ASSIGNMENT ON INSURANCE SECTOR

Date

SUBMITTED BY :

17-02-2010

AKHIL M NAIR VIPINKRISHNA C

JERIN JACOBSAJITH SDIVYA U

OVERVIEW OF INSURANCE

SECTOR

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

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

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

FACTORS EFFECTING SERVICE SECTOR

CustomersCompetitorsGovernmentTechnology andGlobalization -are forcing rapid changes

in the service sector.In addition, there are four factors of

particular importance to service providers- change in how quality is perceivedcost controlcustomer services andthe new definitions of the customer.

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

Under GIC there were four subsidiariesNational Insurance Company Ltd.Oriental Insurance Company Ltd. New India Assurance Company Ltd.United India Assurance Company Ltd.

ORIGIN AND GROWTH OF INSURANCE SECTOR

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

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

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

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

ORIGIN AND GROWTH OF INSURANCE SECTOR:

DIVISION OF INSURANCE SECTOR

INSURANCE

GENERAL INSURANCE

FIRE INSURAN

CE

MARINE INSURAN

CE

MEDICLAIM

MOTOR VEHICAL

LIFE INSURANCE

GENERAL INSURANCE

It means fire, marine / miscellaneous insurance business whether carried on singly or in combination with one/more of them.

Types of General InsuranceFire insurance Policies(a) Specific Policy(b) Comprehensive Policy(c) Valued Policy(d) Floating Policye) Replacement or Reinstatement Policy:

GENERAL INSURERS 107 insurers amalgamated and grouped

into four companies viz.:

The National Insurance Company Ltd.The New India Assurance Company Ltd. The Oriental Insurance Company Ltd.The United India Insurance Company

Ltd. The General Insurance Corporation

incorporated as a company.

Cont

ribut

ors

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

Cont

ribut

ors

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

Other Type of insuranceProperty insuranceAutomobile insuranceAviation insurance Boiler insurance Builder's risk insuranceCrop insurance Earthquake insurance

Type of Life Insurance PolicesEndowment PolicyWhole Life PolicyLimited Payment Life PolicyJoint Life PolicyConvertible Whole Life PolicyAnnuities

Type of Life Insurance PolicesSinking Fund PolicyDouble Accident Indemnity PolicyJanata Policy

COMPANY LOGOS

COMPANY LOGOS

Insurance Regulatory and Development Authority (IRDA)

• In 1993 Government setup a committee under chairmanship of RN Malhotra ,former Governor of RBI for reforms in Insurance sector.

• Recommendations are :-• IRDA was constituted as an autonomous

body to regulate and develop the insurance industry.

• Foreign companies are allowed up to 26% of paid up capital and can operate with an Indian company.

Composition of Authority under IRDA Act, 1999

The Authority is a ten member team consisting of

    (a)    a Chairman;     (b)    five whole-time members;     (c)    four part-time members

Duties, Powers and Functions of IRDA

To regulate, promote and ensure orderly growth of the insurance business and re-insurance business.

Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration .

Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance

Duties, Powers and Functions of IRDASpecifying requisite qualifications, code of

conduct and practical training for intermediary or insurance intermediaries and agents.

Specifying the code of conduct for surveyors and loss assessors.

Promoting efficiency in the conduct of insurance business.

Duties, Powers and Functions of IRDA• Levying fees and other charges for carrying

out the purposes of this Act• Calling for information from, undertaking

inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries.

• Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business .

CONDITIONS OF IRDAFOR REGESTRATION

Company is formed and registered under the Companies Act, 1956;

The aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed 26%, paid up equity capital of such Indian insurance company;

The company's sole purpose is to carry on life insurance business or general insurance business or reinsurance business.

CONDITIONS OF IRDA

The minimum paid up equity capital for life or general insurance business is Rs.100 crores.

The minimum paid up equity capital for carrying on reinsurance business has been prescribed as Rs.200 crores.

CONTRIBUTING TO GROWTH• Currently, the insurance sector size is

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

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

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

CONTRIBUTING TO GROWTH• LIC and GIC have limited number of policies

to offer to their subscribers • Private insurance companies offer many

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

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

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

Future of the Sector: Indian insurance sector is likely to

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

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

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

Insurance Sector - Emerging Areas:• Demand for Pension Plans

Two relatively modern trends affect life insurance business in India significantly:

– Joint Family System and– elderly are increasingly having to fend for

themselves• Separateness of Banking and Insurance

– Bancassurance• Role of Information Technology• Using Postal Network• Creating Insurance awareness• Innovative Products

CHANGE IN TRENDSFROM PRICE POINT OF VIEWDIFFERENT COMPANIES ARE PROVIDING

POLICES OF INSURANCE AT COMPETETIVE PRICES

EVEN THE ALLOCATION CHARGES UNDER POLICIES IS ALSO DECREASED

THE INSURANCE AGENT COMISSION IS ALSO FIXED AND REDUCED SO THAT THE CUSTOMER CAN GET THE BEST.

FROM CUSTOMER AND SERVICE POINT OF VIEW

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

FROM PROMOTION POINT OF VIEWComputerizationInternetElectronic Clearance Service (ECS)

Call Centres and SMS services

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

prudential and HDFC Standard Life insurance first private insurers to sell a policy

• 2001: Royal Sundaram Alliance first non life insurer to sell a policy • 2002: Banks allowed selling insurance plans. As TPAs enter the

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

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

2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership.

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

UNIT LINKED INSURANCE POLICIES(ULIP)Combination of risk cover and investment

BENEFITS OF ULIPSTOP UPSWITCHPARTIAL WITHDRAWAL

THANKS AND IF ANY QUERY THEN PLEASE ASK US ?