Insurance Sector
Content
Indian Insurance Sector 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. Together with banking services, it contributes to about 7 per cent to the country's GDP. Insurance is a federal subject in India and Insurance industry in India is governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. Insurance industry has always been a growth-oriented industry globally. On the Indian scene too, the insurance industry has always recorded noticeable growth vis-à-vis other Indian industries. The life insurance of India added 4.1% to the GDP of the economy in 2009, an immense growth since 1999, when the gates were opened for the private company in the market. The Indian Insurance industry is featured by the attributes: y y y y Low market penetration Ever-growing middle class component in population Growth of consumer movement with an increasing demand for better insurance products Inadequate application of information technology for business
Types of Insurance in India y Life insurance this sector deals with the risks and the accidents affecting the life of the customer. Alongside, this insurance policy also offers tax planning and investment returns. There are various types of life Insurance Policy India: a. Endowment Policy - An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on earlier death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness. b. Whole Life Policy - provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy c. Term Life Policy- is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the
previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary d. Money back Policy - In a money-back plan, you keep getting a percentage of the sum assured during lifetime of the policy. In case of the insurer outliving the term, he/she gets the remaining corpus with accrued options like bonus. e. Joint Life Policy - Joint life insurance policies are policies that enables two individuals to be protected, but the full value of the policy is paid only once at the time of either insurer's death. This is also referred to as the joint first to die clause. f. Group Insurance Policy- Group insurance offers life insurance protection under group policies to various groups such as employers-employees, professionals, co-operatives, weaker sections of society, etc. It also provides insurance coverage for people in certain approved occupations at the lowest possible premium cost. Group insurance plans have low premiums. Such plans are particularly beneficial to those for whom other regular policies are a costlier proposition. y General Insurance this sector covers almost everything related to property, vehicle, cash, household goods, health and also one's liability towards others. The major segments covered under general Insurance Policy India are: a. Home Insurance b. Health Insurance c. Motor Insurance d. Travel Insurance e. Fire Insurance
FUNCTIONS of Insurance: 1. Primary Functions: o Provide Protection o Collective bearing of risk o Assessment of Risk o Provide Certainty
2. Secondary Functions o Prevention of Losses o Small capital to cover larger risks o Contributes towards the development of larger industries 3. Other Functions o Means of savings and investments o Source of earning foreign exchange o Risk-free trade Distribution channel: y y y y y Direct Selling Corporate agents Group selling Brokers and cooperative societies Banc assurance
Life Insurance: Major Players y Public Sector: o Life Insurance Corporation of India www.licindia.com LIC the largest life insurance company in India, and also the country's largest investor; it is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses. It has assets estimated of 8 Trillion Rupees (or about $170 Billion dollars). It was founded in 1956. Private Sector: o Allianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in o Birla Sun-Life Insurance Company Limited www.birlasunlife.com o HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com o ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com o ING Vysya Life Insurance Company Limited www.ingvysayalife.com o Max New York Life Insurance Co. Limited www.maxnewyorklife.com o MetLife Insurance Company Limited www.metlife.com o Om Kotak Mahindra Life Insurance Co. Ltd. www.omkotakmahnidra.com o SBI Life Insurance Company Limited www.sbilife.co.in o TATA AIG Life Insurance Company Limited www.tata-aig.com
y
o AMP Sanmar Assurance Company Limited www.ampsanmar.com o Dabur CGU Life Insurance Co. Pvt. Limited www.avivaindia.com
General Insurance: Major Players y Public Sector: o National Insurance Company Limited www.nationalinsuranceindia.com o New India Assurance Company Limited www.niacl.com o Oriental Insurance Company Limited www.orientalinsurance.nic.in o United India Insurance Company Limited www.uiic.co.in Private Sector: Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in Reliance General Insurance Co. Limited www.ril.com Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com TATA AIG General Insurance Co. Limited www.tata-aig.com Cholamandalam General Insurance Co. Ltd. www.cholainsurance.com Export Credit Guarantee Corporation www.ecgcindia.com Universal Sompo General Insurance Co. Ltd. http://universalsompo.com HDFC Chubb General Insurance Co. Ltd.
y o o o o o o o o o o
IFFCO Tokio General Insurance IFFCO-Tokio General Insurance (ITGI) was incorporated on 4th December 2000 with a vision of being industry leader by building customer satisfaction through fairness, transparency, and quick response. It is a joint venture between the Indian Farmers Fertilizer Co-operative (IFFCO) and its associate and Tokio Marine and Nichido Fire Group, the largest listed insurance group in Japan. It offers a wide range of uniquely customized policies covering a wide range of customers, from farmers to some of India's largest automobile manufacturers. This comprehensive policy is based on international rates and optimizes the premium outflow for clients even as it offers a one-stop, all-risk cover. Other than the conventional products, it has been able to come out niche products like Credit Insurance, Fine Arts Insurance, P & I Insurance, and Errors & Omissions Policy for the IT Sector etc. It is also the only insurance company in the country to have a 100%-owned distribution channel to service its retail
customers called IFFCO-TOKIO Insurance Services Ltd (ITIS). IFFCO holds 72.64% shareholding and its Associate M/s Indian Potash Ltd. holds 1.36% shareholding in ITGI.
INTERNATIONAL SCENARIO Life insurance not plays an important role in national economy but also in international economy. Countries Insurance Penetration (Premium as a% of GDP) United Kingdom Japan United States South Africa Australia South Korea India China Malaysia Indonesia Brazil 12.71 8.70 4.48 14.04 6.04 9.89 1.77 1.12 2.13 0.54 0.36 Insurance Density (Per Capita Premiums in USD) 3028.5 3165.1 1611.4 392.9 1193.5 935.6 7.6 9.5 86.4 4.0 12.9
Market Facts: y y India with about 200 million middle class household shows a huge untapped potential. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors.
y
Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice.
y
Computerisation of operations and updating of technology has become imperative in the current scenario.
y y
The rural consumer is now exhibiting an increasing propensity for insurance products. The perceived benefits of buying a life policy range from security of income bulk return in future, daughter's marriage, children's education and good return on savings.
4 P s of the Insurance Industry in India
Product Mix: y y Give due weightage to the socially and economically backward classes Maximize the mobilization of savings by offering lucrative schemes
y y y y y
Assign due weightage to interests of investors Maintain economy in business by promoting cost effectiveness Act as a trustee of policyholders Keep in mind the emerging trends in business environment Improve the quality of customer / user services
Promotion Mix: y y y y y y y Advertisement Publicity Sales Promotion Personal Selling Word of Mouth Promotion Telemarketing Internet Marketing
Price Mix: y y y y y y y Making possible cost of effectiveness Restructuring of premium Due priority to profit generating investments Rationalizing or optimizing the social costs Paving avenues for channelising the productive investments Assigning due weightage to the policies meant for the socially & economically backward classes Making the ways for maximizing profit
Place: y y y Managing the insurance personnel Location of a branch Physical Evidence o Signage - company s philosophy & policy o Tangibles - pens, letter pad, calendars etc. o Statements punch lines, tag lines Process o Flow of activities o Standardization o Customization o Simplicity
y
o Complexity o Customer Involvement The market is now in an evolving phase where one can expect a lot of actions in coming days. The current impediments for foreign participation like 26% equity cap on foreign partner, ill defined regulatory role of IRDA (Insurance Regulatory development Authority- the watchdog of the industry) in pension business etc. are expected to be removed in near future. The earlyadopters will then have a clear advantage compared to laggards in gaining the market share and market leadership. They will need to make sure right now that their entire infrastructure is in place so that they can reap the benefit of an "unlimited potential."
Types of Insurance in India y Life insurance this sector deals with the risks and the accidents affecting the life of the customer. Alongside, this insurance policy also offers tax planning and investment returns. There are various types of life Insurance Policy India: a. Endowment Policy - An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on earlier death. Typical maturities are ten, fifteen or twenty years up to a certain age limit. Some policies also pay out in the case of critical illness. b. Whole Life Policy - provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy c. Term Life Policy- is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the
previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary d. Money back Policy - In a money-back plan, you keep getting a percentage of the sum assured during lifetime of the policy. In case of the insurer outliving the term, he/she gets the remaining corpus with accrued options like bonus. e. Joint Life Policy - Joint life insurance policies are policies that enables two individuals to be protected, but the full value of the policy is paid only once at the time of either insurer's death. This is also referred to as the joint first to die clause. f. Group Insurance Policy- Group insurance offers life insurance protection under group policies to various groups such as employers-employees, professionals, co-operatives, weaker sections of society, etc. It also provides insurance coverage for people in certain approved occupations at the lowest possible premium cost. Group insurance plans have low premiums. Such plans are particularly beneficial to those for whom other regular policies are a costlier proposition. y General Insurance this sector covers almost everything related to property, vehicle, cash, household goods, health and also one's liability towards others. The major segments covered under general Insurance Policy India are: a. Home Insurance b. Health Insurance c. Motor Insurance d. Travel Insurance e. Fire Insurance
FUNCTIONS of Insurance: 1. Primary Functions: o Provide Protection o Collective bearing of risk o Assessment of Risk o Provide Certainty
2. Secondary Functions o Prevention of Losses o Small capital to cover larger risks o Contributes towards the development of larger industries 3. Other Functions o Means of savings and investments o Source of earning foreign exchange o Risk-free trade Distribution channel: y y y y y Direct Selling Corporate agents Group selling Brokers and cooperative societies Banc assurance
Life Insurance: Major Players y Public Sector: o Life Insurance Corporation of India www.licindia.com LIC the largest life insurance company in India, and also the country's largest investor; it is fully owned by the Government of India. It also funds close to 24.6% of the Indian Government's expenses. It has assets estimated of 8 Trillion Rupees (or about $170 Billion dollars). It was founded in 1956. Private Sector: o Allianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in o Birla Sun-Life Insurance Company Limited www.birlasunlife.com o HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com o ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com o ING Vysya Life Insurance Company Limited www.ingvysayalife.com o Max New York Life Insurance Co. Limited www.maxnewyorklife.com o MetLife Insurance Company Limited www.metlife.com o Om Kotak Mahindra Life Insurance Co. Ltd. www.omkotakmahnidra.com o SBI Life Insurance Company Limited www.sbilife.co.in o TATA AIG Life Insurance Company Limited www.tata-aig.com
y
o AMP Sanmar Assurance Company Limited www.ampsanmar.com o Dabur CGU Life Insurance Co. Pvt. Limited www.avivaindia.com
General Insurance: Major Players y Public Sector: o National Insurance Company Limited www.nationalinsuranceindia.com o New India Assurance Company Limited www.niacl.com o Oriental Insurance Company Limited www.orientalinsurance.nic.in o United India Insurance Company Limited www.uiic.co.in Private Sector: Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in Reliance General Insurance Co. Limited www.ril.com Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com TATA AIG General Insurance Co. Limited www.tata-aig.com Cholamandalam General Insurance Co. Ltd. www.cholainsurance.com Export Credit Guarantee Corporation www.ecgcindia.com Universal Sompo General Insurance Co. Ltd. http://universalsompo.com HDFC Chubb General Insurance Co. Ltd.
y o o o o o o o o o o
IFFCO Tokio General Insurance IFFCO-Tokio General Insurance (ITGI) was incorporated on 4th December 2000 with a vision of being industry leader by building customer satisfaction through fairness, transparency, and quick response. It is a joint venture between the Indian Farmers Fertilizer Co-operative (IFFCO) and its associate and Tokio Marine and Nichido Fire Group, the largest listed insurance group in Japan. It offers a wide range of uniquely customized policies covering a wide range of customers, from farmers to some of India's largest automobile manufacturers. This comprehensive policy is based on international rates and optimizes the premium outflow for clients even as it offers a one-stop, all-risk cover. Other than the conventional products, it has been able to come out niche products like Credit Insurance, Fine Arts Insurance, P & I Insurance, and Errors & Omissions Policy for the IT Sector etc. It is also the only insurance company in the country to have a 100%-owned distribution channel to service its retail
customers called IFFCO-TOKIO Insurance Services Ltd (ITIS). IFFCO holds 72.64% shareholding and its Associate M/s Indian Potash Ltd. holds 1.36% shareholding in ITGI.
INTERNATIONAL SCENARIO Life insurance not plays an important role in national economy but also in international economy. Countries Insurance Penetration (Premium as a% of GDP) United Kingdom Japan United States South Africa Australia South Korea India China Malaysia Indonesia Brazil 12.71 8.70 4.48 14.04 6.04 9.89 1.77 1.12 2.13 0.54 0.36 Insurance Density (Per Capita Premiums in USD) 3028.5 3165.1 1611.4 392.9 1193.5 935.6 7.6 9.5 86.4 4.0 12.9
Market Facts: y y India with about 200 million middle class household shows a huge untapped potential. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors.
y
Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice.
y
Computerisation of operations and updating of technology has become imperative in the current scenario.
y y
The rural consumer is now exhibiting an increasing propensity for insurance products. The perceived benefits of buying a life policy range from security of income bulk return in future, daughter's marriage, children's education and good return on savings.
4 P s of the Insurance Industry in India
Product Mix: y y Give due weightage to the socially and economically backward classes Maximize the mobilization of savings by offering lucrative schemes
y y y y y
Assign due weightage to interests of investors Maintain economy in business by promoting cost effectiveness Act as a trustee of policyholders Keep in mind the emerging trends in business environment Improve the quality of customer / user services
Promotion Mix: y y y y y y y Advertisement Publicity Sales Promotion Personal Selling Word of Mouth Promotion Telemarketing Internet Marketing
Price Mix: y y y y y y y Making possible cost of effectiveness Restructuring of premium Due priority to profit generating investments Rationalizing or optimizing the social costs Paving avenues for channelising the productive investments Assigning due weightage to the policies meant for the socially & economically backward classes Making the ways for maximizing profit
Place: y y y Managing the insurance personnel Location of a branch Physical Evidence o Signage - company s philosophy & policy o Tangibles - pens, letter pad, calendars etc. o Statements punch lines, tag lines Process o Flow of activities o Standardization o Customization o Simplicity
y
o Complexity o Customer Involvement The market is now in an evolving phase where one can expect a lot of actions in coming days. The current impediments for foreign participation like 26% equity cap on foreign partner, ill defined regulatory role of IRDA (Insurance Regulatory development Authority- the watchdog of the industry) in pension business etc. are expected to be removed in near future. The earlyadopters will then have a clear advantage compared to laggards in gaining the market share and market leadership. They will need to make sure right now that their entire infrastructure is in place so that they can reap the benefit of an "unlimited potential."
