PRESENTATION

ON

INSURANCE INDUSTRY

S U B M I T T E D B Y

S H I V A N I

M B A 1 S T S E M

CONTENT

Introduction

History

IDRA

Types of insurance

Growth factor

Major players

Functions

Current Scenario

GIC

Bibliography

WHAT IS INSURANCE INDUSTRY?

Insurance is the equitable transfer of the risk of aloss, from one entity to another in exchange forpayment. It is a form of riskmanagement primarily used to hedge againstthe risk of a contingent, uncertain loss.

The amount of money to be charged for a certainamount of insurance coverage is called thepremium.

HISTORY OF INSURANCE

Insurance in India has its history dating back till1818,when Oriental Life Insurance Companywas started by European community.

The oldest existing insurance company in India isNational Insurance Company, which wasfounded in 1906 and is doing business even day.

Insurance industry, earlier comprised of only twostate insurer

• Life Insurance CORPORATION OF India(LIC)

General Insurance Corporation of India(GIC)

In 1956, 245 Indian and Foreign life insurers and provident

societies were nationalized, and new single entity namely

“LIC” was established by passing the LIC Act, 1956.

- Similarly, in 1972, 107 general insurers were nationalized

through the passing of General Insurance Business

(Nationalization) Act, 1972.

- The existing 107 insurers were amalgamated and grouped

into Five companies, viz., National Insurance Company

(NIC), New India Assurance Company (NIAC), Oriental

Insurance Company (OIC), United India Insurance

Company (UIIC), and General Insurance Corporation

(GIC).

- Then insurance industry transformed into monopoly and

Oligopolistic state or public sector insurance industry in

India.

The General insurance business in India, on the other hand,

can trace its roots to the Triton Insurance Company Ltd.,

the first general insurance company established in the year

1850 in Calcutta by the British.

1907: The Indian Mercantile Insurance Ltd. set up, the first

company to transact all classes of general insurance

business.

1957: General Insurance Council, a wing of the Insurance

Association of India, frames a code of conduct for ensuring

fair conduct and sound business practices.

1972: The General Insurance Business (Nationalization) Act,

1972 nationalized the general insurance business in India

with effect from 1st January 1973.

OBJECTIVE OF THE STUDY

To study the patterns of growth and development of life

insurance industry in India.

To study the performance of public and private sector life

insurance units in a comparative manner on the basis of

the selected variables.

IRDA

PROTECTION OF THE INTEREST OF POLICY

HOLDERS

IRDA has notified Protection of Policyholders Interest

Regulations 2001 to provide for: policy proposal

documents in easily understandable language; claims

procedure in both life and non-life; setting up of grievance

redressal machinery; speedy settlement of claims; and

policyholders' servicing.

The insurers are required to maintain solvency margins so

that they are in a position to meet their obligations towards

policyholders with regard to payment of claims.

CLASSIFICATION OF INSURANCE

Types

General

insurance

Health

insurance

Vehicle

insurance

Fire insurance

Marine insurance

Life Insurance

GROWTH FACTORS FOR

INSURANCE SECTOR

There is a high demand for insurance products due to agrowing middle class, increasing working population,rising household savings and increasing purchasing power

Favorable government and regulatory initiatives areexpected to increase the contribution of the insuranceindustry to the overall economic development of thecountry.

Source: IDRA.ORG

WHY INSURANCE?

• To provide security

• Old age pensions

• As an investment /or saving

mechanism

• As a collateral for loans

• For tax benefits

FUNCTIONS OF INSURANCE

Primary

Functions

• Provide Protection

• Collective bearing of risk

• Provide Certainty

Secondary

Functions

• Provide prevention of losses

• Small capital to cover larger risk

• Contributes towards the developments of larger industries

OtherFunctions

• Means of saving investments

• Source of earning foreign exchange

• Risk free trade

WHY INSURANCE SECTOR IS PRIVATIZED?

To give individual & corporate consumers a

competitive environment that can deliver

products and services in tune with their

requirement. Industry to benefits from

technology transfer & capital from global

insurance players.

India is signatory to WTO committed to open

insurance & banking.

5 R’S OF INSURANCE

Risk

Return

Rider

Rewards value add

Rebate

MAJOR PLAYERS OF LIFE INSURANCE IN

INDIA:-

1. Life Insurance Corporation of India

2. ICICI prudential Life Insurance

3. HDFC Standard Life Insurance

4. Max New York Life Insurance

5. Birla Sun Life Insurance

6. Om Kotak Mahindra Life Insurance

7. Reliance Life Insurance

8. Allianz Bajaj Life Insurance

9. ING Vyasa Life Insurance

10. SBI Life Insurance

11. Metlife Insurance

12. Sahara Life Insurance

13. Aviva Life Insurance

14. TATA AIG life Insurance

MAJOR PLAYERS

GENERAL INSURANCE

CORPORATION (GIC)

• GIC was incorporated as a holding company in 1992.

• General Insurance Business is completely owned bythe government.

• The paid up capital of GIC was fully subscribed bythe Government and of four subsidiaries.

• It was controlled by a single organization with foursubsidiaries.

• GIC’s four subsidiaries:

1. National Insurance Co. Ltd.,

2. New India Assurance Co. Ltd.,

3. Oriental Fire and General Insurance Co. Ltd., and

4. United India Insurance Co. Ltd.

• The Govt of India took over Control, supervision, and policy making is

with GIC.

• The premium income for GIC comes mainly through the obligatory

reinsurance premium on a quota share basis from subsidiaries on their

direct business in India (almost 20% of subsidiaries business come to

GIC).

SWOT ANALYSIS

• Strengths : As a vast emerging economy and a country

with more than 1bn people, India is too large to ignore,

even if the present barriers to entry are high.

• The economy is growing quite strongly and will

experience less of a slowdown than a number of other

emerging markets.

• Weaknesses : The market is dominated by state-owned

insurers and the progress to open up the market is

glacial. In the current political climate there is even less

support for change.

• Opportunities : The long-term potential of an

emerging economy with more than 1bn people

is unmistakable

• While GDP per capita remains low, there is an

emerging wealthier group, loosely referred to as

'middle class', and an elite group of extremely

wealthy Indians.

• Threats : The political environment is not

conducive to constructive change or sound

economic management.

PORTER’S 5 FORCE MODEL

Challenges facing Insurance Industry

Threat of New Entrants: The insurance industry has been budding with new entrants every other day.

• Power of Buyers: No individual is a big threat to the insurance industry and big corporate houses have a lot more negotiating capability with the insurance companies. Big corporate clients like airlines and pharmaceutical companies pay millions of dollars every year in premiums.

Availability of Substitutes: There exist a lot of substitutes in the insurance industry. Majorly, the large insurance companies provide similar kinds of services –be it auto, home, commercial, health or life insurance

PEST Analysis Political factors affecting insurance industry

• Insurance business in rural/ social sector

• Capital requirement

• Renewal of registration

• Requirement as to capital

• Investment of funds outside India

• Power to investigation or inspection

• Tax policy and insurance sector

Economical factors affecting insurance industry

• Adequacy of capital

• Increased economical activity

• Interest rates

• Inflation rate

• Market related factors

• Customer satisfaction

Socio-Cultural factors affecting insurance industry

• Population

• Life style

• Educational level

• Level of earning

• Societal benefits

Technological factors affecting insurance industry

• Maintaining the database

• E-business insurance in India

BIBLIOGRAPHY

IRDA website and its report.

Indianfinance.com

Insuranceinfo.com