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GENERAL ECONOMIC ENVIRONMENT
The Indian economy grew at the rate of 6.5 per cent in 2011-12. It is the lowestgrowth rate achieved in the past nine year period. Such dismal growth was
preceded by two successive years of robust growth of 8.4 per cent. The slowdownin economy was reflected across all sectors of the Indian economy, but the weakest
performance was reported in the industrial sector. During 2011-12, the agriculturalsector grew at the rate of 2.8 per cent, substantially lower than the growth of 7.0
per cent recorded in the previous year. The year 2010-11 saw simultaneousoccurrence of a normal and well distributed south-west monsoon as also an excessnorth-east monsoon, which was not observed in the last decade. The north-eastmonsoon witnessed a deficit by 48 per cent in 2011-12, although the south-westmonsoon remained normal during 2011-12. With this the production level of food
grains stood at 257.4 million tonnes in 2011-12 (244.8 million tonnes in 2010-11).
The industrial sector reported a growth rate of2.6 per cent during 2011-12, as compared to 6.8 per cent of previous year and anaverage growth rate of 6.3 per cent in the last five years. The slowdown inindustrial production appeared to be across all subsectors except electricity leadingto the slowdown in overall growth of the economy during 2011-12. Various macro-economic factors, such as, the moderation in demand (both domestic and external),hardening of interest rates, slowdown in consumption expenditure, especially ininterest rate sensitive commodities, subdued business confidence and global
economic uncertainty contributed to the weakening of Indian economy.
The services sector, the main contributor of Indias success story in recent years,reported slower growth of 8.5 per cent compared to 9.2 per cent growth achievedin the previous year. The deceleration in services sector appeared to be on accountof both weakening demand as well as inter-linkages with the industrial sector. Thesavings and investment rates continued to decline. The average savings rate haswitnessed consistent decline since 2008-09, led by a sharp decline in public sectorsavings rate, which was not offset by private savings. As per the preliminary
estimates of RBI, the net financial savings of the household sector reduced to 7.8per cent of GDP in 2011-12 from 9.3 per cent in the previous year and 12.2 percent in 2009-10. This moderation in the net financial savings rate of the householdsector during the year mainly reflected an absolute decline in small savings and
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slower growth in households holdings of bank deposits, currency as well as lifefunds. Furthermore, with real interest rates on bank deposits and instruments suchas small savings remaining relatively low on account of the persistent highinflation, and the stock market adversely impacted by global developments,households seemed to have favoured investment in valuables such as gold, whichimpacted the pace of their investment in physical assets such as housing in 2011-12(RBI Annual Report, 2011-12).
The headline inflation rate continued to rule at high levels. It remained high at 9.6per cent and 8.9 per cent during 2010-11 and 2011-12 respectively, as measuredthrough annual average Wholesale Price Index (WPI). These levels appeared to bevery high as compared to the same for the average of last 10 years (2000-01 to2009-10), which remained at a substantially low level at 5.4 per cent. Due to highInflation rate, Reserve Bank continued its stance of high interest rates.
Comparatively, interest rates hovered at higher levels in 2011-12, as compared to2010-11. the average Call Money rate stood at 8.2 per cent in 2011-12 compared to5.8 per cent in the previous year. The yield on 10-year Government Securitieshovered at around 8.4 per cent in 2011-12, higher from the 7.9 per cent of previousyear. The weighted average interest rate on Central Government Borrowings wentup from 7.9 per cent in 2010-11 to 8.5 per cent in 2011-12.
The benchmark deficit indicators widened in 2011-12 on account of many externaland domestic factors. The year 2011-12 witnessed surge in international crude oil
prices as also decrease in the indirect taxes on petroleum products. On domestic
front, the shortfall in revenue due to more than anticipated slowdown in economicgrowth and lower than budgeted disinvestment receipts contributed to the fiscalslippage leading to the gross fiscal deficit (GFD)-GDP ratio to a level of 5.8 percent in 2011-12. The ratio stood at 4.6 per cent in 2010-11.
WORLD INSURANCE SCENARIO
As per World Insurance Report published by reinsurance major Swiss Re, theglobal direct premium during 2011 fell by 0.8 per cent (Year 2010: grew by 2.7 per
cent). The growth situation varied significantly by regions. While in the advancedmarkets, premium volume slipped by 1.1 per cent, the same grew in the emergingmarkets at 1.3 per cent. The growth also varied by lines of business. In the WesternEurope, life premiums dropped steeply by 9.8 per cent. The North America
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witnessed a positive growth of 2.3 per cent in its life premium. In the emergingmarkets, though life premium dropped by 5.1 per cent partly due to newdistribution regulations in China, non-life insurance reported a smart growth of 9.1
per cent.
Out of total global insurance premium, life insurance premiums accounted for 57per cent (USD 2627 billion). This share is higher in advanced economies (58 percent) than in emerging markets (52 per cent) mainly due to the low share of lifeinsurance in the Middle East and Central & Eastern Europe.
During 2011, global life insurance premium shrank by 2.7 per cent to USD 2627billion. However, remarkable differences appeared to be in the development ofpremium income across various markets. In advanced economies, life insurancepremium declined by 2.3 per cent, thereby reversing their short-lived recovery in
2010. In the United States, where in-force life premium continued to decline tilllast year, the premium accelerated modestly in 2011, driven by a rebound insavings products. However, in Western Europe, premiums declined by 9.8 per cent.Premium continued to slip in the United Kingdom and in-force premiums fellsharply in Germany, Italy, Portugal and France. Among the advanced Asianeconomies, growth in Japan accelerated on account of good sales of individualwhole life policies and a recovery in sales of annuity products. Hong Kong andSingapores life markets remained robust.
Amongst the emerging markets, life premium income fell sharply as premium
volume shrank in China and India. The introduction of tighter regulationsgoverning banc assurance in China and the distribution of unit-linked insurance
products in India resulted in a sharp fall in new life premium growth. Premiumunderwritten slipped by 15 per cent and 8.5 per cent in China and Indiarespectively. In contrast, other emerging regions witnessed good growth. Premiumunderwritten went up by 9.4 per cent in the Middle East and 9.5 per cent in theLatin America. Overall, emerging markets share of global life premiums decreasedslightly from 14.2 per cent in 2010 to 13.9 per cent in 2011. The growth in non-lifeinsurance premium stood at 1.9 per cent in 2011. Costly natural catastrophe events
in Japan, New Zealand, and Australia led to significant rate increases in propertymarkets. Rates increased in other advanced markets as well, partially off-settingthe effects of the weak economic environment. In emerging markets, premiumgrowth was mostly driven by robust economic growth.
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The non-life insurance markets in emerging economies grew faster than theadvanced economies in 2011. However, the year 2011 witnessed heavy naturalcalamities, such as the earthquake in Japan, the countrys worst on record in termsof magnitude.
REAL GROWTH IN PREMIUM DURING 2011
(In per cent)
COUNTRIES LIFE NON-LIFE TOTAL
Advanced Countries -2.3 0.5 -1.1Emerging Market -5.1 9.1 1.3
Asia 0.5 7.0 2.2
India -8.5 13.5 -5.5
World -2.7 1.9 -0.8Source: Swiss Re, Sigma No. 3/2012.Note: * calendar year ** financial year 2011-12.
Table 1.1
Indian Insurance in the global scenario
In the life insurance business, India ranked 10 th among the 156 countries, for whichthe data is published by Swiss Re. During 2011-12, the life insurance premium inIndia declined by 8.5 per cent (inflation adjusted). During the same period, theglobal life insurance premium declined by 2.7 per cent. The share of Indian lifeinsurance sector in global life insurance market stood at 2.30 per cent during 2011,
as against 2.54 per cent in 2010.
The non-life insurance sector witnessed a significant growth of 13.5 per centduring 2011-12. Its performance is far better when compared to global non-life
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premium, which expanded by a meagre 1. per cent during the same period. Theshare of Indian non-life insurance premium in global non-life insurance premiumincreased slightly from 0.57 per cent in 2010- 11 to 0.62 per cent in the year 2011-12. India stood at 19th rank in global non-life premium income.
Insurance penetration & density in IndiaThe measure of insurance penetration and density reflects the level of developmentof insurance sector in a country. While insurance penetration is measured as the
percentage of insurance premium to GDP, insurance density is calculated as theratio of premium to population (per capita premium). Since opening up of Indianinsurance sector for private participation, India has reported increase in insurancedensity for every subsequent year and for the first time reported a fall in the year2011. However, insurance penetration, which surged consistently till 2009, slippedin the consecutive second year on account of slower rate of growth in the lifeinsurance premium as compared to the rate of growth of the Indian economy.
INSURANCE PENETRATION AND DENSITY IN INDIA
Year Life Non-Life IndustryDensity
(USD)
Penetration
(Percentage)
Density
(USD)
Penetration
(Percentage)
Density
(USD)
Penetration
(Percentage)
2007 40.4 4.0 6.2 0.6 46.6 4.7
2008 41.2 4.0 6.2 0.6 47.4 4.62009 47.7 4.6 6.7 0.6 55.3 5.2
2010 55.7 4.4 8.7 0.71 64.4 5.1
2011 49.0 3.4 10.0 0.70 59.0 4.1
1. Insurance density is measured as ratio of premium (in US Dollar) to total population.2. Insurance penetration is measured as ratio of premium (in US Dollars) to GDP (in USDollars).3. The data of Insurance penetration is available with rounding off to one digit after decimal from2006.
Source: Swiss Re, Various Issues.
Table 1.2
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INSURANCE DENSITY IN INDIA
NEED OF INSURANCE:
People who are prone to the similar risks come together and agree to share and
compensate the losses of the particular person facing losses. Different kinds of
risks can be identified and separate groups made, including those prone to similar
risks. By this way, the loss on a particular person is divided among other member
of group. Thus risk is shared by the community and the particular person doesnt
have to face the impact of such a heavy loss. There are some rules and principles,
which make it possible for insurance to remain a fire- arrangement. It is difficult
for any individual to bear the result of the risk that he is pone to. It will become
manageable when the community shares the loss. And that the peril should happen
unexpectedly and not be deliberately created by the insured person.
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The loss should be proportionally divided amongst the members of the community
who are prone to similar risks, and this method must be predetermined. The share
can be collected before or after the losses arise or at the time of admission to the
group.
Insurance companies collect in and create a fund from which the losses are paid.
From the past experiences of the individuals, assumptions are made and collections
are determined accordingly.
Therefore, Insurance is necessary to aid those depending on the income and he
who would have made arrangements on the basis of some expectation. If of these
expectation do not come true, the original arrangement would become inadequate
and there could be problems, which need to be protected against.
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Thus, The Need Of Insurance Can Be Classified As:
1 Protection of the interest of the faculty of the loss of income due to death of
the breadwinner.
1 Provision for the education & marriage of children.
1 Post retirement income for self & dependent.
1 Special needs like loss of income due to disabilities, accidents, treatment of
diseases, sickness etc.
1 To protect against future inflation.
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INSURANCE IN ECONOMIC DEVELOPMENT:
Investments are made out of savings and they are necessary for further economic
development. A life insurance company is a quit important in mobilizing savings of
people, especially from the middle and lower income group and these savings are
channeled into investment for economic growth.
Most of the life insurance companies have large funds that are accumulated
through the payments of small amounts of premium of individuals and these funds
further the economic development of the countries in which they do business.
These funds are collected and held in trust for the benefit of the policyholders. The
managements of life insurance companies have to remember this aspect and take
decision keeping in mind the benefit of the community.
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Business and trade also benefit through insurance. Without insurance, trade and
commerce is exposed to perils and it will find it difficult to face the impact of such
events.
MAJOR PLAYERS OF INSURANCE IN VARANASI
The new face of the insurance industry is craving for attention in Varanasi. Before
the entry of the private sector the insurance market in Varanasi is an
underdeveloped market that was only ruled and tapped by the state owned LIC.
Today, the dozen-odd life and non-life companies in the private sector are fightinga quiet but intense battle to make their presence felt to the general mass of Varanasi
through advertisements in newspapers and on television, insurance agents and
direct mailers form part of the campaign vehicle.
However, the biggest players of insurance sector which have captured the market
and gained trust, and built faith in the minds of people with their immense
marketing strategy, aggressive and penetrative distribution channel, and innovativeproducts in Varanasi.
The following, therefore, are the major players of insurance business in the
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city, are as under:-
1. LIFE INSURANCE CORPORATION
1. ICICI PRUDENTIAL LIFE INSURANCE
1. BAJAJ ALLIANZ LIFE INSURANCE
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LIFE INSURANCE CORPORATION OF INDIA
Life Insurance Corporation of India (LIC) is an autonomous body authorized to runthe life insurance business in India with its Head Office at Mumbai. It has been
established by an act of the Parliament and started functioning from 1/9/1956.
LIC is the biggest insurance player in the country. Out of the total premium of Rs
3766 crore generated by the insurance industry through group business in the year
2005-06, LIC alone accounted for Rs 3051 crore. As it is the giant Life Insurance
Corporation in Public Sector and enjoys the life insurance monopoly. The
corporation has been fully carrying out the role assigned to it and justifying the
confidence of people by offering the following benefits to them, which are:-
1 Absolute Security
1 Better Policy
1 Condition
1 Cheaper Rates
1 Dependable Service and Better Economic Management
1 Favorite Returns to the People
In the financial year 2005-06, LIC has grown at 30.68%. In respect of number of
lives insured, LIC has shown a growth of over 152%. In respect of number of
schemes, LIC has a growth of 2%. LIC market share in number of individuals
covered and number of policies stands at 77% and 81%, respectively.
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ICICI PRUDENTIAL LIFE INSURANCE
ICICI Ltd. was established in 1955 by the World Bank, the Government of India
and the Indian Industry, to promote and lend money for industrial development.
ICICI Prudential Life Insurance Company Limited was incorporated on July 20,
2000. It is a joint venture between ICICI Bank, a premier financial powerhouse and
Prudential plc, established in 1848 is a leading international financial services
group and is presently the largest life insurance company in the UK.
Today, it has diversified into retail banking and is the largest private bank in the
country. ICICI Prudential is currently the No. 1 private life insurer in the country.
For the financial year ended March 31, 2005, the company garnered Rs 1584 crore
of new business premium for total sum assured of Rs 13,780 crore and wrote
nearly 615,000 policies.
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BAJAJ ALLIANZ LIFE INSURANCE
Bajaj Allianz is a joint venture between Allianz AG one of the world's largest
insurance companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler
manufacturers in the world. Bajaj Allianz is into both life insurance and general
insurance.
Allianz Group is one of the world's leading insurers and financial services
providers. Founded in 1890 in Berlin, Allianz is now present in over 70 countries
with almost 174,000 employees. Bajaj group is the largest manufacturer of two-
wheelers and three-wheelers in India and one of the largest in the world.
Today, Bajaj Allianz is one of India's leading and fastest growing insurance
companies. Currently, it has presence in more than 550 locations with over 60,000
Insurance Consultants.
EMERGING PLAYERS OF INSURANCE IN1414141414
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VARANASI
Competition has well and truly set in the fast-growing insurance sector in Varanasi
although the new breeds of companies are showing their presence in the market.
Therefore, the stress is beginning to show on the key players of the market to
compete with the emerging players in order to be in market and can create impact
on the minds of people with better investment schemes and insurance policies.
The new players of insurance business have attracted the attention of people in
Varanasi due to following reasons:-
1 Innovative and wide range of products which are designed according to the
needs of customer.
1 Higher return
1 Convenient and better distribution channel
The following, therefore, are the new players of insurance business in
Varanasi city:-
1. RELIANCE LIFE INSURANCE COMPANY
2. MAX NEW YORK LIFE INSURANCE
3. TATA AIG LIFE INSURANCE COMPANY
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RELIANCE LIFE INSURANCE COMPANY
Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the
Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of Indias
leading private sector financial services companies, and ranks among the top 3
private sector financial services and banking companies, in terms of net worth.
Reliance Capital has interests in asset management and mutual funds, stock
broking, life and general insurance, proprietary investments, private equity and
other activities in financial services.
Reliance Life Insurance Company had acquired 100 per cent shareholding in AMP
Sanmar Life Insurance Company in August 2005. Taking over AMP Sanmar Life
provided Reliance Life Insurance a readymade infrastructure and a portfolio.
AMP Sanmar Life Insurance was a joint venture between AMP, Australia and the
Sanmar Group. Headquartered in Chennai, AMP Sanmar had over 90 offices across
the country, 9,000 agents, and more than 900 employees.
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MAX NEW YORK LIFE INSURANCE
Max New York Life Insurance Company Limited is a joint venture between Max
India Limited, a multi-business corporate, and New York Life International, a
global expert in life insurance.
New York Life is a Fortune 100 company that has over 160 years of experience in
the life insurance business. Max India Limited is a multi-business corporate
dealing in Clinical Research, IT and Telecom Services, and Specialty Plastic
Products businesses.
Max New York Life Insurance started its operations in India in 2000. It is the first
life insurance company in India to be awarded the IS0 9001:2000 certifications.
Max New York offers customized products tailored to suit individual's needs. With
its various Products and Riders, there are more than 400 product combinations to
choose from. Today, Max New York Life Insurance has a network of 57 offices
spread over 37 cities all over India.
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TATA AIG LIFE INSURANCE COMPANY
Tata AIG Life Insurance Company Limited is a joint venture between Tata Group
and American International Group, Inc. (AIG). Tata Group is one of the oldest and
leading business groups of India. Tata Group has had a long association with
India's insurance sector having been the largest insurance company in India prior to
the nationalization of insurance. The Late Sir Dorab Tata was the founder
Chairman of New India Assurance Co. Ltd., a group company incorporated way
back in 1919.
American International Group, Inc is the leading U.S. based international insurance
and financial services organization and the largest underwriter of commercial and
industrial insurance in the United States. AIG has one of the most extensive life
insurance networks in the world.
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NAME OF THE INSURANCE COMPANY AND THE SHARE HOLDING
PATTEN
Name of the Insurance Company Shareholding
Agricultural Insurance Co Bank and Public Ins Co
Bajaj Allianz General Insurance Co. Ltd. Privately Held
Cholamandalam MS General Insurance Co.
Ltd.Privately Held
Export Credit Guarantee Company Public Sector
HDFC Chubb General Insurance Co. Ltd. Privately Held
ICICI Lombard General Insurance Co. Ltd. Privately Held
IFFCO-Tokio General Insurance Co. Ltd. Privately Held
National Insurance Co. Ltd. Public Sector
New India Assurance Co. Ltd. Public Sector
Oriental Insurance Co. Ltd. Public Sector
Reliance General Insurance Co. Ltd. Privately Held
Royal Sundaram Alliance General InsuranceCo. Ltd.
Privately Held
Tata AIG General Insurance Co. Ltd. Privately Held
United India Insurance Co. Ltd. Public Sector
There are a total of 13 life insurance companies operating in India, of which
one is a Public Sector Undertaking and the balance 12 are Private Sector
Enterprises.
List of Companies are indicated below:-
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TABLE NO: 4 NAME OF THE LIFE INSURANCE COMPANY AND THE
SHARE HOLDING PATTEN
Name of the company Nature of Holding
Allianz Bajaj Life Insurance Co PrivateAviva Life Insurance Private
Birla Sun Life Insurance Co Private
HDFC Standard Life Insurance Co Private
ICICI Prudential Life Insurance Co Private
ING Vysya Life Insurance Co. Private
Life Insurance Corporation of India Public
Max New York Life Insurance Co. Private
MetLife Insurance Co. Private
Om Kotak Mahindra Life Insurance Private
Reliance insurance Private
SBI Life Insurance Co Private
TATA- AIG Life Insurance Company Private
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TABLE 5. NAME OF THE PLAYER MARKET SHARE (%)
Name of the Player Market share (%)
LIFE INSURANCE CORPORATION OF
INDIA82.3
ICICI PRUDENTIAL 5.63
BIRLA SUN LIFE 2.56
BAJAJ ALLIANZ 2.03
SBI LIFE INSURANCE 1.80
HDFC STANDARD 1.36
TATA AIG 1.29
MAX NEW YARK 0.90
AVIVA 0.79
OM KOTAK MAHINDRA 0.51ING VYSYA 0.37
MET LIFE 0.21
PRESENT SCENARIO OF INSURANCE INDUSTRY
India with about 200 million middle class household shows a huge
untapped potential for players in the insurance industry. Saturation of
markets in many developed economies has made the Indian market even
more attractive for global insurance majors. The insurance sector in Indiahas come to a position of very high potential and competitiveness in the
market. Indians, have always seen life insurance as a tax saving device, are
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now suddenly turning to the private sector that are providing them new
products and variety for their choice.
Consumers remain the most important centre of the insurance sector. After
the entry of the foreign players the industry is seeing a lot of competition
and thus improvement of the customer service in the industry.
Computerisation of operations and updating of technology has become
imperative in the current scenario. Foreign players are bringing in
international best practices in service through use of latest technologies
The insurance agents still remain the main source through which
insurance products are sold. The concept is very well established in the
country like India but still the increasing use of other sources is imperative.
At present the distribution channels that are available in the market are listed
below.
Direct selling
Corporate agents
Group selling
Brokers and cooperative societies
Bancassurance
Customers have tremendous choice from a large variety of products from
pure term (risk) insurance to unit-linked investment products. Customers are
offered unbundled products with a variety of benefits as riders from which
they can choose. More customers are buying products and services based on
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their true needs and not just traditional moneyback policies, which is not
considered very appropriate for long-term protection and savings. There is
lots of saving and investment plans in the market. However, there are still
some key new products yet to be introduced - e.g. health products.
The rural consumer is now exhibiting an increasing propensity for
insurance products. A research conducted exhibited that the rural consumers
are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium
each year. In the insurance the awareness level for life insurance is the
highest in rural India, but the consumers are also aware about motor,
accidents and cattle insurance. In a study conducted by MART the results
showed that nearly one third said that they had purchased some kind of
insurance with the maximum penetration skewed in favor of life insurance.
The study also pointed out the private companies have huge task to play in
creating awareness and credibility among the rural populace. The perceived
benefits of buying a life policy range from security of income bulk return in
future.
APPLICATION OF INFORMATION TECHNOLOGY IN
INSURANCE SECTOR
There is a evolutionary change in the technology that has revolutionized the entire
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insurance sector. Insurance industry is a data-rich industry, and thus, there is a need
to use the data for trend analysis and personalization.
With increased competition among insurers, service has become a key issue.
Moreover, customers are getting increasingly sophisticated and tech-savvy. People
today dont want to accept the current value propositions, they want personalized
interactions and they look for more and more features and add ones and better
service
The insurance companies today must meet the need of the hour for more and more
personalized approach for handling the customer. Today managing the customer
intelligently is very critical for the insurer especially in the very competitive
environment. Companies need to apply different set of rules and treatment
strategies to different customer segments. However, to personalize interactions,
insurers are required to capture customer information in an integrated system.
With the explosion of Website and greater access to direct product or policy
information, there is a need to developing better techniques to give customers a
truly personalized experience. Personalization helps organizations to reach their
customers with more impact and to generate new revenue through cross selling and
up selling activities. To ensure that the customers are receiving personalized
information, many organizations are incorporating knowledge database-
repositories of content that typically include a search engine and lets the customers
locate the all document and information related to their queries of request for
services. Customers can hereby use the knowledge database to mange their
products or the company information and invoices, claim records, and histories of
the service inquiry. These products also may be able to learn from the customers
previous knowledge database and to use their information when determining the
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relevance to the customers search request.
GROWTH OF INDIAN INSURANCE INDUSTRY
Insurance acts as a catalyst in economic growth of a country. It is closely related to
savings and investment that comes from, life insurance, funded pension systems
and to some extent the non-life insurance industry.
LIC(Life Insurance Corporation) & GIC(General Insurance Corporation) had
monopoly prior to the expansion of insurance market to private companies. LICwas established in 1956 and controlled all life-insurance policies across the nation.
These were government run organizations. The Insurance business is divided into
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four classes :
1. Life Insurance business
2. Fire
3. Marine
4. Miscellaneous Insurance.
Following the Insurance Regulatory and Development Act in 1999, India
abandoned the public sector exclusivity of the insurance industry and switched to a
market-driven competitive industry. This shift has brought about many changes
and developments in the insurance industry in India. Domestic private-sectorcompanies were permitted to enter both the life and general insurance business and
foreign companies were allowed to participate and join these domestic companies
albeit with a cap of 26% investment.
The objectives of this report are to examine the current status of the insurance
industry, its prospective growth and the valuation methods used for insurance
companies in developed and under-developed countries.
CURRENT MARKET STRUCTURE
Today there are 16 private players with aggregate control of 27% of the life
insurance market and 15 private players in the general insurance industry. Entry of
private sector has fuelled the growth in the sector driven by new products and
aggressive marketing strategies. LIC still covers majority market share with other
private companies growing at alarming rates with market share of 48.1% . ICICIPrudential has the majority market share among the private companies and has
maintain its market leadership with an estimated market share of 19.2%, SBI
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life(10.7%),Bajaj Allianz (14.0%), HDFC Standard Life (8.6%), Birla Sun Life
(9.2%) , Reliance life(11.0%),max new york (5.9%) etc within the private sector in
FY09.
With low barriers to entry, there will be increased competition and better quality of
service within the next decade in the Indian insurance industry. An insurance
survey by LIC & KPMG showed that annual growth in average premium is 8.2%
in India compared to a global average of only 3.4%. The Associated Chambers of
Commerce and Industry of India (ASSOCHAM) has projected a 500% increase in
the size of current Indian insurance business from US$ 10 billion to US$ 60 billion
by 2010 particularly in view of contribution that the rural and semi-urbaninsurance will make to it.
Below is the distribution of companies in Life Insurance Industry:
COMPANIESFY
11
FY
12
ICICI Prudential 25.4 19.2
Allianz Bajaj 21.3 14.0
HDFC Standard
Life8.4 8.6
SBI Life 9.7 10.7
Birla Sunlife 6.5 9.2
Reliance Life 7.0 11.0
Max New York
Life4.9 5.9
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Aviva 3.7 2.4
Tata AIG 3.0 3.6
OM Kotak
Mahindra 3.6 4.4
ING Vysya 2.5 2.4
MetLife 2.9 4.0
Shriram 0.5 0.7
Bharti Axa 0.4 1.0
Canara HSBC 0.0 1.1
SOURCE:IRDA
LIFE INSURANCE
Life Insurance industry is under the phase of infancy after 50 years of monopoly.
LIC, the market leader in this segment, is a state owned organization and has had a
monopoly in the life insurance business for over four decades until 2001. LIC still
remains the market leader, by a wide margin, with an estimated market share of
48.1% (IRDA,FY09). However, at the margin, it has been loosing market share toprivate sector players.
Types of Insurance Policies
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a. Single Premium v/s Regular Premium
b. Unit linked v/s Traditional
c. Pure Risk Policies (Term) v/s Savings + Risk
d. Participating v/s Non Participating
US$31.7 billion assets were managed by the private players(June,2009) , whereas
LIC was able to manage with US$ 167.37 billion(march ,2009)
GENERAL INSURANCE
Gross direct premium income underwritten (GDPIU) by 21 generals insurance
insurers grew by 12.62% in FY09 as said by insurance regulator IRDA. Some new
entries in this field were Future Generali, Universal Sompo, Shriram General,
Bhart AXA, Raheja QBE, Apollo DKV and Star Health , combined collected a
total premium of INR11.47 bn. HDFC ERGO recorded a growth of 24%.
MARKET SHARE:
New india assurance secured 1st position and is enjoying market share of 14.80% ,
ahead of United india ny INR 1.78 billion. Among the private players ICICI
Lombard stood 1st with market share of 8.52%. . star heath and Apollo DKV were
new entrants.
MIX OF NON-LIFE BUSINESS & PRODUCTS
The mix of non-life business in India resembles most other developing regional
economies. Motor and fire policies are the backbone of non-life business in India.
They also contributed the most to overall premium growth in the last five years.
Compared to other markets, personal lines insurance is also relatively well-
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developed in India. This is mainly manifested in personal motor and private
residential fire policies. In fact, among emerging markets with a similar level of
per capita income, India has the highest share of personal lines business.
After the opening of the sector to private players, more new products were
introduced. To take an example, one joint-venture non-life insurer introduced 29
different products during one year, according to the IRDA. They included products
liability, corporate cover, professional indemnity policies, burglary cover,
individual and group health policies, weather insurance, credit insurance, travel
insurance and so on. Some of these products were completely new (e.g. weather
insurance) while others were already available through the public insurancecompanies.
REGULATION AND TARIFF
Before deregulation in 1999, non-life products that were available in the market
were rather limited and similar across the four GIC subsidiaries. They could also
be classified by whether they were regulated by tariffs: fire insurance, motor
vehicle insurance, engineering insurance and workers' compensation etc that came
under tariff; and burglary insurance, Mediclaim, personal accident insurance etc
that did not. In addition, most specialized insurance (e.g. racehorse insurance) did
not fall under tariff regulations.
SCOPE FOR EXPANSION OF INDIAN INSURANCE MARKET
Currently there is a huge scope for this industry to grow with increased disposable
income among the working class in India. Up to 80% of India's population is
uninsured today.
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CHANGING DEMOGRAPHICS
Life expectancy is growing with advances in medicine and technology. The rapid
rise in income levels and the high proportion of Indians below 30 years of age
(estimated at 60% of India's total population of 1bn) should be a significant driver
for life insurance in coming years.
The following table shows the age-wise distribution of population in future years:
Households earning over Rs5mn per year are growing the fastest (at 27%p.a.), and
many of them are still either uninsured or under-insured. Further incrementally
there is a shift happening from large joint families to nuclear families, which
increases the need insurance amongst these households as the dependency ratio
increases significantly. Aversion to debt by most of the new generation households
has also led to higher monthly debt servicing requirement. Increasing debt
servicing has also resulted in higher need for insurance as most of the families
have a single bread earner.
LOW PENETRATION
Currently there is very low penetration in India specially in rural places. Tapping
those markets will boost the insurance industry. Privatization of the insurance
industry in 2000 improved penetration from 1.4% of GDP in 2000 to 3.8% of GDP
in 2009 in India
SOURCE: Macquarie research, July 2009
Life insurance market in semi-urban and rural territories is expected to rise to US$
20 Billion mark in the upcoming four years from the existing value of less than
US$ five Billion. Life insurance industry has contributed to more than 3.5% to
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India's GDP growth whereas non life insurance sector has contributed to only 0.6%
over past 9 years. The non-life public sector insurers have been rather slow to
respond to the evolving competition. Both the Authority and the industry have been
playing an active role in increasing consumer awareness.
Large sections of rural India are still untouched because of long distances, poor
distribution and high return costs. To understand the prospects for insurance
companies in rural India, it is very important to understand the requirements of
India's villagers, their daily lives, their peculiar needs and their occupational
structures. There are farmers, craftsmen, milkmen, weavers, casual laborers,
construction workers and shopkeepers and so on. In the context of internationalcomparison, insurance penetration in India is low but commensurate with its level
of per capita income.
GENERATION OF EMPLOYMENT
There is a high demand for skilled insurance agents to explain the technicalities
and understand the various products offered in the market. With such high demand,
the insurance industry has created scope for expansion in the employment industry
too. Life insurance industry provides increased employment opportunities.
Brokers, corporate agents, training establishments provide extra employment
opportunities. Many of these openings are in rural sectors.
FOREIGN INVESTMENT
India differs from other Asian markets in the sense that its life insurance market is
still heavily dominated by indigenous players, partly reflecting the fact that de-
monopolization only took hold in 2000. In contrast, most Asian life insurance
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sectors are already heavily populated by foreign insurers. Foreign non-life insurers
have achieved penetration in India similar to those in other Asian markets. It can be
expected that foreign insurance companies will continue to expand their market
share in India in the coming years, notwithstanding the fact that public sector
insurers are also proactively strengthening their business strategies to fight rising
competition.
With the entry of private foreign firms, consumer knowledge is increasing through
international approach of advertising and marketing. With scope for foreign
investment to increase to 49% according to the planning of the government,
foreign companies will pay more attention to the Indian market but currentlyforeign direct investment (FDI) limit in the insurance sector for foreign investors is
26 per cent. Also most of the private sector players have set up a vast distribution
network, including over 250,000 agents (LIC has over a million agents), most of
whom are more qualified than LIC agents. A qualified work force and an extensive
distribution network has further helped the private insurance companies to increase
awareness about life insurance.
The mentality of Indian policy holders is only from an investment perspective, and
with foreign influence this is changing to awareness of insurance as security and
protection.
POTENTIAL IN PENSION AND HEALTH CARE MARKETS
The Indian insurance industry is still dominated by investment linked insurance
products like endowment and ULIP(Unit linked insurance plan). Pure insurance
products like term and health are not yet popular, largely owing to the mindset of
the average Indian consumer. This is predicted to change with more western
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exposure and awareness of other insurance products. Pension system and health
insurance are increasing with urbanization.
There are around 30 health insurance products in the market right now . owing to
growing awareness and rising health care costs has led to an increase in sale of
health insurance products by 30% in 2009.companies are launching new health
insurance products like tata launched Hospicashback' and metlife launched met
health care in 2009
TAX BREAKS
The tax structure in India is also favorable for the insurance industry in the form of
deductions and exemptions. Over the past several years, Government of India has
been offering various tax benefits to encourage individuals to buy life insurance.
Tax relief offered is
Under Section 80C of Income Tax Act, a portion of premiums paid for life
insurance policies are deducted from tax liability. Exemption is also
available for Health Insurance Policy premiums.
Money paid as claim including Bonus under a life policy is exempted from
payment of Income Tax. Under section 10(10D).
Tax Incentives have been a key growth driver for the life insurance business over
the past two decades, largely owing to the absence of awareness of other benefits
of life insurance. Historically LIC collected the bulk of its premium income in the
last quarter of the financial year, when people used to buy insurance to reduce their
tax liabilities. However the trend has changed in the past few years, with the
private insurance companies driving the growth by increasing the awareness.
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MARKET CHALLENGES AND DRAWBACKS
Some of the factors that have slowed down the growth of the industry are as
follows:
Slow down in single premium policies owing to a change in regulation
.Sustainability of single premium policies, especially post June'06 when the
new changes proposed by IRDA come into play which, in our view, could
negatively impact the growth of single premium policies.
Managing the distribution network, especially the agent attrition rates
Managing the cost as most of the insurance companies have already priced
in higher economies of scale in their load structure.
INCREASED WAGES
Rapid expansion of the insurance business and an attrition rate amongst life
insurance agents has resulted in an estimated 30-40% rise in wage bills. In
particular, the shortage of actuaries, specialized agents and marketing people has
meant life insurers are paying up almost 50% more than they had originallybudgeted when they had entered the sector, almost 5 years ago. This is partly due
to the much higher money that life insurers have to spend on training and on
retention of employees.
DISTRIBUTION
Distribution still appears to be a key challenge for insurers. Despite the large
branch network of Indian banks, bank assurance has still not fully evolved in
India.Bank branches still account for around 10% of all policies sold. In contrast,
most Insurers still rely on the agency model. Almost 80% of the policies are sold
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through agents who have to be well trained.
QUALITY OF AGENTS AND MANAGERS
Unfortunately for the industry, in the absence of skilled manpower, employee
turnover has emerged as one of the challenges facing the industry. According to
many of the insurers, employee turnover in the life insurance segment is running at
35-40%. The problem appears to stem from managing business managers'
(typically people who manage about 100 agents) aspirations and keeping pace with
the rise in salary levels offered by competitors. As a result, there is a concern that
having sufficient employees could be the biggest challenge for the larger players to
ensure that they face no capacity constraints while rapidly growing their business.
DECLINE OF ULIP'S
Decline in the growth of stock market , 2008 , due to global meltdown had also
adversely affected investor sentiments towards ULIP products. ULIP contributed to
around 60-70% of the business turnup of any private life insurance company. With
reviving economy in the 3rd quarter of 2009 and better stock market performance ,
investors again started showing confidence in ULIP products. Now ULIP growth is
expected to rise in the next 5 years.
OTHER FACTORS
On the regulatory side, there are outstanding issues concerning solvency
regulations, further liberalizing of investment rules, caps on foreign equity
shareholdings as well as the enforcement of price tariffs in the non-life insurance
sector.
The proliferation of bank assurance is rapidly changing the way insurance products
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are distributed in India. This will also have strong implications on the process of
financial convergence and capital market development in India.
IRDA AND REGULATIONS
IRDA(Insurance Regulatory Development Authority) Act was formed in 1999 to
promote market efficiency and ensure consumer protection of the insurance
industry. Several regulations were laid down to control ensure a fair market after
private companies were allowed to enter the market some of which are:
Capital Requirement:
A minimum capital requirement of INR 1 billion for new entrants and INR 2billion of reinsures. This helped insure that companies were well established with
long term goals.
Foreign Direct Investment:
is capped at 26% presently. This puts a strain on Indian promoters and blocks
foreign investment in the insurance industry. However, currently there is an
ongoing proposal to raise this cap to 49%. With this, there will be an influx of
foreign investment and expansion of the insurance industry further.
Company Listing:
All the new life insurers would have to compulsorily list their companies within 10
years of beginning their operations.
Rural sector requirement:
Life insurance players are required to issue minimum no of policies in rural areas
and in social sector.
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Solvency controls:
Insurers have to observe the required solvency margin (RSM).20. For general
insurers, this is the higher of RSM-1 or RSM-2, where RSM-1 is based on 20% of
the higher of (i) gross premiums multiplied by a factor A,21 or (ii) net premiums;
RSM-2 is based on 30% of the higher of (i) gross net incurred claims multiplied by
a factor B, or (ii) net incurred claims;
There is also a lower limit of INR 500 million for the RSM. Life insurers have to
observe the solvency ratio, defined as the ratio of the amount of available solvency
margin to the amount of required solvency margin. In addition, The required
solvency margin is based on mathematical reserves and sum at risk, and the assets
of the policyholders fund; The available solvency margin is the excess of the
value of assets over the value of life insurance liabilities and other liabilities of
policyholders' and shareholders' funds.
Investment:
In 1958, Section 27A of the Insurance Act was modified to stipulate the following
investment regime:
a. Central government market securities of not less than 20%;
b. Loans to National Housing Bank including (a) above should be no less than
25%;
c. In state government securities including (b) above should be no less than
50%; and
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d. In socially oriented sectors including the public sector, cooperative sector,
house building by policyholders, own-your-own-home schemes including
(c) above should be no less than 75%.
For General Insurance, The guideline for investment was set out as follows: (a)
central government securities of no less than 25%; (b) state government and public
sector bonds of no less than 10%; and (c) loans to state governments, various
housing schemes of no less than 35%. The remaining 30% investment could be in
the market sector in the form of equity, long-term loans, debentures and other
forms of private sector investment.
General insurance business lines that are subject to tariffs include fire, motor,
marine hull, tea crop, engineering, industrial all risks, business interruption,
personal accident and workers' compensation. Tariffs are managed by the Tariff
Advisory Committee.
VALUATION METHODS USED FOR INSURANCE COMPANIES
Different valuation methods are used for insurance companies in different
countries.
Embedded Value(Ev)
The widely used method for valuation of insurance companies worldwide is EV.
This is the addition of shareholders net worth and the value of in-force business.
Shareholders net worth equals the sum of net assets of life insurance companies
adjusted to reflect market values of these assets. Value of in-force business equals
the present value of projected future after-tax regulated profits to be generated
from policies in force. Appraisal value(AV) adds the value of future new
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business(goodwill) to the EV.
The embedded value is higher for life insurers that can deliver across all these
variables.
a. Investment Returns: Higher investment return will provide better investment
margins for insurers, lifting overall profitability and embedded value
b. Expenses: Better cost control, running under budgeted expense will provide
better expense profit
c. Persistency: This measures how successful insurers are able to retain its
customers
d. Claims: Better mortality and morbidity experience would deliver higher risk
profit
e. Product Mix: and lastly, product mix will affect all of the above.
For instance, insurers having a higher proportion of the traditional endowment and
whole life policies, (all else being the same) would have a higher embedded value
owing to the both the higher loading in these policies and also owing to the longerlife of the policy providing the insurers with a more extended cash flow. In contrast
ULIP's have lower loading and also shorter durations. The single premium policies
have the lowest embedded value having no renewal premiums.
In essence, EV is the present value of the current business base, while AV is EV
plus the value of the company's growth potential. Usually for a typical life insurer,
the EV would be the large component while the AV would be a much smaller
proportion. Usually in markets where there is a developed life insurance market,
the valuations would tend to range between the EV and AV.
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Problem with using EV and Appraisal Value for India
Unfortunately, the Indian insurance industry and has just spurted growth and
currently all private companies are incurring large losses and initial set-up costs,
hence the EV and Appraisal value methods of valuation are not useful. For most
life insurers, the expenses are likely to be still quite high owing to high start up
costs and money spent on creating a distribution network, marketing and
advertising and expanding agent network (as they all rely on the agency model) as
they are all rapidly scaling up their businesses. Further, owing to the high reserve
requirements and the high acquisition costs that most life insurers have to incur,
they are still making accounting losses. Most of these insurers could break even in
about another 2-3 years by around FY09.
Solution(NBAP)
The best suitable valuation method at the current phase of the insurance industries
is NBAP(new business achieved profit). It is the present value of the future profits
expected from the new business written through that policy. Each product carries
different NBAP margins. ULIP's for example have a NBAP margin of around 19-
20% v/s 30-33% margins for traditional endowment products. Single premium
policies, in contrast, are the least profitable with an estimated NBAP margin of
around 3-4%.
An insurance company like LIC, which is at an advanced stage of its life cycle,
would probably have EV accounting for 80-90% of total value of the firm, while
for new companies 80-90% of the value will come from the NBAP calculation.
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For the majority of the private insurers, the EV is likely to be very small owing to
the very small value of the in force business as they have been in existence for just
about 6-7 years. Thus, the value of the existing business (EV) will be only a small
proportion of the total actuarial value of the company with the new business
component of AV dominating. Hence, the valuation of these companies would
largely be a function of their AV and they could potentially trade at a premium to
their AV depending upon the likelihood of them being able to achieve the projected
growth rates and the underlying actuarial values.
VALUATIONS OF LIABILITIES IN LIFE INSURANCE
Valuation of liabilities for life insurers requires assumptions of the rate of interest,
rate of mortality, level of future expenses etc. Two methods to value liabilities of
insurance companies which are Gross Premium method and Net premium method.
Gross Premium Valuation
Liabilities= (P.V of the benefits contracted to be payable + P.V of the future
expenses likely to be incurred + P.V of bonuses likely to be declared in the future) -
(P.V of premium receivable)
An important feature of this method is its transparency. It is possible for any one
examining the valuation report to judge whether sufficient margins have been
provided for possible adverse developments. At the same time, the method has one
serious drawback, viz., its sensitivity to the various parameters used. A marginal
increase in the valuation rate of interest or a decrease in the expected level of
future bonuses could lead to a significant reduction in liability and release of larger
surplus for distribution than what could be considered as prudent.
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Net Premium Valuation
Liability under a policy = P.V of benefits contracted to be payable - P.V of the
true/net premium.
No explicit provision is made for either future expenses or future bonuses as under
the gross premium method.
Practices in Different Developed countries
1) United Kingdom: Currently, the United Kingdom may perhaps be the only
industrial country in which the net premium valuation is prescribed as the statutory
method of valuation.
2) Canada: The statutory method of valuation prescribed in Canada since 1992 is
known as the Policy Premium Method (PPM). The PPM is a gross premium
prospective method of valuation. Policy premium simply means the premium
charged under a policy, i.e., gross premium. The assumptions regarding valuation
parameters are based on the best estimates of future experience with provision for
adverse deviations. Though this method is similar to the gross premium valuation
discussed earlier, there are some significant differences.
3) Australia: The statutory method of valuation prescribed in Australia is the
'Margin on Services Method'. In this method, the liability is defined as the sum of
i) the best estimate value of policy liabilities, which is the amount required to meet
future expenses and benefits and ii) the value of future expected profit margins on
the services provided to policyholders such as insurance of mortality risks and on-
going expenses of administration.
4) Germany:The gross premium method of valuation that is generally used in
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Germany. The net premium method of valuation, with Zillmer adjustment, is also
permitted. Since 1986, the Indian insurance industry has been following the gross
premium method of valuation.
GENERAL INSURANCE
While well defined procedures are in place in almost all the countries for the
valuation of liabilities under the life insurance business, it is not so in case of the
general insurance business. The systems in vogue are more general than specific.
The only stipulation is that the system followed should be in accordance with the
GAAP. As per the European directives, the balance sheet needs only to show the
directors' opinion about the financial position of the general insurance company. In
the USA, the directors have liberty to place an appropriate value on the liabilities.
In general, it is the responsibility of the accounting profession to ensure that the
value placed on the liability is fair and reasonable. In many European countries, it
is the tax authorities and not the insurance regulators who require that the amount
of reserves shown be estimated scientifically.
Investments of insurance companies have been largely in bonds floated by GOI,
PSU's, state governments, local bodies, corporate bodies and mortgages of long
term nature. Liability (known as the Technical Reserve) under a general insurance
portfolio can be broadly defined as the sum of:
The amount of premium estimated as required to cover the risk during the
balance policy period falling after the balance sheet date (Unearned or Un-
expired Premium Reserve - UPR),
The amounts expected to be paid in future in respect of the claims already
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The amount expected to be paid in future in respect of claims that might
have occurred but could not be reported to the insurer till the balance sheet
date (Incurred But Not Reported - IBNR),
The direct expenses expected to be normally incurred for the settlement of
the above two classes of claims, and
Reserves required to be held on a prudent basis towards catastrophe losses or
a single incident giving rise to multiple claims.
INVESTMENTS VALUATION
Generally, under life insurance policies, premiums are received in advance and
after providing for acquisition and management expenses, the current cost of
claims and other outgo, the balance of premium is available for investment. These
balance premiums and the investment income is available to meet claims, which
would occur in later years.
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GROWTH AND FUTURE
With a large population and untapped market, insurance happens to be a big
opportunity in India. The insurance business is growing at the rate of 32-34%
annually .India's insurance sector is the 5th largest life insurance market, globally
worth US$ 41 billion. With alarming growth in the past, the insurance industry is
predicted to grow even faster in the coming years, with a business opportunity of
$70 billion in 2020 for private players.
Life Insurance
Life insurance industry recorded a premium income of US$ 24 billion during 2009
with a growth of 32-34% annually and non life insurance US$ 24 billion. The
contribution of first year premium, single premium and renewal premium to the
total premium was Rs.21275.75 crore (20.09 per cent); Rs.17509.78 crore (16.54
per cent); and Rs.67090.21 crore (63.37 per cent), respectively.
Total Sector Premiums are expected to grow at 16% p.a. for the next 5 years.
Private sector is expected to grow at 59% CAGR. Private players are expected to
gain market share of 45% by 2010. Life insurance sector has contributed to more
than 4% in the GDP whereas nonlife insurance has contributed to around 0.6%
Projection of life insurance and non life insurance premiums, 2004-2012:
Life insurance (INR m)Non life insurance (INR
m)
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2004 749971 203856
2005 871672 234323
2006
102595
7 271830
2007120142
5315522
2008140336
2368094
2009
166781
4 429750
2010198305
1496953
2011236657
6572727
2012
280456
1 651736
Average growth rate between 2004-
2012
Is
18.1%And 15.1%
Source: Swiss ReEconomic Research and Consulting
While the overall sector premium growth will continue to be in the 15-20% range,
premium income for the private sector is expected to grow at a much faster rate as
they are expected to continue to gain market share owing to:
Increasing demand for new products like health insurance and pension funds
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Aggressive expansion of distribution network
Low base effect
Rising share of private sector
Source:IRDA
Growth To Decelerate Near Term (FY12)
A sharp deceleration in the single premium' policies is expected as the regulator,
IRDA, has recently come out with regulations stipulating that from June'06
onwards, all ULIP's would have to have a life cover of at least 3 years and has also
lowered the maximum commission that can be paid on ULIP's. In particular, this
affects all unit linked policies which were structured as single premium policies.
Hence, the FYP growth my decelerate to 35% from a heady 85% last year. Players
like Bajaj Allianz and SBI Life that have a high proportion of single premium
policies may see sharper deceleration. We, however, expect traditional policies
(endowment / whole life) to grow at +40-50% pa. Hence, in FY12, the FYP (first
year premiums) growth is expected to decelerate to 30% (v/s 93% in FY06E)
driven by a sharp slowdown in single premium policies to under 20% from 120%
in FY11. However, traditional products (whole life and endowment) are expected
to gather more momentum and that should, help support overall industry growth
(private players) at +30%.
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RESEARCH OBJECTIVE
1. To study the awareness of insurance among different kind of Insurance
Company & Policy..
1. To study the customer preferences in the Insurance Segment.
1. To study the major players in the Insurance Segment.
2. To study the Reasons for the preference in the Insurance Sector.
1. To study the growth of insurance sector in past 10 years
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RESEARCH METHODOLOGY
The information required for the study was collected in the form of Secondary
data. The present research is of descriptive type. The information was gathered
from Media and Secondary based data.
RESEARCH DESIGN
A research design is the arrangement of conditions for the collection and analysis
of data in a manner that aims to combine relevance to the research purpose with
economy in procedure.
In fact, the research design is the conceptual structure within which research is
conducted. It constitutes the blueprint for the collection, measurement and analysis
of data.
Research design facilitates smooth sailing of various research operations, thereby
making research as efficient as possible yielding maximum with minimal
expenditure of effort, time and money.
Research design stands for advance planning of methods to be adopted for
collecting the relevant data and the techniques to be used in there analysis, keeping
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Secondary data required for the study was collected from various websites,
magazines, brochures, pamphlets and newspapers.
DATA - ANALYSIS
MARKET SHARE ANALYSIS
IRDA ranking in July 2012 showed that LIC has the higher market share in the
number of policies sold compared with premium income means private life
insurers are cornering a larger share of high premium policies.
Market share of private life insurance companies in new business in July 2012
stood at 37 per cent. Among the private life insurance companies, ICICI Prudential
Life Insurance Company is at the number one position in July 2012 and Bajaj
Allianz Life Insurance Company captured the second place in the IRDA rankings
of July 2012.
INSURER
MARKET SHARE
STRUCTURE
Total in (%)
LIC 66%
ICICI PRUDENTIAL 12%
BAJAJ ALLIANZ 7.5%
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HDFC SLIC 4.5%
TATA AIG 2.5%
MAX NEW YORK 3.5%
RELIANCE LIFE 4%
LIC
ICICI
BAJAJ
HDFC SLIC
TATA AIG
MAX
RELIANCE
The above chart shows the market share structure of the major players and new
players in the insurance business. LIC have the monopoly in the life insurance
whereas, ICICI and BAJAJ are the top rankers in private sector.
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Source IRDA Ranking in July 2012.
2002 2003 2004 2005 2006 2007 2008 2009 2011 2012
TABLE No: 11 Net Worth Movement for the Past Ten Years
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FINDINGS
1. It was found that people are interested to invest their money in mutual fund
which is more than the percentage of the respondents who invest their money in
other investment plans.
2. The foremost factor which people consider while purchasing an insurance policy
is the company image and then they consider other factors.
3. People are satisfied with their investment and insurance policies
4. Everyone focuses on return at the time of investment in comparison of risk or
liquidity.
5. According to the survey I observed that good return can be obtained if the risk is
high.
6. Minimal knowledge about the investment schemes are being given.
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SUGGESTIONS
1. The company should educate people about their rigidity and longevity in
order to gain their confidence and built trust on them.
1. The company emphasize on their promotional tools to increase the
awareness level of people about their products.
1. Company should advertise and promote their emerging distribution
channels through various media, which would helpful in creating awareness
among the people.
1. The company should try to provide good return to the investors for creating
good level of satisfaction.
1. The company should mostly focuses on the quality of financial consultant
instead of the quantity.
1. The company should ensure that insurance policies should not be purchased
for the purpose of tax benefits but it should be purchased for future security,investment and return.
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However, the size of the existing insurance market is very large; thus, it shows
bright future of insurance industry. On the other hand, the primary success of
insurance sector depends upon to build trust and fulfill expectations of the people
that help in the growth of the industry.
LIMITATIONS
The sample taken may not be a true representative of the population. Thus, some
of the limitations are:-
As the universe is too large and to take opinion is very difficult.
Exact data is not given on net.
Due to shortage of time, response of countable sites and magzines are taken.
These information is totally correct and appropriate as it's purely made and
based on secondary data.
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CONCLUSION
India is among the most promising emerging insurance markets in the world. The
major drivers include sound economic fundamentals, a rising middle-income class,
an improving regulatory framework and rising risk awareness.
The groundwork for realizing potential was arguably laid in 2000 when India
undertook to open the domestic insurance market to private-sector and foreign
companies. Significantly, foreign players participated in most of these new
companies - despite the restriction of 26% on foreign ownership. Incumbent state-
owned insurance companies have so far managed to hold their own and retain
dominant market positions. Yet, their market share is likely to decline in the near to
medium term. Important steps have thus been already taken, but there are still
major hurdles to overcome if the market is to realize its full potential. To begin
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with, India needs to further liberalize investment regulations on insurers to strike a
proper balance between insurance solvency and investment flexibility. With the
current proposal in the parliament to raise the foreign investment cap to 49%, the
future has potential. Furthermore, both the life and non-life insurance sectors
would benefit from less invasive regulations.
In the life sector, insurers will need to increase efforts to design new products that
are suitable for the market and make use of innovative distribution channels to
reach a broader range of the population. There is huge untapped potential, for
example, in the largely undeveloped private pension market and the rural sector.
Private insurers will have a key role to play in serving the large number of informalsector workers. The same is true for the health insurance business. In addition, the
rapid growth of insurance business will put increasing pressure on insurers' capital
level. The current equity holding ceilings, however, could limit the ability of new
companies to rapidly inject capital to match business growth.
A key challenge for India's non-life insurance sector will be to reform the existing
tariff structure. From a pricing perspective, the Indian non-life segment is stillheavily regulated. Some 75% of premiums are generated under the tariff system,
which means that they are often below market clearing levels. Reinsurance in India
is mainly provided
by the General Insurance Corporation of India (GIC), which receives 20%
compulsory cessions from other non-life insurers.
As far as reinsurance is concerned, policymakers have to recognize that insuranceand reinsurance cannot be treated in the same manner. Due to the unique nature of
reinsurance, it is necessary to de-link the sector from regulations governing direct
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insurance companies. To allow branching of foreign reinsurers, for example, would
make the market more attractive for international players and secure cover for
natural catastrophe risks which, today, are mainly uninsured.
Finally, the largely underserved rural sector holds great promise for both life and
non-life insurers. To unleash this potential, insurance companies will need to show
long-term commitment to the sector, design products that are suitable for the rural
population and utilize appropriate distribution mechanisms.
WEAKNESS:
Lack of trustworthiness of customers on private companies.
Lack of good training programme.
Technical knowledge of financial consultant and development officers are
inadequate, thus, dont provide sufficient information to the customers.
The company mostly focuses on to increase the quantity of FC instead of quality.
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THREAT:
1. Lack of awareness level of various life insurance plans was quite limited even
amongst the policyholders, especially in rural areas.
2. The competitors of the company are of aggressive nature but Insurance
companies is of conservative nature so if the competitors of the company
continue doing aggressive nature in selling the Policies will loose their target
customers.
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BIBLIOGRAPHY
Books:
1. Marketing Management- Philip Kotler
1. Marketing Research- C.R. Kothari
Magazines and Journals:
1.Business Standard
1. The Economic Times
1. Outlook money
Web Site:
www.google.com
www.hdfcinsurance.com
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www.iloveindia.com
www.iciciprudential.com