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8/6/2019 Insurance Dewas
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1
³Impact of financial downturn on
insurance sector in India´
Dr. D.D. Bedia,
Reader ± Pt. Jawahar lal Nehru Institute of Business Management, Vikram University Ujjain
(M P )
Ms. Annada Padmawat.
Sr. lecturer & HR Manager- Mahakal Institute of Management, Ujjain
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Abstract
This study is an attempt to find out the functions of
insurance company which are highly influenced by the
recession or financial crisis. The study is based on the
collecting information regarding impact measurement
of financial crisis on insurance sector. This paper
focuses how premium deposits are being affected by
financial downturn. In nut shell the impact of financial
crisis on insurance sector in India is not substantial.
Statistically there is no impact of financial crisis in
insurance sector and an average before crisis premium
deposits and during crisis premium deposits are same.
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Introduction
In macroeconomics, recession is defined as a distinct
decline in any particular country's GDP (Gross DomesticProduct). In some other cases, when a country faces
negative real economic expansion, for two or more
successive quarters of a year, that¶s also termed as state of
recession. In general, recession affects a country¶s overalleconomic activities, including, investment, employment
rate, profits data of companies etc. Recession is almost
always accompanied by sharp increase in prices of
commodities. When recession continues for a longduration and with severe implications, it¶s termed as
economic depression whereas complete breakdown of
economy is referred as economic fall down.
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This is true, Insurance Carriers in India are also struggling to
balance their funds. Top 100 companies have applied costcutting majors, giving a reason of economy slowdown, financial
crisis & Recession, giving pink slips to employees. The
slowdown in economic activities in India has lead to a sharp
reduction in asset creation in the Indian industries. This alongwith rigorous cost cutting measures in all businesses has directly
impacted the insurance industry in the country. The most
important reason for the go down in this business was that many
small and medium businesses either did not buy insurancecovers, or went for lower cover to save on premium expenditure.
Also the sharp drop in sales of commercial vehicles, tractors and
near stagnation in car sales led to a big drop in insurance
premium underwritten. Interestingly, despite the slowdown, the
insurance industry attracted many new players last year.
Introduction
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Objective of the study
The main objectives of study are:
*To provide the overview of financial downturn.
*To measure the impact of financial downturn on
insurance sector.
*To study the impact of recession on premium deposits
in insurance sector.
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Research Methodology
This study is an attempt to find out the functions of
insurance company which are highly influenced by therecession or financial crisis. We have taken all the data
from report, journal and website. Premium is the
important factor in various insurance companies in this
research paper, we are using secondary data for theanalysis of insurance sectors various private and public
insurance companies¶ premium. we have selected 4
insurance companies from the public sector and 3 private
life and general insurance companies from private sector and duration from 2006 to 2009.The statistical tool which
is appropriate to analyze the data to measure the impact of
financial crisis on insurance sector is paired µT µtest. With
the use of this technique, the inferences are drawn.
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Analysis & FindingsHypothesis:
H0: There is significant difference before, during and after the financial crises in general insurance
and life insurance companies.
H1: During and after financial crises general and life insurance companies have not affected.
Table- 2 Paired Samples Statistics for general Insurance sector (both public and private) 2007-2009
Mean N Std. Deviation Std. Error Mean
Pair 1 Before crisis
± 3208101.0000 4 5002022.22661 2501011.11330
during crisis
7949008.4075 4 8085016.29900 4042508.14950
Pair 2 During crisis
± 7949008.4075 4 8085016.29900 4042508.14950
after crisis10231894.5150 4 10525476.65365 5262738.32683
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Analysis & Findings
Table -3 Paired Samples Test for general Insurance sector (both public and private) 2007-2009
Paired Differences
Mean
Std.
Deviation
Std. Error
Mean
95% Confidence Interval
of the Difference t df
Sig.
(2-
tailed)
Lower Upper
Pair 1 Before crisis
± during
crisis-
4740907.407
50
6724630.61
145
3362315.305
72
-
15441295.32
940
5959480.5
1440
-
1.4103 .253
Pair2
During
crisis ± after
crisis-
2282886.107
50
2476004.74
779
1238002.373
90
-
6222762.188
24
1656989.9
7324
-
1.8443 .162
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Analysis & Findings
Table -5 Paired Samples Test for Life Insurance (both public and private sector) 2007-2009
Paired Differences t df
Sig.
(2-
tailed)
Mean Std. Deviation
Std.Error
Mean
95% ConfidenceInterval of the
Difference
Lower Upper
Pair 1 P
Pair1
Before
crisis -
during
crisis
-30170688.83250
25163271.06939
12581635.53469
-
7021106
8.35431
9869690.68931
-2.398 3 .096
Pair 2P
Pair2
During
crisis ±
after crisis -8508125.240007396974.8091
5
3698487.
40457
-
2027836
2.81582
3262112.
33582-2.300 3 .105
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Analysis & Findings
Hypothesis:
H0: There is significant difference before, during and after the financial crises in overall banking both
sectors.
H1: During and after financial crises in overall banking both sectors have not affected.
Table -6 Lives and general Insurance 2007-2009 Paired Samples Statistics
Mean N Std. Deviation Std. Error Mean
Pair 1 Before crisis
24820043.8943 7 30824081.59230 11650407.75503
-during crisis
42748664.3171 7 54260718.57226 20508623.90027
Pair 2 During crisis
42748664.3171 7 54260718.57226 20508623.90027
-after crisis
48235201.9443 7 60661817.11550 22928011.73784
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Analysis & Findings
Table -7 Insurance sector (public and private both) 2007-2009 Paired Samples Test
Paired Differences t df
Sig. (2-
tailed)
MeanStd.Deviation
Std.
Error Mean
95% Confidence Interval of the Difference
Lower Upper
Pair 1 Before
crisis ±
during
crisis
-
17928620.
42286
23509078.
94792
8885596
.63548
-
39670892.1
3472
3813651.2890
0-2.018 6 .090
Pair 2 During
crisis ±
after crisis
-
5486537.6
2714
6577495.0
9441
2486059
.46708
-
11569705.9
9979
596630.74551 -2.207 6 .069
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Conclusion
When we see in comparative analysis of public and private insurance
sector, even both have face the crises but in public sector there was
not the condition of jobless situation, cost cutting situation and people
had faith on LIC on that time also, but because of financial meltdown
people might be not able to invest the money even in LIC, but in
private sector there was worst situation in inside of the companies,
very much pressure on employees to sale the products, cost cutting
situation have faced by many private insurance sector, there old
products were not in running position and new one were almost
failed.
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Conclusion
In conclusion, the impact of financial crisis on insurance sector in
India is not substantial. Statistically there is no impact of financial
crisis in insurance sector and an average before crisis premium
deposits and during crisis premium deposits are same. There is no
difference between average premium deposits during the crisis and
after the financial crisis. Thus it is clear that there is no effect of
financial crisis in insurance sector both in life insurance and general
insurance.