«Published Annually Vol. 6, No. 1 ISBN 978-0-979-7593-3-8 CONFERENCE PROCEEDINGS Sawyer School of Business, Suffolk University, Boston, Massachusetts ...»
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Insurance has been the back bone of society. For country like India, insurance does serve the need as social security practices that are not present in India compared to some foreign nations. There is no support from the government agencies to the ailing families of India, who have lost there bread winner in past, which resulted in weakening the economic front of the family The origin of Insurance can be dated in 18 th century when for the need of some European sailors the idea of Insurance was discussed and brought in light for the mutual benefit.
With emergence of Life Insurance Act in 1912 and provident fund Act, gave the regulation to the business. Many Insurance companies flourished in India and started their operations. Mal Practices became rampant as on every corner new “Insurance Shops” were opened.
In 1999, the IRDA was set up under Companies Act., aspiring to carry on insurance and reinsurance business in India.
Insurance business in India is growing at the rate of 15.20% annually India's insurance sector is to show an unprecedented progressive growth of more than 200% by the period of 2010-11 The business of insurance is expected to reach at Rs.2000 billions in coming 2 years from the present level of Rs. 500 billion-.
With new insurance company coming in India, increase in awareness about Insurance in India and good marketing and advertising campaigns carried out by the marketers will give rise and will grow the Insurance market in future.
The tendency and dependency in the product is surely benefitting the industry to achieve its growth targets that they are expecting.
With more companies coming up everyday and the growing demand of the industry the markets are becoming very competitive. Until and unless the existing companies makes a mark and create their very own brand name it would be quite tough to sustain their position in the market. There is also a probability of big companies taking over the new emerging companies.
With new Distribution channels emerging for the markets, creating and crafting the products for these new intermediateries, surely will cater the Insurance need of the end customer. Fuelled competition, increased awareness will bring the customers on the centre- stage. More Customer awareness, more regulatory frame work and ethical sales practices will be one to look forward in the Insurance Business.
This paper discusses the present scenario of Insurance industry, the future developing channels and the perceptions and expectations of end users toward Insurance Industry.
Conference papers © Knowledge Globalization Institute, Pune, India, 2012 Keywords: Insurance, Irda, Growth, Distribution Channels
Insurance has been the back bone of society. For country like India, insurance does serve the need as social security practices that are not present in India compared to some foreign nations. There is no support from the government agencies to the ailing families of India, who have lost there bread winner in past, which resulted in weakening the economic front of the family. The penetration of Insurance is also less as compared to other countries. Also the ignorance toward the Insurance in one more reason for low penetration.
Insurance in India can be traced back to the Vedas. Yogakshema, the name of Life Insurance Corporation of India's corporate headquarters, is derived from the Rig Veda. The term suggests that a form of "community insurance" was prevalent around 1000 BC and practiced by the Aryans.
The Year 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. Bombay Mutual Assurance Society, the first Indian life assurance society, was formed in 1870. Other companies like Oriental, Bharat and Empire of India were also set up in the 1870-90s.
In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.
By the mid-1950s, there were around 170 insurance companies and 80 provident fund societies in the country's life insurance scene. However, in the absence of regulatory systems, scams and irregularities were almost a way of life at most of these companies.
It was seen that many Insurance shops were opened and were flourished in a big way. With less or no control of any regulator over these companies, rampart unfair business practices were common, many times customer was not benefited and was not at the center stage as no transparency was seen in there business. Huge exploitation of customer was seen at the hands of these principal agents. India by then was indeed independent and Government then though about regulating the business of Insurance.
The Insurance Amendment Act of 1950 abolished those Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business. As a result, the government decided to nationalize the life st assurance business in India. The Life Insurance Corporation of India was set up on 1 September 1956 to take over around 250 life companies.
For years thereafter, insurance remained a monopoly of the public sector. It was only after seven years of deliberation and debate - after the RN Malhotra Committee report of 1994 became the first serious document calling for the re-opening up of the insurance sector to private players -- that the sector was finally opened up to private players in 2001.
As of now today India is having 23 Life Insurance company serving the need of customers in all parts of India. These are:
Conference papers © Knowledge Globalization Institute, Pune, India, 2012
List of Life Insurance companies in India till 2011:
1. Life Insurance Corporation of India
2. MetLife India Life Insurance
3. ICICI Prudential
4. Bajaj Allianz Life Insurance
5. Max New York Life Insurance
6. Sahara Life Insurance
7. TATA AIG Life Insurance
8. HDFC Standard Life
9. Birla Sunlife
10. SBI Life Insurance Company Limited
11. Kotak Life Insurance
12. Aviva Life Insurance
13. Reliance Life Insurance Company Limited – Formerly known as AMP Sanmar LIC
14. ING Vysya Life Insurance
15. Shriram Life Insurance
16. Bharti AXA Life Insurance Co Ltd
17. Future Generali Life Insurance Co Ltd
18. IDBI Fortis Life Insurance
19. AEGON Religare Life Insurance 1
20. DLF Pramerica Life Insurance
21. Canara HSBC Oriental Bank of Commerce Life Insurance
22. Star Union Dai-ichi Life Insurance Co. Ltd.
23. IndiaFirst Life Insurance Company These companies are not only able to create the awareness about the Insurance in country but also are able to create a good competitive environment needed for any business to flourish. With better Corporate Governance, fair business practices and transparency in business they are now able to beak the monopoly of single Insurance provider in Life Insurance business in India.
The Indian Insurance Market:
Regulation of business:
With changing economies and open trade barriers, there was also a need for regulation of business is concern. With this need arising a regulator was formalized for the Insurance sector. In 1999, Insurance regulatory development authority (IRDA) was set up under Companies Act. Any Company aspiring to do business either in Life or in Non-life Insurance arena need to register itself with IRDA. They not only look at regulative frame work but also prohibit 100% foreign ownership of an Indian Insurance Company.
An Indian Promoter is require to invest either wholly or team up with a foreign insurer, which can own not more than 26% of the shares in a venture. With 26% share capital with the foreign partner and remaining 74% with the Indian player.
Major players and growth:
The Insurance market of India, especially Life Insurance was mainly dominated by Life Insurance Corporation of India (LIC). With other players coming into the market provided a competitive environment to the Industry. LIC (Life Insurance Corporation of India) still remains the largest life insurance company accounting for 64% market share in 2010. Its share, however, has dropped from 74% a year before, mainly owing to entry of private players with innovative products and better sales force.
In private players ICICI Prudential Co Ltd is the biggest private life insurance company in India. It experienced growth of 58% in new business premium. In line with expectations, life Insurance industry’s new business volumes in the individual new business segment remained strong, growing 36% Y-o-Y and 23% M-o-M, in year 2010.
Conference papers © Knowledge Globalization Institute, Pune, India, 2012 Here is how Various Life Insurers stack up against each in the Industry as a whole. The following Data suggests that LIC of India is still the market leader followed by ICICI Prudential, HDFC Standard Life, SBI, Reliance, Bajaj, Birla Sun Life, Max New York etc.
Source: IRDA The first year premium, by Life Insurers in India for the period 2009-10 was 1, 09,894 crore as compared to 87,331 crore in 2008-09 registering a growth of 25.84 per cent. The total premium underwritten by the Life Insurance sector in 2009-10was 2, 65,450 crore as against 2, 21,785 crore in 2008-09 exhibiting a growth of 19.69 per cent. Still the state owned company leads the chart till date.
In life insurance business, India ranked 9th among the 156 countries. During 2009, the life insurance premium in India grew by
10.1 per cent however, during the same period; the global life insurance premium had contracted by 2 per cent. The share of Indian life insurance sector in global market was 2.45 per cent during 2009, as against 1.98 percent in 2008. The measure of insurance penetration and density reflects the level of development of insurance sector in a country. While insurance penetration is measured as the percentage of insurance premium to GDP, insurance density is calculated as the ratio of premium to population (per capita premium). Since opening up of Indian insurance sector for private participation, India has reported increase in both insurance penetration and density. But, the increase has been almost entirely contributed by the life insurance sector.
Insurance penetration and density in India:
2001 9.1 2.15 2002 11.7 2.59 2003 12.9 2.26 2004 15.7 2.53 Conference papers © Knowledge Globalization Institute, Pune, India, 2012 2005 18.3 2.53 2006 33.2 4.10 2007 40.4 4.00 2008 41.2 4.00 2009 47.7 4.60 ___________________________________________
Insurance density is measured as ratio of premium (in US Dollar) to total population.
Insurance penetration is measured as ratio of premium (in US Dollars) to GDP (in US Dollars).
Source: Swiss Re, Various Issues.
With the data, it can be seen that in business arena, the estate owned insurer LIC is still holding its base and position as number one Life Insurance Company in India. At the same way the private players are also leading an upward direction. Due to the competitive environment the aware ness, and also due to the marketing activity of all insurers together has surely helped to increase the penetration and increase in the insurance density in India.
Products in Insurance Market:
Insurance market today consists of multiple products. To have a classification of products they can be mainly classified as Term Product Endowment Products.
Annuity (Pension) Plans Though today Insurance is projected as an investment product to the customer, the avenues of these investments can be into traditional markets (Been tagged as a traditional products which gives fixed Guaranteed returns) and Unit linked products (Investment made in capital market).
Along with need generation new product lines were introduced by many insurers and developed products like children products, short duration products, single payment products, limited period products and many more.
With recent societal change also gave rise to products like “Reverse Mortgage “by these insurers. They are now able to developed and market the products depending upon the need and demands of customers. This has indeed helped the customer in form of customization of products at there disposal.