nsurance Sector in India

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The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries. A brief history of the Insurance sector The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of 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. Some of the important milestones in the general insurance business in India are: 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. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

INDIA is the 5th largest market in Asia by premium following Japan, Korea, China and Taiwan. The US$ 30 billion insurance business in India is expected to grow 17 per cent in fiscal 2008-09* if the country’s economy clocks 7.6 percent GDP. In fiscal 2007-08 life insurers grew their business by 23.3 percent to Rs.930 billion while general insurers posted growth of about 14 percent in premium income to Rs 298 billion. Presently the total number of insurers registered with the Insurance Regulatory and Development Authority (IRDA) stands at 42 : 21 in life insurance and 21 in general insurance segments. Some joint ventures include Tata AIG, Bajaj Allianz, ICICI Prudential, SBI Life, HDFC Standard Life, Birla Sunlife, Max New York Life and Bharti AXA Life. India is the fifth-largest country in Asia in terms of total insurance premium. The premium income in the country increased to 4.7 percent of GDP in fiscal 2006-07 from 3.3 percent in the fiscal 2002-03.Total premium in the insurance industry grew at a CAGR of 28.1 percent during the same period. The life insurance sector grew at a CAGR of 29.3 percent outsmarting the general insurance sector’s CAGR of 21.3 percent. The Indian insurance sector has a turnover of around Rs 26,287 crore. The current FDI in this sector stands at around Rs 2500 crore and market experts expects FDI to zoom by about 2.5 times once the FDI cap is raised by another 23 percent to 49 percent. The terror Pool, set up after 9/11 attacks, and being funded by the insurers currently has a corpus of Rs 1000 crore. The settlement of the claims for Taj, trindent and Oberoi amounting to Rs 500 crore could be well taken care of. The urrent coverage is till March 31, 2009. It is expected with renewals for next fiscal year, the Terror Pool fund will increase substantially. General Insurance Corporation (GIC), the Indian reinsurer, is planning to rise terrorism insurance cover to Rs 1000 crore from Rs 750 crore. Currently any claim beyond Rs 750 crore is covered by international insurers. Meanwhile, on the expected line of foreign investors, the Congress(I)-led UPA government in New Delhi has introduced the Insurance Laws (Amendment) Bill 2008 in the upper house of Indian Parliament on December 22, 2008 that seeks to raise the Foreign Direct Invest (FDI) cap in the insurance sector from existing 26 percent to 49 percent. The government move is seen as the UPA government’s most significant and biggest reform measure in the financial sector since the then Finance minister P. Chidambaram in his Budget speech announced plan to hike FDI in insurance to 49 percent. The Bill, once through in both houses of Parliament, will allow companies, exclusively into the business of health insurance, to operate with a minimum paid up capital of Rs 50 crore against the current minimum paid up capital of Rs 100 crore for any insurance business- Life or General. For re-insurance business the minimum paid-up capital will be Rs 200 crore. The Bill when translated into an Act would enable all the state-run general insurance companies- Oriental Insurance, New India Assurance, United India Insurance and National Insurance – to enter the capital market to mop up funds. The Bill also seeks to allow Lloyd’s of London to enter Indian insurance market as a foreign company in joint venture partnership with local companies. The insurance regulatory body- IRDA, would chart the terms and conditions for cancellation of

registration. Business without registration will invite fine up to Rs 25 crore. For not meeting the obligations for rural or social sector or third party insurance of motor vehicles, fine up to Rs 25 crore will be slapped. According to the Bill, no insurance policy can be challenged after a gap of five years. It will protect the interest of policy holders against any possible litigation. Besides Insurance Law (Amendment) Bill 2008, the government has also introduced another Bill namely, Life Insurance Corporation (Amendment) Bill to raise its capital from existing Rs 5 crore to Rs 100 crore. This would enable LIC comply with IRDA norms. The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has projected that foreign direct investment (FDIs) will increase in insurance sector by $ 0.46 billion in next 2 years and likely to touch $ 0.96 billion as it is still regulated. A Paper on FDI’s Prospects in Insurance Sector brought out by the ASSOCHAM says that currently the total insurance market in India is about $ 30 billion, in which the element of FDI’s is $ 0.5 billion. This is 1.6 percent of total insurance business in India. Despite, insurance being a highly regulated sector, however, in the first five months of current calendar, i.e. between January to May, it could attract FDI’s of $ 217.97 million which by any standard is not too insignificant. If the insurance sector is opened up to an extent of 49 percent for FDI’s, in next 2 years, i.e. by 2010, the FDI’s contribution to insurance business would touch nearly $ 2 billion. Currently, only 26 percent of FDI’s are permitted in insurance sector, the chamber expects. It is pointed out that the domestic insurance sector has been growing at an average speed of nearly 200 percent and that is why the chamber is of the view that by 2012, the total insurance business would touch $ 60 billion size. In the life insurance sector particularly on FDI’s front, the growth that has taken between 2006 and 2007 is estimated to be around 270 percent. This itself speaks the significance and importance, investors are attaching to both life insurance and non-life insurance sector. India’s insurance market lags behind other economies in the baseline measure of insurance penetration. At only 3.1 percent, India is well behind the 12.5 percent for the UK, 10.5 percent for Japan, 10.3 percent for Korea and 9.2 percent for the US. Currently, FDI represents only Rs.827 core of the Rs.3179 crore capitalizations of private life insurance companies. FDI in insurance would increase the penetration of insurance in India, where the penetration of insurance is abysmally low with insurance premium at about 3 percent of GDP against about 8 percent global average. This would be better through marketing effort by MNCs, better product innovation, consumer education etc. The chamber President Sajjan Jindal maintains that insurance sector in India has the capability of raising long term capital from the market as it is the only avenue where people put in money for as long as 30 years even more. An increase in FDI in insurance would indirectly be a boon for the Indian economy, the investments not withstanding but by making more people invest in long term funds to fuel the growth of the Indian economy, he feels. Since end of 2000 when insurance was privatized, life insurance company promoters pumped in Rs 21,000 crore so far. The distribution network also expanded significantly. In the second quarter of fiscal 2008-09 1480 branches were added including 1293 branches set up by private sector life insurers. During this period the life industry added

53332 employees to their payrolls. The number of pay-roll employees now crossing over 300,000. Of the total 10,037 branches of life insurance companies around 7,000 are in semi urban and rural areas. By the end of 1st quarter of current fiscal (2008-09) the total assets of the life insurance companies stood at Rs 857,500 crore. Of this, Unit Linked Policies ( ULIP) accounts for Rs 140,000 crore. The total premium of all insurance companies taken together aggregated to Rs 86,500 crore in the first half of current fiscal. Yet another highly prospective business segment is health insurance. According to a CIIE&Y study report, the health insurance premium income is likely to touch Rs 30,000 crore in 2015 from the existing Rs 4,000 crore. The premium was Rs 670 crore in fiscal 2001-02. It is expected that the hike in FDI for the insurance sector from 26 percent to 49 percent will boost the healthcare business. The immense business potential in health sector is reflected in the fact that only about 1 percent of the country’s population is presently covered under health insurance policies. The fillip to the health insurance segment will also come when the Insurance Regulatory and Development Authority’s (IRDA) recommendation to bring down capital requirements for stand-alone health insurance companies from Rs 100 crore to Rs 50 crore. In fact, the Insurance Laws (Amendment) Bill 2008 makes provision to allow companies, exclusively into the business of health insurance, to operate with a minimum paid up capital of Rs 50 crore against the current minimum paid up capital of Rs 100 crore for any insurance business- Life or General. This is expected to prompt entry of more health insurance companies into the country. Micro insurance is yet another which is yet to be explored optimally. The CII-E&Y report says that micro health insurance schemes in India have achieved good enrolment levels among their target populations including poor. Out of the total insurance premium of Rs 100,000 crore collected in fiscal 2007-08, micro-insurance accounted for a meager Rs 125 crore. The CII-E&Y recommendations include introduction of risk-based capital in the life insurance segment, institutionalization of underwriting and marketing skills in the general insurance segment, articulation of proper reforms and industry compliance for health insurance and regulatory and industry endeavor to promote deepening of markets for micro insurance. The health expenditure across the country was Rs 180,000 crore in 2007. With healthcare costs escalation, rising demand for healthcare services and limited access of the lowincome group to quality healthcare, health insurance is emerging as an alternative mechanism for financing healthcare. And with merely 12 percent of the population being covered, companies are looking at the health insurance space as a lucrative segment. The state-owned companies constitute nearly 70 percent of the health insurance market and private companies account for the remaining 30 percent As the out-of-pocket expenditure on healthcare is pegged at more than 70%, private insurers are treating this as an important target market. ICICI Prudential has started a division catering to health insurance, while Bupa-Max is awaiting the IRDA’s approval to launch health insurance schemes. LIC recently unveiled its health insurance scheme to compete with players such as Apollo, Star and Bajaj Allianz. Bajaj Allianz head of health insurance Shreeraj Deshpande said, “We are going to the semi-urban and rural areas. We are targeting the informal sector by having viable products and communicating through NGOs.” The channels of reach are also seeing a change, with companies tapping banks’ databases in

an attempt to reach people. “Banks will play an important role in selling policies, given the difficult environment. The entry of additional companies into the health insurance sector will depend on regulations and companies’ abilities to make profits,” he said. “The growth in healthcare will be supported by standalone health insurance companies and new players. Moreover, domestic life insurance players are augmenting their product portfolios with innovative standalone health insurance products for catering to the growing health insurance segment,” the report stated. Commenting on the prospect of the general insurance industry in India a Moody’s-ICRA report on Indian General Insurance Industry Outlook said: The outlook for the general insurance industry in India is stable based on Moody’s expectations for steady fundamental credit conditions in the sector over the next 12-18 months. With the Indian economy forecast to grow at 7.5% in 2008 and given rising income levels and higher risk awareness among insureds, the country’s insurers are optimistic about demand for their products. However, intense competition from new entrants, deregulation and a moderation in returns from the equities market will pressure pricing and ultimately shortterm profitability.” “At the same time, despite rising inflation and a severe correction in the stock market (the key Sensex index fell 26% in 1Q2008), the prevailing view in Asia is that while China and India are not insulated from the credit crisis afflicting the US and EU, domestic demand is strong enough to support GDP growth1. Being less export dependent, India is also less vulnerable than some of its neighbors”, the Report pointed out. According to Moody’s-ICRA report published in April 2008, “Rising income levels, low penetration for most consumer products, availability of financing and changes in lifestyles/ aspirations are likely to sustain consumer demand over the next few years. In the short term, the focus on infrastructure development will keep the economy going, even if the tightening in credit leads to a slowdown in consumer spending.” “Furthermore, over the medium and long term, India’s insurance market will continue to experience major changes as its operating environment increasingly deregulates. On the one hand, a mix of new products, new delivery systems and a greater awareness of risk will generate growth. On the other hand, competition will remain intense asInsurance sector reforms: In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at "creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…"

In 1994, the committee submitted the report and some of the key recommendations included: 1) Structure Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. 2) Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only One State Level Life Insurance Company should be allowed to operate in each state. 3) Regulatory Body The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance (Currently a part from the Finance Ministry) should be made independent. 4) Investments Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time). 5) Customer Service LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerisation of operations and updating of technology to be carried out in the insurance industry The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body. MAJOR POLICY CHANGESInsurance sector has been opened up for competition from Indian private insurance companies with the enactment of Insurance Regulatory and Development Authority Act, 1999 (IRDA Act). As per the provisions of IRDA Act, 1999,

Insurance Regulatory and Development Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of insurance policy and to regulate, promote and ensure orderly growth of the insurance industry. IRDA Act 1999 paved the way for the entry of private players into the insurance market which was hitherto the exclusive privilege of public sector insurance companies/ corporations. Under the new dispensation Indian insurance companies in private sector were permitted to operate in India with the following conditions: Company is formed and registered under the Companies Act, 1956; The aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed 26%, paid up equity capital of such Indian insurance company; The company's sole purpose is to carry on life insurance business or general insurance business or reinsurance business. The minimum paid up equity capital for life or general insurance business is Rs.100 crores. The minimum paid up equity capital for carrying on reinsurance business has been prescribed as Rs.200 crores. The Authority has notified 27 Regulations on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of policy holders' interest etc. Applications were invited by the Authority with effect from 15th August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The Authority has its Head Quarter at Hyderabad. Insurance companies:IRDA has so far granted registration to 12 private life insurance companies and 9 general insurance companies. If the existing public sector insurance companies are included, there are currently 13 insurance companies in the life side and 13 companies operating in general insurance business. General Insurance Corporation has been approved as the "Indian reinsurer" for underwriting only reinsurance business. Particulars of the life insurance companies and general insurance companies including their web address is given below:
LIFE INSURERS Websites Public Sector Life Insurance Corporation of India www.licindia.com 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 www.allianzbajaj.co.in www.birlasunlife.com www.hdfcinsurance.com www.iciciprulife.com www.ingvysayalife.com

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

www.maxnewyorklife.com www.metlife.com www.omkotakmahnidra.com www.sbilife.co.in www.tata-aig.com www.ampsanmar.com www.avivaindia.com

GENERAL INSURERS Public Sector National Insurance Company Limited New India Assurance Company Limited Oriental Insurance Company Limited United India Insurance Company Limited www.nationalinsuranceindia.com www.niacl.com www.orientalinsurance.nic.in www.uiic.co.in Private Sector Bajaj Allianz General Insurance Co. Limited ICICI Lombard General Insurance Co. Ltd. IFFCO-Tokio General Insurance Co. Ltd. Reliance General Insurance Co. Limited Royal Sundaram Alliance Insurance Co. Ltd. TATA AIG General Insurance Co. Limited Cholamandalam General Insurance Co. Ltd. Export Credit Guarantee Corporation HDFC Chubb General Insurance Co. Ltd. REINSURER General Insurance Corporation of India www.gicindia.com www.bajajallianz.co.in www.icicilombard.com www.itgi.co.in www.ril.com www.royalsun.com www.tata-aig.com www.cholainsurance.com www.ecgcindia.com

private sector insurers and those about to enter India seek to win market share from the more established public sector entities,” the report indicated.

OVERVIEW
SIZE
Insurance is a US$41-billion industry in India, and grew by 36% in 2006-07 over the previous year Life Insurance - US$35 billion industry with US$24 billion accounting for First Year Premium (inclusive of Single Premium) Non-Life Insurance - US$5.6-billion industry; motor and health segments account for 56% of total business

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STRUCTURE
Indian Insurance market was opened to private and foreign investment in 1999-2000 The Indian Insurance industry consists of a total of 34 players Life: 1 public sector player; 16 private players Non-life: 6 public sector players; 11 private players Major international players like AIG, Aviva, MetLife, New York Life, Prudential, Allianz, Sun Life, Standard Life and Lombard are already present with minority stakes in joint ventures with Indian companies for both Life and Non-life segments The Life Insurance market is still dominated by Life Insurance Corporation (LIC) - a public sector company which had 75% share of first year premium in 2006-07 In non-life, private sector companies (almost all are joint ventures with foreign insurers) accounted for 34% of the market in 2006-07

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POLICY
FDI up to 26% is permitted under the automatic route subject to obtaining a license from the Insurance Regulatory and Development Authority (IRDA) Intention to increase FDI up to 49% Insurance Regulatory Development Authority (IRDA) is the regulator for the Insurance industry In a landmark move the government detariffed the General Insurance business on 1st January, 2007

IMPACT OF GLOBALISATION

While nationalized insurance companies have done a commendable job in extending the volume of the business, opening up insurance sector to private players was a necessity in the context of globalization of financial sector. If traditional infrastructural and semipublic goods industries such as banking, airlines, telecom, power etc., have significant private sector presence, continuing a state of monopoly in provision of insurance was indefensible and therefore, the globalization of insurance has been done as discussed earlier. Its impact has to be seen in the form of creating various opportunities and challenges. The introduction of private players in the industry has added colours to the dull industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in the sector. The new players have improved the service quality of the insurance. As a result LIC down the years have seen the declining in its career. The market share was distributed among the private players. Though LIC still holds 75% of the insurance sector the upcoming nature of these private players are enough to give more competition to LIC in the near future. LIC market share has decreased from 95%(2002-03) to 81% (2004-05). The following company holds the rest of the market share of the insurance industry. TABLE – 1IMPACT OF GLOBALISATION NAME OF THE PLAYER MARKET SHARE (%)LIC 82.3ICICI PRUDENTIAL 5.63 BIRLA SUN LIFE 2.56BAJA ALLIANZ 2.03SBI LIFE 1.80HDFC STANDARD 1.36 TATA AIG 1.29MAX NEW YORK 0.90AVIVA 0.79OM KOTAK MAHINDRA 0.51ING VYASA 0.37AMP SANMAR 0.26METLIFE 0.21 PRESENT SCENARIO OF GLOBALISATION In a tough battle to expand market shares the private sector life insurance industry consisting of 14 life insurance companies at 26% have lost 3% of market share to the state owned Life Insurance Corporation(LIC) in the domestic life insurance industry in 2006-07. According to the figures released by Insurance Regulatory & Development Authority, the total premium of these 14 companies have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore. LIC with a total premium mobilisation of Rs 55,934 crore has been able to retain a market share of 74.26 % during the reporting period. In total the life insurance industry in first year premium has grown by 110% to Rs 75, 406 crore during 2006-07. The 2006-07 performance has thrown a few surprises in the ranking among the private sector life insurance companies. New entrants like Reliance Life and SBI Life had shown a huge growth of over 381% and 210% respectively during the year. Reliance Life which has become one of the top five companies ended the year with a premium of Rs 930 crore during the year. Though ICICI Prudential Life Insurance remained as the No 1 private sector life insurance company during the year. Bajaj Allianz overtook ICICI Prudential in terms of monthly market share in March, for the first time ever. Bajaj's market share among private players in non-single premium for March stood at 29.1% vs. ICICI Prudential's 23.8%. Bajaj gained 4.6 percentage point market share among private sector players for FY07.

Among other private players, SBI Life and Reliance Life continued to do well, each gaining 4% market share in FY07. SBI Life's growth was driven by increasing contribution from ULIP premiums. Another notable developments of the 2006-07 performance has been the expansion of retail markets by the life insurance comapnies. Bajaj Alliannz Life insurance has added 20 lakh policies while ICICI Prudential has expanded over 19 lakh policies during the year. With the largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 per cent to the country’s GDP. Gross premium collection is nearly 2 per cent of GDP and funds available with LIC for investments are 8 per cent of GDP. Yet, nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subject to weak social security and pension systems with hardly any old age income security. This itself is an indicator that growth potential for the insurance sector is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and at the same time strengthens the risk taking ability. It is estimated that over the next ten years India would require investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country. Insurance is a federal subject in India. There are two legislations that govern the sector- The Insurance Act- 1938 and the IRDA Act- 1999. The insurance sector in India has become a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.
The insurance industry has grown by 83 per cent since the opening up of the sector. Remarking on the performance of the insurance industry, C S Rao, chairman, Insurance Regulatory & Development Authority, said public sector players have not suffered with the opening up of the sector. Insurance premium income has risen to Rs 82,415 crore (Rs 824.15 billion) in 2003-04, against Rs 45,000 crore (Rs 450 billion) in 2000-01. Rao expects premium income in the life insurance sector to rise further by 15-16 per cent and non-life insurance premium by 14 per cent in 2005-06. The growth comes on the back of healthy demand from the manufacturing sector. "There has been no reduction in growth rates as seen in the case of the Life Insurance Corporation of India. It is able to hold on to its existing share in terms of business growth. Market share is bound to stand reduced as some business goes to the private players," said Rao. The health and personal line segments are expected to see maximum growth during the current financial year. "The health insurance sector is expected to grow by 10-15 per cent," Rao said at a one-day seminar

on 'Growth of Insurance Industry in India' organised by the Indian Merchants' Chamber in Mumbai [ Images ] on Friday. If the cap on foreign direct investment is increased to 49 per cent from the current 26 per cent, the industry can expect greater entry of players. But this, said Rao, should not be seen as a threat to public sector players.

The reforms in the insurance sector leading finally to the opening of the insurance sector for private participation have brought in its wake major changes not only in the design of the products available in the market but also the manner in which they are marketed. We have today a host of products coupled with a large number of intermediaries who market them. The post-liberalized insurance industry panorama in India is witnessing dramatic changes in terms of a slew of latest products and services, new channels of distribution, greater use of I.T. as a service facilitator etc. There is also the phenomenon of noticeable shifts in consumer preferences impacting the product mix being offered by insurers. The market structure dominated by a few stabilized public sector players and the 'new' players in the market (some of whom claim their lineage from established international insurance behemoths) is in a state of flux- in terms of figure out market shares but is full of potential. Added to these are the rising trends of convergence of financial services, especially in the areas like wealth management and evolution of newer risk management tools, particularly in the context of reinsurance management. Greater attention is also being bestowed on the areas like Agricultural Insurance and risk coverage of export-import trade. Then there is impact of visible socio-economic changes like greater urbanization, greater job mobility, growth of the services industry, weakening of traditional family structure, impact of globalization etc. All in all, interesting things are happening in the Indian insurance scene. Insurance undergone rapid and massive changes in all aspects of their business: product and services, sectoral structure, market segmentation, competitive environment.It is believed that the information sharing has not taken its expected shape in the insurance industry for the purposes of practices, research and education. However, data is one of the most needed ingredients in the insurance business development as well as for research and consultancy. There have been regular efforts by IRDA for collection and sharing of the data and other information of public interest. The industry is facing problems in terms of data review as parliament need to register this beforehand. We believe that progress of the industry should not be constrained by any extraneous conditions in the interest of research and development in the area. Manpower India today released the Manpower Employment Outlook Survey for the first quarter of 2006 revealing sustained positive hiring intentions of employers in India. India continues to lead all 23 countries surveyed this quarter, with a positive overall Net Employment Outlook of +27%. Even though this figure represents a decrease of 13 percentage points from the fourth quarter of 2005, the employment outlook remains extremely healthy. For the first time since the Survey was launched in India, the Finance, Insurance and Retail industry sector emerged as the most optimistic sector for a quarter with a Net Employment Outlook of +32%, surpassing the Services sector.

Privatization of insurance sector has allowed insurance companies to work in the market by depositing 100 crore rupees in the reserve of government. This has encouraged many overseas insurance companies, having a required amount in their reserve, to open their branch in our country. Introduction of the sector has changed the employment pattern, but people must know how to make profit from it. To be in the global market and have advantage of it, capital and skill as per the demand and knowledge of market is the requirement. It is necessary that institutions, which form a part of this financial system, have internal management, governance and accountability structures, which measure up to the highest standards.

India’s insurance sector is likely to clock an unprecedented growth of over 200 per cent by 2009-10. During this period, private players will grow at 140 per cent owing to their aggressive marketing techniques as against a growth rate of 35-40 per cent of state owned insurance companies, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM). The Chamber expects the total insurance business to reach Rs. 2000 billion in the next two years from current level of Rs. 500 billion. On account of intense marketing strategies adopted by private insurance players, the market share of state owned insurance companies like GIC, LIC and others have already come down to 70 per cent in the last four-five years from over 97 per cent and more intense competition is likely to be witnessed in the near future. Till very recently, the insurance sector was largely under the government. However, many private multinational firms have now entered the scene, such as HDFC, ICICI, Kotak Mahindra and Birla Sunlife.

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