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Present & Relative Position & Prospects in Global Context of Indian Insurance Sector:

Present & Relative Position & Prospects in Global Context of Indian Insurance Sector

Flow of Presentation:

Flow of Presentation Introduction History Current Scenario Global Scenario India in the international context Relative Position of India Major Driving Force Issues, Trends & Opportunities Solutions


Introduction An insurance policy protects the buyer at some cost against financial loss arising from a specified risk. Different situation and different people require different mix of risk – cost combinations Insurance-as a security measure

Milestones in Life Insurance Business in India:

Milestones in Life Insurance Business in India 1818 Oriental Life Insurance Company started by Europeans in Kolkata for European community 1870 Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912 The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1938 Legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public. 1956 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalized. LIC formed by an Act of Parliament

Milestones in General Insurance Business in India:

Milestones in General Insurance Business in India 1907 The Indian Mercantile Insurance Ltd. sets up first company to transact all classes of general insurance business. 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. 1999 107 insurers amalgamated and grouped into four companies viz. The National Insurance Company Ltd. T he New India Assurance Company Ltd., The Oriental Insurance Company Ltd The United India Insurance Company Ltd. GIC incorporated as a company.

Acts related to Insurance:

Acts related to Insurance The Insurance Act, 1938 Life Insurance Corporation Act, 1956 General Insurance Business (Nationalization) Act, 1972 Insurance Regulatory and Development Authority (IRDA) Act, 1999


INSURANCE SECTOR REFORMS Headed by former Finance Secretary and RBI Governor R.N. Malhotra in year 1993. The objective was to complement 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.

Key Recommendations:

Key Recommendations 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 COMPETETION Private Companies with minimum paid up capital of Rs.1 bn should be allowed to enter the industry. No Company should deal in both Life and General Insurance through a single entry. 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.


Continued…. 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 . INVESMENTS 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) . CUSTOMER SERVICE LIC should pay interest on delays on 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.

Registered Insurance Companies in India:

Registered Insurance Companies in India 1. Bajaj Allianz Life Insurance Co. Limited 12. Reliance Life Insurance Co. Limited. 2. Birla Sun Life Insurance Co. Ltd 13. Aviva Life Insurance Co. India Pvt. Ltd. 3. HDFC Standard life Insurance Co. Ltd 14. Sahara India Life Insurance Co, Ltd. 4. ICICI Prudential Life Insurance Co. Ltd. 15. Shriram Life Insurance Co, Ltd. 5. ING Vysya Life Insurance Company Ltd. 16. Bharti AXA Life Insurance Co. Ltd. 6. Life Insurance Corporation of India 17. Future General Life Insurance Co.Ltd . 7. Max New York Life Insurance Co. Ltd 18. IDBI Fortis Life Insurance Co. Ltd. 8. Met Life India Insurance Company Ltd. 19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd 9. Kotak Mahindra Life Insurance Limited 20. AEGON Religare Life Insurance Co. Ltd 10. SBI Life Insurance Co. Ltd 21. DLF Pramerica Life Insurance Co. Ltd. 11. Tata AIG Life Insurance Co. Limited 22. Star Union Dai- ichi Life Insurance Comp. Ltd.

Various Insurance Covered :

Various Insurance Covered Life Insurance Health insurance Non-life insurance Home or House Insurance Property insurance Auto Insurance Infrastructure Projects Insurance Travel Insurance Real Estate insurance Mobile insurance, etc. Reinsurance (for insurance companies)

India’s Current Scenario:

India’s Current Scenario Most populous country in the world after China. 4 th largest economy based on PPP basis. Insurance sector in India has gone through no. of phases. Private companies allowed FDI up to 26%. Life & General Insurance in India at infancy stage. Life Insurance : 4.1 % of GDP General Insurance : 0.6 % of GDP


Continued.. Market size went up to US$ 47.89 billion in 2007 from US$ 21.71 billion in 2000. Between 2000 and 2007, overall premiums sustained an average growth rate of 11.96 %. Health insurance sector (both life and general insurance) is growing currently at 50 per cent. Expected to grow by 17 % in the current financial year.


Continued.. Out of 78 % Indian households that are aware about life insurance only 24 % own a policy. Wide scale expansion activities by private insurance companies. Share of state-owned insurance companies like GIC, LIC and others is about 70 per cent 20–30 per cent of business of many companies comes from children-specific insurance policies.

Major Life Insurance Companies in India:

Major Life Insurance Companies in India LIC Largest Institutional Investor in India Operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal Assets as on 31.03.2008 : $ 185 billion No. of policies : 250 million No. of employees : 1,13,000 No. of agents : 1.2 million ICICI Prudential Market Share: 9.1 % Bajaj Allianz Market Share: 4.2 % Other companies contribute 16 %

Major General Insurance Companies (Mar’ 08):

Major General Insurance Companies (Mar’ 08)

Global Scenario:

Global Scenario Global insurance premiums grew by 9.7% & reached $4.2 trillion by 2007. NA is the most important region with premium income of $1,600 billion in 2007. More than 75 % of popln in USA is insured. EU (at $1,198 billion) & Japan (at $492 billion.) The United States & Japan account for a half of world insurance premiums. Emerging markets accounted for over 85% of the world’s population but generated only 10% of premium.

Major Players in World:

Major Players in World

India in the international context:

India in the international context The Indian insurance market is the 19th largest globally. Ranks 5th in Asia, after Japan, South Korea, China and Taiwan. Total gross premiums collected is under 2.0 % of world premiums. In 2003, India had the 11th highest insurance penetration in Asia and ranked 54th worldwide.

The following chart depicts the current position of different emerging markets as well as their expected position by 2013.:

The following chart depicts the current position of different emerging markets as well as their expected position by 2013.

Insurance density in Asia 2007 (USD):

Insurance density in Asia 2007 (USD)

Penetration rate of P & C insurance as a % of GDP in 2007:

Penetration rate of P & C insurance as a % of GDP in 2007

Major Driving Factors:

Major Driving Factors Globalization Deregulation which is opening up the markets Cheaper and more effective distribution channels Ongoing industry consolidation Increment in the policy holder firms Boost in Merger and Acquisitions activities Changing socio-economic dynamics Market offering wider margins Unique combination of size, age profile and growth prospects

Major Issues:

Major Issues Need for diversification in the income streams Insurance companies create products and go out to find customers. Lack of proper agent quality Risk management concerns in insurance companies Impact of sub-prime Regulatory and market obstacles in the emerging markets

Trends and Opportunities:

Trends and Opportunities Continuous increment in intra-Asian trade Drastic increment in marine and cargo insurance sectors Developments in countries, who are closely regulated by their government Global Expansion. Unit–linked Insurance Plans. Healthcare Sector. Rural Market.


Solutions India needs to further liberalize investment regulations. Price structures should reflect product risk. Provide flexible products suited to the customers requirements Application of information technology in insurance sector.


Conclusion Insurance sector today has become a mainstay of any market economy since it offers plenty of scope for garnering large sums of money for long periods of time. A well-regulated life insurance industry which moves with the times by offering its customers tailor-made products to satisfy their financial needs is, therefore, essential if we desire to progress towards a worry-free future.

PowerPoint Presentation:


PowerPoint Presentation:

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