Insurance Sector - HD

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Insurance Sector

HD


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TYPES OF INSURANCE

Life

General


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BRIEF JOURNEY OF INSURANCE

SECTOR IN INDIA


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1818 - Establishment of the Oriental Life

Insurance Company in Calcutta.1829 - Madras Equitable begun transacting life

insurance business in the Madras Presidency.

1870 saw the enactment of the British Insurance

Act.The Bombay Mutual (1871), Oriental (1874) and

Empire of India (1897) were started in theBombay Residency.

This era, however, was dominated by foreigninsurance offices which did good business in India,namely Albert Life Assurance, Royal Insurance,Liverpool and London Globe Insurance.

LIFE INSURANCE IN INDIA


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The Indian Life Assurance Companies Act, 1912

was the first statutory measure to regulate life

business.

In 1928, the Indian Insurance Companies Act

was enacted.

With a view to protecting the interest of the

Insurance public, the earlier legislation was

consolidated and amended by the InsuranceAct, 1938 with comprehensive provisions for

effective control over the activities of insurers.



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An Ordinance was issued on 19th January,

1956 nationalizing the Life Insurance sector

and Life Insurance Corporation came into

existence in the same year.

The LIC absorbed 154 Indian, 16 non-Indianinsurers as also 75 provident societies 245

Indian and foreign insurers in all.

The LIC had monopoly till the late 90s whenthe Insurance sector was reopened to the

private sector.



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General Insurance came to India as a legacy of

British occupation. General Insurance in India hasits roots in the establishment of Triton InsuranceCompany Ltd., in the year 1850 in Calcutta by theBritish.

In 1907, the Indian Mercantile Insurance Ltd, wasset up. This was the first company to transact allclasses of general insurance business.

1957 saw the formation of the General InsuranceCouncil, a wing of the Insurance Association ofIndia. The General Insurance Council framed acode of conduct for ensuring fair conduct and

sound business practices.

GENERAL INSURANCE IN INDIA


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General insurance business was nationalized

with effect from 1st January, 1973. 107

insurers were amalgamated and grouped into

four companies, namely National Insurance

Company Ltd., the New India AssuranceCompany Ltd., the Oriental Insurance

Company Ltd and the United India Insurance

Company Ltd.The General Insurance Corporation of India

was incorporated as a company in 1971 and it

commenced business on January 1st

1973.

GENERAL INSURANCE IN INDIA


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Following the recommendations of the Malhotra

Committee report, in 1999, the Insurance Regulatory

and Development Authority (IRDA) was constituted.

The IRDA was incorporated as a statutory body in

April, 2000. The key objectives of the IRDA include

promotion of competition so as to enhance

customer satisfaction through increased consumerchoice and lower premiums, while ensuring the

financial security of the insurance market.

The IRDA opened up the market in August 2000 withthe invitation for application for registrations.

Foreign companies were allowed ownership of up to

26%.


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In December, 2000, the subsidiaries of the

General Insurance Corporation of India were

restructured as independent companies and atthe same time GIC was converted into a national

re-insurer. Parliament passed a bill de-linking the

four subsidiaries from GIC in July, 2002.

Today there are 27 general insurance

companies including the ECGC and Agriculture

Insurance Corporation of India and 24 life

insurance companies operating in the country.


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PRESENT LANDSCAPE OF INSURANCE

IN INDIA


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Insurance penetration and insurance density are

the two widely used parameters for the

assessment of the potential and performance of

the insurance industry.Insurance penetration is defined as the ratio of

premium underwritten to the GDP.

Insurance density is defined as the ratio ofpremium underwritten to total population.

Indias insurance penetration & density

indicate tremendous potential for growth


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Life insurance penetration in India had

consistently gone up from 2.15% in 2001 to 4.6%

in 2009. However, decline has been observed in

last few years and the Life insurance penetration

currently stands at 3.17%.

General Insurance penetration has shown minor

growth from 0.55% in 2001 to 0.78% at present.




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Life insurance density in India had consistently

gone up from $ 9.1 in 2001 to $ 42.7 at present.

The peak was $ 55.7 in 2010

General Insurance density has shown growth from

$ 2.4 in 2001 to $ 10.5 at present.




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Insurance industry contributes to 4% of IndiasGDP.

Insurance accounts for 24.2% of the totalhousehold financial savings.

As on 31stMarch 2012 Insurance industry has 2.5

lac direct employees and 23.5 lac individualinsurance advisors.

Insurance Sector is significant contributor

to the Indian economy.


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Insurance is a tightly regulated industry with

policy changes having a visible impact on the

business in short as well as long run.For Example, change in regulations governing the

sales of ULIPs negatively impacted the Life

insurance business. Life insurance premiumsregistered a growth of -1.6% in FY 12 as compared

to 9.9% in FY 11.

Regulatory changes play a critical role in

the Insurance business.


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EMERGING TRENDS & CHALLENGES

IN THE INSURANCE SECTOR.


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Changing Socio-Economic trends and diverse

consumer needs necessitate product

customization and innovation

More number of working women, payouts

coinciding with requirements in childrens lifeevents.

Examples - ULIPs, Hyundais job loss protection in

US and IndiasWBCIS.


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Transition from traditional model to a multi

channel distribution model.


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Continuous growth in bancassurance.

Despite late start, bancassurance accounts for 25

to 30 % of premiums collected by privateinsurance companies.


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E Commerce is acting as a great facilitator but yet

to gain full fledged momentum.

10.2% of Indiaspopulation has access to internet.

Internet as a medium is being effectively used to

create awareness and sell simple insuranceproducts like Motor and Health insurance.

However, complex insurance products which need

personalized advice have not shown any salesthrough this channel.

Use of social media is in nascent stage.


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Micro-Insurance: An Essential tool to achieve

financial inclusion.

Micro insurance is designed for low income

people and is characterized by low premiums and

margins.The product is suitable in for people in rural areas.

Urban poor can also benefit.

Currently the product is distributed bymicrofinance companies. Insurers are exploring

options for distribution with NGOs and small and

big retailers in rural areas.


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Health and Motor insurance will lead non life

segment; Property insurance has huge potential.


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Private insurance companies to play a major role

in future.

If FDI in insurance increases to 49% the sector is

expected to many new foreign entrants. (Bill is

pending in Rajya Sabha).Regulatory reforms, foreign collaborations, quality

services and better growth strategies will see the

share of private sector companies continue toincrease.


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Life insurance industry is at the threshold of new

growth phase.

High inflationary environment erodes the intrinsic

value of insurance policy thereby reducing

demand.Steps taken by GOI to moderate inflation will have

a positive impact on the growth in insurance

sector.


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Regulatory changes will ensure risk management

and improve transparency and supervision.

IRDA has given new guideline for insures to

withdraw old products and introduce new

products from October 2013.New steps have been taken by IRDA to improve

solvency, increase transparency, increase

accountability and protect consumer interests inthe long run.


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Embracing new technology will enable new growth.


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CONCLUSION.


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Growth in the insurance sector will be driven by factors

such as Customer demographics, Macro environment,

Regulatory changes and Adoption of new technology.

Product innovation and customization will be one of the

key strategies.

Alternative distribution channels will emerge.

Micro insurance will help in increasing penetration. Prudent investment and stronger risk management will

become more prevalent.

Favorable changes in macro economic environment areneeded for new phase of growth.

Regulatory changes will improve solvency and corporate

governance.


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Many Thanks.

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Insurance Sector - HD