Insurance Sector in 2015

PRESENTED BYBaibhav Agrawal

Priyanshu Jaiswal

PRESENTATION LAYOUT• Insurance Overview• Sector History• FDI in Insurance• Benefit Of FDI• Government Role• Future Expectation• Challenges• Industry Growth

Pattern• References

INSURANCE OVERVIEW• A contract (policy) in which an individual or entity receives financial protection or

reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.(1)

According to Investopedia

TYPES OF INSURANCE(2)

1. Life Insurance

2. General Insurance Motor Insurance

Personal Accident Insurance Medical and Health Insurance

Travel Insurance Marine Insurance

HISTORY OF LIFE INSURANCE IN INDIAYear Milestones in the life insurance business in India(3)

1912 The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business

1928 The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses

1938 Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

HISTORY OF GENERAL INSURANCE IN INDIAYear Milestones in the general insurance business in India(3)

1907 The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business

1957 General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices

1968 The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

1972 The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 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. and the United India Insurance Company Ltd. GIC incorporated as a company.

FDI IN INSURANCE(4)

• The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. Due to new economic policy the insurance sector was reopened to the private sector.

• The IRDA opened up the market in August 2000 with the invitation for application for registrations. The bill allows foreign equity stake in domestic private insurance companies to maximum of 26% of the total paid-up capital and seeks to provide statutory status to the insurance regulator.

• The Insurance Bill, 2015, already passed by the Lok Sabha, Receive a green signal from the Rajya Sabha (on Mar 12, 2015), seeks to increase the cap on foreign direct investment (FDI) in the insurance sector from 26% to 49%

Type of Business No. of Public Sector Companies

No. of Private Sector Companies

Total Companies

Life Insurance 01 23 24 General Insurance 06 22 28 Re Insurance 01 0 01 Total 08 45 53

Data as on June 2014

BENEFITS OF INCREASED FDI IN INSURANCE(5)

1. Insurance Products : Insurers will benefit from the hike of FDI and will offer better and wide range of insurance products to customers at larger competitive prices.

2. Aggression : The industry has been cautious in selling products which are capital intensive, it will be able to become more aggressive.

3. Increased Capital Inflow : Most of the private sector insurance companies have been making considerable losses. The increased FDI limit has brought some much needed relief to these firms as the inflow of more than 10,000 crore is expected in the near term. This could go up to 40,000 crore in the medium to long term, depending on how things pan out.

4. New Players : We can expect about 100 life and non-life insurance companies to serve a market of our size. Increasing FDI could see 25-30 new insurers entering the market.

5. Level Playing Field : With the increase in foreign direct investment to 49 percent, the insurance companies will get the level playing field. So far the state owned Life Corporation of India controls around 70 percent of the life insurance market.

IRDA's Annual Report 2014

• Increase in Foreign Direct Investment Limit from 26 to 49%.• Increase in Deduction Allowed for Medical Insurance (Section 80D) in Income Tax (Budget 2015)

(6).

• Pradhan Mantri Jeevan Jyoti Bima Yojana. This scheme aims to provide life insurance cover. Premium: Rs. 330 per annum. It will be auto-debited in one instalment.

• Pradhan Mantri Suraksha Bima Yojana. This scheme is mainly for accidental death insurance cover for up to Rs. 2 lakh. Premium: Rs. 12 per annum.

FEW GOVERNMENT POLICY

• India's life insurance sector is the biggest in the world with about 360 million policies which are expected to increase at a compound annual growth rate (CAGR) of 12-15% over the next five years.

• The insurance industry plans to hike penetration levels to five per cent by 2020.

• The country’s insurance market is expected to quadruple in size over the next 10 years from its current size of US$ 60 billion. During this period, the life insurance market is slated to cross US$ 160 billion.

• The general insurance business in India is currently at Rs 78,000 crore (US$ 11.7 billion) premium per annum industry and is growing at a healthy rate of 17 per cent.

• The Indian insurance market is a huge business opportunity waiting to be harnessed. India currently accounts for less than 1.5% of the world’s total insurance premiums and about 2 per cent of the world’s life insurance premiums despite being the second most populous nation. The country is the fifteenth largest insurance market in the world in terms of premium volume, and has the potential to grow exponentially in the coming years.

• Life Insurance Sector Likely to Grow 12-15% in FY16: ICRA

FUTURE EXPECTATION(7)

INDUSTRY CHALLENGES(8)

• Cut Threat Competition

• Customer Relationship Management

• Distribution of Products

• Risk Management

• Untapped Market Segments

• Relationship Management

• Human Resource Management

• Managing the Regulatory Authority

INDUSTRY GROWTH PATTERN (9)

REFERENCES1. http://www.investopedia.com/terms/i/insurance.asp (Dated 1st Nov 2015)2. http://www.insuranceinfo.com.my/learn_the_basics/types_of_insurance.php?intPrefLangID=1 and http

://www.allbankingsolutions.com/Top-Topics/Types-of-insurance.shtml (Dated 1st Nov 2015)3. https://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo4&mid=2 (Dated 1st

Nov 2015) and Dr. N. KANNAN (2010), “A STUDY ON THE GROWTH OF INDIAN INSURANCE SECTOR” International Journal of Management, Vol. 1, Issue-1, May 2010, pp. 17 –32

4. Singh Ruby, Gautam Amit (2014), “Foreign Direct Investment and Indian Insurance Industry”, International Journal of Advance Research Computer Science and Management Studies, Vol. 2, Issue-6, June 2014 and http://www.business-standard.com/article/current-affairs/six-year-wait-ends-for-up-to-49-fdi-in-insurance-115031300034_1.html (Dated 1st Nov 2015).

5. Pawar Subhash D., “ROLE OF FDI AND INSURANCE SECTOR : INDIAN PERSPECTIVE”, Tactful Management Research Journal

6. http://www.charteredclub.com/section-80d/7. http://www.ibef.org/industry/insurance-sector-india.aspx8. G. Chandrayya (2015), “Opportunities and Challenges of Insurance Industry in India”, International

Journal of Academic Research, Vol.2, Issue-2(3)9. http://www.ibef.org/industry/insurance-sector-india.aspx