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INDIAN INSURANCEINDUSTRY[INDUSTRY ANALYSIS]

26THJULY 2010, MONDAY

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CONTENTS

SR.

No.

PARTICULARS PAGE

NO.

1 INTRODUCTIONINSURANCE 3

2. STRUCTURE OF INDIAN INSURANCE INDUSTRY 9

3. SIZE OF THE INDIAN INSURANCE INDUSTRY 10

4. STRATEGIC GROUPSINSURANCE INDUSTRY 14

5. SEGMENTATION:PRODUCTS

CUSTOMERS

15

6. INTERNATIONAL OVERVIEW 23

7. NEW ENTRANTS IN THE RECENT PAST 24

8. TOP FIVE PLAYERS IN THE INDUSTRY 26

9. MAJOR POLICY CHANGES IN THE RECENT PAST 47

10. EXTERNAL ANALYSIS: PEST ANALYSIS 51

11. PORTERS FIVE FORCES MODEL 7712. EXTERNAL ANALYSIS: SWOT ANALYSIS 84

13. PROJECTED FUTURE TRENDS 86

14. CONCLUSION 88

15. BIBLIOGRAPHY 89

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3

INTRODUCTIONINSURANCE

In India, insurance has a deep-rooted history. It finds mention in the writings of

Manu (Manusmrithi), Yagnavalkya (Dharmasastra ) and Kautilya

(Arthasastra ). The writings talk in terms of pooling of resources that could be

re-distributed in times of calamities such as fire, floods, epidemics and famine.

This was probably a pre-cursor to modern day insurance. Ancient Indian history

has preserved the earliest traces of insurance in the form of marine trade loans

and carriers contracts. Insurance in India has evolved over time heavily

drawing from other countries, England in particular.

1818 saw the advent of life insurance business in Indiawith the

establishment of the Oriental Life Insurance Company in Calcutta. This

Company however failed in 1834. In 1829, the Madras Equitable had begun

transacting life insurance business in the Madras Presidency. 1870 saw the

enactment of the British Insurance Act and in the last three decades of the

nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of

India (1897) were started in the Bombay Residency. This era, however, was

dominated by foreign insurance offices which did good business in India,

namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe

Insurance and the Indian offices were up for hard competition from the foreigncompanies.

In 1914, the Government of India started publishing returns of Insurance

Companies in India. The Indian Life Assurance Companies Act, 1912 was the

first statutory measure to regulate life business. In 1928, the Indian Insurance

Companies Act was enacted to enable the Government to collect statisticalinformation about both life and non-life business transacted in India by Indian

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and foreign insurers including provident insurance societies. In 1938, with a

view to protecting the interest of the Insurance public, the earlier legislation was

consolidated and amended by the Insurance Act, 1938 with comprehensive

provisions for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies.

However, there were a large number of insurance companies and the level of

competition was high. There were also allegations of unfair trade practices. The

Government of India, therefore, decided to nationalize insurance business.

An Ordinance was issued on 19thJanuary, 1956 nationalising the Life

Insurance sector and Life Insurance Corporation came into existence in the

same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75

provident societies245 Indian and foreign insurers in all. The LIC had

monopoly till the late 90s when the Insurance sector was reopened to the private

sector.

The history of general insurance datesback to the Industrial Revolution in

the west and the consequent growth of sea-faring trade and commerce in the

17thcentury. It came to India as a legacy of British occupation. General

Insurance in India has its roots in the establishment of Triton Insurance

Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the IndianMercantile Insurance Ltd, was set up. This was the first company to transact all

classes of general insurance business.

1957 saw the formation of the General Insurance Council, a wing of the

Insurance Associaton of India. The General Insurance Council framed a code of

conduct for ensuring fair conduct and sound business practices.

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In 1968, the Insurance Act was amended to regulate investments and set

minimum solvency margins. The Tariff Advisory Committee was also set up

then.

In 1972 with the passing of the General Insurance Business (Nationalisation)

Act, general insurance business was nationalized with effect from 1stJanuary,

1973. 107 insurers were amalgamated and grouped into four companies, namely

National Insurance Company Ltd., the New India Assurance Company Ltd., the

Oriental Insurance Company Ltd and the United India Insurance Company Ltd.

The General Insurance Corporation of India was incorporated as a company in

1971 and it commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending

to nearly 200 years. The process of re-opening of the sector had begun in the

early 1990s and the last decade and more has seen it been opened up

substantially. In 1993, the Government set up a committee under thechairmanship of RN Malhotra, former Governor of RBI, to propose

recommendations for reforms in the insurance sector.The objective was to

complement the reforms initiated in the financial sector. The committee

submitted its report in 1994 wherein , among other things, it recommended that

the private sector be permitted to enter the insurance industry. They stated that

foreign companies be allowed to enter by floating Indian companies, preferablya joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999,

the Insurance Regulatory and Development Authority (IRDA) was constituted

as an autonomous body to regulate and develop the insurance industry. The

IRDA was incorporated as a statutory body in April, 2000. The key objectives

of the IRDA include promotion of competition so as to enhance customer

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satisfaction through increased consumer choice and lower premiums, while

ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for

application for registrations. Foreign companies were allowed ownership of up

to 26%. The Authority has the power to frame regulations under Section 114A

of the Insurance Act, 1938 and has from 2000 onwards framed various

regulations ranging from registration of companies for carrying on insurance

business to protection of policyholders interests.

In December, 2000, the subsidiaries of the General Insurance Corporation

of India were restructured as independent companies and at the same time GIC

was converted into a national re-insurer. Parliament passed a bill de-linking the

four subsidiaries from GIC in July, 2002.

Today there are 14 general insurance companies including the ECGC andAgriculture Insurance Corporation of India and 14 life insurance companies

operating in the country.

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Overview

Insurance business is divided into four classes:

a) Life Insurance

b) Fire

c) Marine

d) Miscellaneous Insurance.

Life insurers undertake the Life Insurance business; general insurers handle the

rest. The business of insurance essentially means defraying risks attached to an

activity (including life) and sharing the risks between various entities, both

persons and organisations. Insurance companies are important players in

financial markets as they collect and invest large amounts of premium in

various investment instruments. Insurance offers the following benefits:

a) Protection to investors

b) Accumulation of savings

c) Channelling these savings into sectors needing huge long-term investments.

Insurance companies receive a steady cash stream of premium or contributions

to pension plans. Their cash flows are determined on the basis of various

actuary studies and models. Since their liabilities are long-term or contingent in

nature, their investments are also long-term and they are able to maintain a

healthy liquidity position. Since they offer more than the return on savings inthe shape of life cover to the investors, the rate of return guaranteed on their

insurance policies is relatively low. Consequently, the need to seek high rates of

return on their investments is also low. Since the risk factor in the insurance

business is quite high, insurance companies usually invest in relatively safer

bets such as bonds of GOI, PSUs, state governments, local bodies, corporate

houses and mortgages of long-term nature. Lately, insurance companies have

also ventured into pension schemes and mutual funds.

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Life insurance constitutes the major share of insurance business. Life insurance

depends upon the laws of mortality. Life has to end sooner or later and the claim

in respect of life is certain.

On the other hand, in case of general insurance, there may never be any claim

and the amount cannot be ascertained in advance. Hence, life insurance, besides

providing a cover for life of individuals, alsoserves as a good source of savings

for the beneficiaries. The life insurance market in India presents several striking

features, which appear, for the most part, to be necessary concomitants of the

underdeveloped nature of the countrys economy.

Existences of a large number of life insurance sellers and the narrowness of the

life insurance market have been the characteristics peculiar to India.

The volume of life insurance business annually sold on the Indian life insurance

market came on an average to about Rs 160 crore. Most of these policies were

sold during the phase of private enterprise, by Indian organisations termedinsurers by the Indian Insurance Act (Act IV of 1938).

The term insurers included:

a) Proprietary Joint Stock Companies

b) Mutual Joint Stock Companies

c) Partnership firms to which the Indian Partnership Act of 1932 applied

d) Co-operative Life Insurance Societies

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STRUCTURE OF INDAIN INSURANCE

INDUSTRY

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SIZE OF THE INDIAN INSURANCE INDUSTRY

The Insurance sector is a colossal oneand is growing at a speedy rate of 15-

20%. Together with banking services, Insurance services add about 7% to

the countrys GDP. Total value of the Indian insurance market(2004-05) is

estimated at Rs. 450 billion (US$10 billion).The funds available with the

state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP.

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.

The US$ 41-billion Indian life insurance industry is considered the fifth largest

life insurance market, and growing at a rapid pace of 32-34 per cent annually,according to the Life Insurance Council.

Life Insurance Corporation of India (LIC) registered an 83 per cent

increasein new business income in March 2010, while private players posted

a 47 per cent growth in new business premium.

Moreover, according to IRDA, insurers sold 10.55 million new policies in 2009-10 with LIC selling 8.52 million and private companies 2.03 million policies. At

the end of March 2010, LIC held 65 per cent market share in terms of new

business income collection with the private sector contributing the remaining 35

per cent share in 2009-10.

According to IRDA, total premium collected in 2009-10 was US$ 24.64 billion,

an increase of 25.46 per cent over US$ 19.64 billion collected in 2008-09.

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A growth of 18 per cent is expected in total premium income and is likely to

cross the US$ 64.93 billion mark, according to B Mathur, Secretary General,

Life Insurance Council.

General Insurance

Vehicle financing firm, Magma Fincorp has applied to IRDA for approval and

expects clearance in 2010. The firm is entering the general insurance business in

a joint venture with Germany-based company HDI-Gerling International

Holding AG.

According to data released by IRDA, the general insurance industry recorded

13.42 per cent growth in gross premium collected during 2009-10. The

industry collected gross premium of US$ 7.84 billion in 2009-10 compared with

US$ 6.91 billion in 2008-09.

The public sector players posted 13.85 per cent growth in gross premium in

2009-10. At the same time, private players recorded a 12.82 per cent increase in

gross premium till March 2010.

During April-May 2010, non-life insurers mopped up US$ 1.59 billion against

US$ 1.34 billion in the previous year, registering an increase of 19 per cent

according to IRDA data.

The four state-run insurers fared better than their private counterparts, with New

India Insurance collecting the maximum premium of US$ 294.5 million in April

and May 2010, compared to US$ 253.15 million in the previous year, growing

by 16.34 per cent.

According to the IRDA's Summary Reports of Motor Data of Public and Private

Sector Insurers - 2008-09, nearly 30 million vehicle policies were issued and a

total premium worth US$ 1.83 billion was collected.

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Health Insurance

The Indian health insurance market has emerged as a new and lucrative growth

avenue for both the existing players as well as the new entrants. According to alatest research report "Booming Health Insurance in India" by research firm

RNCOS released in April 2010,all emerging trends including the key factors

driving the market growth. Furthermore, the report also identifies what could be

the possible growth areas for expansion and gives a detailed overview of the

competitive landscape. The Indian health insurance market has continued to

post record growth in the last two fiscals (2008-09 and 2009-10). Moreover, as

per the RNCOS estimates, the health insurance premium is expected to grow at

a compound annual growth rate (CAGR) of over 25 per cent for the period

spanning from 2009-10 to 2013-14.

A well-developed and evolved insurance sector is a boon for economic

development as it provides long- term funds for infrastructure development at

the same time strengthening the risk taking ability of the country.

Current Position:

67%

33%

Insured

yes

no

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Awareness of Different Schemes:

Reasons for taking Insurance:

22%

78%

Awareness

yes

no

Businessman

Professional

Student

Housewife

Tax Benefit 32% 65% 5% 22%

Flexible 0.00% 2.00% 0.00% 5.00%

Less Risk 11% 15% 2% 12%

Wide Acceptance 10% 5% 12% 18%

Security 42% 13% 75% 31%High Return 5% 0% 6% 12%

0%

20%

40%

60%

80%

100%120%

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STRATEGIC GROUPSINSURANCE

INDUSTRY

Insurance Business

LIFE INSURANCE GENERAL INSURANCE

FIRE INSURANCE MARINE

INSURANCE

MISCELLANEOUS

INSURANCE

Life Insurance Corporation of India

Bajaj Allianz Life Insurance

Company Limited .

Birla Sun Life Insurance Co. Ltd

ICICI Prudential Life Insurance Co.Ltd

Reliance Life Insurance Company

Limited. etc.

The Oriental Insurance Co. Ltd.

Reliance General Insurance Co. Ltd.

Bajaj Allianz General Insurance Co. Ltd.

ICICI Lombard General Insurance Co.

Ltd.

IFFCO Tokio General Insurance Co. Ltd.

etc.
http://www.licindia.com/http://www.bajajallianzlife.co.in/http://www.bajajallianzlife.co.in/http://www.birlasunlife.com/birlasunlife/insurance/bsli_mp/index5.aspxhttp://www.iciciprulife.com/http://www.iciciprulife.com/http://www.reliancelife.com/http://www.reliancelife.com/http://orientalinsurance.nic.in/http://www.reliancegeneral.co.in/http://www.bajajallianz.co.in/http://www.icicilombard.com/http://www.icicilombard.com/http://www.itgi.co.in/http://www.itgi.co.in/http://www.icicilombard.com/http://www.icicilombard.com/http://www.bajajallianz.co.in/http://www.reliancegeneral.co.in/http://orientalinsurance.nic.in/http://www.reliancelife.com/http://www.reliancelife.com/http://www.iciciprulife.com/http://www.iciciprulife.com/http://www.birlasunlife.com/birlasunlife/insurance/bsli_mp/index5.aspxhttp://www.bajajallianzlife.co.in/http://www.bajajallianzlife.co.in/http://www.licindia.com/

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SIZE OF THE INDIAN INSURANCE INDUSTRY

The Insurance industry in India has been progressing at a rapid pace since

opening up of the industry in 2000. Indian domestic insurance market would

touch around US$ 60.5 Billion in the year 2010 from existing size of about US$

10.2 billion about 500% hike. According to the Insurance Regulatory and

Development Authority (IRDA), new business premium income from April

2006 to February 2007 amounted to INR 579.38 billion (US$13.18 billion),

registering an impressive 120% growth over the same period last year.

Indias life insurance premium as a percentage of GDP is currently estimated at

1.8% against 5.2% in US, 6.5% in UK and about 8% in South Korea.

Rural and semi-urban India will contribute US $35 billion to the Indian

insurance industry by 2010, including US $20 billion by way of life insurance

and the rest US $15 billion through non-life insurance schemes.

The Insurance industry graph is definitely ascending. Distribution accounts for

the largest element in insurers cost and affects profitability. The size of the

country combined with problems of connectivity in the rural areas, makes

insurance selling in India a difficult proposition. The distribution capabilities

strongly influence product design in insurance. The distribution channels have a

direct impact on the insurers market image. Emergence of alternative channels

such as Bancassurance and Internet is reshaping the insurance

industry. India with a population of more than a billion people offers unlimited

growth potential.

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SEGMENTATION OF CUSTOMERS(AGE WISE) AND

VARIOUS PRODUCTS OFFERED BY INSURANCE

COMPANIES

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

- -

42% 38%

21%14%

3% 9%

17% 32%

44% 40%

34%12%

11% 13%

28%

42%

Retirement

InsuranceLife Insurance

Education

Medical Insurance

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DYNAMICS OF THE INSURANCE INDUSTRY

Changing Customer Expectationsin Insurance Sector ( PRE TO POST liberalization) :

Pre Liberalisation Post Liberalisation

Motivating Factor(s) for Considering Insurance

Security 43%

Savings 14%

Tax Rebate 43%

Security 50%

Savings* 34%

Tax Rebate 16%

* childrens education,

daughters marriage, retirement

plan

Sources of Information on Insurance & Product Awareness

Friends, Colleagues,

Relatives and Agent

Low awareness of several

insurance products

due to poor communication in

spite of availability

Additionally from direct

mailers, consumer

meets, internet & media (mass

media & outdoor)

Rising level of awareness

of new products of bothLIC and private

companies

Choice of First Policy

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Money Back 60%

Endowment 40%

Whole Life 0%

Money Back 42%

Endowment 48%

Whole Life 10%

Thi s change in product-mix

refl ects maturing of the

insurance customer

Pre Purchase Process : LIFE


Motivating Factor(s) for Considering Insurance

Security 43%

Savings 14%

Tax Rebate 43%

Security 50%

Savings* 34%

Tax Rebate 16%

* childrens education, daughters

marriage, reti rement plan

Sources of Information on Insurance & Product Awareness

Friends, Colleagues, Relatives

and Agent

Low awareness of several

insurance products

due to poor communication in spite

of availability

Additionally from direct

mailers, consumer

meets, internet & media (mass

media & outdoor)

Rising level of awareness of

new products of both LIC and

private companies

Choice of First Policy

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Money Back 60%

Endowment 40%

Whole Life 0%

Money Back 42%

Endowment 48%

Whole Life 10%

Thi s change in product-mix refl ects

matur ing of the insurance customer

Purchase Process : LIFE


Discount Offering Practices

No. of customers getting

discount : 50%

Rate of discount : 25%-50%

of first year premium

Customers getting discount :

33% (highest in Delhi)

Rate of discount : More or

less same

Policy Delivery

Mode

- Registered post for L IC, hand

delivered by

agent in 23% cases

Time taken

Up to 1 week 0%

One month 65%

> 1 month 35%

Mode

- Registered post for L IC

- Couri er for private companies

In both cases, policy comes in

attractive,

protective plastic jacket

Time taken LIC

Pri vate Co

Up to 1 week 5%

85%

Up to one month 77%

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15%

> 1 month 18%

0%

Post Purchase Process : LIFE


Correspondence (other than premium notice) from

Company / Agent

Generally no

correspondence fromeither

company or agent except

for late premium

payment reminder from

company

Agent maintained

informal contact with

close

customers

Mailers from both

private companies &LIC on

products & services,

greeting cards on birthdays,

anniversary and new year

Phone calls from

private company call

centres

Agent in regular

contact for offering

new

products

Delay in Premium Payment

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Incidence of delay

high 30%

(due to ir regular receipt of

premium notice from

company / reminder from

agent)

Incidence of delay low

15%

(more regular receipt of

premium notice fr om

company / reminder from

agent)

Changing Customer ExpectationsLIFE

Role of IRDA

Educate public on regulatory safeguards, investment guidelines and

plough back of profits (several people had expressed concern about

security of their money, credibility of private insurance companysinvestment of funds in foreign markets and repatriation of profits to

foreign countries)

Inform public on Social and Rural obligations of private players (several people

believed that only LIC was responsible for insuring the poor)

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Changing Trends in Savings Pattern:


Saving Instruments % of

Respondents

Insurance 23

Bank Deposit 28

PPF 19

NSC 12

Shares 7

Post office 7

Bonds 0

Gold 4_

TOTAL 100

Saving Instruments % of

Respondents

Insurance 33

Bank Deposit 44

PPF 8

NSC 0

Shares 3

Post office 3

Bonds 9

Gold 0_

TOTAL 100

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International Overview

On the 19thJuly 2010, the Indian based company Larsen & Toubro (L&T) received final approval from

Indian insurance regulators to start commencing business through its subsidiary, L&T Insurance. The

newly formed general insurer is supported by L&T, valued at US$9.8 billion. The Indian conglomerateL&Twill have 100% equity in L&T Insurance.

Larsen & Toubro is one the largest private sector conglomerates in India, and the decision to enter

into the insurance industry comes at a time when L&T aim to strengthen their position in the Indian

financial service industry. Already established in the non-banking financial sector, with L&T Finance

Ltd, the move into the general insurance sector meets L&Ts aim to diversify the companys financial

services offerings, and create a bigger corporate presence in the Indian financial market.

With health insurance as the key focus of its entry to the insurance business, the company plans to

emphasize the importance of their offerings in this area. As such, the long term aim for L&T

Insurance is the development of its own health insurance claim management team.

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NEW ENTRANTS IN THE RECENT PAST

Indian Insurance Industry in the year 2007-2008, has 5 new entrants:

LIFE INSURERS:

I. Future Generali India Life Insurance Company Limited

II. IDBI Fortis Life Insurance Company Ltd.

GENERAL INSURERS

:

1. Apollo Munich Health Insurance Company Limited

2. Future Generali India Insurance Company Limited

3. Universal Sompo General Insurance Company Ltd.

Indian Insurance Industry in the year 2008-2009, so far has 5 new entrants in

life and 3 new entrant in general:

LIFE INSURERS:

I. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.

II. Aegon Religare Life Insurance Company Ltd.

III. DLF Pramerica Life Insurance Company Ltd.

IV. Star Union Dai-ichi Life Insurance Co. Ltd.,

V. IndiaFirst Life Insurance Company Ltd.

GENERAL INSURERS:

1. Shriram General Insurance Company Limited,

2. Bharti Axa General Insurance Company Ltd.

3. Raheja QBE General Insurance Co. Ltd
http://www.irdaindia.org/www.fg-life.inhttp://www.idbifortis.com/http://www.apollodkv.co.in/http://www.irdaindia.org/www.fg-general.inhttp://www.universalsompo.com/http://www.canarahsbclife.com/http://www.aegonreligare.com/http://www.dlfpramericalife.com/http://www.shriramgi.com/http://www.irdaindia.org/www.bharti-axagi.co.inhttp://www.irdaindia.org/www.bharti-axagi.co.inhttp://www.shriramgi.com/http://www.dlfpramericalife.com/http://www.aegonreligare.com/http://www.canarahsbclife.com/http://www.universalsompo.com/http://www.irdaindia.org/www.fg-general.inhttp://www.apollodkv.co.in/http://www.apollodkv.co.in/http://www.apollodkv.co.in/http://www.idbifortis.com/http://www.irdaindia.org/www.fg-life.in

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Indian Insurance Industry in the year 2009-20010:

Max Bupa Health Insurance,the India-based joint venture betweenMax India

Ltd.andBupa,has launched its business and revealed its first product on April

29th, 2010.

Max Bupa Health Insurances first product, named Heartbeat, which is targeted

at Indian families, providing health insurance coverage for infants, senior

citizens and all the family members in between.

The company currently has an initial capital base of Rs 1.51 billion, or Rs 151

crore (US$ 33.89 million), with intentions to raise that number up to Rs 700-

750 crore (US$ 157-168 million) in five years time.
http://www.maxbupa.com/default.aspxhttp://www.maxindia.com/http://www.maxindia.com/http://www.bupa.com/http://www.bupa.com/http://www.maxindia.com/http://www.maxindia.com/http://www.maxbupa.com/default.aspx

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TOP 5 PLAYERS IN THE INDIAN INSURANCE

INDUSTRY

Top five players in the Indian Insurance Industry are:

1.Life Insurance Corporation of India

2.ICICI Prudential Life Insurance Co Ltd

3.Bajaj Allianz Life Insurance Co Ltd

4.SBI Life Insurance Co Ltd

5.Reliance Life Insurance Co Ltd

64%8.93%

6.98%

5.15%

2.96% 11.98%

Market Share of Insurance Companies In India

Life Insurance Corporation of

India

ICICI Prudential Life Insurance Co

Ltd

Bajaj Allianz Life Insurance Co Ltd

SBI Life Insurance Co Ltd

Reliance Life Insurance Co Ltd

Others

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I. Life Insurance Corporation of India

LIC still remains the largest life insurance company accounting for 64% market

share. Its share, however, has dropped from 74% a year before, mainly owing to

entry of private players with innovative products and better sales force.

LIC experienced growth of only 5% during 2007-08 in new business premium.

It had an estimated 1.1 million licensed agents, with the private insurers adding

another 900,000.

LIC witnessed decline in sales by 24% for new business premium for the first

four months for the current financial year.

Total sales stood at Rs 10,797.1 crore during April-July as against new sales of

Rs 14,186.04 crore in the corresponding period last financial year.

This is was mainly due to slowdown in economy and crash of stock market.

Also, private companies are eating the share of LIC by introducing innovative

products.

Products in dif ferent market segment:

1. Insurance Plans:

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As individuals it is inherent to differ. Each individuals insurance needs and

requirements are different from that of the others. LICs Insurance Plans are

policies that talk to you individually and give you the most suitable options that

can fit your requirement.

Jeevan AnuragKomal Jeevan

CDA Endowment Vesting At 21 Marriage Endowment Or

Educational Annuity PlanCDA Endowment Vesting At 18

Jeevan Kishore

Jeevan Chhaya

Child Career Plan

Child Future Plan

Child Fortune Plus

Jeevan Aadhar

Jeevan Vishwas

The Endowment Assurance Policy

The Endowment Assurance Policy-Limited Payment

Jeevan Mitra(Double Cover Endowment Plan)

Jeevan Mitra(Triple Cover Endowment Plan)

Jeevan Anand

New Janaraksha Plan
http://www.licindia.in/children_need_001_benefits.htmhttp://www.licindia.in/children_need_002_features.htmhttp://www.licindia.in/children_need_002_features.htmhttp://www.licindia.in/children_need_006_features.htmhttp://www.licindia.in/children_need_006_features.htmhttp://www.licindia.in/children_need_005_features.htmhttp://www.licindia.in/children_need_005_features.htmhttp://www.licindia.in/children_need_006_features.htmhttp://www.licindia.in/children_need_003_features.htmhttp://www.licindia.in/children_need_004_features.htmhttp://www.licindia.in/children_need_004_features.htmhttp://www.licindia.in/children_need_007_features.htmhttp://www.licindia.in/children_need_007_features.htmhttp://www.licindia.in/children_need_008_features.htmhttp://www.licindia.in/children_need_008_features.htmhttp://www.licindia.in/children_need_009_features.htmhttp://www.licindia.in/children_need_009_features.htmhttp://www.licindia.in/handicapped_001_features.htmhttp://www.licindia.in/handicapped_002_features.htmhttp://www.licindia.in/handicapped_002_features.htmhttp://www.licindia.in/endowment_001_features.htmhttp://www.licindia.in/endowment_002_features.htmhttp://www.licindia.in/endowment_002_features.htmhttp://www.licindia.in/endowment_003_features.htmhttp://www.licindia.in/endowment_003_features.htmhttp://www.licindia.in/endowment_004_features.htmhttp://www.licindia.in/endowment_004_features.htmhttp://www.licindia.in/endowment_005_features.htmhttp://www.licindia.in/endowment_005_features.htmhttp://www.licindia.in/endowment_006_features.htmhttp://www.licindia.in/endowment_006_features.htmhttp://www.licindia.in/endowment_006_features.htmhttp://www.licindia.in/endowment_005_features.htmhttp://www.licindia.in/endowment_004_features.htmhttp://www.licindia.in/endowment_003_features.htmhttp://www.licindia.in/endowment_002_features.htmhttp://www.licindia.in/endowment_001_features.htmhttp://www.licindia.in/handicapped_002_features.htmhttp://www.licindia.in/handicapped_001_features.htmhttp://www.licindia.in/children_need_009_features.htmhttp://www.licindia.in/children_need_008_features.htmhttp://www.licindia.in/children_need_007_features.htmhttp://www.licindia.in/children_need_004_features.htmhttp://www.licindia.in/children_need_003_features.htmhttp://www.licindia.in/children_need_006_features.htmhttp://www.licindia.in/children_need_005_features.htmhttp://www.licindia.in/children_need_005_features.htmhttp://www.licindia.in/children_need_006_features.htmhttp://www.licindia.in/children_need_002_features.htmhttp://www.licindia.in/children_need_001_benefits.htm

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Jeevan Amrit

Jeevan Shree-I

Jeevan Pramukh

The Money Back Policy-20 Years

The Money Back Policy-25 Years

Jeevan Surabhi-15 Years



Bima Bachat

Jeevan Bharati - I

The Whole Life Policy

The Whole Life Policy- Limited Payment

The Whole Life Policy- Single Premium

Jeevan Anand

Jeevan Tarang
http://www.licindia.in/endowment_007_features.htmhttp://www.licindia.in/high_worth_001_features.htmhttp://www.licindia.in/high_worth_002_benefits.htmhttp://www.licindia.in/high_worth_002_benefits.htmhttp://www.licindia.in/periodic_moneyback_003_features.htmhttp://www.licindia.in/periodic_moneyback_003_features.htmhttp://www.licindia.in/periodic_moneyback_003_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_006_benefits.htmhttp://www.licindia.in/periodic_moneyback_006_benefits.htmhttp://www.licindia.in/periodic_moneyback_007_features.htmhttp://www.licindia.in/wholelife_001_features.htmhttp://www.licindia.in/wholelife_002_features.htmhttp://www.licindia.in/wholelife_002_features.htmhttp://www.licindia.in/wholelife_003_features.htmhttp://www.licindia.in/wholelife_003_features.htmhttp://www.licindia.in/endowment_005_features.htmhttp://www.licindia.in/endowment_005_features.htmhttp://www.licindia.in/jeevan_tarang_plan_007_features.htmhttp://www.licindia.in/jeevan_tarang_plan_007_features.htmhttp://www.licindia.in/jeevan_tarang_plan_007_features.htmhttp://www.licindia.in/endowment_005_features.htmhttp://www.licindia.in/wholelife_003_features.htmhttp://www.licindia.in/wholelife_002_features.htmhttp://www.licindia.in/wholelife_001_features.htmhttp://www.licindia.in/periodic_moneyback_007_features.htmhttp://www.licindia.in/periodic_moneyback_006_benefits.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_004_features.htmhttp://www.licindia.in/periodic_moneyback_003_features.htmhttp://www.licindia.in/periodic_moneyback_003_features.htmhttp://www.licindia.in/high_worth_002_benefits.htmhttp://www.licindia.in/high_worth_001_features.htmhttp://www.licindia.in/endowment_007_features.htm

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Two Year Temporary Assurance Policy

The Convertible Term Assurance Policy

Anmol Jeevan-I

Amulya Jeevan-I

Jeevan Saathi Plus

Jeevan Saathi

2. Pension Plans:

Pension Plans are Individual Plans that gaze into your future and foresee

financial stability during your old age. These policies are most suited for

senior citizens and those planning a secure future, so that you never give up on

the best things in life.

Market Plus I

Jeevan Nidhi

Jeevan Akshay-VI

New Jeevan Dhara-I
http://www.licindia.in/term_assurance_002_features.htmhttp://www.licindia.in/term_assurance_003_features.htmhttp://www.licindia.in/term_assurance_003_features.htmhttp://www.licindia.in/term_assurance_001_benefits.htmhttp://www.licindia.in/term_assurance_001_benefits.htmhttp://www.licindia.in/amulya_jeevan-I_benefits.htmhttp://www.licindia.in/amulya_jeevan-I_benefits.htmhttp://www.licindia.in/JeevanSaathiPlus_features.htmlhttp://www.licindia.in/joint_life_001_features.htmhttp://www.licindia.in/joint_life_001_features.htmhttp://www.licindia.in/market_plus_feature.htmlhttp://www.licindia.in/pension_plans_001_features.htmhttp://www.licindia.in/jeevan_akshay_plan_009_features.htmhttp://www.licindia.in/pension_plans_004_features.htmhttp://www.licindia.in/pension_plans_004_features.htmhttp://www.licindia.in/jeevan_akshay_plan_009_features.htmhttp://www.licindia.in/pension_plans_001_features.htmhttp://www.licindia.in/market_plus_feature.htmlhttp://www.licindia.in/joint_life_001_features.htmhttp://www.licindia.in/JeevanSaathiPlus_features.htmlhttp://www.licindia.in/amulya_jeevan-I_benefits.htmhttp://www.licindia.in/term_assurance_001_benefits.htmhttp://www.licindia.in/term_assurance_003_features.htmhttp://www.licindia.in/term_assurance_002_features.htm

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New Jeevan Suraksha-I

3. Unit Plans:

Unit plans are investment plans for those who realise the worth of hard-earned

money. These plans help you see your savings yield rich benefits and help you

save tax even if you don't have consistent income.

Market Plus I

Profit Plus

Money Plus-I

Child Fortune Plus

Jeevan Saathi Plus

4. Pension Plan

LICs Special Plans are not plans but opportunities that knock on your door once in

a lifetime. These plans are a perfect blend of insurance, investment and a lifetime

of happiness!

New Bima Gold

Health Protection Plus
http://www.licindia.in/pension_plans_003_features.htmhttp://www.licindia.in/market_plus_feature.htmlhttp://www.licindia.in/profit_plus_features.htmhttp://www.licindia.in/money_plus1_features.htmhttp://www.licindia.in/children_need_009_features.htmhttp://www.licindia.in/JeevanSaathiPlus_features.htmlhttp://www.licindia.in/investment_bimagold_features.htmhttp://www.licindia.in/Health_Protection_Plus_features.htmhttp://www.licindia.in/Health_Protection_Plus_features.htmhttp://www.licindia.in/investment_bimagold_features.htmhttp://www.licindia.in/JeevanSaathiPlus_features.htmlhttp://www.licindia.in/children_need_009_features.htmhttp://www.licindia.in/money_plus1_features.htmhttp://www.licindia.in/profit_plus_features.htmhttp://www.licindia.in/market_plus_feature.htmlhttp://www.licindia.in/pension_plans_003_features.htm

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Bima Nivesh

2005

Jeevan Saral

Jeevan Madhur

Jeevan Mangal

5. Group Scheme:

Group Insurance Scheme is life insurance protection to groups of people. This

scheme is ideal for employers, associations, societies etc. and allows you to enjoy

group benefits at really low costs.

Group LIC's Superannuation Plus

Group Term Insurance Schemes

Group Insurance Scheme in Lieu Of EDLI

Group Gratuity Scheme

Group Super Annuation Scheme

Group Savings Linked Insurance Scheme

Group Leave Encashment Scheme

Group Mortgage Redemption Assurance Scheme
http://www.licindia.in/investment_plan_001_features.htmhttp://www.licindia.in/investment_plan_001_features.htmhttp://www.licindia.in/special_plan_001_features.htmhttp://www.licindia.in/jeevan_madhur_plan_010_features.htmhttp://www.licindia.in/JeevanMangal_features.htmlhttp://www.licindia.in/JeevanMangal_features.htmlhttp://www.licindia.in/group_schemes_0010.htmlhttp://www.licindia.in/group_schemes_001.htmhttp://www.licindia.in/group_schemes_001.htmhttp://www.licindia.in/group_schemes_002.htmhttp://www.licindia.in/group_schemes_002.htmhttp://www.licindia.in/group_schemes_003.htmhttp://www.licindia.in/group_schemes_003.htmhttp://www.licindia.in/group_schemes_004.htmhttp://www.licindia.in/group_schemes_004.htmhttp://www.licindia.in/group_schemes_005.htmhttp://www.licindia.in/group_schemes_005.htmhttp://www.licindia.in/group_schemes_006.htmhttp://www.licindia.in/group_schemes_006.htmhttp://www.licindia.in/group_schemes_007.htmhttp://www.licindia.in/group_schemes_007.htmhttp://www.licindia.in/group_schemes_007.htmhttp://www.licindia.in/group_schemes_006.htmhttp://www.licindia.in/group_schemes_005.htmhttp://www.licindia.in/group_schemes_004.htmhttp://www.licindia.in/group_schemes_003.htmhttp://www.licindia.in/group_schemes_002.htmhttp://www.licindia.in/group_schemes_001.htmhttp://www.licindia.in/group_schemes_0010.htmlhttp://www.licindia.in/JeevanMangal_features.htmlhttp://www.licindia.in/jeevan_madhur_plan_010_features.htmhttp://www.licindia.in/special_plan_001_features.htmhttp://www.licindia.in/investment_plan_001_features.htmhttp://www.licindia.in/investment_plan_001_features.htm

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Gratuity Plus

Group Critical Illness Rider

JanaShree Bima Yojana (JBY)

Shiksha Sahayog Yojana

Aam Admi Bima Yojana

6. Withdrawn Plans:

Jeevan Nischay

Wealth Plus

Jeevan Aastha

Jeevan Varsha

Fortune Plus

Health Plus
http://www.licindia.in/images/Gratuity-Plus-Sales-Brochure.pdfhttp://www.licindia.in/group_schemes_0012.htmlhttp://www.licindia.in/group_schemes_0012.htmlhttp://www.licindia.in/social_securities_001_features.htmhttp://www.licindia.in/social_securities_003.htmhttp://www.licindia.in/social_securities_003.htmhttp://www.licindia.in/aam_admi_features.htmhttp://www.licindia.in/aam_admi_features.htmhttp://www.licindia.in/Jeevan_Nischay_features.htmlhttp://www.licindia.in/wealth_plus_feature.htmlhttp://www.licindia.in/endowment_008_features.htmhttp://www.licindia.in/jeeva_varsha_benefits.htmlhttp://www.licindia.in/fortune_plus_features.htmhttp://www.licindia.in/images/health_plus_brochure.pdfhttp://www.licindia.in/images/health_plus_brochure.pdfhttp://www.licindia.in/fortune_plus_features.htmhttp://www.licindia.in/jeeva_varsha_benefits.htmlhttp://www.licindia.in/endowment_008_features.htmhttp://www.licindia.in/wealth_plus_feature.htmlhttp://www.licindia.in/Jeevan_Nischay_features.htmlhttp://www.licindia.in/aam_admi_features.htmhttp://www.licindia.in/social_securities_003.htmhttp://www.licindia.in/social_securities_001_features.htmhttp://www.licindia.in/group_schemes_0012.htmlhttp://www.licindia.in/images/Gratuity-Plus-Sales-Brochure.pdf

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FINANCIAL ANALYSIS OF LIC:

Figures are as on March 2010

1.) P/E Ratio : 25.06P/E ratio of LIC is favourable

2. ) Current Ratio: 18.49

The short term financial position of LIC is favourable.

3.) Debt Equity Ratio: 10.26

PSU bonds offer yields of close to 10 per cent, conforming to the insurers yield

expectations. However, the sources said, LICs covenants were stiff. Borrowers

are not permitted early exits.

This was because LIC preferred to have long-term assets on its books to match

its liabilities.

Besides, borrowers are expected to maintain a debt equity ratio (DER) of 2:1

(67:33) during the tenure of the loan. The ratios are far tighter than the Finance

Ministry prescribed guidelines of 80:20 DER.

4.) ROE:8.70

LICs ROE is high which is very favorable.

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5.) EPS: 69.75

6.) Debt Service Ratio: 1.38

The DSCR measures the amount of cash available for debt servicing interest,

principal and lease/royalty payments and is used by project financiers to

assess the debt carrying capacity of borrowers.

In addition, LIC has also begun insisting on physical asset cover by PSU

borrowers. NHPC, for instance, has mortgaged some of its project assets to LIC.

7.) Net Profit Margin: 16.05

The overall operational efficiency of LIC is favourable with 16.05

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II. ICICI Prudential Life Insurance Co Ltd

ICICI Pru is the biggest private life insurance company in India. It experienced

growth of 58% in new business premium, accounting for increase in market

share to 8.93% in 2007-08 from 6.97% in 2006-07.

Total premium collected increased to Rs 8,305.80 crore from Rs 5,254.64 in

2006-07. Total number of policies sold went up by 49%, from 1,960,034 to

2,913,606 in 2007-08, with a market share of 5.73%.

Renewal premium had gone up by 101% to Rs.5,526 crore from Rs 2,751

crore.

The company has 950 urban and 1,000 non-urban branches across the country.

For the first four months of current financial year, it reported growth of 45.3%.

Products in different market segment:

1.) Life Insurance Plans:

Education Solutions

Wealth Creation plans

Protection Plans

2.) Retirement Plans

3.) Health Insurance Products

Health saver

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HealthAssure

Hospital Care II

Crisis Cover

FINANCIAL ANALYSIS OF ICICI Prudential Life Insurance Co Ltd

F inancial comparisons with competi tors

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Current Ratio:

Debt Equity Ratio:

0.54

0.56

0.58

0.6

0.62

0.64

0.66

0.68

2008 2007

0

0.2

0.4

0.6

0.8

1

2008 2007

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Profitability Ratio:

-1

-0.8

-0.6

-0.4

-0.2

0

2007 2008

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III.) Bajaj Allianz Life Insurance Co Ltd

Total new business premium collected by Bajaj Insurance was Rs 6,491.70

crore in 2007-08.

The company reported a growth of 52% and its market share went up to 6.98%

in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in

number of policies sold in 2007-08, with total market share of 7.36%.

For the period of April July 2008, total amount of new insurance premium

sold was Rs 1,197.95 crore as against Rs 1,075.93 in the same period last year,

experiencing a growth of 11.35%. Number of policies sold dropped by around

3%.

Bajaj Allianz Life has a strong distribution network across the country with over

1000 branches spread over 950 towns.

It plans to raise its capital base by infusing Rs 500 crore in next few months to

support its expansion plans.

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Products offered in different market segments:

UNIT LINKED

Regular

Premium

ew UnitGain

II

Assured Gain

Single Premium

Shield Plus

Wealth Gain

PENSION

Annuity

Retirement

Retirement

Advantage

RP

Future

Income

Generator

TRADITIONAL

Endowment

Life Time Care

Super Saver

Money Back

CashGain

TERM PLANS

ew Risk

Care

Term Care

WOMEN

INSURANCE

House Wives

HEALTH

Family

CareFirst

Health Care

CHILDREN PLAN

ChildGain

YoungCare II

JUST

LAUNCHED

Invest Plus

Premier

Group SecureLife
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Organization Design and Structure

Chairman

Board ofDirectors

ManagingDirector

CFO CMO

SalesChannel

Heads

BankAssurance

TideAgencies

Group & RuralHeads

RGSM

GSM

Key AccountManager

Account Manager

ActurialHead

UnderwritingHead

HR Head

Service &Operations

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IV.) SBI Life Insurance Co Ltd

State Bank of India has a 74% equity stake and the balance 26% is held by

French firm Cardif SA in SBI Life insurance. The company broke even in

March 2006.

Its the fourth year of operations. SBI Life leveraged the 14,000-odd bank

branches of its parent SBI to push insurance policies.

The company grew 142.5% in the first four months of the current fiscal year.

Total market share of the company increased from 3.14% in 2006-07 to 5.15%

in 2007-08, making it the 4th largest company in India.

However, in terms of new number of policies sold, the company ranked 6th in

2007-08. New premium collection for the company was Rs 4,792.66 crore in

2007-08, an increase of 87% over last year.

The company this year got approval to open 100 more branches to sell life

insurance products.

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Products offerent in different segments:

Protection Plan

Pension Plan

Savings Plan

Child Plan

Unit linked Plan

Health Plan

Group Plan

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V.) Reliance Life Insurance Co Ltd

Reliance Life has sold maximum number of new group non-single policies in

2007-08. It experienced a phenomenal growth of 196% in 2008.

Total new business premium collected was Rs 2,792.76 crore and its market

share went up to 2.96% from 1.23% a year back. It now ranks 5th in new

business premium and 4th in number of new policies sold in 2007-08.

RLIC has been one of the fast gainers in market share in new business premium

amongst the private players. It has crossed 1.7 Million policies in just two years

of operations, after its takeover of AMP Sanmar business.

The number of policies sold in the year 2007-08 stood at 10.74 lakh as against

4.51 lakh in the previous year. In a short span of time, the company

accomplished a large distribution set-up by opening 600 branches in 10 months,

taking the overall branch network to above

Products offered in different segments:

1.) For individuals:

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Protection Plan

Savings and investment Plans

Retirement Plan

Child Plans

2.) For Groups:

Employers Liability Solutions

Employers Protection Solutions

Employee Voluntary Benefit

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Major policy changes that has affected the industry

(both positively and negatively) in the recent

past.

Regulatory tightening for the Insurance Industry in 2009:

2009 was a year in which regulators ushered in quite a few changes and

proposed as many, for the insurance industry. The most notable changes were

the ones that had policyholder interests in mind a cap on the expenses of the

popular unit-linked insurance plans and allowing life insurers to sell products

online.

Apart from regulations which have already passed into law, there are others in

the proposal stagesuch as the Swarup Committee recommendations and the

Direct Taxes Code which may have far reaching implications for players.

Here's a look at the changes suggested, implemented and their impact on the

industry.

1.) Cap on ULIP expenses

Unit-linked insurance plans (ULIPs) have been long criticised for their high

front-end charges, compared to alternative investments such as mutual funds;

which depressed the yield to the investor.

It was to address this issue that the Insurance Regulatory Development

Authority introduced an upper ceiling on ULIP charges. This cap is expressed in

terms of difference between the gross and net yield to customers.

For ULIPs up to 10 years, the yield difference is capped at 300 basis points, and

for those running over 10 years, it should not exceed 225 basis points.

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Apart from this, the regulator has also imposed a cap on fund management

charges at 1.35 per cent annually, within the overall cap, for all products.

Insurance companies voiced their reservation on including the mortality andmorbidity charges in the overall cap and upon the representation, IRDA

removed these charges from the purview of the cap on expenses.

The new regulation came into effect from October 1 for new products and

existing ULIPs are required to meet these criteria by December 31. Responding

to this change, a few insurers have already withdrawn some existing products

and re-launched them in line with the new regulation.

2.) Online purchases

IRDA has permitted insurers to sell life insurance products online, which allow

customers to purchase a life insurance policy without an intermediary.

This is expected to drive down the cost of buying policies with one insurerrecently offering a discount of 40 per cent on premia for investors who opted for

its online term insurance plan.

3.) Promoters lock-in

IRDA is also ready with the final guidelines on corporate governance pertaining

to the insurance industry. According to the guidelines, the promoters ofinsurance companies would have a lock-in period of five years before they are

allowed to transfer the shares of the company to a third party.

In India, AMP Sanmar was the only insurance company to exit the business

since the sector was opened up to private players.

However, this regulation is designed to ensure that policyholders enjoycontinuity as only players with a long-term view will enter the sector.

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4.) Swarup Committee recommendations

The Swarup committee has submitted its proposals for doing away with the

agent commission that is embedded in the premium paid by the policyholder,akin to mutual fund entry loads. It has also suggested rationalising the current

commission structures of the agent. While the agent force has predictably

objected to these recommendations, the insurance regulator, insurers and the life

insurance council have also opposed these proposals.

5.) Direct Taxes Code

The draft of the proposed Direct Taxes Code recommended that insurance

investments, for long driven by their tax benefits, should be brought under

Exempt-Exempt- Tax regime, which would make the final proceeds of

insurance policies taxable on withdrawal. Further, it has stated that to get tax

exemption, the premium payable during the term of the policy does not exceed

5 per cent of the capital sum assured. If the committee's proposals are accepted,

insurance companies may find it hard to sell traditional endowment products

that driven largely by tax benefits.

6.) Multiple products

IRDA is considering allowing banks to tie-up with multiple insurance

companies, for vending their products. That will give bank customers wider

menu of options to choose from, and they can buy insurance products based on

their needs.

7.) IPOs from insurers

Initial public offerings (IPOs) from insurance players have been on the anvil for

some time now. However, according to IRDA regulations, only those with a 10-

year track record are allowed to float public offers.

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Reliance Life has approached IRDA to seek its permission to float a public

issue, despite a shorter history and the regulator has asked the company to

approach the Government. Currently, the Government is considering the

request.

Recent Investment policy changes in the Indian Insurance

Industry

A policy known by the name of 'Health plus Life Combi Product', offeringlife cover along with health insurance has been granted permission by the

IRDA act and insurance companies are allowed to provide it now.

The FDI limit in the insurance sector has been capped at 26% for the

foreign marketers but the government is thinking to increase it to 49% and

a bill of this offer is pending at the Rajya Sabha

A low cost pension scheme is supposed to be formed by the Pension Fund

Regulatory and Developmental Authority (PFRDA) on 1st April, 2010 to

provide social security to the the poorer class.

The compulsory ceding by every General Insurance Corporation (GIC),

would go on to stay at 10% under current regulations as specified by

IRDA.

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EXTERNAL ANALYSIS OF INDIAN

INSURANCE INDUSTRY

PEST ANALYSIS

I.] POLITICAL FACTORS AFFECTING LIFE INSURANCE

INDUSTRY

Within India political ambitions and rise of communalism, fissiparous

tendencies are on the rise and may well continue for quite some time to time.

Therefore, it expected that the insurance companies might consider offering

political risk coverage also. The only area where Indian insurers consider giving

cover is with regard to customs duty change under certain conditions. Certain

type of political risk at the international level has serious implications for

exporters. The term political risk has a wider connotation than commonly

understood or assumed. It covers events arising not just from politics, but risks

in the course of international transactions. In this connection, it may be noted

that export credit insurance has evolved out of uncertainties relating to

international trade, particularly due to problems arising out of foreign legal

jurisdiction, political changes and currency exchange difficulties faced by many

developing countries.

Prohibition for Investment: -

The funds of policyholders are prohibited from being directly / indirectly

invested outside India as per section 27C.

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Manner and conditions of investment: -

Subject to the above provisions contained in Section 27 -/ 27- A / 27 B, the

IRDA may,

In the interest of the policyholders, specify the time, manner and other

conditions of investment by insurer.

Give specific directions applicable to all insurers for the time, manner and

other conditions subject to which the policyholders funds should beinvested in

the infrastructure and social sectors.

After taking into account the nature of business and to protect the interest of the

policyholders, issue directions to insurers relating to time, manner and other

conditions of the investments provided the latter are given a reasonable

opportunity of being heard.

Insurance business in rural / social sector: -

All insurers are required to undertake such percentage of their insurancebusiness, including insurance for crops, in the rural social sector as specified by

the IRDA. They should discharge their obligations to providing life insurance

policies to persons residing in the rural sector, workers in the unorganized

sector or to economically vulnerable classes of society and other categories of

persons as specified by the IRDA.

Capital requirement: -

The paid up equity of an insurance company applying for registration to carry

on life insurance business should be Rs 100 Crores.

Renewal of registration: -

An insurer, who has been granted a certificate of registration, should have the

registration renewed annually with each year ending on March 31 after the

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commencement of the IRDA Act. The application for renewal should be

accompanied by a fee as determined by IRDA regulations, not exceeding one

forth of one percent of the total gross premium income in India in the preceding

year or Rs 5 Crores or whichever is less, but not less than Rs 50000 for each

class of business as per Section 3-A.

Requirements as to Capital: -

The minimum paid up equity capital, excluding required deposits with the RBI

and any preliminary expenses in the formation of the country, requirement of an

insurer would be Rs 100 crore to carry on life insurance business and Rs 200

crore to exclusively do reinsurance business as per Section 6.

Investment of funds outside India: -

Insurers outside India as per Section 27-C cannot invest the funds of

policyholders.

Insurance business in Rural Sector: -

After the commencement of the IRDA Act, 1999, every insurer would have to

undertake such percentage of life insurance business in the rural sector as may

be specified by the IRDA in this behalf. It is mandatory for the new companies

to meet the obligations relating to the rural and unorganized sector as per

section 32-B.

Power to investigation or inspection: -

The IRDA may, at any time, order in writing a person as investigating authority

to investigate the affairs of any insurer and report to it. Government has power

to change the tax policy against life insurance industry.

Health insurance rebate,

Pension saving rebate,

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Mede claim premium rebate,

P.P.F., E.P.F., NSC all are tax exempted saving,

All life insurance policy are tax exempted saving ,

Agricultural income is tax exempted,

House rent allowances,

Post office saving,

Expenses on dreaded diseases are tax exempted.

Recently there is issue to increase FDI level from 26% to 49%.

Role of the government: -

As insurance is an important service sector, hence it is highly regulated by

government. Since 1956 insurance sector was highly regulated by government

of India. On March 16, 1999, the Indian cabinet approved on Insurance

Regulatory Authority Bills that was designed to liberalize the insurance sector.

Two governments in India have fallen over the issue of liberalization of the

insurance sector (which was nationalized in 1971). But the government ofA.B.Vajpayee as gone ahead to announce the liberalization of this sector

announcement was made in November 1998.

Governments objectives for liberalization of insurance: -

The main objective of opening of insurance sector to the private insurers is as

under:1. To provide better coverage to the Indian citizens.

2. To augment the flow of long-term financial resources to finance the growth

of infrastructure.

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Important government guidelines for private players for entering into Indian life

insurance market:

1. Private companies with a minimum paid-up capital of Rs. 1bn should be

allowed to enter the industry.

2. No company should deal in both life and general insurance through a single

entity.

3. Foreign companies may be allowed to enter the industry in collaboration with

the domestic companies.

4. Postal life insurance should be allowed to operate in the rural market.

5. Only one state level life insurance company should be allowed to operate in

each state.

6. Foreign investors can invest up to 26% of the equity of their joint venture

with Indian firms.

Government will prevail on grounds that the Rs. 4.5 billion India needs for

infrastructure development in the five years from 1997-98, cannot materialize ifthe insurance sector is not opened up.

BODIES THAT REGULATE THE SECTOR:

For better regulation purpose of the insurance sector the government has

established following bodies;1. IRA: Insurance Regulatory Authority.

2. IRDA: Insurance Regulatory and Development Authority.

3. TAC: Tariff Advisory Committee.

1. I RA: I nsurance Regulatory Authori ty:

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The IRA, under the chairmanship of Rangachary, was set-up in January 1996.

IRA Bill has to be passed by parliament to make the IRA a statutory body.

Comprehensive legislation aimed at reviewing the insurance Act of 1938 and

repealing the life insurance corporation Act of 1956 have to be passed.

The IRA is also preparing an internal rating system to screen all applications, as

entry will be in phases. The joint venture status of life insurance companies

(with majority holding of the domestic partner) is likely to be approved by the

parliament. Consensus also seems to be emerging on the minimum of Rs. 1 bn

capital stipulations for new insurance companies.

The IRA has stipulated a minimum rural presence for all companies. The

exhaustive guidelines have been issued for the appointment of intermediaries

(brokers, agents, surveyors and actuaries).

2. IRDA: I nsurance Regulatory and Development Author i ty:-

The Insurance Regulatory and Development Authority, constituted under theIRDA Act, 1999, provide for the establishment of an authority to protect the

interest policyholders, to regulate, promote and ensure orderly growth of the life

insurance industry.

a. Business Requirement:-

A company will not be issued a license unless the IRDA is satisfied with thesound financial condition, the general character of management, the volume of

business, the capital structure, earning prospects for the insurers and that the

interests of the general public will be served if registration is granted to the

insurer.

Foreign insurance companies have been allowed to have a maximum 26% share

holding. No life insurance company can be registered under the Act unless they

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have a paid up capital of Rs. 100 crores. Every life insurer shall deposit with the

reserve bank of India one percent of the total gross premium written in India in

any financial year, not exceeding Rs. 10 crores.

This amount would not be susceptible to any assignment or charge nor would it

be available for the discharge of any liabilities other than liabilities arising out

of policies issued, so long as any such liabilities remain undercharged.

b. Investment of Assets:-

Every insurer is required to invest, and keep invested, assets equivalent to not

less than the net liabilities as follows:

(a) 25 % in government securities,

(b) a least 25% of the said sum in government securities or other approved

securities and

(c) the balance in any approved investment rated as very strong or more by

reputed rating agencies, which include various debt instruments on which

dividend on its ordinary shared for the five years immediately preceding or forat least five out of the six or seven years immediately preceding have been paid

and which have priority in payment over ordinary shares of the company in

winding up.

The IRDA may in the interest of the policyholders directions relation the time,

manner and other conditions and investments of assets to be held by an insurer.The IRDA may also direct the insurer to realize the investment, if it sees the

investments to be unsuitable or undesirable. The Act prohibits an insurer from

directly or indirectly investing policyholder funds outside India.

Further, every insurer has to always maintain an excess of the value of his assets

over the amount of his liabilities of not less than Rs. 50 crores in the case of an

insurer carrying of life insurance business. If at any time an insurer does not

maintain the required solvency margin, he is required to submit a financial plan,

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as per directions issued by the IRDA, indicating a plan of action to correct the

deficiency within three months.

In order to ensure that the company does not risk the money of the

policyholders, the Act provides that an insurer who does not comply with the

aforesaid provisions may be deemed to be insolvent and may be would up by

the court.

Insurers are required to get an actuary to investigate the financial conditions of

the life insurance business including a valuation of liabilities every year in order

to ensure continual compliance.

In order to maintain transparency in its dealings, insurers would have to keep

separate account relating to funds of shareholders and policyholders.

c. Consequences of non-compliance: -

A company failing to comply with the act shall be liable for panel action.Further, IRDA is empowered to investigate into the affairs of the company.

Failure to comply with

Documents

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