Introduction:

• Insurance = Collective bearing of Risk.• Basic Human trait is to be averse to the idea

of risk taking.• Insurance, whether life or non-life, provides

people with a reasonable degree of security and assurance that they will be protected in the event of a calamity or failure of any sort.

Fact

ors

affec

ting

serv

ice

sect

or • Five environmental variables that affect all industries-– Customers– Competitors– Government– Technology and

– Globalization -are forcing rapid changes in the service sector.

• In addition, there are four factors of particular importance to service providers- – change in how quality is perceived– cost control– customer services and– the new definitions of the customer.

DIVISION OF INSURANCE SECTOR

• Till end of FY 1999-2000, two state-run insurance companies, namely, Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were the monopoly insurance providers in India.

• Under GIC there were four subsidiaries– National Insurance Company Ltd.– Oriental Insurance Company Ltd. – New India Assurance Company Ltd.– United India Assurance Company Ltd.

ORIGIN AND GROWTH OF INSURANCE SECTOR:

• In fiscal 2000-01, the Indian federal government lifted all entry restrictions for private sector investors.

• Foreign investment insurance market was also allowed with 26 percent cap.

• GIC was converted into India's national reinsure from December, 2000

• All the subsidiaries working under the GIC umbrella were restructured as independent insurance companies.

ORIGIN AND GROWTH OF INSURANCE SECTOR:

Milestones in GIC

107 insurers amalgamated and grouped into four companies viz.:

• The National Insurance Company Ltd.• The New India Assurance Company Ltd. • The Oriental Insurance Company Ltd.• The United India Insurance Company Ltd. • GIC incorporated as a company.

Cont

ribut

ors

Life Insurers:Allianz Bajaj Life Insurance Co. Ltd.AMP Sanmar Assurance Co. Ltd.Birla Sun Life Insurance Co. Ltd.Dabur CGU Life Insurance Company Pvt. Ltd.HDFC Standard Life Insurance Co. Ltd. ICICI Prudential Life Insurance Co. Ltd. ING Vysya Life Insurance Co. Pvt. Ltd. Life Insurance Corporation of India.Max New York Life Insurance Co. Ltd.Metlife India Insurance Co. Pvt. Ltd.Om Kotak Mahindra Life Insurance Co. Ltd.SBI Life Insurance Co. Ltd.Tata AIG Life Insurance Co. Ltd.

Cont

ribut

ors

Non-Life Insurers:• Bajaj Allianz General Insurance Co. Ltd.• ICICI Lombard General Insurance Co. Ltd.• IFFCO Tokyo General Insurance Co. Ltd.• National Insurance Co. Ltd.• New India Assurance Co. Ltd.• Oriental Insurance Co. Ltd.• Reliance General Insurance Co. Ltd.• Royal Sundaram Alliance Insurance Co. Ltd.• Tata AIG Life Insurance Co. Ltd.• United India Insurance Co. LtdReinsurers:• General Insurance Corporation of India.

Contribution to growth:• Currently, the insurance sector size is estimated

at Rs.500 billion. • On account of intense marketing strategies

adopted by private insurance players, the market share of state owned insurance companies like GIC, LIC and others have come down to 70% in last 4-5 years from over 97%.

• The private insurance players despite the sector is still regulated has been offering rate of return (RoR) to its policy holders which is estimated at about 35% as against 20% of domestic insurance companies.

Contribution to growth:• LIC and GIC have limited number of policies to

offer to their subscribers • Private insurance companies offer many policies

and the premium amount as well as the maturity period is much competitive as against those of government insurance companies.

• The private sector insurance players have started exploring the rural markets in which until recently, the state owned companies had the monopoly.

• India’s life insurance premium, as a percentage of GDP is 1.8%

Future of the Sector: Indian insurance sector is likely to register

unprecedented growth of 200% and attain a size of Rs. 2000 billion by 2009-10

A private sector insurance business will achieve a growth rate of 140% as a result of aggressive marketing technique being adopted by them against 35-40% growth rate of state owned insurance companies.

In rural markets, the share of private insurance players would increase substantially as these have been able to generate a faith among their rural consumers.

Insurance Sector - Emerging Areas:

• Demand for Pension PlansTwo relatively modern trends affect life insurance

business in India significantly: – Joint Family System and– elderly are increasingly having to fend for

themselves• Separateness of Banking and Insurance– Bancassurance

• Role of Information Techno-logy• Using Postal Network• Creating Insurance awareness• Innovative Products

CHANGE IN TRENDS

FROM PRICE POINT OF VIEW• DIFFERENT COMPANIES ARE PROVIDING POLICES OF

INSURANCE AT COMPETETIVE PRICES• EVEN THE ALLOCATION CHARGES UNDER POLICIES IS

ALSO DECREASED• THE INSURANCE AGENT COMISSION IS ALSO FIXED

AAND REDUCED SO THAT THE CUSTOMER CAN GET THE BEST.

FROM CUSTOMER AND SERVICE POINT OF VIEW

• Globalization - "The Dynamic Force"• MNCs - "The New Path Maker"• More customer oriented• Mostly better service oriented• More competitive• Better satisfaction• More value addition• Strategic development

FROM PROMOTION POINT OF VIEW

• Computerization• Internet• Electronic Clearance Service (ECS)• Call Centres and SMS services

INDIAN INSURANCE IN 21ST CENTURY• 2000: IRDA starts giving licenses to private insurers: ICICI prudential and

HDFC Standard Life insurance first private insurers to sell a policy • 2001: Royal Sundaram Alliance first non life insurer to sell a policy • 2002: Banks allowed selling insurance plans. As TPAs enter the scene,

insurers start setting non-life claims in the cashless mode • 2007: First Online Insurance portal, https:/// set up by an Indian Insurance

Broker, Bonsai Insurance Broking Pvt Ltd.• The Government of India liberalized the insurance sector in March 2000

with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership.

• Minimum capital requirement for direct life and Non-life Insurance company is INR1000 million and that for reinsurance company is INR 2000 million. In the 2004-05 budgets, the Government proposed for increasing the foreign equity stake to 49%, this is yet to be effected. Under the current guidelines, there is a 26 percent equity cap for foreign partners in direct insurance and reinsurance Company

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