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Insurance Sector
HD
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TYPES OF INSURANCE
Life
General
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BRIEF JOURNEY OF INSURANCE
SECTOR IN INDIA
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1818 - Establishment of the Oriental Life
Insurance Company in Calcutta.1829 - Madras Equitable begun transacting life
insurance business in the Madras Presidency.
1870 saw the enactment of the British Insurance
Act.The Bombay Mutual (1871), Oriental (1874) and
Empire of India (1897) were started in theBombay Residency.
This era, however, was dominated by foreigninsurance offices which did good business in India,namely Albert Life Assurance, Royal Insurance,Liverpool and London Globe Insurance.
LIFE INSURANCE IN INDIA
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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.
With a view to protecting the interest of the
Insurance public, the earlier legislation was
consolidated and amended by the InsuranceAct, 1938 with comprehensive provisions for
effective control over the activities of insurers.
LIFE INSURANCE IN INDIA
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An Ordinance was issued on 19th January,
1956 nationalizing the Life Insurance sector
and Life Insurance Corporation came into
existence in the same year.
The LIC absorbed 154 Indian, 16 non-Indianinsurers as also 75 provident societies 245
Indian and foreign insurers in all.
The LIC had monopoly till the late 90s whenthe Insurance sector was reopened to the
private sector.
LIFE INSURANCE IN INDIA
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General Insurance came to India as a legacy of
British occupation. General Insurance in India hasits roots in the establishment of Triton InsuranceCompany Ltd., in the year 1850 in Calcutta by theBritish.
In 1907, the Indian Mercantile Insurance Ltd, wasset up. This was the first company to transact allclasses of general insurance business.
1957 saw the formation of the General InsuranceCouncil, a wing of the Insurance Association ofIndia. The General Insurance Council framed acode of conduct for ensuring fair conduct and
sound business practices.
GENERAL INSURANCE IN INDIA
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General insurance business was nationalized
with effect from 1st January, 1973. 107
insurers were amalgamated and grouped into
four companies, namely National Insurance
Company Ltd., the New India AssuranceCompany Ltd., the Oriental Insurance
Company Ltd and the United India Insurance
Company Ltd.The General Insurance Corporation of India
was incorporated as a company in 1971 and it
commenced business on January 1st
1973.
GENERAL INSURANCE IN INDIA
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Following the recommendations of the Malhotra
Committee report, in 1999, the Insurance Regulatory
and Development Authority (IRDA) was constituted.
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 consumerchoice and lower premiums, while ensuring the
financial security of the insurance market.
The IRDA opened up the market in August 2000 withthe invitation for application for registrations.
Foreign companies were allowed ownership of up to
26%.
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In December, 2000, the subsidiaries of the
General Insurance Corporation of India were
restructured as independent companies and atthe same time GIC was converted into a national
re-insurer. Parliament passed a bill de-linking the
four subsidiaries from GIC in July, 2002.
Today there are 27 general insurance
companies including the ECGC and Agriculture
Insurance Corporation of India and 24 life
insurance companies operating in the country.
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PRESENT LANDSCAPE OF INSURANCE
IN INDIA
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Insurance penetration and insurance density are
the two widely used parameters for the
assessment of the potential and performance of
the insurance industry.Insurance penetration is defined as the ratio of
premium underwritten to the GDP.
Insurance density is defined as the ratio ofpremium underwritten to total population.
Indias insurance penetration & density
indicate tremendous potential for growth
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Life insurance penetration in India had
consistently gone up from 2.15% in 2001 to 4.6%
in 2009. However, decline has been observed in
last few years and the Life insurance penetration
currently stands at 3.17%.
General Insurance penetration has shown minor
growth from 0.55% in 2001 to 0.78% at present.
Indias insurance penetration & density
indicate tremendous potential for growth
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Life insurance density in India had consistently
gone up from $ 9.1 in 2001 to $ 42.7 at present.
The peak was $ 55.7 in 2010
General Insurance density has shown growth from
$ 2.4 in 2001 to $ 10.5 at present.
Indias insurance penetration & density
indicate tremendous potential for growth
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Indias insurance penetration & density
indicate tremendous potential for growth
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Insurance industry contributes to 4% of IndiasGDP.
Insurance accounts for 24.2% of the totalhousehold financial savings.
As on 31stMarch 2012 Insurance industry has 2.5
lac direct employees and 23.5 lac individualinsurance advisors.
Insurance Sector is significant contributor
to the Indian economy.
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Insurance is a tightly regulated industry with
policy changes having a visible impact on the
business in short as well as long run.For Example, change in regulations governing the
sales of ULIPs negatively impacted the Life
insurance business. Life insurance premiumsregistered a growth of -1.6% in FY 12 as compared
to 9.9% in FY 11.
Regulatory changes play a critical role in
the Insurance business.
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EMERGING TRENDS & CHALLENGES
IN THE INSURANCE SECTOR.
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Changing Socio-Economic trends and diverse
consumer needs necessitate product
customization and innovation
More number of working women, payouts
coinciding with requirements in childrens lifeevents.
Examples - ULIPs, Hyundais job loss protection in
US and IndiasWBCIS.
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Transition from traditional model to a multi
channel distribution model.
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Continuous growth in bancassurance.
Despite late start, bancassurance accounts for 25
to 30 % of premiums collected by privateinsurance companies.
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E Commerce is acting as a great facilitator but yet
to gain full fledged momentum.
10.2% of Indiaspopulation has access to internet.
Internet as a medium is being effectively used to
create awareness and sell simple insuranceproducts like Motor and Health insurance.
However, complex insurance products which need
personalized advice have not shown any salesthrough this channel.
Use of social media is in nascent stage.
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Micro-Insurance: An Essential tool to achieve
financial inclusion.
Micro insurance is designed for low income
people and is characterized by low premiums and
margins.The product is suitable in for people in rural areas.
Urban poor can also benefit.
Currently the product is distributed bymicrofinance companies. Insurers are exploring
options for distribution with NGOs and small and
big retailers in rural areas.
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Health and Motor insurance will lead non life
segment; Property insurance has huge potential.
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Private insurance companies to play a major role
in future.
If FDI in insurance increases to 49% the sector is
expected to many new foreign entrants. (Bill is
pending in Rajya Sabha).Regulatory reforms, foreign collaborations, quality
services and better growth strategies will see the
share of private sector companies continue toincrease.
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Life insurance industry is at the threshold of new
growth phase.
High inflationary environment erodes the intrinsic
value of insurance policy thereby reducing
demand.Steps taken by GOI to moderate inflation will have
a positive impact on the growth in insurance
sector.
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Regulatory changes will ensure risk management
and improve transparency and supervision.
IRDA has given new guideline for insures to
withdraw old products and introduce new
products from October 2013.New steps have been taken by IRDA to improve
solvency, increase transparency, increase
accountability and protect consumer interests inthe long run.
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Embracing new technology will enable new growth.
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CONCLUSION.
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Growth in the insurance sector will be driven by factors
such as Customer demographics, Macro environment,
Regulatory changes and Adoption of new technology.
Product innovation and customization will be one of the
key strategies.
Alternative distribution channels will emerge.
Micro insurance will help in increasing penetration. Prudent investment and stronger risk management will
become more prevalent.
Favorable changes in macro economic environment areneeded for new phase of growth.
Regulatory changes will improve solvency and corporate
governance.
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Many Thanks.