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AWARENESS OF INSURANCE IN INDIA

1. THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW

With the largest number of life insurance policies in force in the world, Insurance

happens to be a mega opportunity in India. Its a business growing at the rate of

15-20 per cent annually and presently is of the order of s 15!0."1 billion #for the

financial year 200! $ 200%&. 'ogether with ban(ing ser)ices, it adds about %* to

the countrys +ross omestic roduct #+&. 'he gross premium collection is

nearly 2* of + and funds a)ailable with I/ for in)estments are * of the

+.

)en so nearly !5* of the Indian population is without life insurance co)er while

health insurance and non-life insurance continues to be below international

standards. large part of our population is also sub3ect to wea( social security and

pension systems with hardly any old age income security

well-de)eloped and e)ol)ed insurance sector is needed for economic

de)elopment as it pro)ides long term funds for infrastructure de)elopment and

strengthens the ris( ta(ing ability of indi)iduals. It is estimated that o)er the ne4t

ten years India would reuire in)estments of the order of one trillion 67 dollars.

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2. HISTORICAL PERSPECTIVE

'he history of life insurance in India dates bac( to 11 when it was concei)ed as

a means to pro)ide for nglish Widows. Interestingly in those days a higher

premium was charged for Indian li)es than the non - Indian li)es, as Indian li)es

were considered more ris(y to co)er. 'he 8ombay 9utual ife Insurance 7ociety

started its business in 1%0. It was the first company to charge the same premium

for both Indian and non-Indian li)es.

'he :riental ssurance /ompany was established in 10. 'he +eneral insurance

business in India, on the other hand, can trace its roots to 'riton Insurance

/ompany imited, the first general insurance company established in the year

150 in /alcutta by the 8ritish. 'ill the end of the nineteenth century insurance

business was almost entirely in the hands of o)erseas companies.

Insurance regulation formally began in India with the passing of the ife Insurance/ompanies ct of 1;12 and the ro)ident 0=s sullied insurance business in India. 8y 1;> there were 1%!

insurance companies.

'he first comprehensi)e legislation was introduced with the Insurance ct of 1;>

that pro)ided strict 7tate /ontrol o)er the insurance business. 'he insurance

business grew at a faster pace after independence. Indian companies strengthened

their hold on this business but despite the growth that was witnessed, insurance

remained an urban phenomenon.

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'he +o)ernment of India in 1;5!, brought together o)er 2"0 pri)ate life insurers

and pro)ident societies under one nationali?ed monopoly corporation and ife

Insurance /orporation #I/& was born. @ationali?ation was 3ustified on the

grounds that it would create the much needed funds for rapid industriali?ation. 'his

was in conformity with the +o)ernment=s chosen path of 7tate led planning and

de)elopment.

'he non-life insurance business continued to thri)e with the pri)ate sector till

1;%2. 'heir operations were restricted to organi?ed trade and industry in large

cities. 'he general insurance industry was nationali?ed in 1;%2. With this, nearly

10% insurers were amalgamated and grouped into four companies- @ational

Insurance /ompany, @ew India ssurance /ompany, :riental Insurance /ompany

and 6nited India Insurance /ompany. 'hese were subsidiaries of the +eneral

Insurance /ompany #+I/&.

3. KEY MILESTONES

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1912:'he Indian ife ssurance /ompanies ct enacted as the first statute to

regulate the life insurance business.

1928:'he Indian Insurance /ompanies ct enacted to enable the go)ernment to

collect statistical information about both life and non-life insurance businesses.

1938:arlier legislation consolidated and amended by the Insurance ct with the

ob3ecti)e of protecting the interests of the insuring public.

1956:2"5 Indian and foreign insurers along with pro)ident societies were ta(en

o)er by the central go)ernment and nationali?ed. I/ was formed by an ct of

arliament- I/ ct 1;5!- with a capital contribution of s. 5 crore from the

+o)ernment of India

4. INDUSTRY REFORMS

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eforms in the Insurance sector were initiated with the passage of the I 8ill in

arliament in ecember 1;;;. 'he I since its incorporation as a statutory

body in pril 2000 has fastidiously stuc( to its schedule of framing regulations and

registering the pri)ate sector insurance companies. 7ince being set up as an

independent statutory body the I has put in a framewor( of globally

compatible regulations.

'he other decision ta(en simultaneously to pro)ide the supporting systems to the

insurance sector and in particular the life insurance companies was the launch of

the I online ser)ice for issue and renewal of licenses to agents. 'he appro)al

of institutions for imparting training to agents has also ensured that the insurance

companies would ha)e a trained wor(force of insurance agents in place to sell their

products.

5. PRESENT SCENARIO - LIFE INSURANCE

INDUSTRY IN INDIA

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'he life insurance industry in India grew by an impressi)e "%.>*, with premium

income at s. 15!0."1 billion during the fiscal year 200!-200%. 'hough the total

)olume of I/=s business increased in the last fiscal year #200!-200%& compared to

the pre)ious one, its mar(et share came down from 5.%5* to 1.;1*.

'he 1% pri)ate insurers increased their mar(et share from about 15* to about 1;*

in a year=s time. 'he figures for the first two months of the fiscal year 200%-0 also

spea( of the growing share of the pri)ate insurers. 'he share of I/ for this period

has further come down to %5 percent, while the pri)ate players ha)e grabbed o)er

2" percent.

With the opening up of the insurance industry in India many foreign players ha)e

entered the mar(et. 'he restriction on these companies is that they are not allowed

to ha)e more than a 2!* sta(e in a companys ownership.

7ince the opening up of the insurance sector in 1;;;, foreign in)estments of s.

.% billion ha)e poured into the Indian mar(et and 1; pri)ate life insurance

companies ha)e been granted licenses.

Inno)ati)e products, smart mar(eting, and aggressi)e distribution ha)e enabled

fledgling pri)ate insurance companies to sign up Indian customers faster than

anyone e4pected. Indians, who had always seen life insurance as a ta4 sa)ing

de)ice, are now suddenly turning to the pri)ate sector and snapping up the new

inno)ati)e products on offer. 7ome of these products include in)estment plans

with insurance and good returns #unit lin(ed plans&, multi $ purpose insurance

plans, pension plans, child plans and money bac( plans. #www.wi(ipedia.com&

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6. INSURANCE INDUSTRY CLASSIFICATION

7INSURANCE

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F!" I#$%!'" M&!#" I#$%!'" M"(')&* M+,+! V"')"

L" #$%!'"

L" #$%!'"is a contract between the policy owner and the insurer, where the

insurer agrees to pay a designatedbeneficiarya sum of money upon the occurrence

of the insured indi)idual=s or indi)iduals= deathor other e)ent, such as terminal

illnessor critical illness. In return, the policy owner agrees to pay a stipulated

amount #at regular inter)als or in lump sums&. 'here may be designs in some

countries where bills and death e4penses plus catering for after funeral e4penses

should be included in olicy remium. In the 6nited 7tates, the predominant form

simply specifies a lump sum to be paid on the insured=s demise.

'he )alue for the policyholder is deri)ed, not from an actual claim e)ent, rather itis the )alue deri)ed from the =peace of mind= e4perienced by the policyholder, due

to the negating of ad)erse financial conseuences caused by the death of the ife

ssured.

8

LIFE INSURANCE GENERAL INSURANCE
http://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Beneficiaryhttp://en.wikipedia.org/wiki/Deathhttp://en.wikipedia.org/wiki/Terminal_illnesshttp://en.wikipedia.org/wiki/Terminal_illnesshttp://en.wikipedia.org/wiki/Critical_illnesshttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Beneficiaryhttp://en.wikipedia.org/wiki/Deathhttp://en.wikipedia.org/wiki/Terminal_illnesshttp://en.wikipedia.org/wiki/Terminal_illnesshttp://en.wikipedia.org/wiki/Critical_illness

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ife policies are legal contracts and the terms of the contract describe the

limitations of the insured e)ents. 7pecific e4clusions are often written into the

contract to limit the liability of the insurerA for e4ample claims relating to suicide,

fraud, war, riot and ci)il commotion.

F!" I#$%!'"

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goods, wares, merchandise and property of whate)er description insured for any

transit by land or water or both, and whether or not including warehouses ris(s or

similar ris(s in addition or as incidental to such transit and includes any other ris(s

customarily included among the ris(s insured in marine policies

H"&), I#$%!'"

Dealth Insurance mainly co)ers two types of benefitsB one is related to the

reimbursement of medical e4penses related to specific diseases and the other is

related to the hospitali?ation. +lobally, the health co)ers operate in two ways $

cashless and cash reimbursable ones.

'he health insurance has changed the way medicine is dispensed and sold in the

most parts of the world. In India, its impact has yet to be felt. Dowe)er, the

introduction of the now famous E9ediclaim policy made a huge difference to an

ordinary citi?ens usage of insurance for medical co)er purpose.

M+,+! I#$%!'"

9otor Insurance is one of the largest non-life insurance business in the world.

'his is because it is statutorily mandated in most parts of world. ll motor

)ehicles are reuired to be registered with road transport authorities and insured

for third party liability. 'he basic premise is that motor )ehicles could either cause

in3ury or be a sub3ect to damage and in3ury and thus reuire insurance.

'he 9otor Fehicle ct of 1;>; introduces compulsory insurance to ta(e care ofthose who may get in3ured in an accident. 'he insurance of damage to )ehicle is

not mandatory

I#$%!'" /!+0("$:

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rotection to in)estor.

ccumulation of sa)ings.

/hanneling these sa)ings into sectors needing huge long term in)estment.

F%#',+#$ + #$%!'":

P!+0(" /!+,"',+# : 'he primary function of insurance is to pro)ide

protection against future ris(, accidents and uncertainty. Insurance cannot

chec( the happening of the ris(, but can certainly pro)ide for the losses of

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ris(. Insurance is actually a protection against economic loss, by sharing the

ris( with others.

C+))"',0" "&!# + !$ : Insurance is an instrument to share the

financial loss of few among many others. Insurance is a mean by which few

losses are shared among larger number of people. ll the insured contribute

the premiums towards a fund and out of which the persons e4posed to a

particular ris( is paid.

A$$"$$*"#, + !$ : Insurance determines the probable )olume of ris(

by e)aluating )arious factors that gi)e rise to ris(. is( is the basis for

determining the premium rate also.

P!+0(" '"!,, : Insurance is a de)ice, which helps to change from

uncertainty to certainty. Insurance is de)ice whereby the uncertain ris(s may

be made more certain.

S*&)) '&/,&) ,+ '+0"! )&!"! !$ :Insurance relie)es the businessmen

from security in)estments, by paying small amount of premium against

larger ris(s and uncertainty.

C+#,!%,"$ ,+&!($ ," ("0")+/*"#, + #(%$,!"sB Insurance

pro)ides de)elopment opportunity to those larger industries ha)ing more

ris(s in their setting up. )en the financial institutions may be prepared to

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gi)e credit to sic( industrial units which ha)e insured their assets including

plant and machinery.

M"$ + $&0#$ ( #0"$,*"#, : Insurance ser)es as sa)ings and

in)estment, insurance is a compulsory way of sa)ings and it restricts the

unnecessary e4penses by the insured=s

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7. CONSUMER AARENESS

/onsumer awareness is the mainspring of demand creation which runs the wheelsof industry $ any industry for that matter. 'o this Edemand cur)e, suppliers and

ser)ice pro)iders respond, by ma(ing a)ailable to consumers what they want,

meeting their needs and e4pectations. 'his is the way two usages Ecustomer needs

and Ecustomer satisfaction emerged. nd these later tra)elled to domains of

Ecustomer delight and Ecustomer ecstasy. /onsumer awareness, thus, becomes the

genesis for business entities.

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launch awareness mo)ement through )arious con)enient people-oriented

programs through media, corporate publicity, rural camps and popular

communication channels including adio, 'F, ublicity FansA

awareness of products and ser)ices though )isuals that trigger curiosity and

manifest in terms of desire and later sale-purchase transactionsA

beyond these stages, to ta(e up awareness of other aspects such as product,

price, uality, ser)ice , con)enience, status, pride, 3oy and easeA

campaigns to educate rural and semi urban masses on the need for security

that protects their li)elihood, security for produce and belongings and create

feel-good feelingsA

ngage @+:s with pro)en credentials and rural intermediaries.

In summary, as life insurers #and similarly non-life insurers& get into such massi)e

efforts to reach out to all and sundry, a new phenomenon will emerge to their

delight )i?., opening up promising a)enues for Ecreation of new mar(ets $ the

basic fundamental and prereuisite for sustainable growth. 9ar(et dynamics willrule and unfold a stage through a process of e)olution Enew )alue creation $ the

sum total of all inno)ations. 'hereby a new phenomenon of Eco-creating uniue

)alue with customers will emerge as so brilliantly in his later path-brea(ing 'itle

G'he

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8. INSURANCE AARENESS

INSURANCE AARENESS#Issued in ublic Interest&

Why do you need to put your hard earned money inH

6@I' I@ I@76@/ @7 li(e

I/ @:W9@' plus, 9oney plus, rofit plus,

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9. INSURANCE AND ECONOMY

Indian economy is growing in reference to global mar(et. 8usiness of

insurance with its uniue features has a special place in Indian economy.

It is a highly speciali?ed technical business and customer is the most concern

people in this business, therefore this business is able to spur the growth of

infrastructure and act as a catalyst in the o)erall de)elopment of Indian

economy.

'he high )olumes in the insurance business help spread ris( wider, allowinga lowering of the rates of the premium to be charged and in turn, raising

profits. When there is a bigger base, the probabilities become more

predictable, and with system wide ris(s balanced out, profits impro)e. 'his

e4plains the current scenario of mergers, acuisitions, and globali?ation of

insurance.

Insurance is a type of sa)ings. Insurance is not only important for ta4

benefits, but also for sa)ings and for pro)iding security. It can be ser)ing as

an essential ser)ice which a welfare state must ma(e a)ailable to its people.

Insurance play a crucial role in the commercial li)es of nations and act as the

lubricants of economic acti)ities. Insurance firms help to spread the

potentially financial conseuences of ris( among the large number of

entities, to mobili?e and distribute sa)ings for producti)e use, facilitate

in)estment, support and encourage e4ternal trade, and protect economic

entities against e4ternal ris(.

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Insurance and economic growth mutually influences each other. s the economy

grows, the li)ing standards of people increase. s a conseuence, the demand for

life insurance increases. s the assets of people and of business enterprises

increase in the growth process, the demand for general insurance also increases. In

fact, as the economy widens the demand for new types of insurance products

emerges. Insurance is no longer confined to product mar(etsA they also co)er

ser)ice industries. It is eually true that growth itself is facilitated by insurance.

well-de)eloped insurance sector promotes economic growth by encouraging ris(-

ta(ing. is( is inherent in all economic acti)ities. Without some (ind of co)er

against ris(, some of these acti)ities will not be carried out at all. lso insurance

and more particularly life insurance is a mobili?e of long term sa)ings and life

insurance companies are thus able to support infrastructure pro3ects which reuire

long term funds. 'here is thus a mutually beneficial interaction between insurance

and economic growth. 'he low income le)els of the )ast ma3ority of population

ha)e been one of the factors inhibiting a faster growth of insurance in India. 'o

some e4tent this is also compounded by certain attitudes to life. 'he economy has

mo)ed on to a higher growth path. 'he a)erage rate of growth of the economy in

the last three years was .1 per cent. 'his strong growth will bring about

significant changes in the insurance industry.

t this point, it is important to note that not all acti)ities can be insured. If

that were possible, it would completely negate entrepreneurship. rofessor

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ccording to him, it is non-uantifiable ris( that leads to profit. De wrote GIt is a

world of change in which we li)e, and a world of uncertainty. We li)e only by

(nowing something about the futureA while the problems of life or of conduct at

least, arise from the fact that we (now so little. 'his is as true of business as of

other spheres of acti)ityC. 'he real management challenges are uninsurable ris(s.

In the case of insurable ris(s, ris( is a)oided at a cost.

1O. DISTRIUTION OF INSURANCE

PRODUCTS

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Insurance has to be sold the world o)er. 'he 'ouch point with the ultimate

customer is the distributor or the producer and the role played by them in insurance

mar(ets is critical. It is the distributor who ma(es the difference in terms of the

uality of ad)ice for choice of product, ser)icing of policy post sale and settlement

of claims. In the Indian mar(et, with their distinct cultural and social ethics, these

conditions will play a ma3or role in shaping the distribution channels and their

effecti)eness. In today=s scenario, insurance companies must mo)e from selling

insurance to mar(eting an essential financial product. 'he distributors ha)e to

become trusted financial ad)isors for the clients and trusted business associates forthe insurance /ompanies.

D"!"#, ($,!%,+# '#")$ # I#(&

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multi-channel strategy is better suited for the Indian mar(et. Indian insurance

mar(et is a combination of multiple mar(ets. ach of the mar(ets reuires a

different approach. part from geographical spread the socio-cultural and

economic segmentation of the mar(et is )ery wide, e4hibiting different traits and

needs. ifferent multi-distribution channels in India are as follows

Internet B -commerce sales through internet portals

Wor(site B 9ar(eting arrangements with entities to sell insurance to their

employees

irect B 7ales through call centres andLor direct mailing

8ro(ersB epresentati)es for buyers who deal with either agent or companies

in arranging for co)erage

/orporate agents B @on-ban( institutions in)ol)ed in the sale of insurance

products

8anc assurance B Insurance products offered through ban(s

'ied agents B Insurance companies aligned agency force

In todays scenario, insurance companies must mo)e from selling insurance to

mar(eting an essential financial product. 'he distributors ha)e to become trusted22

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financial ad)isors for the clients and trusted business associates for the insurance

companies.

'he most prominent channel of insurance distribution areB

A"#,$ : gents are the primary channel for distribution of insurance. 'he

public and pri)ate sector insurance companies ha)e their branches in almost

all parts of the country and ha)e attracted local people to become their

agents. 'oday=s insurance agent has to (now which product will appeal to

the customer, and also (now his competitor=s products to be an effecti)e

salesman who can sell his company, the product, and himself to the

customer. 'o the a)erage customer, e)ery new company is the same.

erceptions about the public sector companies are also cemented in his

mind. 7o an insurance agent can play an important role to create a good

image of company.

$ : 8an(s in India are all per)asi)e, especially the public sector ban(s.

9any insurance companies are selling their products through ban(s.

/ompanies which are ban( owned, they are selling their products through

their parent ban(. 'he public sector ban(s, with their )ast branch networ(s,

are helpful to insurance companies. 'his channel of selling insurance is

(nown as ' &$$%!'".

INSURANCE COMPANY ASSOCIATE ANKS

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ICICI /!%("#,&) ICICI + I#(&;

C, A))&&&( F"("!&)

$+%, I#( P%#

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distributing insurance products. 7uch as- 8a3a3 llian? tied up with 9aruti

6dyog and

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'o impro)e cost efficiency in insurance distribution

ri)ate players are e4ploring se)eral alternati)es to reduce the cost of replicating

the distribution networ( of public sector insurance companies. While third-party

distribution in fast-mo)ing consumer goods is a possibility, the comple4ity of

insurance products, especially gi)en the low awareness le)els, would necessitate

direct selling.

:ne potential channel is mar(eting through corporate employers, i.e., employers

purchase products on behalf of the employees or at least support the mar(eting

effort. 'he concept of Gwor(site mar(eting,C i.e., the sale of )oluntary insuranceproducts to employees at the wor(site through payroll deduction has become

common. Wor(site mar(eting, which was once the realm of a few small

companies, selling 3ust a few products, has now stretched to large companies,

offering a )ariety of wor(site products.

11. CHAN=IN= FACE OF INDIAN INSURANCE

INDUSTRY

fter the Insurance egulatory and e)elopment uthority ct ha)e been

passed there has been establishment of many pri)ate insurance companies in India.

re)iously there was a monopoly business for ife Insurance /orporation of India

#.I./.& who was the only life-insurance company for the people till 2000. .I./.

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still holds %1."* of the mar(et share in 200!. 8ut after the introduction of pri)ate

life insurance companies there is a great competition in Indian mar(et now.

)eryone is trying to capture the fresh mar(et here and penetrate it with aggressi)e

mar(eting strategies. 'oday life-insurance is not only limited up to 3ust life ris(

co)er and maturity period bonuses but changed to greater return from the

in)estments. With the introduction of the unit lin(ed insurance policies these

companies are in)esting the money in different in)estment instruments li(e shares,

bonds, debentures, go)ernment and other securities. eople are demanding for

higher returns with the life ris( co)er and pri)ate companies are gi)ing >0-"0*

a)erage growth per annum. 'hese life-insurance companies ha)e e)ery (ind of

policies suiting e)ery need right from financial needs of, marriage, gi)ing birth and

rearing up a child, his education, meeting daily financial needs of life, pension

solutions after retirement. 'hese companies ha)e e)ery aspects and needs of our

life co)ered along with the death-benefit.

In India only 25* of the population has life

insurance. 7o Indian life-insurance mar(et is the target mar(et of all the companieswho either want to e4tend or di)ersify their business. 'o tap the Indian mar(et

there has been tie-ups between the ma3or Indian companies with other International

insurance companies to start up their business. 'he go)ernment of India has set up

rules that no foreign insurance company can set up their business indi)idually here

and they ha)e to tie up with an Indian company and this foreign insurance

company can ha)e an in)estment of only 2"* of the total start-up in)estment.

Indian insurance industry can be featured byB

ow mar(et penetration.

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)er growing middle class component in population.

+rowth of customers interest with an increasing demand for better

insurance products.

pplication of information technology for business.

ebate from go)ernment in the form of ta4 incenti)es to be insured.

'oday, the Indian life insurance industry has a do?en pri)ate players,

each of which are ma(ing strides in raising awareness le)els, introducing

inno)ati)e products and increasing the penetration of life insurance in the )astly

underinsured country. 7e)eral of pri)ate insurers ha)e introduced attracti)e

products to meet the needs of their target customers and in line with their business

ob3ecti)es. 'he success of their effort is that they ha)e captured o)er 2* of

premium income in fi)e years.

'he biggest beneficiary of the competition among life insurers has

been the customer. wide range of products, customer focused ser)ice and

professional ad)ice has become the mainstay of the industry, and the Indian

customers forms the pi)ot of each companys strategy. enetration of life

insurance is beginning to cut across socio-economic classes and attract people who

ha)e ne)er purchased insurance before.

ife insurance is also now being regarded as a )ersatile financial

planning tool. part from the traditional term and sa)ing insurance policies,

industry has seen the entry and growth of unit lin(ed products. 'his pro)ides

mar(et lin(ed returns and is among the most fle4ible policies a)ailable today for

in)estment. @ow products are priced, fle4ible, and realistic and sustain so people

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in better position to understand the ris( and benefits of the product and they are

accepting these inno)ati)e products.

7o it is clear that the face of life insurance in India is changing, but

with the changes come a host of challenges and it is only the credible players with

a long term )ision and a robust business strategy that will sur)i)e. Whate)er the

de)elopments, the future and the opportunities in this industry will surely be

e4citing.

'here are 12 pri)ate players in Indian life insurance mar(et.

6 +#"( #$%!"!$: - D

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many more 3oint )entures in the offing, the insurance industry in India today stands

at a crossroads as competition intensifies and companies prepare sur)i)al strategies

in a detariffed scenario.

'here is pressure from both within the country and outside on the +o)ernment to

increase the

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companies ha)e come into e4istence leading to open competition and hence better

products for customers.

Indian customers ha)e become )ery sensiti)e to /o)erage L remium as well as the

roducts #read is( 7olution&, that is gi)en to them. 'here are not ready to accept

any product, no matter e)en if that is coming from the mar(et leader, should that

product is not ser)ing the purpose. case in point is 6I roduct L +roup ife

and /redit ife in ife Insurance segment and 'ra)el L

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13. KEY SUCCESS FACTORS

In order to succeed in any of the business it is )ery necessary to ma(e and follow

the strategies. 7trategies are )ery important for any of the business.

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would be targeted towards such selected mar(ets. 'he effort would be to GtieC

clients to their company- by customi?ed combination of co)erage, easy payment

plan, ris( management ad)ice, and con)enient uic( claim handling.

P+!,"! ="#"!' S,!&,""$:

:ne of the e4pert 9ichel porters has identified three internally consistent generic

strategies, which can be used singly or in combinationB o)erall cost leadership is

clearly under stable. In a differentiation strategy, a company see(s to be uniue in

its industry along some dimensions that are widely )aluable by the customer. 9ay

be the lowest cycle time for settling a claim under say, a med claim policy could bedifferentiating factor. In a cost focus, a company see(s a cost ad)antage in its

target segment, while in differentiation focusA a company see(s a differentiation

target.

M&!#&) D"!"#, P!+(%',:

nother strategy would be for the companies to design products that will ma(e

comparison-shopping difficult. 'hey could offer a wide )ariety of co)ers with

marginal differences and )arying prices, whose terms and conditions are difficult

to compare for consumers who may not ha)e sufficient e4perience in purchasing

insurance and who would find it difficult to ma(e a clear choice. If the consumer is

offered a uniue policy, he will ha)e no alternati)e co)erage with which can be

compared. +i)en the combination policy, which can offer protection against a

number of losses, the consumer will find comparison e)en more difficult.

D"$## N" S,!&,""$:

'he e4isting insurance companies cannot be satisfied with concentrating on the

consolidation of their e4isting mar(ets, but ha)e to achie)e further growth and

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any of the companies to wor( o)er this scenario. 7o we belie)e and suggest

all the players to mo)e towards the rural areas.

M+,0&,+# + $&)"$ +!'":

life insurance company should constantly be in)ol)ed in the process of

moti)ating the sales force in the turbulent times. 'he following strategies are

recommendingA

8uilding relationship is real per(. :ne should be sure to build in networ(ing

times for agents during the program-in addition to entertainment and

education.

Web should be freuently used for creating gift ideas.

Dold sales contests in the forth uarter. It is the best times to moti)ates

agents who wants to ualify for a trip.

/onsider a contrast within the contest Efor- top-tier producersA additional

rewards for additional milestones that are met, such as air and guest room

upgrades.

U$" + I#,"!#",:

'he present scenario is such that the products sold with the help of Internet. 'he

technological ad)ancement is such that force the companies to ta(e such steps. 7till

the full-fledged use of Internet is not done in our country. s suggestion earlier the

Internet based life insurance will help the companies to reduce the transaction cost

and time. t the time it can impro)e the uality of ser)ice to its customers, which

is the mission of the company.

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M&!",# T/$ + A(0"!,$" + I#$%!'" A"#'

' *+$, '+*/"$ +))+ ( ' '%$,+*"!

&!" &&!" &+%, ,"! &"#'

)+' )#" &(0"!,$# # #(%$,! /%)'&,+#$ +! ,!&("

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T")"0$+# A($ :'he most ob)ious and e4pensi)e forms of ad)ertising is

the tele)ision.

L+'&) M+0" T"&,!"$ : local audience and a family type atmosphere

is a great way for mar(eting insurance business. 9any types of insurance

come into play here when an indi)idual or the family are out watching the

mo)ie. ll these things come into play when parents are out with their (ids.

D!"', M&) A(0"!,$# :'here are companies out there that will do

direct mail by which people are aware.

A(0"!,$# +%,(++!$ :'ransit systems, bus benches, neon and

electronic signs are becoming a great way for the agent to ad)ertise. 'his is

affordable, unli(e tele)ision ads. nd this targets the e4act audience as most

insurers pro)ide insurance ser)ices to their local area.

S,&,+#&! &(0"!,$# : )ery great way of ad)ertising is right through

business stationary and supplies. nice way of showing good faith is gi)ing

customers a pen of insurance office name and contact information

"$," A(0"!,$# : website tells customer about insurance agency

and it a uic( and easy reference for customers loo(ing for uotes of any

type of insurance such as, homeowners insurance, auto insurance, life

insurance and many others

O#)#" &(0"!,$# :9any insurance companies do online ad)ertisement.

s today in 21stcentaury it is )ery important.

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RSS FEED COMMENTSo ECONOMY

o MARKETS

Monday, April 21, 2008

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I#(&@$ #$%!'" $"',+! /+$"( +! 2B !+,

21

8yJo Black

Indian insurance sector is li(ely to register unprecedented growth of 200* and

attain a si?e of s. 2000 billion #O51.2 billion& by 200;-10, in which a pri)ate

sector insurance business will achie)e a growth rate of 1"0* as a result of

aggressi)e mar(eting techniue being adopted by them against >5-"0* growth rate

of state owned insurance companies.

'he aforesaid findings are made by 'he ssociated /hambers of /ommerce and

Industry of India #77:/D9& on PInsurance in @e4t 2 Mears, saying that in the

last couple of years, the insurance sector has grown by /+ of around 1%5* and

the trend will emerge still better because of potential factor. /urrently, the

insurance sector si?e is estimated at s.500 billion #O12. billion&.

eleasing the 77:/D9 findings, its resident, 9r. Fenugopal @. hoot said

that on account of intense mar(eting strategies adopted by pri)ate insurance

players, the mar(et share of state owned insurance companies li(e +I/, I/ and

others ha)e come down to %0* in last "-5 years from o)er ;%*.

'he pri)ate insurance players despite the sector is still regulated has been offering

rate of return #o& to its policy holders which is estimated at about >5* as

against 20* of domestic insurance companies. 'his factor is mainly responsible

for hi(e in pri)ate insurance mar(et share which will grow further which is why

the 77:/D9 estimates that its growth rate could e)en e4ceed 1"0*.

7econdly, the state owned insurance companies such as I/ and +I/ ha)e limited

number of policies to offer to their subscribers while in case of pri)ate insurance

companies, their policy numbers are many more and the premium amount as well

as the maturity period is much competiti)e as against those of go)ernment

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insurance companies. Interestingly, said 9r. hoot that the pri)ate sector

insurance players ha)e started e4ploring the rural mar(ets in which until recently,

the state owned companies had the monopoly.

'he /hamber has pro3ected that in rural mar(ets, the share of pri)ate insurance

players would increase substantially as these ha)e been able to generate a faith

among their rural consumers.

stimating the potential of the Indian insurance mar(et from the perspecti)e of

macro-economic )ariables such as the ratio of premium to +, 77:/D9

re)eals that Indias life insurance premium, as a percentage of + is 1.* against

5.2* in the 67, !.5* in the 6 or * in 7outh orea.

77:/D9 findings further re)eal that in the coming years, the corporate

segment, as a whole will not be a big growth area for insurance companies. 'his is

because penetration is already good and companies recei)e good ser)ices. In both

)olumes and profitability therefore, the scope for e4pansion is modest. 'he

/hamber has suggested that insurers strategy should be to stimulate demand in

areas that are currently not ser)ed at all. Insurance companies mostly focus on

manufacturing sectorA howe)er, the ser)ices sector is ta(ing a large and growing

share of Indias +. 'his offers immense opportunities for e4pansion

opportunities.

'o understand the prospects for insurance companies in rural India, it is )ery

important to understand the reuirements of Indias )illagers, their daily li)es, their

peculiar needs and their occupational structures. 'here are farmers, craftsmen,

mil(men, wea)ers, casual laborers, construction wor(ers and shop(eepers and so

on. 9ore often than not, they are into more than one profession.

'he rural mar(et offers tremendous growth opportunities for insurance companies

and insurers should de)elop )iable and cost-effecti)e distribution channelsA build

consumer awareness and confidence. 'he 77:/D9 found that there are a total41

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12" million rural households. @early 20* of all farmers in rural India own a

issan /redit cards. 'he 25 million credit cards used till date offer a huge data

base and opportunity for insurance companies. n e4tensi)e rural agent networ(

for sale of insurance products could be established. 'he agent can play a ma3or role

in creating awareness, moti)ating purchase and rendering insurance ser)ices.

'here should be nothing to stop insurance companies from trying to pursue their

own uniue policies and target whate)er needs that they want to target in rural

India. 77:/D9 suggests that insurance needs to be pac(aged in such a form

that it appears as an acceptable in)estment to the rural people

N&,+#&) S%**,

I#( I#$%!'": T" & F+!&!(

29 %&!; 29 H+,") L"-M"!("#; N" D")

egister :nline7ummit etails

'he Insurance industry in India has been progressing at a rapid pace since opening

up of the industry in 2000. Indian domestic insurance mar(et would touch around

67O !0.5 8illion by the year 2010 from e4isting si?e of about 67O 10.2 billion.

ccording to the Insurance egulatory and e)elopment uthority #I&, new

42
http://www.assocham.org/events/evreg.php?id=310http://www.assocham.org/downloads/?filename=ev29jan2009_Insurance_Summit_Details.dochttp://www.assocham.org/events/evreg.php?id=310http://www.assocham.org/downloads/?filename=ev29jan2009_Insurance_Summit_Details.doc

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business premium income from pril 200! to billion #67O1>.1 billion&, registering an impressi)e 120* growth o)er the

same period last year.

'he Insurance industry graph is definitely ascending. istribution accounts for the

largest element in insurers cost and affects profitability. 'he si?e of the country

combined with problems of connecti)ity in the rural areas, ma(es insurance selling

in India a difficult proposition. 'he distribution capabilities strongly influence

product design in insurance. 'he distribution channels ha)e a direct impact on the

insurers mar(et image. mergence of alternati)e channels such as 8ancassurance

and Internet is reshaping the insurance industry. India with a population of more

than a billion people offers unlimited growth potential.

With a )iew to spreading the awareness of Insurance co)er and discussing )arious

regulatory issues, ASSOCHAM $ +!?# & N&,+#&) S%**, +# I#(

I#$%!'" T" & F+!&!( &, 1. &.*. +# 29, %&!; 29 &, H+,")

L"-M"!("#; N" D").

S! P K $&); H+#)" M#$,"! + S,&," +! F#'" > P&!)&*"#,&!

A&!$ &$ 0"! #() &!""( ,+ #&%%!&," ," S%**,. " &0" &)$+

#0,"( S! H&! N&!& C&!* IRDA ( S! T&%# &

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consultants, bro(ers, regulators, custodians, lawyers, ban(s, financial planners and

retail in)estors.

I#$%!'"

L&$, U/(&,"(: D"'"*"! 21

'he 67O "1-billion Indian life insurance industry is considered the fifth largest life

insurance mar(et, and growing at a rapid pace of >2->" per cent annually,

according to the ife Insurance /ouncil.

ife insurance companies ha)e witnessed a %0 per cent 3ump in new premium

collection during the first fi)e months of the financial year. ccording to data

released by the Insurance egulatory and e)elopment uthority #I&,

insurance companies garnered 67O 11.%> billion in new business premium during

pril-ugust 2010, against 67O !.;0 billion in the corresponding period last year.

7tate-owned I/ gained the most, with an increase of per cent in new business

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premium income. t the same time, pri)ate sector insurance recorded a >" per cent

increase in income from sales of new policies. @ew business income collected by

I/I/I rudential stood at 67O 5%!.!0 million during pril-ugust. 78I ife

remained in the third position after registering a "0 per cent increase in new sales

to 67O 5>1.% million from 67O >%;.20 million in pril-ugust 200;. D

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H"&), I#$%!'"

'he Indian health insurance mar(et has emerged as a new and lucrati)e growth

a)enue for both the e4isting players as well as the new entrants. ccording to a

latest research report Q8ooming Dealth Insurance in IndiaQ by research firm

@/:7 released in pril 2010, all emerging trends including the (ey factors

dri)ing the mar(et growth.

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I#(& I#$%!'" M&!",: A ("'&(" +)( +! ( + & #" "!&

CONCLUSION

Insurance sector in India is one of the booming sectors of the economy and is

growing at the rate of 15-20 per cent annum. :ne of the (ey ser)ice industries in

India would be health and education. Insurance sector in India grew at a faster pace

after independence. In 1;5!, +o)ernment of India brought together 2"5 Indian and

foreign insurers and pro)ident societies under one nationali?ed monopoly

corporation and formed ife Insurance /orporation #I/& by an ct of arliament,

)i?. I/ ct, 1;5!, with a capital contribution of s.5 crore. 'he #non-life&

insurance businessLgeneral insurance remained with the pri)ate sector till 1;%2.

'here were 10% pri)ate companies in)ol)ed in the business of general operations

and their operations were restricted to organi?ed trade and industry in large cities.

'he insurance sector in India has come to a position of )ery high potential and

competiti)eness in the mar(et. Indians, ha)e always seen life insurance as a ta4

sa)ing de)ice.

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IILO=RAPHY

ESITES REFFERED

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www.licindia.in

www.wi(ipedia.org

www.answers.com

www.insuranceguru.com

REPORTSJARTICLES REFFERED

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