Background and Brief History of LIFE INSURANCE The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era – past few centuries – yet its beginnings date back almost 6000 years. Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Some of the important milestones in the life insurance business in India are: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 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. 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.
Transcript
Background and Brief History of LIFE INSURANCE
The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era – past few centuries – yet its beginnings date back almost 6000 years.
Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates.
Some of the important milestones in the life insurance business in India are:
1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning.
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.
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 are 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.
Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal offices, 992 satellite offices and the Corporate office. LIC’s Wide Area Network covers 109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LIC’s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future.
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 private sector insurance companies.
What is Life Insurance
Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against.
The contract is valid for payment of the insured amount during:
The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if it occurs earlier.
Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilization’s partial solution to the problems caused by death. Life insurance, in short, is concerned with the hazards that stand across the life-path of every person:
1. That of dying prematurely leaving a dependent family to fend for itself. 2. That of living till old age without visible means of support. 3. Temporary needs/threats, regular savings, investments, retirement, tax relief and liquidity.
Life Insurance Vs Other Savings
Protection: Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable
Aid To Thrift:
Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy instalment' facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half yearly or yearly). For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one's salary. In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions.
Liquidity: In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan.
Tax Relief: Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force.
Assessees can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.
Money When You Need It:
A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time. Children's education, start-in-life
or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies. Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).
Who Can Buy A Policy?
Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself and those in whom he/she has insurable interest.
Policies can also be taken, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, certain factors such as the policyholder’s state of health, the proponent's income and other relevant factors are considered by the Corporation.
Overseas Operations of LIC
INTERNATIONAL OPERATIONS / ASSOCIATES
INTERNATIONAL OPERATIONS
LIC Fiji
LIC Mauritius
LIC United Kingdom
LIC Representative Office, Singapore
LIC (International) B.S.C (C), Bahrain
LIC (Nepal) Ltd
LIC (Lanka) Ltd
Saudi Indian Company for Co-op. Insurance, KSA.
Kenindia Assurance Co. Ltd., Kenya.
LIC Mauritius Offshore Ltd.
LIC Singapore Offshore Ltd.
LIC Co-ordinating Office in India
ASSOCIATES
LIC HFL Financial Services Ltd
LIC Housing Finance Ltd.
LICHFL Care Homes Ltd.
LIC Mutual Fund AMC Ltd.
LIC Cards Services Ltd.
LIC Pension Fund Limited
History of Women since ages:
The status of women in India has been subject to many great changes over the past few millennia.
From equal status with men in ancient times through the low points of the medieval period to the promotion of equal rights by many reformers, the history of women in India has been eventful.
Ancient India:
Scholars believe that in ancient India, the women enjoyed equal status with men in all fields of life. However, some others hold contrasting view.] Works by ancient Indian grammarians such as Patanjali and Katyayana suggest that women were educated in the early Vedic period. Scriptures such as Rig Veda and Upanishads mention several women sages and seers, notably Gargi ( The ancient Hindu Vedic texts mention a number of women. Gargi, a prophetess and philosopher is among them. She was the daughter of the wise man, Vachaknu. She composed several hymns that question the origin of all things)and Maitreyi.( Maitreyi lived about the same time as Gargi, another well known philosopher of India)
Medieval Period:
The Indian woman's position in the society further deteriorated during the medieval period. when Sati among some communities, child marriages and a ban on widow remarriages became part of social life among some communities in India. The Bhakti movements ( Mirabai, Akkamahadevi, Molla etc) tried to restore women's status and questioned some of the forms of oppression
Independent India:
Women in India now participate in all activities such as education,sports, politics, media, art and culture, service sectors, science and technology, etc. Indira Gandhi, who served as Prime Minister of India for an aggregate period of fifteen years is the world's longest serving woman Prime Minister.
The Hindu personal laws of mid-1956s (applied to Hindus, Buddhists, Sikhs and Jains) gave women rights to inheritance. However, the sons had an independent share in the ancestral property, while the daughters' shares were based on the share received by their father. Hence, a father could effectively disinherit a daughter by
renouncing his share of the ancestral property, but the son will continue to have a share in his own right. Additionally, married daughters, even those facing marital harassment, had no residential rights in the ancestral home. After amendment of Hindu laws in 2005, now women have been provided the same status as that of men.
As we move to the 21st century, the traditional Indian women simultaneously experiences a metamorphic change in her roles and status, both at the work place and at home. Now the women in India are not confined to home.
In today’s Indian society, traditional, modern, and egalitarian values co-exist. It is this decade that one notices the emergence of new values which are manifested in a variety of ways. A number of women are taking up unconventional, challenging professions such as engineering, artitechture, research , aviation, management, journalism entrepreneurship and so on.
Why women should get life insurance?
Life insurance means protection against risks in life. It is important for a man, so is for a woman, even though she is not considered a breadwinner in a conventional manner. In today’s world, a woman’s contribution to the finances of a family cannot be ignored. But women are seen to be holding themselves back when it comes to buying life insurance. Life insurance can be an emergency fund and help meet one’s objectives. Most men are aware of this; it is the time for women to know this and get themselves insured.
For Example.,Amita, 30, has been looking at getting some insurance policies. She is a working mother with a young child of 2 years. Her husband is a businessman and looking at their financial position she realises that there has to be adequate planning done so that there are no bumps on the way. Her main concern is about the ability to look at the requirement for insurance and the manner in which she will be able to protect her family. She is also wondering as to whether taking some woman-specific policy will be of any help.
o Policies with regular cash flow to meet children’s needso Cash accumulation through insurance for retirement
Since Amita is married and having a child, life insurance becomes an absolute necessity for her. But she does not know what amount of coverage will be adequate for her, and hence will require enough knowledge as well as clarity of goals to get the right amount of coverage. Several factors like her age, salary, and family status will have to be considered to determine the coverage amount.
Insurance Industry Analysis
This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein , among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners. Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market
The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure.
Today there are 23 Life Insurance Companies including LIC operating in India, as per IRDA web site.
The Life Insurance is governed by The Insurance Act, 1938 and the IRDA Act, 1999.
According to IRDA, the insurers in the year 2009-2010 sold 10.55 million new policies with LIC selling 8.52 million and private companies 2.03 million policies. In the year March 2010, LIC held 65% market share in terms of new business income collection with the private sector contributing the remaining 35% share in 2009-10.
Top Leading Companies:Today in India more multinational companies have come forward in the insurance field. ICICI Prudential, Om Kotak Mahindra, Birla Sun-Life, Tata AIF Life, Reliance, HDFC Standard Life-Insurance Co., Max New York Life, SBI Life Insurance, ING Vysa Life etc. are the top companies in the private sector. For the non-life Insurance section the major private players are ICICI Lombard, Royal Sundaram, Cholamandalam, IFFCO Tokyo, Tata AIG etc. All the Insurance companies come under the Insurance Regulatory and Development Authority (IRDA) which is established to regulate, promote and ensure orderly growth of Life and General insurance industry in India.
The ratio of life insurance premium to GDP in India is currently about 4 per cent, much lower than developed market levels of 6 to 9 per cent. In several segments of the population, penetration is lower than potential. For example, in urban areas, penetration of life insurance in the mass market is about 65 per cent, and it is considerably less in the low-income unbanked segment. In rural areas, life insurance penetration in the banked segment is estimated to be about 40 per cent, while it is marginal at best in the unbanked segment.
Industry Structure
The following are the list of 23 Life Insurance Companies in India. The list is published by IRDA.
Bajaj Allianz Life Insurance Company Limited Birla Sun Life Insurance Co. Ltd HDFC Standard Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd. ING Vysya Life Insurance Company Ltd.
Life Insurance Corporation of India Max New York Life Insurance Co. Ltd Met Life India Insurance Company Ltd. Kotak Mahindra Old Mutual Life Insurance Limited SBI Life Insurance Co. Ltd Tata AIG Life Insurance Company Limited Reliance Life Insurance Company Limited. Aviva Life Insurance Co. India Ltd. Sahara India Life Insurance Co, Ltd. Shriram Life Insurance Co, Ltd. Bharti AXA Life Insurance Company Ltd. Future Generali Life Insurance Company Ltd. IDBI Fortis Life Insurance Company Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd AEGON Religare Life Insurance Company Limited. DLF Pramerica Life Insurance Co. Ltd. Star Union Dai-ichi Life Insurance Co. Ltd.
The Sales and distribution channels of the various companies vary as per their demographic distribution, the marketing force ( officials) and the products offered, and the pricing of the products.
LIC is the largest player with 64% share in the market as on Mar-2010.
Below is a list of the Top 10 insurance companies in India, as of Dec-2010.
LIC (Life Insurance Corporation of India)
The undisputed leader of insurance in India LIC is ranked as the best insurance company in India. The history of LIC goes back to the history of insurance in the country. The company accounts for a total market share of 64% in the insurance industry in India. .
ICICI Prudential Life Insurance Co Ltd Among the Top 10 insurance companies in India ICICI Prudential Life Insurance Co Ltd is the largest private life
insurance company in the country. A joint venture between ICICI Bank and Prudential plc this company commenced operations in 2000. Currently the company holds a total market share of 8.93% in the Indian insurance industry.
Bajaj Allianz Life Insurance Co Ltd Bajaj Allianz Life Insurance Co Ltd also figures in the list of the Top 10 insurance companies in India. A joint venture between global automobile giants Bajaj Auto Allianz AG's this company is ranked second (after LIC) in the number of policies sold. Presently the company accounts for a total market share of 7.36%.
SBI Life Insurance Co Ltd Ranked 6th in the year 2007-08 SBI Life Insurance Co Ltd is a joint venture between State Bank of India and BNP Paribas Assurance. The company today stands as one of the most trusted insurance brands after LIC and has shown phenomenal growth over a period of two years.
Reliance Life Insurance Co Ltd Reliance Life Insurance Co Ltd is a part of Reliance Anil Dhirubhai Ambani Group and is among India's leading private insurance companies. Currently the company stands at number five in terms of new business premium and accounts for a a total market share of 2.96% 4th in number of new policies sold in 2007-08.
HDFC Standard Life Insurance Co LtdHDFC Standard Life Insurance Co Ltd is one of the Top 10 insurance companies in India. This company is a joint venture between Housing Development Finance Corporation Limited and Standard Life plc. The company currently holds a total market share of 2.88% in the Indian insurance industry.
Birla Sun Life Insurance Co LtdIncorporated in the year 2000 Birla Sun Life Insurance Co Ltd in the last decade has witnessed phenomenal. Currently the market stands at number seven in the list of the top ten insurance companies in India.
Max New York Life Insurance Co LtdKnown for its extensive product portfolio Max New York Life Insurance Co Ltd is a joint venture between Max India Limited and New York Life International a fortune 500 company. Currently it is among the best insurance and most trusted insurance companies in India today.
Kotak Mahindra Old Mutual Life Insurance Ltd Another important insurance company in India Kotak Mahindra Old Mutual Life Insurance Ltd is one of the fastest growing private insurance companies today. The company is said to have doubled its branches from 74 to 150 since the year 2008 to 2010.
Aviva Life Insurance Company India Ltd Aviva Life Insurance Company India Ltd among the top ten insurance companies in India today is a joint venture between Dabur, and Aviva plc. Presently located in more than places in the country the company has a record for selling one of the largest number of life insurance plans. total premium of R5,710.54 crore (R4,972.23 crore) with a growth of 14.85% and with a market share of 5.5%.
Market Share of Top 3 Life Insurance Cos. as on Dec-2010.
LIC of India 64%ICICI Prudential Life Ins Co Ltd.
8.93%
Bajaj Allianz Life Insurance Co Ltd
7.36%
Market Share of Life Insurers as on 31.03.2010, as per IRDA WEBSITE.
.
Environmental Analysis
Political Factors & Legal & Regulatory Factors:
Post Liberalization Policies regarding Insurance
Under the recommendation of Malhotra Committee the Insurance Regulatory And Development
Authority was set up to monitor and control the Insurance industry Some of the initiatives taken by the
government after Insurance sector reforms are: • Government to have not more than 50 per cent stake in insurance companies. • Insurance sector to be opened up for private companies and any number of insurance enterprises can operate. • Private players with minimum paid up capital of Rs.1 billion should be given opportunity to do business. • Foreign companies can enter Indian market through joint ventures with Indian
companies. 1 document_comme
Source of earning foreign exchange - Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways.
Risk Free trade - Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover.
The state controlled Insurance companies like LIC and GIC faced stiff competition from private insurance
companies post reforms. The monopoly of the national Insurance companies came to an end. The private
Insurance companies were able to exploit the shortcomings in the state run Insurance companies. The private
insurance companies launched a variety of new insurance products like health care, pension plans, annuity plans,
income protection, market linked products which were welcomed by the end customers. The business for the
private sector boomed in both urban and rural sector alike.
Bodies that regulate the sector:
For better regulation purpose of the insurance sector the government has established following bodies;1. IRA: Insurance Regulatory Authority.2. IRDA: Insurance Regulatory and Development Authority.3. TAC: Tariff Advisory Committee.
1. IRA: INSURANCE REGULATORY AUTHORITY:
The IRA, under the chairmanship of Rangachary, was set-up in January 1996. The IRA Bill has to be passed
by parliament to make the IRA a statutory body. Comprehensive legislation aimed at reviewing the insurance Act
of 1938 and repealing the life insurance corporation Act of 1956 have to be passed. The IRA is also preparing an internal rating system to screen all applications, as entry will be in phases. The joint venture status of life insurance companies (with majority holding of the domestic partner) is likely to be approved by the parliament. Consensus also seems to be emerging on the minimum of Rs.1 bn capital stipulations for new insurance companies.
The IRA has stipulated a minimum rural presence for all companies. The exhaustive guidelines have been
issued for the appointment of intermediaries (brokers, agents, surveyors and actuaries). Feature of IRA: 1. The Bill allowed for up to 26% foreign equity participation in the insurance sector. 2. The current India monopoly companies were required to bring down their equity holding to 26% within a period of 10 years.
Government pronouncement: 1. IRA will be sole Authority, which will be responsible for awarding of, licenses i.e. little or no government or political interference in licensing process.2. No restriction on the number of licenses.3. No composite license for life insurance business.4. Licensing to be only on national basis (no city by city approach)5. IRA allowed for up to 26% foreign equity participation in the life insurance sector. 6. The current Indian monopolies companies are required to bring down their equity holding to 26% within a period of 10 years.
IRA proposals:
1. New player should start their business within 15-18 months.
2. Trafficking of licenses not to be permitted.
3. IRA to seek business plan with 5-year protection for all applicants.
4. A system of direct brokers to be introduced.
5. IRA to vet top management appointments.18
2. IRDA: INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY:-
The Insurance Regulatory and Development Authority, constituted under the IRDA Act, 1999, provide for
the establishment of an authority to protect the interest policyholders, to regulate, promote and ensure orderly
growth of the life insurance industry.
Business Requirement:-
A company will not be issued a license unless the IRDA is satisfied with the sound financial condition, the
general character of management, the volume of business, the capital structure, earning prospects for the insurers
and that the interests of the general public will be served if registration is granted to the insurer.
Foreign insurance companies have been allowed to have a maximum 26% share holding. No life
insurance company can be registered under the Act unless they have a paid up capital of Rs.100 crores. Every life
insurer shall deposit with the reserve bank of India one percent of the total gross premium written in India in any
financial year, not exceeding Rs.10 crores.
This amount would not be susceptible to any assignment or charge nor would it be available for the
discharge of any liabilities other than liabilities arising out of policies issued, so long as any such liabilities remain
undercharged. Investment of Assets:- Every insurer is required to invest, and keep invested, assets equivalent to not less than the net liabilities as follows: a. 25 % in government securities, b. a least 25% of the said sum in government securities or other approved securities and c. the balance in any approved investment rated as “very stron” or more by reputed rating agencies, which include various debt instruments on which dividend on its ordinary shared for the five years immediately preceding or for at least five out of the six or seven years immediately
India and the World Market: Unfortunately, the progress achieved by the life insurance industry in India, it compares unfavorably not just with the developed countries. But also even with the developing world. The global market for the life insurance is estimated to be around $ 1412.3 illions.
Country Insurance Penetration
as a %age of GDP
UK 12.71
JAPAN 8.70
USA 4.48
SOUTH AFRICA 14.04
AUSTRALIA 6.04
SOUTH KOREA 9.89
INDIA 1.77
CHINA 1.12
MALAYSIA 2.13
INDONESIA 0.54
BRAZIL 0.36
INTERNATIONAL SCENARIO
Life insurance not plays an important role in national economy but also in international economy. Marine
cargo insurance provides risk coverage for shippers and the banks, which finance international trades. This role
becomes all the more important in the context of an active government policy to encourage exports. Indian life
insurer operates in more than 30 countries through agencies, branches, associates companies. These operations
earn foreign exchange.
The insurance business is concerned with North America, Western Europe, Japan and Oceania. Together
these region’s accounts for about 91 % of the world annul remium. By region’s North America and western Europe
are growing moderately while oceanic, Latin America, eastern Europe and Africa display growth above lone –term
trends to a global context globalization of life insurance helps companies practices underwriting discipline in one
regions globalization of the insurance industry received a big boost.
Insurance Regulatory and Development Authority (IRDA) Act:
The Insurance Regulatory and Development Authority Act was introduced to end the monopoly of State-
owned companies and to invest in the Insurance Regulatory Authority power to control the insurance sector. These powers inter aria are:
Imposition of prudential norms such as solvency margins, capital adequacy;
Requirements and investment guidelines for insurance companies;
Grant of licenses to new companies, and cancellation, suspension andwithdrawal of licenses given to insurance companies;
Regulation of fund investment by insurance companies;
Maintenance of solvency margins;
Adjudication of disputes between insurers and intermediaries; and
Tariff fixing
Economical Factors Affecting Life Insurance Industry :
Interest rate at bank and interest rate of P.F variation very much affect to life insurance industry, because
people always attract by higher return. Therefore, they do not prefer lower return policy. Unemployment also
affects insurance industry, because the unemployment people will not have earning, so saving also affect to life
insurance sector Life insurance industry will directly affected by Earthquake, Monsoon, and Natural calamity.
Because of these events turns into lots of death, so the life insurance companies have to pay claim against policy.
Infant mortality rate and maternity mortality rate are also affecting to life insurance. Typical Indian want luxurious
product against low income, so that they prefer installment or annuity (EMI), so that they may not have extra
saving to invest in life insurance.
Socio-cultural factors Affecting Life Insurance Industry
The basic social factors that affect the life insurance sector are as under: - Population Life Style Educational level Educational level Societal benefits
Population:
Growth in the population is a major factor pushing up the demand. The Population of India as on It is
also going to exert a special influence on the life insurance market in other ways. Apart from exerting pressure on
demand for goods and services, and through that, ill effects of uncontrolled growth of population also could spur
the growth of demand. For example, overcrowding in public places of entertainment, public support, or too many
vehicles on the road can result in hazards like stampedes and pollution, which require covers and still are not sold
on a large scale today. Thus the positive as well as the negative aspects of population growth are going to spur
demand.
Life style:
The peculiar lifestyle of a country or an age also influences the insurance business. Change therein
produces different demands for life insurance. For e.g. All over the world, family size is shrinking and the fact that
in decades to come, both presents are more frequently likely to work outside the home will mean that there could
be a greater possibility of property loss. Similarly, a larger number of vehicleson the roads for people commuting to
their jobs or business would mean larger incidence of accidents. This will increase the demand for life insurance
products.
Of course, there is also the other possibility that wherever it is possible, some people will try to spend a
part of their time working at home either because they would like to be with their families or because they find it
more convenient. Activities like life insurance and financial services are particularly well suited for such
arrangements.
In recent times, there has been a surge in the high end business of the LIC. For instance, as against 90 policies each
worth more than Rs 10 million in 1999-2000, the number was as high as 900 policies in the next year. Or again, the
number of jeevan shri policies jumped from 88,000 to a total of 2,33,000 policies in the same period.
Level of education:
India is one of the developing countries: the level of education is very low here. The literacy rate is very
poor. More than 50% of the population is still uneducated or more or less not educated. Thus the people are not
able to understand the concept of the life insurance. Among the educated people the quality of the education is
still a big question mark. Thus the awareness is not created and it has become a big challenge for the industry.
Thus one of the factors, which affect the life insurance sector, is low level of education.
Level of earning:
Another factor, which affects the life insurance sector, is the level of earning. In India the rule of 80-20 is
working. The 80% of the total population is having the 20% of the wealth and the 20% of the total population is
having 80% of total wealth. Thus the richer are richer and poorer are poorer. Due to this the life insurance sector is
affected very much.
Societal benefits:
In view of the fact that large sections of India have inadequate life insurance cover, an important social
responsibility of the government relates to spreading it far and wide. In addition, the government attempts to
extent life insurance with certain social obligations in view in both urban and the rural areas through such means
special schemes for the weaker sections, and by tilting of the life insurance companies’ investments in favour of
social developments.
The social changes emerging in the country provide opportunities for insurers to sell financial services
products such as family health care programmed, retirement plans disability insurance, long-term care for senior
citizens and different employee benefit plans.
The population in the age group 15-55 is usually regarded as the insurable population, since this can be
considered as the main “active” age group ( in the sense of working, earning. And supporting others), and beyond
this range life risk may be considered to be not worth insuring.
There is one opinion, which suggests that in our country the age group 15-55 as the base is not totally
suitable. Due to various factors including the unemployment problem, real earning starts from around the age of
25 for salaried persons. For others, particularly small entrepreneurs, traders and businessman, the starting age is a
little higher. Only in the affluent sector of society life insurance can be taken before personal earning starts. Thus,
number wise life insurance below the age of 25 is not so significant (although amount wise it need not be so). On
the other hand, people over the age of 50 rarely apply for fresh life insurance, mainly because in India the normal
retirement age is around 60 years. Also, a high percentage of the population in the lower income group does not
remain “insurable” after the age of 50. thus, in our country the practical age range for insurable population actually
narrows down to 25 to 50.
Technological Factors Affecting Life Insurance Industry:
Internet as an intermediary in the current Indian market customer is not aware about the intrinsic value
of insurance. He thinks of insurance only in the mount of March as a tax saving measure. The security provide by
an insurance cover is rarely thought about. In such a scenario Internet can be an effective medium for educating
the consumers about insurance. It serves as a single window for disseminating product, process and procedural
information to the consumers.
Product development and target marketing through the Internet: with increase in the number of
insurance companies there will be a need for market segmentation and subsequently product designed for each of
them. In such a scenario Internet can be a effective channel for pushing product specific information to a particular
market segment. Consumer feedback about a particular product as well as suggestions for different types or covers
can also be generated through the Internet.
Maintaining the database
The most important facto that is affecting the insurance industry is the marinating the database of the
customers. The insurance industry having a huge list of the customers.
In order to maintain it in manual format it is really the work of stupidity. With the change in time the
computers has taken the work of this things. Thus with the development of the technology it has becoming
possible to maintain such huge database very easily. A person can switch over to the computer and get the details
of the customer very easily. Thus maintaining the database has really become easy due to the development in
technology.
E-business insurance in India: -
The Internet has played a vital role in transforming the business of the 21st century. Computers are now
being used extensively for creating a storing data, information with the help of complex and sophisticated
technological tools in every kind of business. This change having been widely accepted, the advantages are
numerous such as fast processing improved. Efficiency, cost reduction among several other benefits. However,
with every positive change, there is an evil attached and technology is no exception. In technical is an evil attached
and technology is no exception. In technical terms, increased sophistications of technology brings with it, an
increased factor of risk involved. The risk can be of various attributes, for example, the risk of data being lost due
to a virus attack, the theft of important and confidential information and so on, which ultimately results in losses
for the business entity. With this change in the business process, insurers have to devise new methods for
assessing, underwriting and servicing claims for the so-called e-business insurance.
Insurers face challenges to ascertain risks, in order to quantify them because such risks don’t have any
past data, which makes it all the more difficult for actuaries. Moreover, what financial impact a particular risk can
have is very difficult to be determined. For example, if some hackers obtain credit card information of few
customers, it’s a loss for banks, their credibility, customers and also their brand. Will an insurance policy cover all
of this is million dollars question hence; the difficulty is to design a cover first of all, which really answers the needs
of customers. But even after designing and pricing such products with difficulty, the challenge to underwrite and
handle claims for such policies remains existent
SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats
SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment.
Once key strategic issues have been identified, they feed into business objectives, particularly marketing objectives. SWOT analysis can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis. It is also a very popular tool with business and marketing students because it is quick and easy to learn.
The Key Distinction - Internal and External Issues
Strengths and weaknesses are Internal factors. For example, a strength could be your specialist marketing expertise. A weakness could be the lack of a new product.
Opportunities and threats are external factors. For example, an opportunity could be a developing distribution channel such as the Internet, or changing consumer lifestyles that potentially increase demand for a company's products. A threat could be a new competitor in an important existing market or a technological change that makes existing products potentially obsolete.
it is worth pointing out that SWOT analysis can be very subjective - two people rarely come-up with the same version of a SWOT analysis even when given the same information about the same business and its environment. Accordingly, SWOT analysis is best used as a guide and not a prescription. Adding and weighting criteria to each factor increases the validity of the analysis.
Areas to Consider
Some of the key areas to consider when identifying and evaluating Strengths, Weaknesses, Opportunities and Threats are listed in the example SWOT analysis below:
Strengths:
1. Actuarial Skills of the experienced staff and the agents.2. Knowledge of local language.3. Established popular Brand Name and had become a synonym for Life Insurance.
The leading brands are 4.Skilled Underwriters at branch level.
5. Assignment of policy at branch level.
6.Grant of loan against the policy at branch level.
7. Minimum paper work/formalities.
8.Pan India presence with a network of 2000+ branches+992 satellite offices.
9.Loyalty embedded in the name and good rapport of the agents with the policy holders.
10.Large Product Portfolio for diversified needs.
11.Economies of scale at all levels.
12.Experienced management with Govt.support.
13. Highest no. of claim settlements.
14. Lower fixed costs.
15.Customer Retention.
16. Wide Publicity thru Television , print media and hoardings and usage of creative slogans.
Weaknesses:
1.Low Communication and Marketing Skills of employees.
2.Poor quality of service and lethargic attitude of staff.
3.Delay in settlement of claims & slow decision making process.
4.Internal Problems between Top Management and Line Staff.
5. Exclusive privilege to market life insurance knocked down by IRDA act.
6.Reduction of Govt. Ownership
7.Large Service Gaps.
8. Mediocre Top Bosses.
9.Unable to tap Gen-Y customers.
10. Weak Distribution Channels.
Opportunities:
1. Entry of new players with business models and products.2. Increased use of technology to ensure to enhance customer satisfaction.3. Large untapped market.4. Pension Market.5. Group Insurance Market Like-BPO, and Employee Organisations etc.6. Health Insurance.7. Large Real Estate Portfolio.8. Changes in population age structures.9. Large customer data base.
Threats:
1.Increased adoption of IT by private players.
2.New Insurers targeting corporate houses and HNIs to gain quick market share and recognition.
3.Poor delegation, Lack of Knowledgeable and effective operational control.
4.Delayed decision making.
5. Red-tapism-excessive paper work, rigid conformity to formal rules.
6.Aggressive marketing by new entrants.
7.Online and telemarketing by new entrants-New Distribution Channels.
8.Changing Customer Tastes.
Competitor Analysis:
Competitor Analysis is an important part of the strategic planning process. This revision note outlines the main role of, and steps in, competitor analysis
Why bother to analyse competitors?
Some businesses think it is best to get on with their own plans and ignore the competition. Others become obsessed with tracking the actions of competitors (often using underhand or illegal methods). Many businesses are happy simply to track the competition, copying their moves and reacting to changes.
Competitor analysis has several important roles in strategic planning:
• To help management understand their competitive advantages/disadvantages relative to competitors
• To generate understanding of competitors’ past, present (and most importantly) future strategies
• To provide an informed basis to develop strategies to achieve competitive advantage in the future
• To help forecast the returns that may be made from future investments (e.g. how will competitors respond to a new product or pricing strategy?
Questions to ask
What questions should be asked when undertaking competitor analysis? The following is a useful list to bear in mind:
• Who are our competitors? (see the section on identifying competitors further below)
• What threats do they pose?
• What is the profile of our competitors?
• What are the objectives of our competitors?
• What strategies are our competitors pursuing and how successful are these strategies?
• What are the strengths and weaknesses of our competitors?
• How are our competitors likely to respond to any changes to the way we do business?
Sources of information for competitor analysis
Davidson (1997) describes how the sources of competitor information can be neatly grouped into three categories:
• Recorded data: this is easily available in published form either internally or externally. Good examples include competitor annual reports and product brochures;
• Observable data: this has to be actively sought and often assembled from several sources. A good example is competitor pricing;
• Opportunistic data: to get hold of this kind of data requires a lot of planning and organisation. Much of it is “anecdotal”, coming from discussions with suppliers, customers and, perhaps, previous management of competitors.
The table below lists possible sources of competitor data using Davidson’s categorisation:
Recorded Data Observable Data Opportunistic DataAnnual report & accounts Pricing / price lists Meetings with suppliersPress releases Advertising campaigns Trade showsNewspaper articles Promotions Sales force meetingsAnalysts reports Tenders Seminars / conferencesRegulatory reports Patent applications Recruiting ex-employeesGovernment reports Discussion with shared distributorsPresentations / speeches Social contacts with competitorsIn his excellent book [Even More Offensive Marketing], Davidson likens the process of gathering competitive data to a jigsaw puzzle. Each individual piece of data does not have much value. The important skill is to collect as many of the pieces as possible and to assemble them into an overall picture of the competitor. This enables you to identify any missing pieces and to take the necessary steps to collect them.
What businesses need to know about their competitors
The tables below lists the kinds of competitor information that would help businesses complete some good quality competitor analysis.
You can probably think of many more pieces of information about a competitor that would be useful. However, an important challenge in competitor analysis is working out how to obtain competitor information that is reliable, up-to-date and available legally(!).
What businesses probably already know their competitors
Overall sales and profitsSales and profits by marketSales by main brandCost structureMarket shares (revenues and volumes)Organisation structureDistribution systemIdentity / profile of senior managementAdvertising strategy and spendingCustomer / consumer profile & attitudesCustomer retention levels
What businesses would really like to know about competitors
Sales and profits by productRelative costsCustomer satisfaction and service levelsCustomer retention levelsDistribution costsNew product strategiesSize and quality of customer databasesAdvertising effectivenessFuture investment strategyContractual terms with key suppliersTerms of strategic partnerships
Gap Analysis:
The available untapped market. Only
Public should be more educated for life insurance for investment purpose-eg.ULIP plans, pension plans etc.
Unable to attract Gen-Y customers.
More opportunity for delivery thru alternate channels.
Penetration in to rural areas. More tie-ups with financial giants.
Non-availability of products for low income group.
Poor post sales service, no follow-up, and no pro-active approach.
More Innovative products/value added products to be created. New tech, new age products.
Unable to penetrate to available virgin markets
PRODUCTS AND PRODUCT MIX
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 b. Whole Life Policy c. Term Life Policy d. Money-back Policy e. Joint Life Policy f. Group Insurance Policy
Some of the well known Insurance Policy India are: Social Security Group Scheme – a scheme covering the age group of 18-60 years and an insurance of Rs.5000 for natural death and of Rs.25000 on due to accidental death. Shiksha Sahyog Yojana – a scheme providing an educational scholarship of Rs.300
Latent Market Potential
User/Usage gap
Image Gap
Promotional Gap
Distribution Gap
Price Gap
Product Gap & Service Gap
Competitor Gap
Product
per quarter per child is given for a period of four years. Jan Arogya Bima Policy – a scheme for the adults upto the age of 45 years is Rs. 70 and for children it is Rs. 50. The limit coverage is fixed at Rs.5000 per annum. Mediclaim Insurance Policy – a scheme covering the age group from 5-80 years with a tax benefit of up to Rs 10,000. Jana Shree Bima Yojana – this is a coverage of Rs 2,000 on natural death and Rs 50,000 for accidental death. The premium amount is fixed at Rs. 200 for single member. Videsh Yatra Mitra Policy – a scheme covering medical expenses during the period of oversBhagya Shree Child Welfare Bima Yojana – a scheme covering one girl child in a
family upto the age of 18 whose parents age does not exceed 60 years, with a premium of Rs.15 per annum. Raj Rajeshwari Mahila Kalyan Yojana – a scheme providing protection to woman in the age group of 10 to 75 years with an insurance of Rs. 25,000 and premium Rs.15 per annum. Ashray Bima Yojana – a scheme covering workers in case of loss of jobs.
Personal Accident Insurance Scheme for Kissan Credit Card – a scheme covering all the KCC holders up to an age of
70 years. Insurance coverage includes 50,000 for accidental death and 25,000 for partial disability.
The functions of Insurance can be bifurcated into two parts:
1. Primary Functions
2. Secondary Functions
3. Other Functions
a n s o f f ' s p r o d u c t / m a r k e t m a t r i x
Introduction
The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy.
Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.
The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. These are described below:
Market penetration
Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.
Market penetration seeks to achieve four main objectives:
• Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling
• Secure dominance of growth markets
• Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
• Increase usage by existing customers – for example by introducing loyalty schemesA market penetration marketing strategy is very much about “business as usual”. The business is focusing on
markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.
Market development
Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.
The product portfolio of the major players in the industry are given below:
There are many possible ways of approaching this strategy, including:
• New geographical markets; for example exporting the product to a new country
• New product dimensions or packaging: for example
• New distribution channels
• Different pricing policies to attract different customers or create new market segments
Product development
Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.
Diversification
Diversification is the name given to the growth strategy where a business markets new products in new markets.
This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.
For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.
The following diagram will illustrate the need of the hour
,
Does Marketing create value for customers.
1. Cinema theatres, beauty parlours, children’s parks, Child care centres, women clubs, gyanecologists, lady corners, maternity hospitals, matrimony sites, etc.
2. The product should be a pace player.3. The product should also a KISS product.
s t r a t e g i c p l a n n i n g - t h e l i n k w i t h m a r k e t i n g
Introduction
Businesses that succeed do so by creating and keeping customers. They do this by providing better value for the customer than the competition.
Marketing management constantly have to assess which customers they are trying to reach and how they can design products and services that provide better value (“competitive advantage”).
The main problem with this process is that the “environment” in which businesses operate is constantly changing. So a business must adapt to reflect changes in the environment and make decisions about how to change the marketing mix in order to succeed. This process of adapting and decision-making is known as marketing planning.
Where does marketing planning fit in with the overall strategic planning of a business?
Strategic planning is concerned about the overall direction of the business. It is concerned with marketing, of course. But it also involves decision-making about production and operations, finance, human resource management and other business issues.
The objective of a strategic plan is to set the direction of a business and create its shape so that the products and services it provides meet the overall business objectives.
Marketing has a key role to play in strategic planning, because it is the job of marketing management to understand and manage the links between the business and the “environment”.
Sometimes this is quite a straightforward task. For example, in many small businesses there is only one geographical market and a limited number of products (perhaps only one product!).
However, consider the challenge faced by marketing management in a multinational business, with hundreds of business units located around the globe, producing a wide range of products. How can such management keep control of marketing decision-making in such a complex situation? This calls for well-organised marketing planning.
What are the key issues that should be addressed in strategic and marketing planning?
The following questions lie at the heart of any marketing and strategic planning process:
• Where are we now?• How did we get there?• Where are we heading?• Where would we like to be?• How do we get there?• Are we on course?
Why is marketing planning essential?
Businesses operate in hostile and increasingly complex environment. The ability of a business to achieve profitable sales is impacted by dozens of environmental factors, many of which are inter-connected. It makes sense to try to bring some order to this chaos by understanding the commercial environment and bringing some strategic sense to the process of marketing products and services.
A marketing plan is useful to many people in a business. It can help to:
• Identify sources of competitive advantage• Gain commitment to a strategy• Get resources needed to invest in and build the business• Inform stakeholders in the business• Set objectives and strategies• Measure performance
Marketing the other products with the statement.
• Wide Network with marketing field staff.• E-marketing and digital organisation.• To become transparent.• To become more customized( products specific for ladies with concessions, groups, new employed
people, more business camps)• Establishing new branches in economic clusters-organic growth. • Identifying the potential customers and clusters for expansion.• Identifying the unmet needs of the customers.• More segmentation and positioning by using customized products.• Identify the loyal and long standing customers and make them feel important and feel proud.• Build new loyal customers from new investment zones.• Catch them young strategy.(Gen-Y customers)• Maintain, retain, capture and nurture.• Ask suggestions from policy holders.• Have a tunnel view in service and a bird’s eye view in designing the product.• Help in time and serve in time.• The product and service should have distinctive competence.• Innovate new products & new services if the Product Life Cycle is short.• Increase the competency level of all the staff through continuous training.• Always take feed back at all levels, this will save time.• Better communication with internal and external customers.• Make use of Cinema Halls for local advertisement. Prepare small documentaries.• Since LIC is already settled well , a conglomerate diversification such as ULIP products, Basic Banking
services, Mutual Funds etc, Wealth Management, Housing Finance, LIC cards.• Tie up with major banks like Corporation Bank , with LIC holding 27% stake .
• The new entity, LIC Cards Services Ltd, will leverage LIC and Corporation Bank’s strong brand and
extensive branch, ATM, and sales distribution network to make the credit cards venture rolling without
any hassles.
• Conducting awareness camps at Educational Institutional institutions for building the brand, in the heart
