insurance sector 29 jan 11

8/7/2019 INSURANCE SECTOR 29 JAN 11

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PRESENTATION INSURANCE SECTOR

COL VS RALHI

SATINDER SINGH

TARANDEEP SINGH


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ORIGIN AND GROWTH OF INSURANCE SECTOR

Insurance in modern form originated in the Mediterranean during the 13thcentury. The earliest references to insurance have been found inBabylonia , the Greeks and the Romans.

Marine insurance is the oldest form of insurance followed by lifeinsurance and fire insurance.

Life insurance activity in its modern form started in India in 1818 toprovide insurance for English widows when Oriental Life InsuranceCompany was incorporated at Calcutta, followed by Bombay LifeAssurance Company in 1823 and Tritron Insurance Company for GeneralInsurance in 1850.

Insurance regulation formally began in India through the passing of twoacts, the Life Insurance Companies Act of 1912 and the Provident FundAct of 1912.

However the first comprehensive legislation was introduced with theInsurance Act of 1938 that provided strict state control over insurance

business in the country. 3


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After independence, the business of India Insurance grew at a

faster pace as competition amongst the Indian companiesintensified.

Insurance assurance business took place in 1956 when 245 Indianand foreign insurance provident societies were first merged and

then nationalized. It paved the way towards the establishment ofLife Insurance the purpose of which was to raise the much neededfunds for rapid industrialization and self-reliance in heavyindustries.

General Insurance followed suit and in 1968; the Insurance Actwas amended to allow for total control over the general insurancebusiness.

Subsequently in 1973, non-life insurance business was

nationalized and the General Insurance Business (Nationalization)Act, 1972 was romul ated.

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ORIGIN AND GROWTH OF INSURANCE SECTOR


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GLOBALISATION OF INSURANCE SECTOR:

Post independence showed that the ultimate objective in insurance sectorremained largely unfulfilled.

Government set up an insurance reforms Committee in April, 1993 under thechairmanship of R. N. Malhotra, to suggest reforms in the insurance sectorincluding improving the functioning of the LIC, GIC and strengthening theregulatory system.

The committee submitted its report to union finance minister on 7-01-1994,recommending a phased program of liberalization and called for a private sectorentry and restructuring of LIC and GIC.

The subsequent government moved an insurance bill but it was not passed, thenext government moved on insurance bill again in 1998, which was referred back

to a select committee of parliament afterwards the government introduced theinsurance regulatory Development authority (IRDA) Bill in parliament with somechanges in the original structure the government of India created history InOctober 1999 private sector companies were allowed entry into insurancesector.

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INSURANCE SECTO

R REFO

RMS


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INSURANCE SECTOR REFORMS

APRIL 1993 MALHOTRA COMMITTEE ON INSURANCE SECTOR REFORMSAND DEREGULATION SET UP.

JANUARY 1994 MALHOTRA COMMITTEE SUBMITS REPORT TO THE FINANCEMINISTER

DECEMBER 1996 IRDA BILL INTRODUCED IN PARLIAMENT AND REFERRED TOTHE STANDING COMMITTEE.

AUGUST 1997 IRDA IS WITHDRAWN FOLLOWING OPPOSITION TOFOREIGNPARTICIPATION.

NOVEMBER 1997 GOVERNMENTOF INDIA CLEARS GREATER AUTONOMY TOLIC AND GIC

JUNE 1998 UNION BUDGET ANNOUNCES OPENING UP OF INSURANCE

SECTOR

JANUARY 1999 NOTIFICATION OF IRDA AS A STATUTORY AUTHORITY

OCTOBER 1999 APPROVAL OF IRDA BILL BY THE CABINET WITH FDI LIMITEDTO 26%. FEBRUARY 2000 INSURANCE BILL PRESENTED INTHE BUDGET SESSION

OCTOBER 2000 PRIVATE INSURANCE COMPANIES ENTER THE MARKET


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MAJOR INSURANCE PLAYERS


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INSURANCE COMPANIES IN INDIA

Bajaj Allianz Life Insurance Company Limited

Birla Sun Life Insurance Co. LtdHDFC Standard life Insurance Co. LtdICICI Prudential Life Insurance Co. Ltd.ING Vysya Life Insurance Company Ltd.Life Insurance Corporation of IndiaMax New York Life Insurance Co. Ltd

Met Life India Insurance Company Ltd.Kotak Mahindra Old Mutual Life Insurance LimitedSBI Life Insurance Co. LtdTata AIG Life Insurance Company LimitedReliance Life Insurance Company Limited.Aviva Life Insurance Co. India Pvt. Ltd.

Shriram Life Insurance Co, Ltd.Sahara India Life InsuranceBharti AXA Life Insurance

Future Generali Life Insurance IDBI Fortis Life InsuranceCanara HSBC Oriental Bank of Commerce Life Insurance.


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Religare Life InsuranceDLF Pramerica Life Insurance

Star Union Dai-ichi Life InsuranceAgriculture Insurance Company of IndiaApollo DKV InsuranceCholamandalam MS General InsuranceHDFC Ergo General Insurance Company

ICICI Lombard General InsuranceIFFCO Tokio General InsuranceNational Insurance Company LtdNew India AssuranceOriental Insurance CompanyReliance General Insurance

Royal Sundaram Alliance InsuranceShriram General Insurance Company LimitedTata AIG General InsuranceUnited India InsuranceUniversal Sompo General Insurance Co. Ltd

INSURANCE COMPANIES IN INDIA


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LIFE INSURERS

PUBLIC SECTOR

Life Insurance Corporation of India

PRIVATE SECTOR

Allianz Bajaj Life Insurance Company Limited Birla Sun-Life Insurance Company Limited

HDFC Standard Life Insurance Co. Limited ICICI Prudential Life Insurance Co. Limited

ING Vysya Life Insurance Company Limited Max New York Life Insurance Co. Limited

MetLife Insurance Company Limited Om Kotak Mahindra Life Insurance Co. Ltd.

SBI Life Insurance Company Limited TATA AIG Life Insurance Company Limited

AMP Sanmar Assurance Company Limited Dabur CGU Life Insurance Co. Pvt. Limited


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GENERAL INSURER

PUBLIC SECTOR

National Insurance Company

LimitedO

riental Insurance Company Limited

New India Assurance Company

LimitedUnited India Insurance Company Limited

PRIVATE SECTOR

Bajaj Allianz General Insurance

Co. Limited HDF

C Chubb General Insurance Co. Ltd.

ICICI Lombard General Insurance

Co. Ltd.Export Credit Guarantee Corporation

IFFCO-Tokio General Insurance

Co. Ltd.Cholamandalam General Insurance Co. Ltd.

Reliance General Insurance Co.

LimitedTATA AIG General Insurance Co. Limited

Royal Sundaram Alliance

Insurance Co. Ltd.

REINSURER

General Insurance Corporation of India


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http://winsure.yolasite.com 13

INDIA INSURANCE POLICIES

LIFE INSURANCE THIS SECTOR DEALS WITH THE RISKS AND THE ACCIDENTSAFFECTING THE LIFE OF THE CUSTOMER. ALONGSIDE, THIS INSURANCE POLICY ALSOOFFERS TAX PLANNING AND INVESTMENT RETURNS. THERE ARE VARIOUS TYPES OFLIFE INSURANCE POLICIES IN INDIA:

A. ENDOWMENT POLICY.

B. WHOLE LIFE POLICY.

C. TERM LIFE POLICY.

D. MONEY-BACK POLICY.

E. JOINT LIFE POLICY.

F. GROUP INSURANCE POLICY.

G. LOAN COVER TERM ASSURANCE POLICY.

H. PENSION PLAN OR ANNUITIES.

I. UNIT LINKED INSURANCE PLAN.

GENERAL INSURANCE THIS SECTOR COVERS ALMOST EVERYTHING RELATED TOPROPERTY, VEHICLE, CASH, HOUSEHOLD GOODS, HEALTH AND ALSO ONE'S LIABILITYTOWARDS OTHERS. THE MAJOR SEGMENTS COVERED UNDER GENERAL INSURANCEPOLICY IN INDIA ARE:

A. HOME INSURANCE.

B. HEALTH INSURANCE.

C. MOTOR INSURANCE.

D. TRAVEL INSURANCE.


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MARKET SHARE


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MARKET SHARES PRIVATE LIFE INSURANCE PLAYERS


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PREMIUM COLLECTION 2009- 2010

2009-10 2009-

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GENERAL INSURERS


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INDIAN ECONOMY IS THEINDIAN ECONOMY IS THE12TH LARGEST12TH LARGESTIN THEIN THE

WORLD, WITH A GDP OF $1.25 TRILLION ANDWORLD, WITH A GDP OF $1.25 TRILLION AND3RD3RD

LARGEST IN TERMS OF PURCHASING POWER PARITY.LARGEST IN TERMS OF PURCHASING POWER PARITY.

WITH FACTORS LIKE AWITH FACTORS LIKE A STABLE 8STABLE 8--9 PER CENT9 PER CENT

ANNUAL GROWTH,ANNUAL GROWTH, RISING FOREIGN EXCHANGERISING FOREIGN EXCHANGE

RESERVES,RESERVES, A BOOMING CAPITAL MARKETA BOOMING CAPITAL MARKETAND AAND ARAPIDLY EXPANDING FDI INFLOWS, IT IS ON THERAPIDLY EXPANDING FDI INFLOWS, IT IS ON THE

FULCRUM OF AN EVER INCREASING GROWTH CURVE.FULCRUM OF AN EVER INCREASING GROWTH CURVE.18


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INDUSTRY STRUCTURE ANDPENETERATION OF INSURANCESECTOR IN INDIA


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INDUSTRY STRUCTURE

CURRENTLY, A US$41 BILLIO

N INDUSTRY, INDIA IS THE WO

RLD'SFIFTH LARGEST LIFE INSURANCE MARKET AND GROWING AT ARAPID PACE OF 32-34% ANNUALLY AS PER LIFE INSURANCECOUNCIL STUDIES.

CURRENTLY, IN INDIAO

NLY TWO

MILLIO

N PEO

PLE (0.2 %OF

THETOTAL POPULATION OF 1 BILLION) ARE COVERED UNDERMEDICLAIM, WHEREAS IN DEVELOPED NATIONS LIKE USAABOUT 75 % OF THE TOTAL POPULATION ARE COVERED UNDERSOME INSURANCE SCHEME. WITH MORE AND MORE PRIVATE

CO

MPANIES IN THE SECTO

R, THE SITUATIO

N MAY CHANGESOON.


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PENETRATION OF INSURANCE SECTOR IN INDIA

Insurance is a Rs. 400 billion business in Indias and together

with banking services adds about 7% to Indias gross domesticproduct (GDP) gross premium collection is about 2 percent ofGDP and growing between 15 and 20 percent per annum.

India also has highest number of life insurance policies in force

in the world. Yet more than three fourth of Indias insurancepopulation has no life insurance cover the penetration ofinsurance is very low in India the following indices support thiscontention.

The insurance Premium as a percentage of Gross Domestic Saving(GDS) was 52% for U.K, 35% for other European and Americancountries ,it was only 9% for India in 1999.

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PENETRATION OF INSURANCE SECTOR IN INDIA.

The insurance Premium as a Percentage of GDP was 14% for

Japan, 13% for South Africa, 12% for Korea, 9% for UK and

less than 2% in India in 1999.

The share of India in the World market in terms of Grossinsurance premium is again very low. For instance, While Japan

has 31%, European Union 25% , South Africa 2.3%, Canada

1.7% share of the global insurance premium, it is only 0.3% for

India

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ROLE OF IRDA

IRDAs primary function is to protect consumer interests. This means ensuring

proper disclosure, keeping prices affordable but also insisting on somemandatory products, and most importantly making sure that consumers get paidby insurers.

Further, ensuring the solvency of insurers is a very important function ofregulatory authority.

IRDA has evolved a set of operational guidelines to deal with maintaining thesolvency of insurers.

Growth of insurance business entails better education and protection tocustomers, creating better incentives for agents and intermediaries. It has evolved

guidelines on the entry and functions of such intermediaries.

Licensing of agents and brokers are required to check their indulgence inactivities such as twisting, fraudulent practices, rebating and misappropriation offunds.


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Insurance in India is primarily used as a means

to improve personal finances and for income taxplanning.

Indians have a tendency to invest in propertiesand gold followed by bank deposits. They

selectively invest in shares also but thepercentage is very small--4-5%.

This in itself is an indicator that growth potential

for the insurance sector is immense. Its abusiness growing at the rate of 15-20% per annum and presently is of the order of $47.9billion.

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Insurance is one major sector which has been on acontinuous growth curve since the revival of Indian

economy.

Taking into account the huge population and growing percapita income besides several other driving factors, a hugeopportunity is in store for the insurance companies inIndia.

According to the latest research findings, nearly 80% ofIndian population is without life insurance cover while

health insurance and non-life insurance continues to bebelow international standards.

And this part of e population is also subjected to weaksocial security and pension systems with hardly any old

age income security. 29


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India is a vast market for life insurance that is directlyproportional to the growth in premiums and an increase inlife density.

With the entry of private sector players backed by foreignexpertise, Indian insurance market has become morevibrant.

Competition in this market is increasing with companyscontinuous effort to lure the customers with new productofferings.

However, the market share of private insurance companiesremains very low -- in the 10-15% range. Even to this day,Life Insurance Corporation (LIC) of India dominates Indianinsurance sector. The heavy hand of government stilldominates the market, with price controls, limits onownership, and other restraints.

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The upward growth trend started from 2000 was mainly dueto economic policies adopted by the then Indian

government.

This year saw initiation of an era of economic liberalizationand globalization in the Indian economy followed by severalreforms and long-term policies that created a perfect

roadmap for the success of Indian financial markets.

On the basis of several macroeconomic factors like increasein literacy rate & per capita income, decrease in death rateand unemployment, better tax rebates, growing GDP etc., weestimate that the Indian insurance sector will grow by $28.65billion and reach $76.54 billion by 2011 with a CAGR of12.44% and a growth of 59.82%.

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The Indian life insurance market generated total revenues of $41.36billion in 2007, thus representing a compound annual growth rate

(CAGR) of 11.84% for the period spanning 2000-2007.

Life insurance market had a growth of $22.46 billion within a periodof 7 years with a growth rate of 118.24%.

Estimated life premiums rose from NR1,470,800 million ($36.77billion) in 2006 to INR1,301,540 million ($32.54billion) in 2005.

We envisage that life premiums in 2011 will be $65.96 billion, agrowth larger than they were in 2007.

The performance of the market is forecast to accelerate, with ananticipated CAGR of 9.78% for the four-year period 2007-2011expected to drive the market to a value of $65.96 billion by the endof 2011. There would be a growth of $24.6 billion i.e. 59.48% in thenext 4 years.

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Non-life premiums in India were $6.53 billion in 2007.

Gross written premium (GWP) in the Indian non-life

insurance market reached a value of $5.75 billion in 2006,this representing an annual growth of13.55% for the

period spanning 2006-2007.

Estimated non-life premiums rose from INR230 billion($5.75 billion) in 2006 to INR261 billion ($6.53 billion) in

2007. We anticipate that non-life premiums will grow by a

CAGR of9.40% between 2007-2011.

We are looking for non-life premiums to rise by $405

million over the five years to the end of2011 with a

growth rate of62.02%.33


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MARKET PERFORMANCE & FORECAST

In 2000, Indian insurance market size was $21.71billion. Between 2000 and 2007, it had an increase of

120% and reached $47.89 billion. Between 2000 and

2007, total premiums maintained an average growth

rate of 11.96% and the CAGR growth during this timeframe has been 11.96%.

It was one of the most consistent growth patternswe have noticed in any other emerging economies in

Asian as well as Global markets.

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MAJOR DRIVING FACTORS

=> Growing demand from semi-urban population.

=> Entry of private players following the deregulation.

=> Rising demand for retirement provision in the ageing

population.The opening of the pension sector and the

establishment of the new pension regulator.

=> Success of Auto insurance sector.

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EMERGING AREAS

=> Healthcare Insurance & Pension Plans.

=> Mutual fund linked insurance products.

=> Multiple Distribution Networks .i.e. Banc assurance

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2003-

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2005-

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2006-

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2007-

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2008-

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Predicte

d growth

for 2009-

10 (in

Decemb

er 2009)

Predict

ed

growth

for

2009-

10 (in

April

2010)

Predicte

d growth

for 2010-

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Banking

and

Insurance

2.2 8.8 14.2 20.3 15.4 11.2 8.5 9.0 9.0

GROWTH IN REALGROSS DOMESTIC

PRODUCT AT FACTOR COST (%): BY ECONOMIC ACTIVITY


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Increase in per-cent fromequivalent previous-year period

Actual figures for 2009-10

Life Insurance Corporation of

India new business income

(March 2010)

83

Private Players new business

premium (March 2010)

47

New policies sold in 2010 10.55 million

Total premium collected in 2009-

10

25.46 US$ 24.64 million

Gross premium collected in

General Insurance Industry

during 2009-10

13.42 US$ 7.84 billion

Growth in gross premium for2009-10: Public sector players

13.85

Growth in gross premium for

2009-10: Private players

12.82

non-life insurers(April-May 2010) 19 US$ 1.59 billion

SOME OF THE GROWTH STATISTICS FOR THE YEAR 2009-10


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INSURANCE SECTOR IN INDIA: TOWARDS THE 2020

VISION

BY 2020, PREMIUM VOLUME IN THE INDIAN MARKET

COULD EASILY EXCEED USD 120 BILLION IN TODAYSMONEY.


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THANKS

insurance sector 29 jan 11

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