also protect his old Individual can also protect his old
age with life insuranceage with life insurance
Life insurance procuctsLife insurance procucts
Term insuranceTerm insurance Endowment assuranceEndowment assurance Money back assuranceMoney back assurance Annuity Annuity LinkedLinked
There are a variety of life insurance product There are a variety of life insurance product to suit the needs of various categories of to suit the needs of various categories of people- children, youth, women, middle age people- children, youth, women, middle age person, old people; and also rural people, person, old people; and also rural people, film actors and unorganised labourers.film actors and unorganised labourers.
Why Is It Superior To Other Why Is It Superior To Other Forms Of Savings?Forms Of Savings?
ProtectionProtection Aid to thriftAid to thrift LiquidityLiquidity Tax reliefTax relief Money when u need itMoney when u need it
Company ProfileCompany Profile On the 19th of January, 1956, that life On the 19th of January, 1956, that life
insurance in India was nationalized. About 154 insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian Indian insurance companies, 16 non-Indian companies and 75 provident were operating in companies and 75 provident were operating in India at the time of nationalization. India at the time of nationalization.
Nationalization was accomplished in two Nationalization was accomplished in two stages; initially the management of the stages; initially the management of the companies was taken over by means of an companies was taken over by means of an Ordinance, and later, the ownership too by Ordinance, and later, the ownership too by means of a comprehensive bill. means of a comprehensive bill.
The Parliament of India passed the Life The Parliament of India passed the Life Insurance Corporation Act on the 19th of June Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of 1956, and the Life Insurance Corporation of India was created on 1st September, 1956 India was created on 1st September, 1956
LIC had 5 zonal offices, 33 divisional LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart offices and 212 branch offices, apart from its corporate office in the year from its corporate office in the year 1956. 1956.
Today LIC functions with 2048 fully Today LIC functions with 2048 fully computerized branch offices, 100 computerized branch offices, 100 divisional offices, 8 zonal offices and divisional offices, 8 zonal offices and the Corporate office. the Corporate office.
ContCont……
Mission:Mission: "Explore and enhance the quality of "Explore and enhance the quality of
life of people through financial life of people through financial security by providing products and security by providing products and services of aspired attributes with services of aspired attributes with competitive returns, and by rendering competitive returns, and by rendering resources for economic development.“resources for economic development.“
Vision:Vision: "A trans-nationally competitive "A trans-nationally competitive
financial conglomerate of significance financial conglomerate of significance to societies and Pride of India."to societies and Pride of India."
ContCont……
4 Tier Structure of LIC4 Tier Structure of LICCentral Office
NZ NCZ CZ EZ SCZ SZ WZ EZ
100 Divisional offices
2048 Branch Offices
Research MethadologyResearch Methadology Objective:Objective: The objective of study is to know the market position and The objective of study is to know the market position and
financial position of LIC compare to other Private Players. financial position of LIC compare to other Private Players.
Types of Data:Types of Data: I have used secondary data, as the nature of the project I have used secondary data, as the nature of the project
is study approach.is study approach. Data collection tools:Data collection tools: I have used various internal reports. As well as I have I have used various internal reports. As well as I have
used chairperson’s report of last 4 years and an intranet used chairperson’s report of last 4 years and an intranet site of LIC and IRDA to gather information that I needed.site of LIC and IRDA to gather information that I needed.
Type of Study:Type of Study: The type of study is comparative analysis of LIC and The type of study is comparative analysis of LIC and
other Private Players. other Private Players.
Main Competitors of LICMain Competitors of LIC
SBI Life Insurance CompanySBI Life Insurance Company ICICI Prudential Life Insurance ICICI Prudential Life Insurance
CompanyCompany Birla Sun Life Insurance CompanyBirla Sun Life Insurance Company HDFC Standard Life Insurance HDFC Standard Life Insurance
CompanyCompany Reliance Life Insurance companyReliance Life Insurance company
ComparisonComparison1.1. Policies Policies 2.2. PremiumPremium3.3. ExpensesExpenses 3.13.1 Commission Expenses Commission Expenses 3.23.2 Operating Expenses Operating Expenses4.4. RatiosRatios 4.14.1 Commission Expense Ratio Commission Expense Ratio 4.2 4.2 Operating Expense RatioOperating Expense Ratio5.5. Market ShareMarket Share6.6. Claims PaidClaims Paid7.7. Profit Of year 2007-08Profit Of year 2007-088.8. Life Fund Life Fund
New Policies IssuedNew Policies Issued
31
59
07
07
38
71
41
0
38
22
92
92
79
22
27
4
37
61
25
99
13
26
15
58
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
40000000
2005-06 2006-07 2007-08
LIC Privace Players
PremiumPremiumFirst year premiumFirst year premium
28515.87
10269.67
56223.56
19425.65
59996.57
33715.95
0
10000
20000
30000
40000
50000
60000
2005-06 2006-07 2007-08
LIC Private players
Single PremiumSingle Premium
14787.8
4
2742.78
26337.2
1
3921.1
33774.5
6
5049.8
0
5000
10000
15000
20000
25000
30000
35000
2005-06 2006-07 2007-08
LIC Private Players
Regular PremiumRegular Premium
13728.0
6 7526.8
8
29886.3
5
15474.8
3
26222
28666.1
5
0
5000
10000
15000
20000
25000
30000
2005-06 2006-07 2007-08
LIC Private Players
`
Renewal PremiumRenewal Premium
62276.3
5
4813.86
71599.2
7
8825.05
89793.4
2
17845.47
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
2005-06 2006-07 2007-08
LIC Private Players
Total PremiumTotal Premium
99792.2
2
15083.5
3
127822.8
4
28218.7
5
149789.9
9
51561.4
2
0
20000
40000
60000
80000
100000
120000
140000
160000
2005-06 2006-07 2007-08
LIC Private Players
Commission ExpensesCommission ExpensesFirst Year Premium First Year Premium
ExpensesExpenses
3630.3
3
1362.9
1
5203.7
5
2802.6
9
4963.8
1
4511.1
5
0
1000
2000
3000
4000
5000
6000
2005-06 2006-07 2007-08
LIC Private Players
Single Premium Single Premium CommissionCommission
162.0
8 29.3
3
411.4
2
42.5
1
504.3
3
50.8
50
100
200
300
400
500
600
2005-06 2006-07 2007-08
LIC Private Players
Regular Premium Regular Premium CommissionCommission
3468.25
1333.57
4792.32
2760.17
4459.48
4460.49
0
5001000
1500
20002500
3000
35004000
4500
5000
2005-06 2006-07 2007-08
LIC Private players
Renewal Premium Renewal Premium CommissionCommission
3469.85
180.19
3969.82
306.96
4650.89
578.46
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2005-06 2006-07 2007-08
LIC Private players
Total Premium Total Premium CommissionCommission
7100.1
9
1543.1
9173.5
8
3109.6
5
9614.6
9
5089.6
1
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2005-06 2006-07 2007-08
LIC Private players
Operating ExpensesOperating Expenses
6041.6
5
3569.4
8
7080.8
6
6520.0
4
8309.3
2
12032.4
6
0
2000
4000
6000
8000
10000
12000
14000
2005-06 2006-07 2007-08
LIC Private players
Commission Expense Ratio
Operating Expense Ratio
Commission Expense
Operating Expense
Premium Underwritten
Premium Underwritten
X
X
100
100
Commission Expense RatioCommission Expense RatioFirst year PremiumFirst year Premium
12.7313.27
9.26
14.3
8.27
13.38
0
2
4
6
8
10
12
14
16
2005-06 2006-07 2007-08
LIC Private players
Single Premium Single Premium
1.1 1.07
1.57
1.08
1.49
1
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2005-06 2006-07 2007-08
LIC Private players
Regular PremiumRegular Premium
25.26
17.7216.03
17.68 17.0115.56
0
5
10
15
20
25
30
2005-06 2006-07 2007-08
LIC Private players
Renewal PremiumRenewal Premium
5.57
3.74
5.54
3.48
5.18
3.24
0
1
2
3
4
5
6
2005-06 2006-07 2007-08
LIC Private players
Total PremiumTotal Premium
7.82
10.23
7.18
10.98
6.42
9.42
0
2
4
6
8
10
12
2005-06 2006-07 2007-08
LIC Private Players
Operating Expense Ratio Operating Expense Ratio
6.65
23.66
5.54
23.01
5.55
23.34
0
5
10
15
20
25
2005-06 2006-07 2007-08
LIC Private players
Market shareMarket shareFist year PremiumFist year Premium
LIC, 59996.57,
64.02%
Private Players,
33715.97, 35.98%
LIC Private Players
Single PremiumSingle Premium
Privatte players, 5049.8, 13.01%
LIC, 33774.56,
86.99%
LIC Privatte players
Regular PremiumRegular Premium
Private players,
28666.15, 52.23%
LIC, 26222, 47.77%
LIC Private players
Renewal PremiumRenewal Premium
Private Players,
17845.47, 16.58%
LIC, 89793.42,
83.42%
LIC Private Players
Total PremiumTotal Premium
Private Players,
51561.42, 25.61%
LIC, 149789.99, 74.39%
LIC Private Players
Claims Paid By life InsurersClaims Paid By life Insurers
96.71
1.13 0.062.1
78.93
10.17
0.01
10.88
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100
LIC Private Players
Claims Paid Claims Repudiated
Claims Written Back Claims Pending
Market share* from 2000-01 Market share* from 2000-01 to 2007-08to 2007-08
100%
0
99.46%
0.54%
97.99%
2.01%
95.32%
4.68%
90.67%
9.33%
85.75%
14.25%
81.90%
18.01%
74.39%
25.61%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
LIC Private Players*
In T
erm
s of
Tota
l P
rem
ium
-445
-1395
-191-244
-257
-768
-297
34
-78
-339
21
-202
3 5
-242
-30 -26
845
-1500-1400-1300-1200-1100-1000
-900-800-700-600-500-400-300-200-100
0100200300400500600700800900
Profit of year 2007-08
Life Fund Of LICLife Fund Of LIC
463147.62
560806.33 686616.45
0
100000
200000
300000
400000
500000
600000
700000
2005-06 2006-07 2007-08
2005-06 2006-07 2007-08
Findings And ConclusionFindings And Conclusion There is only 1 public company exist in There is only 1 public company exist in
Indian life insurance market which is Indian life insurance market which is LIC and there are 21 other private LIC and there are 21 other private companycompany
Since, 1958 LIC is playing role as life Since, 1958 LIC is playing role as life insurance so that it has created its insurance so that it has created its monopoly in the Indian Life Insurance monopoly in the Indian Life Insurance Market.Market.
As things stand today LIC is still on As things stand today LIC is still on strong footing vis-à-vis its competitors. strong footing vis-à-vis its competitors.
To retain its market leader status the To retain its market leader status the LIC needs to acquire competitiveness. LIC needs to acquire competitiveness.
Cont….Cont…. The new entrants with their aggressive The new entrants with their aggressive
penetration strategies are at least penetration strategies are at least contributing to the cause of LIC by contributing to the cause of LIC by creating insurance consciousness in the creating insurance consciousness in the minds of a wide cross section of minds of a wide cross section of consumers. consumers.
Privileged by its monopoly status LIC Privileged by its monopoly status LIC did not bother much about creating an did not bother much about creating an insurance consciousness, as its objective insurance consciousness, as its objective was to insure any how that was was to insure any how that was happening. This complacency now has to happening. This complacency now has to go and LIC must opt for marketing go and LIC must opt for marketing insurance as insurance.insurance as insurance.
Private sector increased their total Private sector increased their total premium from 28253.01 to 51561.42 that is premium from 28253.01 to 51561.42 that is 82.50% increase while LIC increased its 82.50% increase while LIC increased its premium income from 127822.84 to premium income from 127822.84 to 149789.99, which is increase of 17.19%.149789.99, which is increase of 17.19%.
Private players also increased their market Private players also increased their market share from 18.1% to 25.61%, which is share from 18.1% to 25.61%, which is increase of 41.50%.increase of 41.50%.
No mean performance given the fact that No mean performance given the fact that the new players are still in the process of the new players are still in the process of finding their feet. If the trend continuous finding their feet. If the trend continuous the LIC needs to take guard and prepare the LIC needs to take guard and prepare for strike.for strike.
Cont….Cont….
BibliographyBibliography Research Methodology – Kothari Research Methodology – Kothari
C.R.2007, Research Methodology, C.R.2007, Research Methodology, Techniques and Methods, New Delhi, Techniques and Methods, New Delhi, 20072007
www.licindia.comwww.licindia.com www.birlasunlife.comwww.birlasunlife.com www.sbilife.co.inwww.sbilife.co.in www.reliancelife.co.inwww.reliancelife.co.in www.hdfcinsurance.comwww.hdfcinsurance.com www.iciciprulife.comwww.iciciprulife.com www.irda.orgwww.irda.org