PRIVATISATION OF INSURANCEPresented To: Dr. Amandeep Kaur

Presented By: Kanika Gupta

(4326) Shevani Gupta (4343)

Rupam (4357) Shallu (4359)

Malika (4381)

CONTENTInsurance IntroductionPrivatisation in Insurance�Types of InsuranceGrowing up of Insurance Sector�Major driving factor�Top players of Insurance sectorInsurance and SalaryChallenges and Opportunity�Causes����

Introduction to InsuranceWhat is Insurance?

Definitions:In law and economics, insurance is a form ofrisk management primarily used to hedgeagainst the risk of a contingent, uncertainloss. Insurance is defined as the equitabletransfer of the risk of a loss, from one entityto another, in exchange for payment.Insurance is a hedging instrument used as aprecautionary measure against futurecontingent losses.

Insurance- Introduction Insurance= Protection

against Risk • Insurance is a co-operative device of

distributing losses, falling on an individual or family over a large number of persons, each bearing a nominal expenditure & feeling secured against heavy loss.

• Insurance business has emerged as one of the prominent financial services during recent times, particularly in developing countries where it could not grow before globalization. But it is very difficult to trace exactly when insurance originated.

Contd…Insurance has always been a politically sensitive subjectin India.Within less than 10 years of independence, the Indiangovernment nationalized private insurance companiesin 1956 to bring this vital sector under governmentcontrol to raise much needed development funds.

Since then, state-owned insurance companies have

grown into monoliths, lumbering and often inefficient but the only alternative. They have been criticized for their huge bureaucracies, but still have millions of policy holders as there is no alternative.

�

Privatization in insuranceThe Narasimha Rao government (1991-96) which unleashed liberal

changesin India's rigid economic structure could not handle this political hot potato.Ironically, it is the coalition government in power today which has declaredits intention of opening up insurance to the private sector. Ironical becausethis government is at the mercy of support from the left groups which havebeen the most vociferous opponents of any such move.

All segments of the financial sector had been opened to private playerswithbetter product, services & social objective

International players are eyeing the vastpotential of the Indian market and arealready making plans to come in.

Types of Insurance Privatization has brought in lot of surprises for insurance sector. In India, insurance sector is at the booming stage as only 40% of the

population is insured. Private organizations are striving hard and hard to develop the sector. Government is also supporting the insurance sector to inrease the Gross �Domestic Product ratio from the sector which is now about 1.4% only.

Accidental insurance

Diabetes insurance

Dental insurance

Family Health

insurance

Other insurance

Medical insurance

Auto insurance

Mediclaims

Grown up insurance sector The insurance industry has grown by 83 per cent since the opening up of the sector. -C S Rao, chairman (IRDA)

Insurance premium income has risen to Rs 82,415 crore in 2003-04, against45,000 crore in 2000-01.premium income in the life insurance sector to rise further by 15-16 �per centand non-life insurance premium by 14 per cent in 2005-06.The health insurance sector is expected to grow by 10-15 per cent.�foreign direct investment is increased to 49 per cent from the current �26 percent,the industry can expect greater entry of players

Cont…. Indian insurance sector is likely to register

unprecedented growth of 200% and attain a size of Rs. 2000 billion by

2009-10, in which a private sector insurance business will achieve a growth rate of 140% as a result of aggressive marketingtechnique being adopted by them against 35-40% growth rate of state owned insurance companies.

On account of intense marketing strategies adopted by �private insurance players, the market share of state owned insurance companies like GIC, LIC and others have come down to 70% in last 4-5 years from over 97%.

Cont…. The private insurance players despite the sector is still regulated has been offering rate of return (RoR) to its policy holders which is estimated at about 35% as against 20% of domestic insurance companies. � LIC and GIC have limited number of policies to offer to their subscribers while in case of private insurance companies, their

policy numbers are many more and the premium amount aswell as the maturity period is much competitive as againstthose of government insurance companies.

� The Chamber has projected that in rural markets, the share of private insurance players would increase substantially as these have been able to generate a faith among their rural

consumers.

Growth of top 10 private insurancecompanies of India: ICICI Prudential Life Insurance Co. Ltd is the biggest

private life insurance company in India. It experienced growth of 58%.

Bajaj Allianz Life Insurance Co. Ltd has reported a �growth of 52% and its market share went up to 6.98% in 2007-08 form 5.66% in 2006-07.

SBI Life Insurance Co Ltd in terms of new number of �policies sold, the company ranked 6th in 2007-08. its growth is 87% over last year.

Cont…. Reliance Life Insurance Co. Ltd Total collected was Rs

2,792.76 crore and its market share went up to 2.96% from 1.23% a year back.

HDFC Standard Life Insurance Co Ltd with an income of Rs �2,680 crore in FY2007-08, registering a year-on-year growth of 64%.

Birla Sun Life Insurance Co Ltd market share of the company� increased from 1.22% to 2.11% in 2007-08. The company

moved to the 7th position in 2007-08.

Cont…. Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-�08, the company reported growth of 80%, moving from the 11th

position to 9th. It captured a market share of 1.19% in 2007-08.

Aviva Life Insurance Company India Ltd ranking dropped to 10th� in 2007-08 from 9th last year. It has presence in more than 3,000

locations across India via 221 branches and close to 40banc assurance partnerships.

Major Driving FactorGrowing Demand from Semi-Urban Population.Rising demand for retirement provision in the ageing�population.The opening of the pension sector and the establishment�of the new pension regulator.Rising per capita incomes among the strong middle class,�and spreading affluence.Public private partnerships infrastructure development.�Growing consumer class and increase in spending &�saving capacity.

Top Players of Insurance Sector

Following are the top players of the insurance sector offering most competitive packages to their employees:

Life Insurance Corporation�New York Life�PrudentialMet LifeBirla InsuranceKotak MahindraICICIHDFC

Insurance and Salary•Due to privatization in insurance sector growthoptions have been changed.•From basic salary withsmall incentives, compensation systems havebeen grown to increasedsalaries, incentives, perks,allowances, accommodations, etc.•The average salary increase for the year 2006 was 17.1%.

Insurance due to privatization

Process of privatization will lead to `green field' area of activity.

The banks and capital �markets were integrated with insurance, which, in turn, was vital to sustain and grow the economy

Trade and finance had no �geographical limits and, hence, the need to align with the international scenario in this aspect.

Risk coverage & security�

Current Scenario

Entry of privatizationCompetition�New product & �

technologyDistribution work�

Customer services�CRM policy increases �

sales forceModern marketing �

approach

Challenges & OpportunitiesMass MarketingJob Opportunities�Inflow of Funds�Reinsurance�Marketing Strategies�Bank assurance�Information technology�

CausesIneffective distribution

and marketing strategies adopted by LIC

Limited advertising �initiatives