A Project on child plan INSURANCE INDUSTRY India Insurance Industry: - New Avenues For Growth With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market (2004-05) is estimated at Rs.450 billion (US$10 billion). According to government sources, the insurance and banking services’ contribution to the country's gross domestic product (GDP) is 7% out of which the
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A Project on child plan
INSURANCE INDUSTRY
India Insurance Industry: - New Avenues For Growth
With an annual growth rate of 15-20% and the largest number of life
insurance policies in force, the potential of the Indian insurance
industry is huge. Total value of the Indian insurance market (2004-
05) is estimated at Rs.450 billion (US$10 billion). According to
government sources, the insurance and banking services’
contribution to the country's gross domestic product (GDP) is 7% out
of which the gross premium collection forms a significant part.
The funds available with the state-owned Life Insurance Corporation
(LIC) for investments are 8% of GDP. Till date, only 20% of the
total insurable population of India is covered under various life
insurance schemes, the penetration rates of health and other non-life
insurances in India is also well below the international level. These
facts indicate the of immense growth potential of the insurance
sector.
The year 1999 saw a revolution in the Indian insurance sector, as
major structural changes took place with the ending of government
monopoly and 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.
Though, the existing rule says that a foreign partner can hold 26%
equity in an insurance company, a proposal to increase this limit to
49% is pending with the government. Since opening up of the
insurance sector in 1999, foreign investments of Rs. 8.7 billion have
poured into the Indian market and 21 private companies have been
granted licenses.
Innovative products, smart marketing, and aggressive distribution
have enabled fledgling private insurance companies to sign up Indian
customers faster than anyone expected. Indians, who had always
seen life insurance as a tax saving device, are now suddenly turning
to the private sector and snapping up the new innovative products on
offer.
The life insurance industry in India grew by an impressive 36%, with
premium income from new business at Rs. 253.43 billion during the
fiscal year 2004-2005, braving stiff competition from private
insurers. RNCOS’s report, “Indian Insurance Industry: New Avenues
for Growth 2012”, finds that the market share of the state behemoth,
LIC, has clocked 21.87% growth in business at Rs.197.86 billion by
selling 2.4 billion new policies in 2004-05. But this was still not
enough to arrest the fall in its market share, as private players grew
by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29
billion in 2003-04.
Though the total volume of LIC's business increased in the last fiscal
year (2004-2005) compared to the previous one, its market share
came down from 87.04 to 78.07%. The 14 private insurers increased
their market share from about 13% to about 22% in a year's time.
The figures for the first two months of the fiscal year 2005-06 also
speak of the growing share of the private insurers. The share of LIC
for this period has further come down to 75 percent, while the
private players have grabbed over 24 percent.
There are presently 12 general insurance companies with four public
sector companies and eight private insurers. According to estimates,
private insurance companies collectively have a 10% share of the
non-life insurance market.
Though the focus of this market research report is on the potential
growth on the Indian Insurance Sector, it also talks about the market
size, market segmentation, and key developments in the market after
1999. The report gives an instant overview of the Indian non-life
insurance market, and covers fire, marine, and other non-life
insurance. The data is supplied in both graphical and tabular format
for ease of interpretation and analysis. This report also provides
company profiles of the major private insurance companies.
Report Highlights:
Gains of Liberalization in Indian Insurance Sector
Indian Insurance Market Segmentation By Products
Size of the Market and Market Share Of Life Insurers, In INR
(crore)
Market Share Of Non-Life Insurers
Forecast of Life Insurance Growth Up to 2012
Forecast of Non-Life Insurance Growth Up to 2012
Market Revenue of Both Public and Private Insurers
Policies and Measures Taken By IRDA To Develop The
Insurance Market
Research and Development Activities
Regulation of insurance and reinsurance companies
Major Challenges That Indian Insurance Sector is Facing
Profiles of the Major Players
LIFE INSURANCE IN INDIA
With such a large population and the untapped market area of this
population Insurance happens to be a very big opportunity in India.
Today it stands as a business growing at the rate of 15-20 per cent
annually. Together with banking services, it adds about 7 percent to
the country’s GDP .In spite of all this growth the statistics of the
penetration of the insurance in the country is very poor. Nearly 80%
of Indian populations are without Life insurance cover and the
Health insurance.
This is an indicator that growth potential for the insurance sector is
immense in India. It was due to this immense growth that the
regulations were introduced in the insurance sector and in
continuation “Malhotra Committee” was constituted by the
government in 1993 to examine the various aspects of the industry.
The key element of the reform process was Participation of overseas
insurance companies with 26% capital. Creating a more efficient and
competitive financial system suitable for the requirements of the
economy was the main idea behind this reform.
Since then the insurance industry has gone through many sea
changes .The competition LIC started facing from these companies
were threatening to the existence of LIC. Since the liberalization of
the industry the insurance industry has never looked back and today
stand as the one of the most competitive and exploring industry in
India. The entry of the private players and the increased use of the
new distribution are in the limelight today. The use of new
distribution techniques and the IT tools has increased the scope of
the industry in the longer run.
A Brief History
The origin of insurance is very old .The time when we were not even
born; man has sought some sort of protection from the unpredictable
calamities of the nature. The basic urge in man to secure himself
against any form of risk and uncertainty led to the origin of
insurance. The insurance came to India from UK; with the
establishment of the Oriental Life insurance Corporation in 1818.
The Indian life insurance company act 1912 was the first statutory
body that started to regulate the life insurance business in India. By
1956 about 154 Indian, 16 foreign and 75 provident firms were been
established in India. Then the central government took over these
companies and as a result the LIC was formed. Since then LIC has
worked towards spreading life insurance and building a wide
network across the length and the breath of the country. After the
liberalization the entrance of foreign players has added to the
competition in the market.
The General insurance business in India, on the other hand, can trace
its roots to the Triton Insurance Company Ltd., the first general
insurance company established in the year 1850 in Calcutta by the
British. In 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. In 1972 The General
Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January
1973.
It was after this that 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.
Present Scenario
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 to enter the market with some limits on direct foreign
ownership. premium rate of most general insurance. Policies come
under the purview of the government appointed Tariff Agenty
Committee. The opening up of the sector is likely to lead to greater
spread and deepening of insurance in India and this may also
restructuring and revitalizing of the public sector companies. A host
of private insurance companies operating in both life and non life
segments have started selling their insurance policies since 2001.
Non life insurance market, In December 2000, the GIC subsidiaries
were restructured as independent insurance companies. At the same
time, GIC was converted into national re-insurer. In July2002,
Parliament passed a bill, delinking the four subsidiaries from GIC.
Presently there are 12 general insurance companies with 4 public
sector companies and 8 private insures. Although the public sector
companies still dominate the general insurance business, the private
insurance companies have a 10 percent share of the market, up from
4 percent in 2001. In the first half of 2002, the private companies
booked premium worth 6.34 billion. Most of the new entrants
reported losses in first yr of their operation in 2001.
Insurance costs constitute roughly around 1.2 – 2 % of the total
project costs. Under the existing norms, insurance premium
payments are treated as part of the fixed costs. Consequently they are
treated as pass through costs for tariff calculations.
For projects costing up to Rs.1 billion, the tariff Agent committee
sets the premium rates, for projects between 1 billion and 15 billion,
the rates are set in keeping with committee’s guidelines; and projects
above 15 billion are subjected to reinsurance pricing. It is the last
segment that has a number of additional products and competitive
pricing. Insurance, like project finance, is extended by a consortium.
Normally one insurer takes the lead, shouldering about 40-50% of
the risk and receiving proportionate percentage of the premium.
Company profile of MAX NEW YORK LIFE :
Max New York Life Insurance
“Max New York Life wants people to view insurance as a financial
protection and wealth creation instrument and not just a tax-saving tool.”
Max New York Life Insurance Company Ltd. is a joint venture
between New York Life, a Fortune 100 company and Max India Limited,
one of India's leading multi-business corporations. The company has
positioned itself on the quality platform. In line with its vision to be the most
admired life insurance company in India, it has developed a strong corporate
governance model based on the core values of excellence, honesty,
knowledge, caring, integrity and teamwork. The strategy is to establish itself
as a trusted life insurance specialist through a quality approach to business.
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