This presentation gives an brief introduction about the growth of insurance sector in India. It also give description about the major players existing in the finance market of insurance.
Text of Insurance Sector
1 Insurance Industry
Insurance 2 We face a lot of risks in our daily lives. Some of these lead to financial losses. Insurance is a way of protecting against these financial losses. For a payment (premium), an insurance company will take the responsibility of compensating your financial losses
Introduction and Overview 3 Insurance Sector
Insurance Introduction 4 What is insurance? Why do we need it? How has the insurance industry and the law of insurance evolved?
What is Insurance? 5 Commercial mechanism for transferring risk and spreading loss Economic Concept of Insurance: 1. Insurer offers policy to cover specified risks 2. Insurer collects policy premiums from customers 3. Insurer invests premiums 4. Insurer pays money to insured customers in the event of losses covered by policy.
What is Insurance 6 Theoretically, everybody comes out ahead (so long as losses do not exceed returns of invested premiums; and all parties honor their contractual obligations). Theoretically, the insurance industry bridges private interests and public good.
Why do we need insurance? 7
Why do we need insurance? 8
Insurance Law 9 Sources of Insurance Obligations Policy/Insurance Agreement Common Law (contract theories; tort theories) Statutes Regulations The law of insurance is multi-layered. The prudent researcher will consider each of the layers when approaching a research problem.
Historical context provides insight and perspective into todays insurance industry 10 The History of Insurance
The History of Insurance 11 3000 B.C.E. Mesopotamian merchants assess risk surcharges in transactions with caravan operators and traders to protect their capital. 1750 B.C.E. Code of Hammurabi formalizes concepts of bottomry and respondentia (protection against loss of hull and cargo, respectively) the underpinnings of maritime insurance.
History of Insurance 12 1574 Queen Elizabeth I grants to Richard Candler the right to establish an insurance office in the Royal Exchange Building for the preparation and registration of policies. 1601 Britains Parliament enacts the Assurances Act of 1601 creating an assurance commission for resolving policy disputes. 43 Eliz. 1 c. 12.
History of Insurance 13 1666 Great Fire of London. Shortly thereafter, Nicholas Brabon opens the first fire insurance office in England. It eventually becomes The Phoenix Assurance Company. Over the next two decades, more fire insurance companies start up.
History of Insurance 1690s Fire insurance companies form the first professional fire brigades. 14
Lloyds of London Late 1600s Edward Lloyds Coffee House. Seafarers, merchants and insurers meet for insurance business and coffee.
Lloyds of London 1688 Edward Lloyd starts a shipping newspaper and reads out shipping news from a pulpit in his coffee house; attracts even more shipowners and insurers 16
History of Insurance 1751 Benjamin Franklin and other capitalists start the Philadelphia Contributorship, the first successful fire insurance company in America.
History of Insurance 18 Mid-18th Century Many insurance companies are more likely than banks to have substantial cash reserves. Insurance companies function as lending institutions. Mid-18th Century Insurance underwriting is prosperous industry in America. Lloyds of London also draws a significant share of Colonial Americas underwriting business (capitalization).
Rise of Risk Management 1906 S.F. Earthquake Lloyds underwriter, Cuthbert Heath, orders agents to pay all claims in full regardless of policy terms. Lloyds pays $50 Million in claims.
Rise of Risk Management Public confidence in insurance industry soars; industry booms; risk management innovations; new types of insurance emerge. 20
Lloyds of London Today, Lloyds of London is an insurance icon Not an insurance company, but an exclusive insurance market
Pre to Post Liberalization 22 Changing Customer Expectations in Insurance Sector
Comparisons of factors influencing Insurance market 23
Pre Purchase Process : LIFE 24
Awareness of New Products- LIFE 25
Though most SEC A & some SEC B customers have generally heard of change in product offering after liberalization but unable to provide any details.
Only some customers have mentioned new products such as
Products with multiple riders-medical, accident, waiver of premium rider
Pension/retirement benefit plans
Flexi premium plans product with single premium and short time premium option
Some customers exposed to new products perceive new products similar to old ones and do not offer any additional advantage.
New policies are like old wine in new bottle
Purchase Process : LIFE 26
Post Purchase Process : LIFE 27
Changing Customer Expectations - LIFE 28 Role of IRDA
Educate public on regulatory safeguards, investment guidelines and plough back of profits (several people had expressed concern about security of their money, credibility of private insurance companys investment of funds in foreign markets and repatriation of profits to foreign countries)
Inform public on Social and Rural obligations of private players (several people believed that only LIC was responsible for insuring the poor)