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INDIAN INSURANCE INDUSTRY &

CAREER PROSPECTS

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ORIGIN AND HISTORY OF INSURANCE

ORIGIN AND HISTORY OF INSURANCE

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ESSENCE OF INSURANCE• The Egyptian ruler or Pharoah dreams of seven fat

and glossy cows, coming out of the river Nile, followed by seven lean and hungry cows, with the latter devouring the former.

• The seven fat cows represented seven years of good crops and the seven lean and hungry cows forebode seven years of famine.

• He was advised by Prophet Joseph or Yusuf to collect one fifth of the crop of each prosperous year as a levy or tax to be used in the years of famine.

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LOMBARDS

• Around the 13th Century, the earliest practice of insurance of ships called marine insurance is associated with the merchants of the cities of Lombardy, Italy.

• The Lombards also established themselves in London and other cities.

• Lombards brought with them the practices of marine insurance, banking and money lending.

• The earliest known policy issued in London was written in Italian and was dated 20th Sept. 1547.

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LLOYD’S

• In 1688, Edward Lloyd, proprieter of Lloyd’s Coffee House in London, encouraged a clientele of ships’ captains, merchants, ship owners and the like.

• He gained an enviable reputation for trustworthy shipping

news. He even published Lloyd’s News, one of the very first newspapers which contained shipping news.

• Lloyds Coffee House, became the recognised place for obtaining marine insurance.• Lloyd himself did no insurance business. He merely provided congenial surroundings for his patrons till his

death in 1713.

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HISTORY OF INSURANCE IN INDIA

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu

(Manusmrithi ) , Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine.

DURING VEDIC PERIOD YOGAKSHEMA, A SANSKRIT TERM MENTIONED IN THE RIGVEDA, A FORM OF INSURANCE WAS PRACTISED BY THE ARYANS,3000 YEARS AGO.

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The Codes of Manu refer to one another practice, i.e. ifthe cargo (good and merchandise carried in the ship) wasLost due to the negligence of the crew, the loss was to beShared by all its members but when the loss was causedby an act of God, the members of the crew were not heldresponsible.

IN MOGHUL DAYS THE PRACTICE OF INSURANCE TOOK

FIRM ROOTS.THERE ARE EVEN REFERENCES TO

INSURANCE AGAINST THE RISKS OF WAR.

Insurance in India has evolved over time heavily drawingfrom other countries, England in particular.

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IN 1810 PERMISSION WAS GIVEN TO ANY RESIDENT OF GREAT BRITAIN TO INSURE ANY PROPERTY IN ANY TERRITORY OF GREAT BRITAIN,WITH THE ENGLISH INSURANCE COMPANIES.

LOCAL OFFICES OF 7 INSURANCE COMPANIES STARTED IN CALCUTTA.

THE BUSINESS OF LIFE INSURANCE IN INDIA IN IT’S EXISTING FORM STARTED IN THE YEAR 1818 WITH THE ESTABLISHMENT OF THE ORIENTAL LIFE INSURANCE COMPANY IN CALCUTTA.

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LIFE INSURANCE BUSINESS INDIA1912: The Indian Life Assurance Companies Act enacted.1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.1938: Insurance Act amended earlier legislation for protecting the interests of the insuring public.1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised to form LIC by an Act of Parliament, viz. LIC Act,1956, with a capital contribution of Rs.5 crore from the Government of India.

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GENERAL INSURANCE BUSINESS IN INDIA

• 1850: Triton Insurance Company Ltd., the first company established in Calcutta by the British.

• 1907: The Indian Mercantile Insurance Ltd., the first Indian company set up 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: 107 general insurance companies nationalised through the General Insurance Business (Nationalisation) Act, 1972 with effect from 1st January 1973.

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INSURANCEINSURANCE SECTOR SECTOR REFORMSREFORMS

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• 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 recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…”

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The Insurance Regulatory and Development Authority,IRDA

• Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999.

• The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the public & private sector insurance companies.

14

WORLD INSURANCE MARKET OVERVIEW

LIFE

NON LIFE

US$ 4061BlnTOTAL

US$ 1668 BlnNON – LIFE

US$ 2393 BlnLIFE

Source:- Swiss Re – Sigma

15

COUNTRIES MARKET SHARECOUNTRIES MARKET SHARE

• US, JAPAN, UK, GERMANY, FRANCE

• 5 LEADING INSURANCE MARKETS

65%

35% Industrialised

Non Industrialised

64%

36% Industrialised

Non Industrialised

LIFE

NON LIFE

Source:- Swiss Re – Sigma

16

COUNTRIES INSURANCE BUSINESS SHARE IN WORLD MARKET

1.53%

2.28%

1.34%

2.88%

10.46%

6.62%

5.49%

11.42%2.47%

30.28%

U.S.A.

Canada

U.K.

Germany

France

Japan

S.Korea

India

Australia

China

Source:- Swiss Re – Sigma

17

WORLD NON-LIFE INSURANCE PREMIUM MARKET SHARE

3.29%

7.22%

6.83%

4.91%

2.03% 5.65% 0.43%

39.05%

USA

Canada

Germany

U.K.

France

China

Japan

India

Source:- Swiss Re – Sigma

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LIFE INSURANCE SHARE IN WORLD MARKET 2007

24.17%

1.91%

14.61%7.81%4.28%

3.69%

13.82%

3.40%

2.45%

1.97%U.S.

Canada

U.K.

France

Germany

Italy

Japan

S.Korea

China

India

Source:- Swiss Re – Sigma

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INDIAN INSURANCE COMPANIESINDIAN INSURANCE COMPANIES LIFE INSURERS:1. LIFE INSURANCE CORPORATION2. HDFC STANDARD LIFE INSURANCE CO.3. MAX NEW YORK LIFE INSURANCE CO.4. ICICI PRUDENTIAL LIFE INSURANCE CO.5. KOTAK MAHINDRA OLD MUTUAL LIFE 6. BIRLA SUN LIFE INSURANCE CO.7. TATA AIG LIFE INSURANCE CO.8. SBI LIFE INSURANCE CO.9. ING VYSYA LIFE INSURANCE CO.10. BAJAJ ALLIANZ LIFE INSURANCE CO.11. METLIFE INDIA INSURANCE CO.12. RELIANCE LIFE INSRUANCE CO.

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13. AVIVA LIFE INSURANCE CO.14. SAHARA INDIA INSURANCE CO.15. SHRIRAM LIFE INSURANCE CO.16. BHARTI AXA LIFE INSURANCE COMPANY LTD.17. FUTURE GENERALI INDIA LIFE INSURANCE COMPANY LIMITED 18. IDBI FORTIS LIFE INSURANCE COMPANY LTD.,19. CANARA HSBC ORIENTAL BANK OF COMMERCE LIFE INSURANCE COMP. LTD. 20. AEGON RELIGARE LIFE INSURANCE COMPANY LIMITED. 21. DLF PRAMERICA LIFE INSURANCE COMPANY LIMITED 22. STAR UNION DAI - ICHI LIFE INSURANCE CO. LTD. 23. INDIAFIRST LIFE INSURANCE COMPANY LTD. 24. EDELWEISS TOKIO LIFE INSURANCE CO. LTD.

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PREMIUM INCOME SHARE IN INDIA(2011-2012)

OF LIFE INSURANSE COMPANIES

34.61%

2.384% 1.58% 5.71%3.36%

4.45%1.69%

1.672%71.35%

BAJAJ ALLIANZ

RELIANCE

SBI LIFE

HDFC STD

ICICI PRU

BIRLA SUN

MAX NEY YORK

LIC

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GENERAL INSURERS:1. NEW INDIA ASSURANCE CO.2. NATIONAL INSURANCE CO.3. ORIENTAL INSURANCE CO.4. UNITED INDIA INSURANCE CO.5. ROYAL SUNDARAM ALLIANCE INS. CO.6. RELIANCE GENERAL INSURANCE CO.7. IFFCO TOKIO GENERAL INSURANCE CO.8. TATA AIG GENERAL INSURANCE CO.9. BAJAJ ALLIANZ GENERAL INS. CO.10. ICICI LOMBARD GENERAL INS. CO.11. CHOLAMANDALAM GENERAL INS.CO.12. EXPORT CREDIT GUARANTEE CORP.13. HDFC ERGO GENERAL INSURANCE CO.

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14. AGRICULTURAL INSURANCE COMPANY15. STAR HEALTH AND ALLIED INS.CO. LTD.16. APOLLO DKV INSURANCE CO. LTD.17. FUTURE GENERALI INDIA INS.CO.LTD. 18. UNIVERSAL SOMPO GENERAL INS.CO. LTD.19. SHRIRAM GENERAL INSURANCE CO. LTD.20. BHARTI AXA GENERAL INS.CO.LTD.21. RAHEJA QBE GENERAL INS.CO.LTD.22. SBI GENERAL INSURANCE CO. LTD.23. MAX BUPA HEALTH INSURANCE CO.LTD.24. L & T GENERAL INSURANCE CO. LTD.25. RELIGARE HEALTH INSURANCE CO. LTD.26. MAGMA HDI GENERAL INSURANCE CO. LTD.27. LIBERTY VIDEACON GENERAL INS. CO. LTD.

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PREMIUM INCOME SHARE IN INDIA2011-2012

NON LIFE INSURANCE COMPANIES

14.62%

13.99%10.36%13.34%

8.83%5.71%

4.42%3.44%

NEW INDIA

UNITED

ORIENTAL

NATIONAL

ICICI LOM

BAJAJ

AIC

IFCO-TOKYO

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PREMIUM INCOME IN INDIA2011-2012

PUBLIC SECTOR COMPANIES (NON LIFE)Fig. in Rs. Crs.

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MARKET STANDING IN INDIA2011-2012 NON LIFE INSURANCE COMPANIES

8535.6828167.05

6043.97

5150.14

7784.91

3333.47

1712.55

2577.07

2008.46

1136.74

1873.141490.79

1697.45

1344.021005.11

1266.45

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Fig . in Rs. Crs.

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CHANGES IN THE INSURANCE ACT 1938 AND IRDA ACT 1999

• REVISE THE FDI FROM THE PRESENT 26% TO 49%.

• CLUBBING BOTH THE ACTS AND MAKING IT INTO ONE ACT OF INSURANCE.

• DOWNSIZING THE PAID UP CAPITAL TO 50 CRORES FOR HEALTH INSURANCE SECTOR.

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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.

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THANK YOUTHANK YOU