Insurance in IndiaInsurance in India

PRESENTED BY:-PRESENTED BY:-

Mihir Trivedi - 02Mihir Trivedi - 02 Rajaram Palav - 26Rajaram Palav - 26 Chandan Kokul - 27Chandan Kokul - 27 Samson Aranha - 28Samson Aranha - 28 Bansi Mehta - 23Bansi Mehta - 23

IndexIndex Definition of Insurance.Definition of Insurance. History of Insurance.History of Insurance. Liberlisation.Liberlisation. Contribution to the Economy.Contribution to the Economy. Introduction of Micro insurance.Introduction of Micro insurance. Misconceptions.Misconceptions. Critical Features.Critical Features. IRDA.IRDA. Target Market.Target Market. Critical Issues.Critical Issues.

““Covers an individual / Company Covers an individual / Company /Household for some or all of a /Household for some or all of a financial loss that is linked to an financial loss that is linked to an unpredictable event or risk, via risk unpredictable event or risk, via risk pooling & the payment of a pooling & the payment of a premium.”premium.”

Definition : Definition :

1850 the first insurance company was formed in 1850 the first insurance company was formed in India.India.

1938 The insurance act was passed.1938 The insurance act was passed. 1947 economic nationalization began in insurance 1947 economic nationalization began in insurance

sector.sector. 1972 Insurance market was fully nationalized.1972 Insurance market was fully nationalized. 1991 economic liberalization was began.1991 economic liberalization was began. 1994 Marine tariffs were removed.1994 Marine tariffs were removed. 1999 the Insurance regulatory & development 1999 the Insurance regulatory & development

authority Act (IRDA) was formed.authority Act (IRDA) was formed. 2000 first private company got the licensed.2000 first private company got the licensed.

““ In 1991 Economic liberlisation began In 1991 Economic liberlisation began under Dr.Manmohan Singh.3 Yrs later the under Dr.Manmohan Singh.3 Yrs later the Malhotra committee report on the state of Malhotra committee report on the state of Indian insurance industry was released.Indian insurance industry was released.

These recommendation were put in These recommendation were put in to practice via IRDA. In particular, the to practice via IRDA. In particular, the monopoly previously enjoyed by GIC monopoly previously enjoyed by GIC (General insurance corporation of India) (General insurance corporation of India) was removed in yr -2000 & First licensed was removed in yr -2000 & First licensed were granted to private. Companies.”were granted to private. Companies.”

Liberalisation: Liberalisation:

Contribution of Insurance market in Indian Contribution of Insurance market in Indian Economy.Economy.

Insurance generated RS 400 billion business in India , and together with banking services adds about 7% to India's GDP .Gross premium collection is about 2% of GDP and has been growing by 15-20% per annum. India also has the highest number of life insurance policies in force in the world , and total investible funds with the LIC are almost 8%. of GDP. Yet more than three –fourths of India’s insurable population has no life insurance or pension cover.

 Life

insurance Non life

insurance

Total Revenue earned (2007) $ 41.36 billion $ 6.53 billion

compound annual growth rate 11.84 % 5.75 %

Premium contribution in 2011 $ 65.96 billion $ 7.48 billion

Growth in next 4 yrs (2011) 59.48 % 62.02 %

* Growth in major types of Insurance * Growth in major types of Insurance

What is Micro What is Micro Insurance ?Insurance ?

Micro-Insurance is a key element in the financial Micro-Insurance is a key element in the financial services packages for people at the bottom of the services packages for people at the bottom of the pyramidpyramid..

Micro insurance is a risk transfer device characterized Micro insurance is a risk transfer device characterized

by low premiums and more coverage limits, and by low premiums and more coverage limits, and designed for low-income people not served by typical designed for low-income people not served by typical social or commercial insurance schemes. It is a social or commercial insurance schemes. It is a financial arrangement to protect low-income people financial arrangement to protect low-income people against specific risk in exchange for risk involved.against specific risk in exchange for risk involved.

Misconceptions on Micro Misconceptions on Micro Insurance Insurance Small insurance companies.Small insurance companies. Just another product offered by Just another product offered by

MFIs.MFIs. Regular insurance products with Regular insurance products with

smaller sums insured and smaller sums insured and premiums .premiums .

Savings, credit, risk prevention.Savings, credit, risk prevention.

Critical Features of Micro Critical Features of Micro Insurance.Insurance. Transactions are low-cost and reflect members’ willingness Transactions are low-cost and reflect members’ willingness

to pay.to pay.

Clients are essentially low-net-worth but not necessarily Clients are essentially low-net-worth but not necessarily uniformly poor.uniformly poor.

Communities are involved in the important phases of the Communities are involved in the important phases of the process (such as package design and rationing of benefits).process (such as package design and rationing of benefits).

The essential role of the network of micro insurance units is The essential role of the network of micro insurance units is to enhance risk management of the members of the entire to enhance risk management of the members of the entire pool of micro insurance units over and above what each pool of micro insurance units over and above what each can do when operating as a stand-alone entity.can do when operating as a stand-alone entity.

Need for Micro InsuranceNeed for Micro Insurance

Poor also need insurance protectionPoor also need insurance protection

Inclusive growth is the only way to ensure sustained growthInclusive growth is the only way to ensure sustained growth

Trickle down effect of the process of economic growth Trickle down effect of the process of economic growth benefiting the poor beliedbenefiting the poor belied

Poor get excluded unless special effort is made to bring Poor get excluded unless special effort is made to bring them into the development processthem into the development process

Monitor it effectivelyMonitor it effectively

Rising Importa

nce

Rising Importa

nce

Risk Priorities by low-income people

Health ProblemsHealth Problems

Death of breadwinnerDeath of breadwinner

Death of family memberDeath of family member

Crop loss / bad harvestCrop loss / bad harvest

Theft; fireTheft; fire

Natural disasterNatural disaster

IRDA’s InitiativesIRDA’s Initiatives Developmental InitiativesDevelopmental Initiatives:-:- Legislature delegated developmental responsibilities – A unique model.Legislature delegated developmental responsibilities – A unique model. Ensuring orderly growth and penetration of insurance are the prime Ensuring orderly growth and penetration of insurance are the prime

objectives.objectives. Introduction of development oriented regulations to Bridge the Demand Introduction of development oriented regulations to Bridge the Demand

Supply gap.Supply gap.

Mandatory Norms Mandatory Norms :-:-Rural Sector - Life InsurersRural Sector - Life Insurers First 5 years - 7% to 16% of total policies underwrittenFirst 5 years - 7% to 16% of total policies underwritten 6th to 10th* year - 18% to 20%6th to 10th* year - 18% to 20%

Non LifeNon Life First 5 years - 2% to 5% of total gross premiumFirst 5 years - 2% to 5% of total gross premium 6th to 10th* year - 5% to 7%.6th to 10th* year - 5% to 7%.

Social Sector - Life & Non LifeSocial Sector - Life & Non Life 5000 to 20000 lives for the first 5 years and 25000 to 55000 lives for 6th to 5000 to 20000 lives for the first 5 years and 25000 to 55000 lives for 6th to

10th year*10th year*

Target Market.Target Market.

WealthyWealthy

MiddleIncomeMiddleIncome

LowIncome

LowIncome

Destitute / Severely PoorDestitute / Severely Poor

AA BB

DD EECC

A Commercial Insurance for wealthy individuals and companies, as well as compulsory products.

B Most of non-motor related commercial insurance.

C Social security and public health services.

D Aggregate market for microfinance providers.

E Potential market for micro insurance.

A Commercial Insurance for wealthy individuals and companies, as well as compulsory products.

B Most of non-motor related commercial insurance.

C Social security and public health services.

D Aggregate market for microfinance providers.

E Potential market for micro insurance.Policyholders (the market):-

People do respond to “good” products.Generally lack understanding of insurance and thus require knowledge and appreciation .Education, marketing, policy documents MUST be simple and appropriate .We need to help people link needs with insurance as an appropriate response

Critical IssuesCritical Issues

Illiteracy.Illiteracy. Ignorance.Ignorance. Lack of complete information.Lack of complete information. Huge untapped rural market.Huge untapped rural market. Commutation & Communication.Commutation & Communication. Lack of expertise.Lack of expertise.

THANK YOUTHANK YOU