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Introduction of LICWith over a billion people India is fast becoming a global economic power With a relatively
youthful population India will become an attractive insurance market over the next decades
This paper examines the Indian insurance industry It highlights the importance of the rural
sector ndash where the majority of the Indians still live It shows how the recent privatization is
playing out in the market Based on recent economic estimates the paper provides
projections of segments of the market for 2025
India is among the important emerging insurance markets in the world Life insurance will
grow very rapidly over the next decades in India The major drivers include sound economic
fundamentals a rising middle-income class an improving regulatory framework and rising
risk awareness The fundamental regulatory changes in the insurance sector in 1999 will be
critical for future growth Despite the restriction of 26 on foreign ownership large foreign
insurers have entered the Indian market State-owned insurance companies still have
dominant market positions But this would probably change over the next decade In the life
sector new private insurers are bringing in new products to the market They also have used
innovative distribution channels to reach a broader range of the population There is huge in
the largely undeveloped private pension market The same is true for the health insurance
business The Indian general insurance segment is still heavily regulated Three quarters of
premiums are generated under the tariff system Reinsurance in India is mainly provided by
the General Insurance Corporation of India which receives 20 compulsory cessions from
other general insurers Finally the rural sector has potential for both life and general
insurance To realize this potential designing suitable products is important Insurers will
need to pay special attention to the characteristics of the rural labor force like the prevalence
of irregular income streams and preference for simple products
Evolution of the insurance sectorIndia had the nineteenth largest insurance market in the world in 2003 Strong economic
growth in the last decade combined with a population of over a billion makes it one of the
potentially largest markets in the future Insurance in India has gone through two radical
transformations Before 1956 insurance was private with minimal government intervention
In 1956 life insurance was nationalized and a monopoly was created In 1972 general
insurance was nationalized as well As a part of the general opening up of the economy after
1992 a Government appointed committee recommended that private companies should be
allowed to operate It took six years to implement the recommendation Private sector was
allowed into insurance business in 2000 However foreign ownership was restricted No
more than 26 of any company can be foreign-owned
Insurance in the Colonial Era
Life insurance in the modern form was first set up in India through a British company called
the Oriental Life Insurance Company in 1818 followed by the Bombay Assurance Company
in 1823 and the Madras Equitable Life Insurance Society in 1829 All of these companies
operated in India but did not insure the lives of Indians They were insuring the lives of
Europeans living in India The first general insurance company Triton Insurance Company
Ltd was established in 1850 It was owned and operated by the British The first indigenous
general insurance company was the Indian Mercantile Insurance Company Limited set up in
Bombay in 1907
In 1912 two sets of legislation were passed the Indian Life Assurance Companies Act and
the Provident Insurance Societies Act First they were the first legislations in India that
particularly targeted the insurance sector Second they left general insurance business out of
it In 1938 the Insurance Act was passed which covered both life and general insurance
companies
Evolution of Insurance during Nationalized Era 1956-2000
Before 1956 insurance was private with minimal government intervention In 1956 life
insurance was nationalized and a monopoly was created In 1972 general insurance was
nationalized as well There were 107 general insurance companies operating at the time The
reason for this was that insurance is a ldquocooperative enterpriserdquo under a socialist form of
government therefore it is more suited for government to be in insurance business on behalf
of the ldquopeoplerdquo Second those Indian companies are excessively expensive Third argued
that private competition has not improved services to the ldquopublicrdquo or to the policyholders
Life Insurance Business during the Nationalized Era Indian life insurance was nationalized in 1956 An Ordinance was issued on 19th January
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 societiesmdash245 Indian and foreign insurers in all The LIC had monopoly till the
late 90s when the Insurance sector was reopened to the private sector All life companies
were merged together to form one single company the Life Insurance Corporation By 2000
Life Insurance Corporation had 100 divisional offices in seven zones with 2048 branches
There were over 680000 active agents across India with a total of 117000 employees in the
Life Insurance Corporation employed directly
After the report of the Malhotra Committee came out changes in the insurance industry
appeared imminent On December 7 1999 the new government passed the Insurance
Regulatory and Development Authority Act Starting in early 2000 the Insurance Regulatory
and Development Authority started granting charters to private life and general insurance
companies By the end of 2003 there were thirteen life insurance companies had charters to
operate one public (the old monopoly) and twelve private companies All of the private
companies had foreign partners in life business Almost all general insurance companies also
have foreign partners
LIC PRODUCTS AND PRICING POLICIESThe largest segment of the life insurance market in India has been individual life insurance
The types of the policies sold were mainly whole life endowment and ldquomoney backrdquo
policies Money back policies return a fraction of the nominal value of the premium paid by
the policyholder at the termination of the contract Thus whether we examine the new
policies sold or the total number of policies in force there has been a tenfold increase during
that period Therefore if we examine the headcount of policies as an indication of
penetration there has been a substantial rise A part of this rise is directly attributable to a
deliberate policy of rural expansion of the Life Insurance Corporation
WHAT IS ENDOWMENT POLICY
Endowment insurance are policies that cover the risk for a specified period and at the end the
sum assured is paid back to the policyholder along with all the bonus accumulated during the
term of the policy
The Endowment insurance policies work in two ways one they provide life
insurance cover and on the other hand as a vehicle for saving
They are more expensive than Term policies and Whole life policies
Normally the bonus in calculated on the sum insured but the only drawback is
that the bonuses are not compounded
Endowment insurance plans are best for people who do not have a saving and an investing
habit on a regular basis Endowment Insurance Plans can be bought for a shorter duration
period
LIC-ENDOWMENT POLICIES
Jivan Mitra-Double cover Endowment Plan
Jivan Mitra-Triple Cover Endowment Plan
Jivan Anand Plan
New Janraksha Plan
Product Benefits include Death Benefit Maturity Benefit ExtraSupplementary Benefit
These benefits are offered by LIC in the wake of increased competition though not many
benefits were offered before
The Plan Parameters
Age at entry 35 years
Policy Term 20 Years
Mode of premium payment Yearly
Sum Assured Rs 100000 -
Annual Premium the rate of annual premium to be paid was very low when LIC was
the sole insurer But in the present scenario LIC has to offer higher premium rates so
as to stay in competition
WHAT IS TERM INSURANCE PLAN
Term Insurance is a no frills life insurance plans and covers you for a term of one or more
years It pays a death benefit only if you die in that term Term Insurance generally offers the
cheapest form of insurance You can renew most Term Insurance policies for one or more
terms even if your health condition has changed Each time you renew the policy for a new
term premiums may climb higher
Term policy cover only the risk during the selected term period If the policyholder
survives the term the risk cover comes to an end
A Term plan is a pure risk cover plan and it meet the needs of people who are initially
unable to pay the larger premium required for a whole life or an endowment assurance
policy but they hope to be able to pay for such a policy in the near future
LIC-TERM ASSURANCE PLANS
Amulya Jivan Policy
Anmol Jivan Policy
Convertible Term Assurance Policy
Two Year Temporary Assurance
Policy Products
Death Benefit Maturity Benefit Payment of Premiums Surrender Value Loan Cooling
Off Period Grace Period Paid Up Value
Plan Parameters- Amulya Jivan amp Anmol Jivan Policies
Minimum age at entry 18 Year (Completed)
Maximum age at entry 60 years (nearest birthday)
Maximum age at maturity 70 years
Policy term 5 to 35years
Minimum Sum Assured Rs250000-
Plan Parameters-Convertible Term Assurance Policy
Entry Age 20(nearer 50 years birthday)
Sum Assured 50000- 1000000
Term 5 years to 7 years
Mode of Payment -Yearly half yearly quarterly monthly
Plan Parameters-Two Years Temporary Policy
Entry Age 18 years 60 years (completed)
Sum Assured 50000 100000
Term 6months to 2 years
Mode of Payment -Single Premium
Maximum Premium -62 years
Policy Loan Available -No
LIC-MONEYBACK PLANS
Jivan Surabhi
Money Back Policy-25 years
Benefits Death Benefit Survival Benefit Maturity Benefit Supplementary Benefit
Surrender Value Loan
Plan Parameters-Jivan Surabhi Policy
Minimum plan Entry Age 18 (last birthday)
Maximum plan 106 55years plan 107 50years plan 108 50years
Sum Assured 50000 No Limits
Term 15 years
Fixed Terms
Maximum Premium 70 years
Paying Period
Plan Parameters-25 Year Money back
Policy
Entry Age 13 (last 50 years birthday)
Sum Assured -50000 No Limit
Term -20 amp 25years -
Maximum Premium -70 years
The preference of money back and endowment policies by Indian customers
But out of all these policies money back and endowment policies of LIC have been widely
preferred by customers for very long The reason for this is provided in the benefits of these
policies given as follows
Money Back Policy Benefits
The benefits under money back policies premiums can be paid as per the insurance
companyrsquos policy These could be quarterly half yearly or annually The premiums for these
policies are payable for the selected term of years or till death if it occurs earlier
By buying such policies one can receive income at regular intervals other than the risk
cover it provides Also a good amount of bonus on the full sum assured is quite a
good bargain
Money back life insurance policies offer the dual benefits of insurance and
redemption of money at regular intervals
These policies fit perfectly in the scheme of things of traditional savings for people
who seek financial instruments that provide insurance and savings elements coupled
with low risk element and guaranteed returns
It creates a long-term savings opportunity with a reasonable rate of return especially
since the payout is considered exempt from tax except under specified situations
Endowment Policy Benefits
Under a special provision in the Income tax Act the returns on an insurance policy are tax
free There will be two possibilities if the policy is other than a term policy
a) On untimely death of the insured In this situation a benefit can be received on the death
of the person insured under the policy This receipt is tax free in the hands of the dependants
who actually receive the insurance benefit This means that under Section 10 (10D) of the
Income Tax Act the amount received on death from an insurance policy will not be included
in the taxable income calculations
b) On maturity In this case the amount would be received at maturity of the policy It
would include bonus and other benefits This happens when the policyholder actually lives
through the entire policy period for example in money back policies or endowment policies
In this case too the receipt is completely tax-free in the hands of the investor
Example
Consider a case where a customer takes a policy with a sum assured of Rs 10 lakh cover At
maturity after 20 years the total amount including bonus comes to Rs 21 lakh The bonus is
accumulated at different rates for the years over the life and this works out to Rs 11 lakh
totalling to an overall figure of Rs 21 lakh this entire amount is tax free
While that is true one of the reasons for endowment and money back policies to be more
popular than others is also the fact that Life Insurance Corporation of India (LIC) agents
pushed them vigorously The reason - commission on these products is higher than other
products As a result the market is not aware about other usual products that are in LICs
portfolio Thus due to the above advantages Indian customers preferred LICrsquos money back
and endowment policies
The new private insurer focused on providing customized product - product that contain
innovative feature- to the customers for this the company conducted extensive market
research to figure out what types of products would appeal to consumers
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
transformations Before 1956 insurance was private with minimal government intervention
In 1956 life insurance was nationalized and a monopoly was created In 1972 general
insurance was nationalized as well As a part of the general opening up of the economy after
1992 a Government appointed committee recommended that private companies should be
allowed to operate It took six years to implement the recommendation Private sector was
allowed into insurance business in 2000 However foreign ownership was restricted No
more than 26 of any company can be foreign-owned
Insurance in the Colonial Era
Life insurance in the modern form was first set up in India through a British company called
the Oriental Life Insurance Company in 1818 followed by the Bombay Assurance Company
in 1823 and the Madras Equitable Life Insurance Society in 1829 All of these companies
operated in India but did not insure the lives of Indians They were insuring the lives of
Europeans living in India The first general insurance company Triton Insurance Company
Ltd was established in 1850 It was owned and operated by the British The first indigenous
general insurance company was the Indian Mercantile Insurance Company Limited set up in
Bombay in 1907
In 1912 two sets of legislation were passed the Indian Life Assurance Companies Act and
the Provident Insurance Societies Act First they were the first legislations in India that
particularly targeted the insurance sector Second they left general insurance business out of
it In 1938 the Insurance Act was passed which covered both life and general insurance
companies
Evolution of Insurance during Nationalized Era 1956-2000
Before 1956 insurance was private with minimal government intervention In 1956 life
insurance was nationalized and a monopoly was created In 1972 general insurance was
nationalized as well There were 107 general insurance companies operating at the time The
reason for this was that insurance is a ldquocooperative enterpriserdquo under a socialist form of
government therefore it is more suited for government to be in insurance business on behalf
of the ldquopeoplerdquo Second those Indian companies are excessively expensive Third argued
that private competition has not improved services to the ldquopublicrdquo or to the policyholders
Life Insurance Business during the Nationalized Era Indian life insurance was nationalized in 1956 An Ordinance was issued on 19th January
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 societiesmdash245 Indian and foreign insurers in all The LIC had monopoly till the
late 90s when the Insurance sector was reopened to the private sector All life companies
were merged together to form one single company the Life Insurance Corporation By 2000
Life Insurance Corporation had 100 divisional offices in seven zones with 2048 branches
There were over 680000 active agents across India with a total of 117000 employees in the
Life Insurance Corporation employed directly
After the report of the Malhotra Committee came out changes in the insurance industry
appeared imminent On December 7 1999 the new government passed the Insurance
Regulatory and Development Authority Act Starting in early 2000 the Insurance Regulatory
and Development Authority started granting charters to private life and general insurance
companies By the end of 2003 there were thirteen life insurance companies had charters to
operate one public (the old monopoly) and twelve private companies All of the private
companies had foreign partners in life business Almost all general insurance companies also
have foreign partners
LIC PRODUCTS AND PRICING POLICIESThe largest segment of the life insurance market in India has been individual life insurance
The types of the policies sold were mainly whole life endowment and ldquomoney backrdquo
policies Money back policies return a fraction of the nominal value of the premium paid by
the policyholder at the termination of the contract Thus whether we examine the new
policies sold or the total number of policies in force there has been a tenfold increase during
that period Therefore if we examine the headcount of policies as an indication of
penetration there has been a substantial rise A part of this rise is directly attributable to a
deliberate policy of rural expansion of the Life Insurance Corporation
WHAT IS ENDOWMENT POLICY
Endowment insurance are policies that cover the risk for a specified period and at the end the
sum assured is paid back to the policyholder along with all the bonus accumulated during the
term of the policy
The Endowment insurance policies work in two ways one they provide life
insurance cover and on the other hand as a vehicle for saving
They are more expensive than Term policies and Whole life policies
Normally the bonus in calculated on the sum insured but the only drawback is
that the bonuses are not compounded
Endowment insurance plans are best for people who do not have a saving and an investing
habit on a regular basis Endowment Insurance Plans can be bought for a shorter duration
period
LIC-ENDOWMENT POLICIES
Jivan Mitra-Double cover Endowment Plan
Jivan Mitra-Triple Cover Endowment Plan
Jivan Anand Plan
New Janraksha Plan
Product Benefits include Death Benefit Maturity Benefit ExtraSupplementary Benefit
These benefits are offered by LIC in the wake of increased competition though not many
benefits were offered before
The Plan Parameters
Age at entry 35 years
Policy Term 20 Years
Mode of premium payment Yearly
Sum Assured Rs 100000 -
Annual Premium the rate of annual premium to be paid was very low when LIC was
the sole insurer But in the present scenario LIC has to offer higher premium rates so
as to stay in competition
WHAT IS TERM INSURANCE PLAN
Term Insurance is a no frills life insurance plans and covers you for a term of one or more
years It pays a death benefit only if you die in that term Term Insurance generally offers the
cheapest form of insurance You can renew most Term Insurance policies for one or more
terms even if your health condition has changed Each time you renew the policy for a new
term premiums may climb higher
Term policy cover only the risk during the selected term period If the policyholder
survives the term the risk cover comes to an end
A Term plan is a pure risk cover plan and it meet the needs of people who are initially
unable to pay the larger premium required for a whole life or an endowment assurance
policy but they hope to be able to pay for such a policy in the near future
LIC-TERM ASSURANCE PLANS
Amulya Jivan Policy
Anmol Jivan Policy
Convertible Term Assurance Policy
Two Year Temporary Assurance
Policy Products
Death Benefit Maturity Benefit Payment of Premiums Surrender Value Loan Cooling
Off Period Grace Period Paid Up Value
Plan Parameters- Amulya Jivan amp Anmol Jivan Policies
Minimum age at entry 18 Year (Completed)
Maximum age at entry 60 years (nearest birthday)
Maximum age at maturity 70 years
Policy term 5 to 35years
Minimum Sum Assured Rs250000-
Plan Parameters-Convertible Term Assurance Policy
Entry Age 20(nearer 50 years birthday)
Sum Assured 50000- 1000000
Term 5 years to 7 years
Mode of Payment -Yearly half yearly quarterly monthly
Plan Parameters-Two Years Temporary Policy
Entry Age 18 years 60 years (completed)
Sum Assured 50000 100000
Term 6months to 2 years
Mode of Payment -Single Premium
Maximum Premium -62 years
Policy Loan Available -No
LIC-MONEYBACK PLANS
Jivan Surabhi
Money Back Policy-25 years
Benefits Death Benefit Survival Benefit Maturity Benefit Supplementary Benefit
Surrender Value Loan
Plan Parameters-Jivan Surabhi Policy
Minimum plan Entry Age 18 (last birthday)
Maximum plan 106 55years plan 107 50years plan 108 50years
Sum Assured 50000 No Limits
Term 15 years
Fixed Terms
Maximum Premium 70 years
Paying Period
Plan Parameters-25 Year Money back
Policy
Entry Age 13 (last 50 years birthday)
Sum Assured -50000 No Limit
Term -20 amp 25years -
Maximum Premium -70 years
The preference of money back and endowment policies by Indian customers
But out of all these policies money back and endowment policies of LIC have been widely
preferred by customers for very long The reason for this is provided in the benefits of these
policies given as follows
Money Back Policy Benefits
The benefits under money back policies premiums can be paid as per the insurance
companyrsquos policy These could be quarterly half yearly or annually The premiums for these
policies are payable for the selected term of years or till death if it occurs earlier
By buying such policies one can receive income at regular intervals other than the risk
cover it provides Also a good amount of bonus on the full sum assured is quite a
good bargain
Money back life insurance policies offer the dual benefits of insurance and
redemption of money at regular intervals
These policies fit perfectly in the scheme of things of traditional savings for people
who seek financial instruments that provide insurance and savings elements coupled
with low risk element and guaranteed returns
It creates a long-term savings opportunity with a reasonable rate of return especially
since the payout is considered exempt from tax except under specified situations
Endowment Policy Benefits
Under a special provision in the Income tax Act the returns on an insurance policy are tax
free There will be two possibilities if the policy is other than a term policy
a) On untimely death of the insured In this situation a benefit can be received on the death
of the person insured under the policy This receipt is tax free in the hands of the dependants
who actually receive the insurance benefit This means that under Section 10 (10D) of the
Income Tax Act the amount received on death from an insurance policy will not be included
in the taxable income calculations
b) On maturity In this case the amount would be received at maturity of the policy It
would include bonus and other benefits This happens when the policyholder actually lives
through the entire policy period for example in money back policies or endowment policies
In this case too the receipt is completely tax-free in the hands of the investor
Example
Consider a case where a customer takes a policy with a sum assured of Rs 10 lakh cover At
maturity after 20 years the total amount including bonus comes to Rs 21 lakh The bonus is
accumulated at different rates for the years over the life and this works out to Rs 11 lakh
totalling to an overall figure of Rs 21 lakh this entire amount is tax free
While that is true one of the reasons for endowment and money back policies to be more
popular than others is also the fact that Life Insurance Corporation of India (LIC) agents
pushed them vigorously The reason - commission on these products is higher than other
products As a result the market is not aware about other usual products that are in LICs
portfolio Thus due to the above advantages Indian customers preferred LICrsquos money back
and endowment policies
The new private insurer focused on providing customized product - product that contain
innovative feature- to the customers for this the company conducted extensive market
research to figure out what types of products would appeal to consumers
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
Life Insurance Business during the Nationalized Era Indian life insurance was nationalized in 1956 An Ordinance was issued on 19th January
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 societiesmdash245 Indian and foreign insurers in all The LIC had monopoly till the
late 90s when the Insurance sector was reopened to the private sector All life companies
were merged together to form one single company the Life Insurance Corporation By 2000
Life Insurance Corporation had 100 divisional offices in seven zones with 2048 branches
There were over 680000 active agents across India with a total of 117000 employees in the
Life Insurance Corporation employed directly
After the report of the Malhotra Committee came out changes in the insurance industry
appeared imminent On December 7 1999 the new government passed the Insurance
Regulatory and Development Authority Act Starting in early 2000 the Insurance Regulatory
and Development Authority started granting charters to private life and general insurance
companies By the end of 2003 there were thirteen life insurance companies had charters to
operate one public (the old monopoly) and twelve private companies All of the private
companies had foreign partners in life business Almost all general insurance companies also
have foreign partners
LIC PRODUCTS AND PRICING POLICIESThe largest segment of the life insurance market in India has been individual life insurance
The types of the policies sold were mainly whole life endowment and ldquomoney backrdquo
policies Money back policies return a fraction of the nominal value of the premium paid by
the policyholder at the termination of the contract Thus whether we examine the new
policies sold or the total number of policies in force there has been a tenfold increase during
that period Therefore if we examine the headcount of policies as an indication of
penetration there has been a substantial rise A part of this rise is directly attributable to a
deliberate policy of rural expansion of the Life Insurance Corporation
WHAT IS ENDOWMENT POLICY
Endowment insurance are policies that cover the risk for a specified period and at the end the
sum assured is paid back to the policyholder along with all the bonus accumulated during the
term of the policy
The Endowment insurance policies work in two ways one they provide life
insurance cover and on the other hand as a vehicle for saving
They are more expensive than Term policies and Whole life policies
Normally the bonus in calculated on the sum insured but the only drawback is
that the bonuses are not compounded
Endowment insurance plans are best for people who do not have a saving and an investing
habit on a regular basis Endowment Insurance Plans can be bought for a shorter duration
period
LIC-ENDOWMENT POLICIES
Jivan Mitra-Double cover Endowment Plan
Jivan Mitra-Triple Cover Endowment Plan
Jivan Anand Plan
New Janraksha Plan
Product Benefits include Death Benefit Maturity Benefit ExtraSupplementary Benefit
These benefits are offered by LIC in the wake of increased competition though not many
benefits were offered before
The Plan Parameters
Age at entry 35 years
Policy Term 20 Years
Mode of premium payment Yearly
Sum Assured Rs 100000 -
Annual Premium the rate of annual premium to be paid was very low when LIC was
the sole insurer But in the present scenario LIC has to offer higher premium rates so
as to stay in competition
WHAT IS TERM INSURANCE PLAN
Term Insurance is a no frills life insurance plans and covers you for a term of one or more
years It pays a death benefit only if you die in that term Term Insurance generally offers the
cheapest form of insurance You can renew most Term Insurance policies for one or more
terms even if your health condition has changed Each time you renew the policy for a new
term premiums may climb higher
Term policy cover only the risk during the selected term period If the policyholder
survives the term the risk cover comes to an end
A Term plan is a pure risk cover plan and it meet the needs of people who are initially
unable to pay the larger premium required for a whole life or an endowment assurance
policy but they hope to be able to pay for such a policy in the near future
LIC-TERM ASSURANCE PLANS
Amulya Jivan Policy
Anmol Jivan Policy
Convertible Term Assurance Policy
Two Year Temporary Assurance
Policy Products
Death Benefit Maturity Benefit Payment of Premiums Surrender Value Loan Cooling
Off Period Grace Period Paid Up Value
Plan Parameters- Amulya Jivan amp Anmol Jivan Policies
Minimum age at entry 18 Year (Completed)
Maximum age at entry 60 years (nearest birthday)
Maximum age at maturity 70 years
Policy term 5 to 35years
Minimum Sum Assured Rs250000-
Plan Parameters-Convertible Term Assurance Policy
Entry Age 20(nearer 50 years birthday)
Sum Assured 50000- 1000000
Term 5 years to 7 years
Mode of Payment -Yearly half yearly quarterly monthly
Plan Parameters-Two Years Temporary Policy
Entry Age 18 years 60 years (completed)
Sum Assured 50000 100000
Term 6months to 2 years
Mode of Payment -Single Premium
Maximum Premium -62 years
Policy Loan Available -No
LIC-MONEYBACK PLANS
Jivan Surabhi
Money Back Policy-25 years
Benefits Death Benefit Survival Benefit Maturity Benefit Supplementary Benefit
Surrender Value Loan
Plan Parameters-Jivan Surabhi Policy
Minimum plan Entry Age 18 (last birthday)
Maximum plan 106 55years plan 107 50years plan 108 50years
Sum Assured 50000 No Limits
Term 15 years
Fixed Terms
Maximum Premium 70 years
Paying Period
Plan Parameters-25 Year Money back
Policy
Entry Age 13 (last 50 years birthday)
Sum Assured -50000 No Limit
Term -20 amp 25years -
Maximum Premium -70 years
The preference of money back and endowment policies by Indian customers
But out of all these policies money back and endowment policies of LIC have been widely
preferred by customers for very long The reason for this is provided in the benefits of these
policies given as follows
Money Back Policy Benefits
The benefits under money back policies premiums can be paid as per the insurance
companyrsquos policy These could be quarterly half yearly or annually The premiums for these
policies are payable for the selected term of years or till death if it occurs earlier
By buying such policies one can receive income at regular intervals other than the risk
cover it provides Also a good amount of bonus on the full sum assured is quite a
good bargain
Money back life insurance policies offer the dual benefits of insurance and
redemption of money at regular intervals
These policies fit perfectly in the scheme of things of traditional savings for people
who seek financial instruments that provide insurance and savings elements coupled
with low risk element and guaranteed returns
It creates a long-term savings opportunity with a reasonable rate of return especially
since the payout is considered exempt from tax except under specified situations
Endowment Policy Benefits
Under a special provision in the Income tax Act the returns on an insurance policy are tax
free There will be two possibilities if the policy is other than a term policy
a) On untimely death of the insured In this situation a benefit can be received on the death
of the person insured under the policy This receipt is tax free in the hands of the dependants
who actually receive the insurance benefit This means that under Section 10 (10D) of the
Income Tax Act the amount received on death from an insurance policy will not be included
in the taxable income calculations
b) On maturity In this case the amount would be received at maturity of the policy It
would include bonus and other benefits This happens when the policyholder actually lives
through the entire policy period for example in money back policies or endowment policies
In this case too the receipt is completely tax-free in the hands of the investor
Example
Consider a case where a customer takes a policy with a sum assured of Rs 10 lakh cover At
maturity after 20 years the total amount including bonus comes to Rs 21 lakh The bonus is
accumulated at different rates for the years over the life and this works out to Rs 11 lakh
totalling to an overall figure of Rs 21 lakh this entire amount is tax free
While that is true one of the reasons for endowment and money back policies to be more
popular than others is also the fact that Life Insurance Corporation of India (LIC) agents
pushed them vigorously The reason - commission on these products is higher than other
products As a result the market is not aware about other usual products that are in LICs
portfolio Thus due to the above advantages Indian customers preferred LICrsquos money back
and endowment policies
The new private insurer focused on providing customized product - product that contain
innovative feature- to the customers for this the company conducted extensive market
research to figure out what types of products would appeal to consumers
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
The Endowment insurance policies work in two ways one they provide life
insurance cover and on the other hand as a vehicle for saving
They are more expensive than Term policies and Whole life policies
Normally the bonus in calculated on the sum insured but the only drawback is
that the bonuses are not compounded
Endowment insurance plans are best for people who do not have a saving and an investing
habit on a regular basis Endowment Insurance Plans can be bought for a shorter duration
period
LIC-ENDOWMENT POLICIES
Jivan Mitra-Double cover Endowment Plan
Jivan Mitra-Triple Cover Endowment Plan
Jivan Anand Plan
New Janraksha Plan
Product Benefits include Death Benefit Maturity Benefit ExtraSupplementary Benefit
These benefits are offered by LIC in the wake of increased competition though not many
benefits were offered before
The Plan Parameters
Age at entry 35 years
Policy Term 20 Years
Mode of premium payment Yearly
Sum Assured Rs 100000 -
Annual Premium the rate of annual premium to be paid was very low when LIC was
the sole insurer But in the present scenario LIC has to offer higher premium rates so
as to stay in competition
WHAT IS TERM INSURANCE PLAN
Term Insurance is a no frills life insurance plans and covers you for a term of one or more
years It pays a death benefit only if you die in that term Term Insurance generally offers the
cheapest form of insurance You can renew most Term Insurance policies for one or more
terms even if your health condition has changed Each time you renew the policy for a new
term premiums may climb higher
Term policy cover only the risk during the selected term period If the policyholder
survives the term the risk cover comes to an end
A Term plan is a pure risk cover plan and it meet the needs of people who are initially
unable to pay the larger premium required for a whole life or an endowment assurance
policy but they hope to be able to pay for such a policy in the near future
LIC-TERM ASSURANCE PLANS
Amulya Jivan Policy
Anmol Jivan Policy
Convertible Term Assurance Policy
Two Year Temporary Assurance
Policy Products
Death Benefit Maturity Benefit Payment of Premiums Surrender Value Loan Cooling
Off Period Grace Period Paid Up Value
Plan Parameters- Amulya Jivan amp Anmol Jivan Policies
Minimum age at entry 18 Year (Completed)
Maximum age at entry 60 years (nearest birthday)
Maximum age at maturity 70 years
Policy term 5 to 35years
Minimum Sum Assured Rs250000-
Plan Parameters-Convertible Term Assurance Policy
Entry Age 20(nearer 50 years birthday)
Sum Assured 50000- 1000000
Term 5 years to 7 years
Mode of Payment -Yearly half yearly quarterly monthly
Plan Parameters-Two Years Temporary Policy
Entry Age 18 years 60 years (completed)
Sum Assured 50000 100000
Term 6months to 2 years
Mode of Payment -Single Premium
Maximum Premium -62 years
Policy Loan Available -No
LIC-MONEYBACK PLANS
Jivan Surabhi
Money Back Policy-25 years
Benefits Death Benefit Survival Benefit Maturity Benefit Supplementary Benefit
Surrender Value Loan
Plan Parameters-Jivan Surabhi Policy
Minimum plan Entry Age 18 (last birthday)
Maximum plan 106 55years plan 107 50years plan 108 50years
Sum Assured 50000 No Limits
Term 15 years
Fixed Terms
Maximum Premium 70 years
Paying Period
Plan Parameters-25 Year Money back
Policy
Entry Age 13 (last 50 years birthday)
Sum Assured -50000 No Limit
Term -20 amp 25years -
Maximum Premium -70 years
The preference of money back and endowment policies by Indian customers
But out of all these policies money back and endowment policies of LIC have been widely
preferred by customers for very long The reason for this is provided in the benefits of these
policies given as follows
Money Back Policy Benefits
The benefits under money back policies premiums can be paid as per the insurance
companyrsquos policy These could be quarterly half yearly or annually The premiums for these
policies are payable for the selected term of years or till death if it occurs earlier
By buying such policies one can receive income at regular intervals other than the risk
cover it provides Also a good amount of bonus on the full sum assured is quite a
good bargain
Money back life insurance policies offer the dual benefits of insurance and
redemption of money at regular intervals
These policies fit perfectly in the scheme of things of traditional savings for people
who seek financial instruments that provide insurance and savings elements coupled
with low risk element and guaranteed returns
It creates a long-term savings opportunity with a reasonable rate of return especially
since the payout is considered exempt from tax except under specified situations
Endowment Policy Benefits
Under a special provision in the Income tax Act the returns on an insurance policy are tax
free There will be two possibilities if the policy is other than a term policy
a) On untimely death of the insured In this situation a benefit can be received on the death
of the person insured under the policy This receipt is tax free in the hands of the dependants
who actually receive the insurance benefit This means that under Section 10 (10D) of the
Income Tax Act the amount received on death from an insurance policy will not be included
in the taxable income calculations
b) On maturity In this case the amount would be received at maturity of the policy It
would include bonus and other benefits This happens when the policyholder actually lives
through the entire policy period for example in money back policies or endowment policies
In this case too the receipt is completely tax-free in the hands of the investor
Example
Consider a case where a customer takes a policy with a sum assured of Rs 10 lakh cover At
maturity after 20 years the total amount including bonus comes to Rs 21 lakh The bonus is
accumulated at different rates for the years over the life and this works out to Rs 11 lakh
totalling to an overall figure of Rs 21 lakh this entire amount is tax free
While that is true one of the reasons for endowment and money back policies to be more
popular than others is also the fact that Life Insurance Corporation of India (LIC) agents
pushed them vigorously The reason - commission on these products is higher than other
products As a result the market is not aware about other usual products that are in LICs
portfolio Thus due to the above advantages Indian customers preferred LICrsquos money back
and endowment policies
The new private insurer focused on providing customized product - product that contain
innovative feature- to the customers for this the company conducted extensive market
research to figure out what types of products would appeal to consumers
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
A Term plan is a pure risk cover plan and it meet the needs of people who are initially
unable to pay the larger premium required for a whole life or an endowment assurance
policy but they hope to be able to pay for such a policy in the near future
LIC-TERM ASSURANCE PLANS
Amulya Jivan Policy
Anmol Jivan Policy
Convertible Term Assurance Policy
Two Year Temporary Assurance
Policy Products
Death Benefit Maturity Benefit Payment of Premiums Surrender Value Loan Cooling
Off Period Grace Period Paid Up Value
Plan Parameters- Amulya Jivan amp Anmol Jivan Policies
Minimum age at entry 18 Year (Completed)
Maximum age at entry 60 years (nearest birthday)
Maximum age at maturity 70 years
Policy term 5 to 35years
Minimum Sum Assured Rs250000-
Plan Parameters-Convertible Term Assurance Policy
Entry Age 20(nearer 50 years birthday)
Sum Assured 50000- 1000000
Term 5 years to 7 years
Mode of Payment -Yearly half yearly quarterly monthly
Plan Parameters-Two Years Temporary Policy
Entry Age 18 years 60 years (completed)
Sum Assured 50000 100000
Term 6months to 2 years
Mode of Payment -Single Premium
Maximum Premium -62 years
Policy Loan Available -No
LIC-MONEYBACK PLANS
Jivan Surabhi
Money Back Policy-25 years
Benefits Death Benefit Survival Benefit Maturity Benefit Supplementary Benefit
Surrender Value Loan
Plan Parameters-Jivan Surabhi Policy
Minimum plan Entry Age 18 (last birthday)
Maximum plan 106 55years plan 107 50years plan 108 50years
Sum Assured 50000 No Limits
Term 15 years
Fixed Terms
Maximum Premium 70 years
Paying Period
Plan Parameters-25 Year Money back
Policy
Entry Age 13 (last 50 years birthday)
Sum Assured -50000 No Limit
Term -20 amp 25years -
Maximum Premium -70 years
The preference of money back and endowment policies by Indian customers
But out of all these policies money back and endowment policies of LIC have been widely
preferred by customers for very long The reason for this is provided in the benefits of these
policies given as follows
Money Back Policy Benefits
The benefits under money back policies premiums can be paid as per the insurance
companyrsquos policy These could be quarterly half yearly or annually The premiums for these
policies are payable for the selected term of years or till death if it occurs earlier
By buying such policies one can receive income at regular intervals other than the risk
cover it provides Also a good amount of bonus on the full sum assured is quite a
good bargain
Money back life insurance policies offer the dual benefits of insurance and
redemption of money at regular intervals
These policies fit perfectly in the scheme of things of traditional savings for people
who seek financial instruments that provide insurance and savings elements coupled
with low risk element and guaranteed returns
It creates a long-term savings opportunity with a reasonable rate of return especially
since the payout is considered exempt from tax except under specified situations
Endowment Policy Benefits
Under a special provision in the Income tax Act the returns on an insurance policy are tax
free There will be two possibilities if the policy is other than a term policy
a) On untimely death of the insured In this situation a benefit can be received on the death
of the person insured under the policy This receipt is tax free in the hands of the dependants
who actually receive the insurance benefit This means that under Section 10 (10D) of the
Income Tax Act the amount received on death from an insurance policy will not be included
in the taxable income calculations
b) On maturity In this case the amount would be received at maturity of the policy It
would include bonus and other benefits This happens when the policyholder actually lives
through the entire policy period for example in money back policies or endowment policies
In this case too the receipt is completely tax-free in the hands of the investor
Example
Consider a case where a customer takes a policy with a sum assured of Rs 10 lakh cover At
maturity after 20 years the total amount including bonus comes to Rs 21 lakh The bonus is
accumulated at different rates for the years over the life and this works out to Rs 11 lakh
totalling to an overall figure of Rs 21 lakh this entire amount is tax free
While that is true one of the reasons for endowment and money back policies to be more
popular than others is also the fact that Life Insurance Corporation of India (LIC) agents
pushed them vigorously The reason - commission on these products is higher than other
products As a result the market is not aware about other usual products that are in LICs
portfolio Thus due to the above advantages Indian customers preferred LICrsquos money back
and endowment policies
The new private insurer focused on providing customized product - product that contain
innovative feature- to the customers for this the company conducted extensive market
research to figure out what types of products would appeal to consumers
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
Plan Parameters-Jivan Surabhi Policy
Minimum plan Entry Age 18 (last birthday)
Maximum plan 106 55years plan 107 50years plan 108 50years
Sum Assured 50000 No Limits
Term 15 years
Fixed Terms
Maximum Premium 70 years
Paying Period
Plan Parameters-25 Year Money back
Policy
Entry Age 13 (last 50 years birthday)
Sum Assured -50000 No Limit
Term -20 amp 25years -
Maximum Premium -70 years
The preference of money back and endowment policies by Indian customers
But out of all these policies money back and endowment policies of LIC have been widely
preferred by customers for very long The reason for this is provided in the benefits of these
policies given as follows
Money Back Policy Benefits
The benefits under money back policies premiums can be paid as per the insurance
companyrsquos policy These could be quarterly half yearly or annually The premiums for these
policies are payable for the selected term of years or till death if it occurs earlier
By buying such policies one can receive income at regular intervals other than the risk
cover it provides Also a good amount of bonus on the full sum assured is quite a
good bargain
Money back life insurance policies offer the dual benefits of insurance and
redemption of money at regular intervals
These policies fit perfectly in the scheme of things of traditional savings for people
who seek financial instruments that provide insurance and savings elements coupled
with low risk element and guaranteed returns
It creates a long-term savings opportunity with a reasonable rate of return especially
since the payout is considered exempt from tax except under specified situations
Endowment Policy Benefits
Under a special provision in the Income tax Act the returns on an insurance policy are tax
free There will be two possibilities if the policy is other than a term policy
a) On untimely death of the insured In this situation a benefit can be received on the death
of the person insured under the policy This receipt is tax free in the hands of the dependants
who actually receive the insurance benefit This means that under Section 10 (10D) of the
Income Tax Act the amount received on death from an insurance policy will not be included
in the taxable income calculations
b) On maturity In this case the amount would be received at maturity of the policy It
would include bonus and other benefits This happens when the policyholder actually lives
through the entire policy period for example in money back policies or endowment policies
In this case too the receipt is completely tax-free in the hands of the investor
Example
Consider a case where a customer takes a policy with a sum assured of Rs 10 lakh cover At
maturity after 20 years the total amount including bonus comes to Rs 21 lakh The bonus is
accumulated at different rates for the years over the life and this works out to Rs 11 lakh
totalling to an overall figure of Rs 21 lakh this entire amount is tax free
While that is true one of the reasons for endowment and money back policies to be more
popular than others is also the fact that Life Insurance Corporation of India (LIC) agents
pushed them vigorously The reason - commission on these products is higher than other
products As a result the market is not aware about other usual products that are in LICs
portfolio Thus due to the above advantages Indian customers preferred LICrsquos money back
and endowment policies
The new private insurer focused on providing customized product - product that contain
innovative feature- to the customers for this the company conducted extensive market
research to figure out what types of products would appeal to consumers
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
It creates a long-term savings opportunity with a reasonable rate of return especially
since the payout is considered exempt from tax except under specified situations
Endowment Policy Benefits
Under a special provision in the Income tax Act the returns on an insurance policy are tax
free There will be two possibilities if the policy is other than a term policy
a) On untimely death of the insured In this situation a benefit can be received on the death
of the person insured under the policy This receipt is tax free in the hands of the dependants
who actually receive the insurance benefit This means that under Section 10 (10D) of the
Income Tax Act the amount received on death from an insurance policy will not be included
in the taxable income calculations
b) On maturity In this case the amount would be received at maturity of the policy It
would include bonus and other benefits This happens when the policyholder actually lives
through the entire policy period for example in money back policies or endowment policies
In this case too the receipt is completely tax-free in the hands of the investor
Example
Consider a case where a customer takes a policy with a sum assured of Rs 10 lakh cover At
maturity after 20 years the total amount including bonus comes to Rs 21 lakh The bonus is
accumulated at different rates for the years over the life and this works out to Rs 11 lakh
totalling to an overall figure of Rs 21 lakh this entire amount is tax free
While that is true one of the reasons for endowment and money back policies to be more
popular than others is also the fact that Life Insurance Corporation of India (LIC) agents
pushed them vigorously The reason - commission on these products is higher than other
products As a result the market is not aware about other usual products that are in LICs
portfolio Thus due to the above advantages Indian customers preferred LICrsquos money back
and endowment policies
The new private insurer focused on providing customized product - product that contain
innovative feature- to the customers for this the company conducted extensive market
research to figure out what types of products would appeal to consumers
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
MAX NEWYORK LIFE - INRODUCTIONMax New York Life Insurance Company is a joint venture between New York Life
International Inc And Max India Limited New York Life a Fortune 100 Company is one of
the worldrsquos experts in life insurance with over 156 years of experience in the business and
over US$ 165 billion (Rs 775000 Crores) in assets under management
HDFC STANDARD LIFE INSURANCE
HDFC Standard Life Insurance Co Ltd is a joint venture between HDFC Indiarsquos largest
housing finance institution and Standard Life Assurance Company Europersquos largest mutual
life company HDFC manages Rs 21450 Crores in assets and Standard Life manages over
US $100 billion in assets Both the promoters are well known for their ethical dealings their
financial strength and their commitment to be a long-term player in the life Insurance
industry
ICICI Prudential Life offered compound interest It also offered accident benefit and
disability benefit riders with a marginally higher premium of Rs 270 pa it also
launched a pension plan ldquo ICICI Pru Foreverrdquo which would provide the policy holder
a fixed income after a certain period of time with additional riders such as critical
illness benefit major surgical benefit accident and disability benefit
Tata AIG came up with whole life policy known as MahaLife which would provide
life cover for 100 years with guaranteed annual payment of 5 of the sun assured
each year from the 13th year for the rest of the life Policy holder needs to pay
premium only for the first 12 years of the policy or until death whichever came
earlier
Aviva launched 3 products in early 2002- life long a whole life flexible protection
plan life saver premium endowment savings plan and life bond a single premium
investment bond Aviva also offered ldquounitize with profitrdquo products (like unit linked
product under ldquounitize with profitrdquo the premium was split into many units A part of
the investment return was held that by the insurance co to offset market fluctuation
during the term of the policy and the surplus was distributed as terminal benefit)
Having realised the untapped potential of the rural market for insurance products
AMP Sanmar decided to target semi urban and small town by having product features
simple and straight forward AMP Sanmar decided to keep its product strategy as
offering simple life insurance solution to individual primarily aiming at wealth
creation and risk protection
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
Birla Sun Life also launched products meant for the rural population in order to
capture a larger market share It launched the Birla Sun Life Kavach Yojna a three
year single premium insurance cover available in denomination of Rs 50 100 and
200 which offered 100 times the amount of premium paid in the event of death of
customer
Comparison of the productsMarket-linked returns have become the norm today This is the reason why insurance
companies launch unit-linked plans in different avatars Important segments of the consumer
market no longer consider life insurers as competing only with other life insurers In an effort
to gain market power and thereby to protect or enhance profitability the issue of product
development and innovation including pricing and marketing innovation is all the more
important with the continued convergence among financial service competitors
The most significant innovation of the Birla Sun Life and AMP Sanmar is that it has
provided social security -insurance cover to the rural and societys poorer sections In
the rural and non-traditional business these two have rightfully claimed distinction
for product innovation The products include insurance cover with a very low rate of
premium for livestock poultry ducks fishery horticulture sericulture agriculture
pump sets gramin personal accident hut insurance tribal welfare etc whereas such
facilities were not made available by GIC nor LIC till 2002
LIC has done a reasonably good job of introducing a couple of new products over the
last two-three years but there has been very little innovation in the sector in general
The majority of the products available today are also skewed more towards
investment return rather than death benefit With the advent of competition many
new products will be introduced in the market and customers will benefit from more
value and options as a result
If we observe the trend of ULIPS in insurance market after the insurance sector is
opened private players came up with aggressive marketing strategies to establish
their presence lsquoModernrsquo products which are unit-linked life insurance policies
where the investment risks is borne by the policyholder The LIC hardly took any
step for this purpose until recently
Falling interest rates [The last five years saw interest rates fall dramatically by 400
basis points] This was also initiated by the private players owing to cut throat
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
competition The liberalization was also accompanied by wider product offerings by
the insurers [ex Endowment plan pension plans etc] as compared to the products of
LIC
In a Whole life policy the sum assured with bonus is paid out either on death or
survival till a pre-determined age Whole life policies expire at age 100 A few expire
earlier Whole life insurance policies are valuable because they provide permanent
protection and accumulate cash values for emergencies or bequeaths Since it is
unrealistic to expect the policyholders to keep paying level annual premiums beyond
certain age most insurance companies provide an option to the policyholders to pay
their premiums over a shorter term called premium-paying term LIC stands nowhere
near this mark of cover of 100years by Tata AIG Again we find that there is only
one non-participating whole life policy available in the Indian market
Change in LIC PortfolioIn the year 2002 LIC introduced a new facility- the term assurance rider- that would
accompany select life insurance policies This facility provided an extra risk cover
which was double the existing risk cover under the plan subject to an overall limit of
Rs 25 lacs In addition to Anmol Jeevan it introduced a few other new policies in
early 2002- ldquoJeevan Anandrdquo (a combination of an endowment and a whole life plan)
ldquoJeevan Rekhardquo (a combination of money back and whole life plan) ldquoJeevan Surbhirdquo
(a money back policy) and ldquoJeevan Mitrardquo (an endowment policy) The ldquoJeevan
Surabhirdquo policy offered early payment of survival benefit and money back facility
LIC also launched a new ldquoBima Kiranrdquo policy which had an accident benefit and
extended term cover beyond maturity period in addition to risk cover during the term
of the policy
In addition to the new launches LIC also made changed to its product portfolio by
withdrawing certain scheme and bringing down return on some others In March
2002 the company withdrew ldquoJeevan Sanchayrdquo a childrenrsquos growth scheme and the
childrenrsquos money back policy due to the falling yield on investment It also brought
down the assured return on its newly launched scheme following a 05 rate cut by
the RBI and the depressed sentiments in the market In late 2001 LIC launched a
special campaign to revive peoplersquos interest in its policies which now carried
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
customer friendly incentives A 30 waiver on late fees was offered along with
relaxation in the procedure of mandatory self declaration of good health and offered
for revival facility
As a consequence of these changes which brought about a bundling of insurance and
investments products portfolio management of life insurance companies today is
similar to that of a bank or non bank financial company Specifically LIC has to
Look out for arbitrage opportunities in the market place both across markets and over
time
Use value at risk modelling to ensure that their reserves are adequate to absorb market
related shocks
Ensure that there is no mismatch of duration between their assets and liabilities and
Ensure that risk return trade off of their portfolios remain at an acceptable level
Analysis of the products of new companiesTo analyse the strategies of new companies it is important to know about the Market
dynamics of insurance sector The Market Overview includes a timeline on the evolution of
the Indian insurance industry An overview of the size and growth of the main segments is
also included Product offerings by the leading players like HDFC LIC Tata AIG Bajaj
Allianz etc are also mentioned in both the life and non-life insurance segments
There have been various factors that have driven the change in the insurance market These
include Increasing Gross Financial Household Savings Deregulation in the Indian Insurance
Market and Increase in Dependency Ratio All these have motivated the companies to come
up with new and innovative insurance products so as to deal with the growing needs of both
urban and rural people As a result it can be justified that the new products by private players
are based on sound market research and reasonable grounds Thus there are less chances of
failure of these private players in this sector Private companies must also have looked into
Major Issues amp Implications involved in the market These include Unprofitable Health
Insurance Sector Dearth of New Products Owing to all these developments it can be
vindicated that most of private players are playing it safe by bringing the innovative products
in a market which is hungry for such rejuvenation These are based on extensive market
research are wisely priced and effectively distributed so as to minimize the risk of their
failure and ripe the maximum benefits of the untapped Indian insurance market Thus these
companies are likely to survive in the long run
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
Future Prospects Market Share How would the life insurance market be divided up between the incumbent Life Insurance
Corporation and the newcomers Models of market share have shown that in a fast growing
market the first few years are critical
In life insurance the Life Insurance Corporation has two important elements in its
favour
The Life Insurance Corporation has a vast distribution network in the rural and semi-
urban areas This would be hard to duplicate One potential way to duplicate it would
be through bancassurance ndash selling insurance through banks Some insurance
companies have already embarked on this road
Since the Life Insurance Corporation started with 100 of the market share it will
lose market share simply because of expansion of the market itself and less because of
loss of existing customers The Life Insurance Corporation is the only financial
institution in the top 50 trusted brand names in India
As life insurance benefits accrue over time it becomes more expensive to switch -
because switching would mean a loss of accrued benefits With the rapid expansion of
life insurance the market share of the Life Insurance Corporation could fall below the
50 mark in five years time
ConclusionsThe insurance sector is a colossal one and is growing at a speedy rate of 15-20 Together
with banking services insurance services add about 7 to the countryrsquos GDP 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
The wake up bugle for Indias largest and till date a monopoly insurance company the Life
Insurance Corporation of India (LIC) has been sounded The Insurance Regulatory and
Development Authority (IRDA) has licensed HDFC Standard Life Max New York Life and
ICICI-Prudential combine to transact life insurance business along with Reliance and Tata-
AIG
So are we going to see LIC struggling Not necessarily given LICs known and hidden
strengths And if the corporation can get its act together to meet the competition it can be a
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
very tough adversary In fact LIC is not perturbed by the likely competition while waking up
to the emerging reality Conversely it believes that it is the new players who will have to
seek cover if the Indian public sector giant flexes its huge financial muscle
In spite of its strengths and advantages LIC has a couple of holes in its shield that new
players would try to exploit For instance with intelligent pricing HDFC Standard Life along
with HDFC could eat into LICs individual assurance market It may be noted that LIC derives
sizeable business through its housing finance subsidiary LIC Housing Finance Ltd as its
insurance policy doubles as a collateral for the housing loan
Competition will be severe in the group assurance schemes more so in the case of gratuity-
assurance as compared to term-assurance schemes Unit-linked insurance products is yet
another area which LIC has not tapped extensively due to restrictions placed by the Insurance
Act on investments of the Life Fund and also due to LICs own diffidence
Savvy marketing is another area where the new companies would score over LIC if the latter
continues its current style of functioning For example when NBFCs and even nationalised
banks deliver their fixed deposit certificates inside a plastic folder LIC sends its policies acirceuroldquo
to be preserved for decades -- in a brown envelope
The flashy office and the glossy product literature of private insurers are sure to attract
customers and will immensely aid their marketing teams On the other hand LIC agents
depend entirely on their personal skills without any product literature to support
On its costs side LIC has to keep an eagle eye While its first year premium cost is the
lowest in the world at 65 per cent it is not so in the case of renewal premium Good global
companies have their renewal premium cost at eight per cent whereas for LIC it is around 13
per cent he remarks In fact premium procurement costs will go up further if LIC decides to
pay agency commission as per the Insurance Act to retain its top-notch agents
But for these small hitches the LIC juggernaut is standing on a solid wicket
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
HISTORY OF GICThe entire general insurance business in India was nationalized by General Insurance Business (Nationalization) Act 1972 (GIBNA) The Government of India (GOI) through Nationalization took over the shares of 55 Indian insurance companies and the undertakings of 52 insurers carrying on general insurance business
General Insurance Corporation of India (GIC) was formed in pursuance of Section 9(1) of GIBNA It was incorporated on 22 November 1972 under the Companies Act 1956 as a private company limited by shares GIC was formed for the purpose of superintending controlling and carrying on the business of general insurance
As soon as GIC was formed GOI transferred all the shares it held of the general insurance companies to GIC Simultaneously the nationalized undertakings were transferred to Indian insurance companies After a process of mergers among Indian insurance companies four companies were left as fully owned subsidiary companies of GIC (1) National Insurance Company Limited (2) The New India Assurance Company Limited (3) The Oriental Insurance Company Limited and (4) United India Insurance Company Limited
The next landmark happened on 19th April 2000 when the Insurance Regulatory and Development Authority Act 1999 (IRDAA) came into force This act also introduced amendment to GIBNA and the Insurance Act 1938 An amendment to GIBNA removed the exclusive privilege of GIC and its subsidiaries carrying on general insurance in India
In November 2000 GIC is renotified as the Indian Reinsurer and through administrative instruction its supervisory role over subsidiaries was ended
With the General Insurance Business (Nationalization) Amendment Act 2002 (40 of 2002) coming into force from March 21 2003 GIC ceased to be a holding company of its subsidiaries Their ownership were vested with Government of India
ManagementBOD
Mr Yogesh Lohiya Chairman-cum-Managing DirectorMr Tarun BajajMr M V NairMr SB MathurMr SLMohanMr G SrinivasanMs Bhagyam Ramani
Vision
ldquoTo be a leading Global Reinsurance and Risk Solution providerrdquo
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
Mission
To achieve our vision by Building long-term mutually beneficial relationship with business partners Practicing fair business ethics and values Applying ldquostate-of-artrdquo technology processes including enterprise risk management
and innovative solutions Developing and retaining highly motivated professional team of employees Enhancing profitability and financial strength befitting the global position
Core values
Trust and mutual respect Professional excellence Integrity and transparency Commitment Responsive service
Regularetory framework
The functioning of GIC has to be within the regulations of the following major Acts
The Companies Act 1956
Insurance Act 1938
General Insurance Business (Nationalization) Act 1972
General Insurance Business (Nationalization) Amendment Act 2002
Insurance Regulatory and Development Authority Act 1999
OUR BUSINESS
Domestic reinsurance business
As a sole reinsurer in the domestic reinsurance market GIC provides reinsurance to the direct general insurance companies in the Indian market GIC receives statutory cession of 10 on each and every policy subject to certain limits It leads many of domestic companiesrsquo treaty
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
programmes and facultative placements GICrsquos capacity for each class of business on Treaty and Facultative basis for domestic business is given in the following table
International reinsurance business
A GIC is spreading its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries South East Asia Middle East and Africa To offer its international clientele an easy accessibility efficient service and tailor made reinsurance solutions GIC has opened liaisonrepresentativebranch offices in London and Moscow GIC provides following capacities for Treaty and Facultative business on risk emanating from the international market based on merits of the business
Investment and fund management
Investments were made within the regulatory framework of Insurance Act and IRDA Regulations and within corporate policy The funds of the Corporation are managed in-house
IRDA regulations on investment
IRDA regulations stipulates that without prejudice to Section 27 or 27(b) of the Act every insurer carrying on General Insurance Business shall invest and at all times keep invested his total assets in the following manner
What is new
AM Best Co reaffirms a - (Excellent) Rating to GIC Re
A M Best Company has affirmed (11th March 2010) the financial strength rating of A- (Excellent) and issuer credit rating of ldquoa-rdquo of General Insurance Corporation of India (GIC Re) The outlook for both ratings is stable
The ratings reflect GIC Rersquos strong capitalization stable expense ratio and established market presence GIC Rersquos risk-adjusted capitalization as measured by Bestrsquos Capital Adequacy Ratio (BCAR) remains strong and is supportive of its current ratings
As per A M Best Co as the sole domestic reinsurer in India GIC Res business profile remains strong with the company maintaining its leading business position in the domestic reinsurance market In recent years GIC Re also has been directing more resources in expanding its overseas markets
Mumbai 17032010
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
a1048576______1048576__
a____________________1048576_______ __________________1048576_1048576_______1048576____1048576_______1048576___1048576___1048576___________________1048576_1048576______1048576________1048576___1048576_a1048576_____ _____________________ _____1048576___a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
__ ____a1048576____ _____1048576______1048576__________ ___1048576____a1048576____1048576______1048576__________ $1048576_____a1048576____a1048576____1048576______1048576_________
