chapter iii life insurance sector in india: an...
TRANSCRIPT
Chapter III
Life Insurance Sector in India: An Overview
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CHAPTER – III LIFE INSURANCE SECTOR IN INDIA: AN OVERVIEW
3.1 Introduction: Insurance in its pure form is a social good and in a number of cases can
be classified as a public good, i.e. it generates desirable externalities. Insurance
companies, mutuals and cooperatives enable individuals and firms to protect
themselves against infrequent but extreme losses at a cost which is small
compared to the feared loss. They do this through the workings of the law of
large numbers and the central limit theorem which ensure that a sufficiently large
number of reasonably homogenous risks will produce well behaved and highly
predictable aggregate results following a roughly Gaussian loss distribution.
Insurance by its nature is an intangible good, involving payment in
advance for an unknowable quality of delivery in the future. Thus trust is a critical
element, and public good classes such as health, disability and work place injury
or illness have to date often been delivered through state entities. However most
classes of insurance are usually delivered through private markets and insurance
regulation tends to reflect solvency concerns and information asymmetry
between suppliers and policyholders.
3.2 Structure of Indian Insurance Industry: From Figure 3.1, one could understand the structure of Indian Insurance
Industry. Indian insurance industry is governed and monitored by the apex
regulatory body Insurance Regulatory and Development Authority (IRDA). The
insurance institutions in India are basically classified in to i) life insurance, ii)
general insurance, iii) reinsurance, iv) specialized insurance institutions and v)
health insurance. The life insurance sector has one public sector company (LIC
of India) and twenty three private sector companies as shown in Table 3.1. The
Table also depicts that the general insurance sector has four public sector
companies and fifteen private sector companies. General Insurance Corporation
of India (GIC of India) is the only reinsurer in India.
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Table 3.1: List of Insurers – Life & General
Life Insurance General Insurance
Public Sector 1. LIC of India
Public Sector 1. National Insurance
2. New India Assurance
3. Oriental Insurance
4. United India Insurance
Private Sector 1. Aegon Religare
2. AVIVA Life
3. Bajaj Allianz Life
4. Bharti AXA Life
5. Birla Sun Life
6. Canara HSBC OBC
7. DLF Pramerica
8. Edelweiss Tokio Life
9. Future Generali India
10. HDFC Standard Life
11. ICICI-Prudential Life
12. IDBI Federal Life
13. IndiaFirst Life
14. ING Vysya Life
15. Kotak Mahindra Old Mutual
16. Max New York Life
17. Metlife India
18. Reliance Life
19. Sahara Life
20. SBI Life
21. Shriram Life
22. Star Union Dai-ichi
23. TATA-AIG Life
Private Sector 1. Bajaj Allianz General
2. Bharti AXA General
3. Cholamandalam MS
4. Future Generali India
5. HDFC ERGO
6. ICICI Lombard
7. IFFCO-TOKIO
8. L & T General
9. Raheja QBE
10. Reliance General
11. Royal Sundaram
12. SBI General
13. Shriram General
14. TATA AIG General
15. Universal Sompo
Source: IRDA Annual Reports
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Figure 3.1 also reveal that there two specialized insurance institutions,
namely Agriculture Insurance Company (AIC) for providing crop insurance
schemes and Export Credit Guarantee Corporation of India (ECGC) for providing
export guarantees and insurance to exporters. Besides, there are also stand-
alone health insurance companies, namely, Star Health, Apollo Munich and Max
Bupa operating in India.
3.3 Insurance Penetration and Density: The potential and performance of the insurance sector is universally
assessed in the context of two parameters, viz., Insurance Penetration and
Insurance Density. Insurance penetration is defined as the ratio of premium
underwritten in a given year to the gross domestic product (GDP). Insurance
density is defined as the ratio of premium underwritten in a given year to the total
population (measured in US$ for convenience of comparison).
Table 3.2: Insurance Penetration & Density in India during 2001-2010
Source: IRDA Annual Report, 2011.
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Table 3.2 depicts the insurance penetration and density scenario in India
between 2001 and 2010. The Table also gives the penetration and density for life
and non-life industry separately. From the Table, one could infer that the overall
insurance density has increased over five times during 2001 – 2010. In 2001,
overall insurance density was just USD 11.5, whereas it reached USD 64.4 in
2010. In 2001, the penetration percentage was just 2.71%, which became 5.10%
in 2009. Thus, the penetration has reduced during the year 2010. The Table also
exhibits that the life insurance density and penetration are greater than the non-
life insurance penetration and density. For instance, the life insurance density
was USD 9.1 in 2001 and the non-life insurance density was just USD 2.4. Life
insurance density has increased by six times whereas the non-life insurance
density increased over 3 times during 2001 – 2010. Life insurance penetration
has almost doubled during 2001 – 2010 from 2.15% to 4.40%. However, the
general insurance penetration has shown a meager improvement from 0.56% in
2001 to 0.71 in 2010.
Figure 3.2 Insurance Density in India during 2001 - 2010
Source: IRDA Annual Report, 2011.
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Figure 3.2 depicts the insurance density in India during 2001 – 2010. From
the figure one could understand that the growth rate of insurance density was
nominal during 2001 – 2005, and it is only during 2006 – 2010, the industry could
achieve a greater insurance density. The Figure also shows that the life
insurance density is far above the non-life insurance density.
Figure 3.3 exhibits the insurance penetration in India during 2001 – 2010,
both in life and non-life industry. From the Figure one could see that the non-life
insurance penetration has shown a flat growth during 2001 – 2010. However, the
life insurance penetration is showing a positive growth during the same period,
with certain ups and downs. Especially during 2005 – 2006, the life insurance
penetration has witnessed a steep increase; however during 2009 – 2010 it has
shown a negative trend.
Figure 3.3: Insurance Penetration in India during 2001 - 2010
Source: IRDA Annual Report, 2011.
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3.4 Life Insurance: A Prelude Life Insurance is the key to good financial planning. On one hand, it
safeguards the money of the insured and on the other, ensures its growth, thus
providing them with complete financial well being. Life Insurance can be termed
as an agreement between the policy owner and the insurer, where the insurer for
a consideration agrees to pay a sum of money upon the occurrence of the
insured individual's or individuals' death or other event, such as terminal illness,
critical illness or maturity of the policy. Life insurance plans, unlike mutual funds,
are beneficial when you look at them as a long term avenue of investment which
also offers protection through life cover. Life insurance policies are broadly
categorized into two types; Traditional Plans and Unit Linked Insurance Plans
(ULIPs).
Traditional policies offer in-built guarantees and define maturity benefits
through variety of products such as guaranteed maturity value. The investment
risk in traditional life insurance policies is borne by life insurance companies.
Additionally, the investment decisions are regulated to a large extent by
Insurance Regulatory and Development Authority (IRDA) rules and regulations of
IRDA ensuring stable returns with minimal risk. Investment income is distributed
amongst the policy holders through annual bonus. These policies are ideal for
policy holders who are not market savvy and do not wish to take investment risks.
ULIPs, on the other hand provide a combination of risk cover and investment.
3.5 Advantages of Life Insurance: Life Insurance provides the dual benefits of savings and security. The
following benefits explain why this investment tool should be an integral part of
financial plans;
Risk Cover: Life today is full of uncertainties; in this scenario life
insurance ensures that one’s loved ones continue to enjoy a good quality of life
against any unforeseen event.
Planning for life stage needs: Life insurance not only provides financial
support in the event of untimely death but also acts as a long term investment.
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One can meet his/her goals, be its children's education, their marriage, building a
dream home or planning a relaxed retired life, according to one’s life stage and
risk appetite. Traditional life insurance policies i.e. traditional endowment plans,
offer in-built guarantees and defined maturity benefits through variety of product
options such as Money Back, Guaranteed Cash Values, Guaranteed Maturity
Values.
Protection against rising health expenses: Life Insurers through riders
or stand alone health insurance plans offer the benefits of protection against
critical diseases and hospitalization expenses. This benefit has assumed critical
importance given the increasing incidence of lifestyle diseases and escalating
medical costs.
Builds the habit of thrift: Life Insurance is a long-term contract where a
policyholder, have to pay a fixed amount at a defined periodicity. This builds the
habit of long-term savings. Regular savings over a long period ensures that a
decent corpus is built to meet financial needs at various life stages.
Safe and profitable long-term investment: Life Insurance is a highly
regulated sector. IRDA, the regulatory body, through various rules and
regulations ensures that the safety of the policyholder's money is the primary
responsibility of all stakeholders. Life Insurance being a long-term savings
instrument, also ensures that the life insurers focus on returns over a long-term
and do not take risky investment decisions for short term gains.
Assured income through annuities: Life Insurance is one of the best
instruments for retirement planning. The money saved during the earning life
span is utilized to provide a steady source of income during the retired phase of
life.
Protection plus savings over a long term: Since traditional policies are
viewed both by the distributors as well as the customers as a long term
commitment; these policies help the policyholders meet the dual need of
protection and long term wealth creation efficiently.
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Growth through dividends: Traditional policies offer an opportunity to
participate in the economic growth without taking the investment risk. The
investment income is distributed among the policyholders through annual
announcement of dividends/bonus.
Facility of loans without affecting the policy benefits: Policyholders
have the option of taking loan against the policy. This helps to meet unplanned
life stage needs without adversely affecting the benefits of the policy they have
bought.
Tax Benefits: Insurance plans provide attractive tax-benefits for both at
the time of entry and exit under most of the plans.
Mortgage Redemption: Insurance acts as an effective tool to cover
mortgages and loans taken by the policyholders so that, in case of any
unforeseen event, the burden of repayment does not fall on the bereaved family.
3.6 Major Type of Insurance Policies in India: The following are the major classification of insurance policies in India;
Term Insurance: Term Insurance helps the customers in safeguarding
their families from financial worries that arise due to unfortunate circumstances.
Term plans are pure risk cover plans with or without maturity benefits. These
pure risk plans cover one’s life at a nominal cost. Term plans also helps to avail
the benefit to cover policyholder’s outstanding debts like mortgage, home loan
etc. In case of something happens to the policyholder, the financial burden is
borne by the insurance company and not the policyholder’s loved ones. The
Benefits of Term Plan are; i) High insurance Cover at lower costs, ii) Financial
security against loans and mortgages, iii) Single premium payment option
available, and iv) Available with host of Additional rider benefits.
Health Insurance: The purpose of health insurance is to overcome
unforeseen emergencies without compromising on any other financial goal.
Health insurance helps to pay for all medical expenses. A health insurance policy
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also gives the benefit of covering the policyholder’s loved ones under one plan to
avoid any financial constraints arising on account of a medical emergency. The
benefits of Health Insurance are; i) Cashless hospitalization in all major hospitals
pan India, ii) Coverage of pre and post hospitalization expense, and iii) Coverage
of all major day care treatments.
Endowment Plans: Endowment Plans are an ideal choice for the risk-
averse customer. Endowments are long-term, regular savings plans with a built-in
life cover. Provided the policyholder has paid all your premiums, at the end of the
term the policyholder receives the sum assured plus accrued /guaranteed
bonuses that have been declared over the years, as a lump sum. In case of the
unfortunate death during the term of plan, the sum assured, will be paid out as a
lump sum with the bonuses that the policy is entitled to. The benefits of
Endowment Plan are; i) Available as money back plans also, ii) Option to avail a
host of additional rider benefits, iii) Cover life for a longer period of time, and iv)
Loan facility can be availed against most of the plans.
Whole Life Insurance Plan: Whole Life Insurance plans provide cover
throughout the lifetime. The premium could be paid for as long as a lifetime or for
a limited period. Unlike endowment plans they do not carry a maturity value and
pay the sum assured to the family in case of the unfortunate death of the
policyholder. A Whole Life Insurance plan assures that family of the policyholder
is protected against financial loss that could occur due to policyholder’s death.
Group Insurance: Group insurance covers a group of people, usually
members of societies, employees of a common employer, or professionals. All
employees or members are included under one 'master policy' owned by the
employer /nodal agency. Group Insurance covers both life and savings products
along with options like Superannuation and Health.
Retirement Plans: Retirement Plans supports in the twilight years of
policyholder’s life. The savings you set aside today become your wealth and
support in the years to come. The Retirement Plan benefit are; i) Alternative to
superannuation's and provident fund, ii) Compulsory Saving, iii) Saving tax, and
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Choice of Open Market Option, i.e., you have the option to purchase an
immediate annuity from your current insurer or from any other life insurer as
recognized by IRDA.
Children Plan: Insurance today offers a very simple assurance in terms of
monetary support to a child and family in case of death or disability of parent and
helps ensure that the shortage of fund never hampers dreams or aspirations of
the policyholder’s child. In short, Children's Plans ensure a secured financial
future for policyholder’s child. However, as parents the policyholder should keep
the following factors in mind before choosing a child insurance plan:
� Should cover child throughout even if something happens to the parent
� The payout should be at a age when the child requires it the most, i.e.,
when he wants to enter his dream college or needs to start his career.
� Should provide a regular source of income so that child doesn't have to
compromise on his dreams and aspirations.
� Child should not be forced to pay the premiums of the policy.
Wealth Plan: Wealth plans invest the premium in to the equity, debt and
cash markets by allocating units, which like any other mutual fund have a NAV.
The policyholder is free to switch between one fund to another depending on the
risk factor to bear. They offer better returns than traditional endowment plans and
offer a great deal of flexibility along with great returns making them the finest
product offering. The benefits of wealth plan are; i) Availability in single premium
and regular premiums options, ii) Investment funds ranging from index funds to
mid-cap funds and debt market linked funds, iii) Option to choose from a host of
additional rider benefits, iv) Tax Benefits as per existing tax laws, v) Flexibility to
move from one investment fund to other by the way of switching of funds, and vi)
Option to infuse additional capital by the way of Top Ups to give your investments
a boost.
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3.7 Structure of Indian Life Insurance Sector: In this part of study, a note on the institutions and bodies concerned with
life insurance sector are discussed;
The Insurance Regulatory and Development Authority (IRDA):
The insurance sector was opened up to private participation with the
enactment of the Insurance Regulatory and Development Authority Act, 1999.
The IRDA at present consists of the Chairman, 4 full-time members and 4 part-
time members. The Authority is functioning from its Head Office at Hyderabad,
Andhra Pradesh. The core functions of the Authority include (i) licensing of
insurers and insurance intermediaries; (ii) financial and regulatory supervision;
(iii) control and regulate premium rates; and (iv) protection of the interests of the
policyholders. With a view to facilitating development of the insurance sector, the
Authority has issued regulations on protection of the interests of policyholders;
obligations towards the rural and social sectors; micro insurance and licensing of
agents, corporate agents, brokers and third party administrators. This is in
addition to the regulatory framework provided for registration of insurance
companies, maintenance of solvency margin, investments and financial reporting
requirements.
Life Insurance Council:
Life Insurance Council is a forum that connects the various stakeholders of
the sector. It develops and coordinates all discussions between the Government,
Regulatory Board and the Public. In short, it is the face of the Life Insurance
industry. It was constituted under Section 64A of Insurance Act 1938, the Life
Insurance Council functions through several sub-committees and includes all life
insurance companies in India. In total, there are 23 life insurers who offer a
variety of traditional and new innovative products.
The major functions of Life Insurance Council are;
� Creating a positive image of the industry and enhancing consumer
confidence.
� Maintaining high standards of ethics and governance.
� Promoting awareness of the role and benefits of life insurance.
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� Organizing structured and proactive discussions with Government,
lawmakers and regulators.
� Conducting research in life insurance, publish monographs and contribute
to development of the sector.
� Acting as forum of interaction with other organizations of the financial
services sector.
� Playing a leading role in insurance education, research, training and
conferences.
� Providing help and guidance to members when necessary.
� Be an active link between the Indian life insurance industry and the global
markets. Life Insurance Companies in India:
In this part of the study, an attempt has been made by the researcher to
provide a brief profile on each of the life insurers;
Life Insurance Corporation of India:
The Parliament of India passed the Life Insurance Corporation Act on the
19th of June 1956, and the Life Insurance Corporation of India was created on
1st September, 1956, with the objective of spreading life insurance much more
widely and in particular to the rural areas with a view to reach all insurable
persons in the country, providing them adequate financial cover at a reasonable
cost.
As of now, LIC functions with 3371 branch offices across the length and
breadth of the country. It has also 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.
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AEGON Religare Life Insurance Company:
AEGON, an international life insurance, pension and investment company,
Religare, a global financial services group and Bennett, Coleman & company,
India’s largest media house, have come together to launch AEGON Religare Life
Insurance Company Limited (ARLI). This venture is dedicated to build a
profiTable customer-centric business with scale, providing a work environment
that fosters excellence and innovation. This joint venture will balance a local
approach with the power of an expanding global operation.
ARLI launched its pan-India operations in July, 2008 following a multi-
channel distribution strategy with a vision to help people plan their life better. The
fulfillment of this vision is based upon having a complete product suite, providing
customized advice and enhancing the overall customer experience through
superior service. The company has 128 branches as on 31st March 2011.
Aviva Life Insurance Company:
Aviva Life Insurance Company India Limited was incorporated on 25
September 2000. The Company is registered as a life insurer with the IRDA and
the Company’s business comprises life insurance and pension business. The
Company is a joint venture of Dabur Invest Corp. (74%) and Aviva International
Holdings Limited, UK (26%). The Company benefits from the management
experience of the India's leading producer of traditional healthcare products and
world’s oldest insurance Group.
With a strong sales force of over 20,000 Financial Planning Advisers
(FPAs), the company has initiated and pioneered many innovative sales
approaches, including the concept of Bancassurance and Financial Health Check
services. The company is among the first companies to introduce the
contemporary unit-linked products. With a wide distribution network of 142
branches and strong Bancassurance partnerships, the company has spread
across nearly 3,000 towns and cities in India. The company is also committed of
social responsibility; and has been successful in reaching out to the
underprivileged strata through our Micro-insurance initiatives.
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Bajaj Allianz Life Insurance Company Limited:
Bajaj Allianz Life Insurance Company Limited was incorporated on 12th
March 2001 as a Company under the Companies Act, 1956. The Company
obtained a license from the Insurance Regulatory and Development Authority
(“IRDA”) for carrying on the business of life insurance on 3rd August 2001. The
registration certificate granted by IRDA is valid and the same has been renewed
for the year 2011-2012. The Company has a wide range of products in traditional
and unit-linked insurance business.
Bajaj Allianz Life Insurance is a union between Allianz SE, one of the
largest Insurance Company and Bajaj Finserv. At Bajaj Allianz Life Insurance,
customer delight is their guiding principle. Their business philosophy is to ensure
excellent insurance and investment solutions by offering customized products,
supported by the best technology. Bajaj Allianz Life Insurance Company is the
third largest private sector life insurance company in the country with 1092
branches as on 31st March 2011.
Bharti Axa Life Insurance Company:
Bharti AXA Life is a life insurance player that was started in 2006. It brings
together strong financial expertise of the Paris-headquartered AXA Group, and
Bharti Enterprises - one of India's leading business groups with interests in
telecom, agricultural business, financial services, and retail. The joint venture has
a 74% stake from Bharti and 26% stake from AXA Asia Pacific Holdings Ltd.
(APH). The company launched national operations in December 2006. Today,
Bharti AXA Life has a national footprint of distributors trained to provide quality
financial advice and insurance solutions to the large Indian customer base. Bharti
AXA Life offers a range of innovative products and services that cater to specific
insurance and wealth management needs of customers.
Bharti Axa Life Insurance Company is the fastest growing private life
insurance company with 181 branches throughout the length and breadth of the
country.
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Birla Sun Life Insurance Company Limited:
Birla Sun Life Insurance Company (BSLI) was established in 2000. BSLI is
a joint venture between the Aditya Birla Group, a well-known and trusted name
globally amongst Indian conglomerates and Sun Life Financial Inc, leading
international financial services organization from Canada.
With an experience of over 10 years, BSLI has contributed significantly to
the growth and development of the life insurance industry in India and currently
ranks amongst the top 6 private life insurance companies in the country. BSLI
which is known for its innovation and creating industry benchmarks has several
firsts to its credit. It was the first Indian Insurance Company to introduce "Free
Look Period" and the same was made mandatory by IRDA for all other life
insurance companies. Additionally, BSLI pioneered the launch of Unit Linked Life
Insurance plans amongst the private players in India. To establish credibility and
further transparency, BSLI also enjoys the prestige to be the originator of practice
to disclose portfolio on monthly basis. The company has an extensive reach
through its network of 617 branches (as on 31st March 2011) and 1, 47,900
empanelled advisors.
Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited:
Canara HSBC Oriental Bank of Commerce Life Insurance Company
Limited was launched on 16 June 2008 and is a Joint Venture between Canara
Bank (holding 51%), HSBC Insurance (Asia Pacific) Ltd (holding 26%), the Asian
insurance arm of one of the world's largest banking and financial services groups
- HSBC and Oriental Bank of Commerce (holding 23%). The Company operates
a bancassurance model and has exclusive 33 branch offices and 5700 bank
branches as its corporate agents.
DLF Pramerica Life Insurance Company Limited:
DLF Pramerica Life Insurance Company Limited commenced business on
September 01, 2008. DLF Pramerica Life Insurance Company Limited is a joint
venture between DLF Limited, one of India’s largest and most respected real
estate organizations, and Prudential International Insurance Holdings, Ltd (PIIH),
a fully owned subsidiary of Prudential Financial, Inc. (hereafter referred to as
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“PFI”), a U.S. based financial services leader. The Company is one of the
youngest private life insurers in the country and has 41 branches across the
country as on 31st March 2011.
The company provides much comprehensive advice on everything related
to insurance. From giving insurance advice to offering information on insurance
solutions and services and then finally provides the promised protection, A hand-
picked and highly trained sales force ensures the needs are assessed accurately
so that the prospects make an informed choice and get the insurance cover that
is best suited to their needs.
Edelweiss Tokio Life Insurance:
Edelweiss Tokio Life Insurance was given license in May 2011. It is the
first of a new generation of Insurance companies, creating its Insurance solutions
around a deep understanding of the diverse financial needs of the Indian
consumer. As a part of its customer centric corporate philosophy, Edelweiss
Tokio Life Insurance has invested in understanding its potential customers; and
based on this, developed a unique need-based selling approach designed to
benefit consumers through all their life stages. The company ensures that
whatever the life insurance solution provided to the customer, it is best suited to
his need. The company is a joint venture between Edelweiss, one of India's
leading diversified financial services companies, and Tokio Marine, one of the
fastest growing Life Insurance companies in Japan. Set up with a start-up capital
of INR 550 Crore, Edelweiss Tokio Life Insurance is dedicated to building a long
term sustainable business focused on a consumer centric approach.
Future Generali India Life Insurance Company Limited:
Future Generali Life Insurance Company was registered on 04.09.2007,
and is a joint venture between the India-based Future Group and the Italy-based
Generali Group. The Company has 185 branches across the country. The values
of the Company are really impressive among the life insurance industry in India.
They are; i) Respect: for all our stakeholders- employees, customers, for all rules
and regulations both internal and external, ii) Indianess: We understand India in
all its diversity and different facets and will use for our local understanding to
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respond to our specific markets, design our products and craft our processes, iii)
Nimbleness: A combination of speed and quality, and ability to overcome all
obstacles which come in the way of the achievement of our vision, and iv) "Can
Do”: An attitude which demonstrates our passion, entrepreneurship, and positive
thinking.
HDFC Standard Life Insurance Company Limited:
HDFC Life, one of India's leading private life insurance companies, offers a
range of individual and group insurance solutions. It is a joint venture between
Housing Development Finance Corporation Limited (HDFC), India's leading
housing finance institution and Standard Life plc, the leading provider of financial
services in the United Kingdom. The Company was the first to be registered as a
private life insurance company in the country on 23.10.2000, and it started its
operations during the financial year 2000 – 2001.
HDFC Life's product portfolio comprises solutions, which meet various
customer needs such as Protection, Pension, Savings, Investment and Health.
Customers have the added advantage of customizing the plans, by adding
optional benefits called riders, at a nominal price. HDFC Life continues to have
one of the widest reaches among new insurance companies with around 498
branches servicing customer needs in over 700 cities and towns. The company
has a strong base of Financial Consultants.
ICICI Prudential Life Insurance Company:
ICICI Prudential Life Insurance Company is the third private life insurance
company in the country which was registered on 24.11.2000. It is a joint venture
between ICICI Bank, one of India's foremost financial services companies, and
Prudential plc, a leading international financial services group headquartered in
the United Kingdom.
The company has a network of 1402 offices and over 1,75,0000 advisors,
as at June 30, 2011. In addition to this, they also have over 5000 distribution
touch-points and over 10,000 servicing touch-points across the country.
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IDBI Federal Life Insurance Company Limited:
IDBI Federal Life Insurance Co Ltd was registered with IRDA as a private
life insurance company on 19.12.2007, and started its operations during 2007 –
08. It is a joint-venture of IDBI Bank, India’s premier development and
commercial bank, Federal Bank, one of India’s leading private sector banks and
Ageas, a multinational insurance giant based out of Europe. In this venture, IDBI
Bank owns 48% equity while Federal Bank and Ageas own 26% equity each.
The company offers its services through a vast nationwide network across
the branches of IDBI Bank and Federal Bank in addition to a sizeable network of
advisors and partners. As on September 30th 2010, the company has issued
over lakhs 2.35 lakhs policies with over Rs 11,577 crore in Sum Assured.
IndiaFirst Life Insurance Company:
India First Life Insurance is one of the youngest life insurance companies
in India with a rich legacy of over 360 years of combined service of its promoters
- Bank of Baroda, Andhra Bank and Legal & General. The Company was
registered on 05.11.2009, and started its operations during 2009 – 2010. This
joint venture brings together a real understanding of the Indian consumers by the
promoter banks with international best practices developed by Legal & General.
Bank of Baroda holds a 44 per cent stake in IndiaFirst, while Andhra Bank and
Legal & General hold a 30 per cent and 26 per cent stake respectively.
This combination of domain expertise, customer knowledge, product
innovation and nationwide reach has helped the company to cross the Rs. 900
crore mark in new business premium within 500 days of its operations and cover
over 1.2 million lives across more than 1000 cities and towns in India. As of
March 2011, the Company has 13 branches across the length and breadth of the
country.
ING Vysya Life Insurance Company:
ING Life Insurance Company was established in September 2001. The
company has issued over 1.2 million policies and is staffed by over 6000
employees. Headquartered in Bangalore, ING Life India is currently present in
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200 cities with 247 branches. In addition, the company distributes its products in
several parts of the country through its partner's presence.
ING Life India distributes its products through two channels, the Tied
Agency Force and the Alternate Channel. The Tied Agency force comprises over
30,000 ING Life Advisors, spread across the country. The Alternate Channels
business within ING Life India is a fast growing distribution channel, and includes
the Banc assurance partner (ING Vysya Bank), Referral Partners, Corporate
Agents and Brokers.
Kotak Mahindra Old Mutual Life Insurance Limited:
Kotak Mahindra Old Mutual Life Insurance Ltd was registered on
10.01.2001 and started its operations during 2001 – 02. It is a joint venture
between Kotak Mahindra Bank Ltd., its affiliates and Old Mutual plc. A Company
that combines its international strengths and local advantages to offer its
customers a wide range of innovative life insurance products, helping them take
important financial decisions at every stage in life and stay financially
independent. The company covers over 3 million lives and is one of the fastest
growing insurance companies in India. As on 31st March 2011, the Company has
a network of 203 branches across the nation.
Max New York Life Insurance Company:
Max New York Life (MNYL) is a joint venture between Max India Ltd.
and New York Life, a Fortune 100 company and the largest life insurer in USA.
Incorporated in 2000 and started its operation on April 2001, Max New York Life
is one of India's leading private life insurance companies and offers both
individual and group life insurance solutions. The Company has developed a
highly trained network that is focused on offering outstanding services and
building partnerships for life with the customer's. Max New York Life offers
flexible product solutions through a nationwide multi-channel distribution network
with over 11,700 employees, 72000 agents and an exclusive distribution tie-up
with Axis Bank, India's 3rd largest private bank. The Company has a network of
504 branches across India.
85
Metlife India Insurance Company Limited:
MetLife India Insurance Company Limited (MetLife) is an affiliate of
MetLife, Inc. and was incorporated as a joint venture between MetLife
International Holdings, Inc., The Jammu and Kashmir Bank, M. Pallonji and Co.
Private Limited and other private investors. MetLife is one of the fastest growing
life insurance companies in the country. It serves its customers by offering a
range of innovative products to individuals and group customers at more than
600 locations through its bank partners and company-owned offices. MetLife has
more than 50,000 Financial Advisors, who help customers achieve peace of mind
across the length and breadth of the country. The Company has 270 branches
across the length and breadth of the country.
Reliance Life Insurance Company Limited:
AMP Sanmar Life Insurance Company was registered on 03.01.2002 and
started operations during 2001 – 2002. However in 2006, the company was
acquired by Reliance Capital Ltd, and thus Insurance Regulatory and
Development Authority (IRDA) has permitted to change the company’s name into
Reliance Life Insurance Company Limited. As of now, the company has no
foreign equity and has 1248 branch offices in India and it is the second largest
private life insurance company with regard to branch network next to ICICI
Prudential Life.
Reliance Life Insurance is an associate company of Reliance Capital Ltd.,
a part of Reliance Group. Reliance Capital is one of India’s leading private sector
financial services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth.
Sahara India Life Insurance Company:
The Sahara India Life Insurance Company Ltd. (SILICL) is the first wholly
Indian-owned Life Insurance Company without any foreign collaboration to enter
the Indian Life insurance market. SILICL launched its operations on 30 October
2004 after being granted license to operate as a life insurer in India by Insurance
Regulatory and Development Authority on 6 February 2004. The launch is with
an initial paid up capital of 157 crores. Currently, the company has a network of
86
135 branches. Another important feature about Sahara Life is that it is 100%
Indian owned company, and has no foreign partners.
SBI Life Insurance Company:
SBI Life Insurance was established on 29.03.2001. It is a joint venture
between State Bank of India and BNP Paribas Cardif. SBI owns 74% of the total
capital and BNP Paribas Cardif the remaining 26%. SBI Life Insurance has an
authorized capital of Rs. 2,000 crores and a paid up capital of Rs 1,000 crores.
Along with its 5 Associate Banks, State Bank Group has the unrivalled strength of
over 18,000 branches across the country, arguably the largest in the world. SBI
Life has a unique multi-distribution model encompassing vibrant Bancassurance,
Retail Agency, Institutional Alliance and Corporate Solutions distribution
channels.
Agency Channel, comprising of the most productive force of over 80,000
Insurance Advisors, offers door to door insurance solutions to customers.
Besides these, the Company has 629 branch offices across the country.
Shriram Life Insurance Company:
Shriram Life Insurance Company was established on 17.11.2005. It is the
joint venture between the Shriram Group and the Sanlam Group. The Shriram
Group has a customer base of 30 lacs chit subscribers and investors and
operates through a network of 630 offices all over the country. The Group has the
largest agency force in the private sector consisting of more than 75,000 loyal
and dedicated agents.
Shriram Life Insurance Company has a network of 162 branch offices in
the country, and considered to be one of the most efficient private life insurers.
Star Union Dai-Ichi Life Insurance Co. Ltd
Bank of India and Union Bank of India, two leading Public Sector Banks in
India and the Dai-ichi Mutual Life Insurance Company, a leading Japanese
Company in the Life Insurance market, have floated a Joint Venture Company,
"Star Union Dai-ichi Life Insurance Co. Ltd." for undertaking Life Insurance
Business in India. The Company has been incorporated / registered with the
87
Registrar of Companies, Maharashtra on 25th September, 2007. The Company
has been issued the license for undertaking life insurance business in India by
Insurance Regulatory and Development Authority (IRDA) on 26.12.2008. The
Company has best insurance, IT, finance and investment resources to ensure
that it soon earns a prominent position in insurance sector.
With the strong brand and commitment of the partners, Star Union Dai-ichi
Life Insurance Company Ltd. promises to be a new star on the horizon of the
Indian life insurance business, promising value to all stakeholders. The Company
currently operates with 22 branches in the country. TATA AIG Life Insurance Company:
Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture
company, formed by Tata Sons and AIA Group Limited (AIA). Tata AIG Life
combines Tata's pre-eminent leadership position in India and AIA's presence as
the largest, independent listed pan-Asia life insurance group in the world
spanning 15 markets in Asia Pacific. Tata Sons holds a majority stake (74%) in
the company and AIA holds 26% through an AIA Group company. Tata AIG Life
Insurance Company Limited was licensed to operate in India on February 12,
2001 and started operations on April 1, 2001. The company has presently 363
branches throughout the country.
3.8 Performance of Indian Life Insurance Industry: The post liberalization period has been witness to tremendous growth in
the insurance industry, more particularly so in the life segment. The first year
premium, which is a measure of new business secured, underwritten by the life
insurers during 2009-10 was 109894.02 crore as compared to 87331.08 crore in
2008-09 registering a growth of 25.84% against negative growth rate of 6.81%
during the year 2008-09. In terms of linked and non-linked business during the
year 2009-10, 54.53% of the first year premium was underwritten in the linked
segment while 45.47% of the business was in non-linked segment as against
51.13 & 48.87 in the previous year. The total premium, which includes first year
premium and renewal premium during 2009-10, was 265450.37 crore as
compared to 221785.47 crore in 2008-09 registering a growth of 19.69% against
88
10.15% in the previous year. In terms of linked and non-linked business during
the year 2009-10, 43.52% of the total premium was procured in the linked
segment while 56.48% of the business was in non-linked segment as against
40.87 and 59.13 in the previous year.
The life insurers underwrote new business of 86699 crore during the
period April to December 2010 in the current financial year, 2010-11 as against
67558 crore in the corresponding period in 2009-10, recording growth of 28.33
per cent. Of the new business premium underwritten, LIC accounted for ` 61719
crore (71.19 per cent market share) and the private insurers accounted for 24980
crore (28.81 per cent market share). The market share of these insurers was
65.39 per cent and 34.61 per cent respectively in the corresponding period of
2009-10.
3.9 Contribution of Life Insurance to Indian Financial Sector: The household financial savings in India include currency, deposits,
insurance funds, pension funds, shares and debentures. Table 3.3 depicts the
percentage distribution of various household financial savings, including
insurance funds.
From Table 3.3, one could understand that deposits constitute the highest
among the different household savings during all the years. The shares and
debentures are the lowest contributor as far as the total gross financial savings of
the household sector. The contribution of insurance funds was 13.7% in 2001
and it has increased to 24.2% in 2011. This clearly shows the insurance is
considered to be one of the favorite destinations of financial investments by the
household sector in India during 2001 – 2011. It is also obvious that out of nine
financial assets, only four have shown positive growth during 2001 – 2011, they
are currency, bank deposits, non-banking deposits and life insurance funds.
Figure 3.4 depicts the trendlines of various financial assets of the
household sector. Bank deposits are unbeaten financial asset preferred by the
household sector during 2001 – 2011, which is evident from the trendline well
above all the other financial assets. Provident and Pension fund was second
89
most preferred in 2001, however it has shown consistent negative growth
between the period 2001 – 2011. A very high fluctuation is observed in the
trendline of claims on government. In this regard, life insurance funds trendline
has shown consistent positive growth during 2001 – 2011. Except in 2004 and
2006, the insurance funds trendline is slopping upward throughout the study
period, i.e. 2001 – 2011.
Figure 3.4: Financial Savings of Household Sector (In %)
Source: Various IRDA & RBI Annual Reports
90
Tabl
e 3.
3: H
ouse
hold
Fin
anci
al A
sset
s (P
erce
ntag
e D
istr
ibut
ion)
200
1 - 2
011
Type
of A
sset
20
00-0
1 20
01-0
220
02-0
320
03-0
420
04-0
520
05-0
6 20
06-0
7 20
07-0
820
08-0
920
09-1
020
10-1
1
Cur
renc
y 6.
32
9.84
8.
85
11
8.27
8.
93
8.79
10
.5
12.6
8 9.
78
13.4
Ban
k D
epos
its
38.3
39
.5
37.9
40
39
.2
45.5
56
.1
50.4
57
.48
45.3
44
.4
Non
bank
ing
Dep
osits
1.
21
-0.1
3.
86
0.5
0.02
0.
09
0.6
0.17
2.
03
1.94
2.
91
Life
Insu
ranc
e
Fund
13
.7
14.4
16
.1
13.4
15
.2
14.3
15
22
21
.03
22.6
24
.2
Pro
vide
nt a
nd
Pen
sion
Fun
d 20
.6
15.5
14
.2
12.6
12
.5
10.6
9.
48
9.26
10
.1
11.5
9.
12
Cla
ims
on
Gov
ernm
ent
15.8
18
.2
17.3
22
.4
23.8
14
.9
2.51
-3
.7
-3.7
9 4.
32
6.51
Sha
res
and
Deb
entu
res
4.5
3.44
2.
2 2.
33
1.81
5.
8 6.
65
9.62
-0
.32
4.78
-0
.44
Uni
ts o
f UTI
-0
.38
-0.7
-0
.5
-2.2
-0
.7
-0.1
-0
-0
-0
.38
-0.2
0
Trad
e D
ebt
0.07
-0
.1
0 -0
-0
-0
0.
85
1.78
1.
17
-0.1
-0
.11
Tota
l Fin
anci
al
Ass
ets
100
100
100
100
100
100
100
100
100
100
100
Sour
ce: V
ario
us IR
DA
& R
BI A
nnua
l Rep
orts
91
3.10 Insurance Sector Reforms: 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 recognizing that insurance is an
important part of the overall financial system where it was necessary to address
the need for similar reforms. In 1994, the committee submitted the report and
some of the key recommendations included:
i) Structure: 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.
ii) Competition: Private Companies with a minimum paid up capital of Rs.
1bn should be allowed to enter the sector. No Company should deal in both Life
and General Insurance through a single entity. 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.
iii) Regulatory Body: The Insurance Act should be changed. An
Insurance Regulatory body should be set up. Controller of Insurance- a part of
the Finance Ministry- should be made independent
iv) Investments: 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)
v) Customer Service: LIC should pay interest on delays in payments
beyond 30 days. Insurance companies must be encouraged to set up unit linked
92
pension plans. Computerization of operations and updating of technology to be
carried out in the insurance industry
The committee emphasized that in order to improve the customer services
and increase the coverage of insurance policies, industry should be opened up to
competition. But at the same time, the committee felt the need to exercise caution
as any failure on the part of new players could ruin the public confidence in the
industry.
The committee felt the need to provide greater autonomy to insurance
companies in order to improve their performance and enable them to act as
independent companies with economic motives. For this purpose, it had
proposed setting up an independent regulatory body- The Insurance Regulatory
and Development Authority.
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. Since being
set up as an independent statutory body the IRDA has put in a framework of
globally compatible regulations. The other decision taken simultaneously to
provide the supporting systems to the insurance sector and in particular the life
insurance companies was the launch of the IRDA online service for issue and
renewal of licenses to agents. The approval of institutions for imparting training to
agents has also ensured that the insurance companies would have a trained
workforce of insurance agents in place to sell their products.
3.11 Recent Initiatives in Indian Life Insurance Sector: Insurance Sector has become one of the vibrant sectors in the financial
sector of India. Various initiatives are being taken by the various stakeholders of
insurance, including IRDA, the regulator. The following are the major recent
initiatives taken in the insurance sector include:
93
i. Amendment to Insurance Legislation: The Insurance Laws
(Amendment) Bill, 2008 introduced in the Parliament proposes to amend the
Insurance Act, 1938, the Insurance Regulatory and Development Authority Act,
1999 and the General Insurance Business (Nationalization) Act, 1972. The
amendments to the Insurance Act and the IRDA Act focus on the current
regulatory requirements. The proposed changes provide for more flexibility in
operations and are aimed at deletion of certain sections which are no longer
relevant in the present context. The amendments also provide for enhancement
of enforcement powers and levy of stringent penalties. This Bills is under
exanimation by the Departmental Standing Committee.
ii. De-tariffing: The road map for de-tariffing was notified by the Authority
on 23rd September, 2005, based on the demand from various stakeholders that
continuance of the tariff regime was inconsistent with the opening of the sector to
provide healthy competition. De-tariffing of the General industry was notified
w.e.f., 01-01-2007. As a first step de-tariffing was confined to de-control of rates
only and terms & conditions of the policy were not permitted to be changed till
31st March, 2008.
iii. Innovations in Health Insurance: Eighty per cent of all health
expenditure in the country is spent through personal resources. This is despite an
increase in premium from 519 crore in 2000-01 to 7311 crore (14 times) in 2009-
10. With increasing demand, the health insurance industry has introduced
innovative products to enable the policyholder to plan comprehensive protection
against health eventualities by combining hospitalization indemnity products with
supplementary covers or additional policies to meet specific needs of the
policyholder.
iv. Micro insurance: One of the main objectives of promoting financial
inclusion packages is to economically empower those sections of society who are
otherwise denied access to financial services, by providing banking and credit
services thereby focusing on bridging the rural credit gap. The banking sector is
focusing on financial inclusion on a priority basis. Vulnerability to various risk
factors is one of the fundamental attributes of these sections of the society. Lack
94
of protective elements may, thus, not serve the objective of promoting financial
inclusion packages as the targeted sections may fall back into the clutches of
poverty in the event of unforeseen contingencies. Hence, to provide a hedge
against these unforeseen risks, micro insurance is widely accepted as one of the
essential ingredients of financial inclusion packages.
v. Investments by the insurance sector: The total funds invested by life
insurers as on 31st March, 2010 was 12,05,155 crore (9,16,365 crore in 2008-09),
of these 3,31,619 crore (27.52 per cent of total funds) represents ULIP funds and
the remaining 8,73,536 crore (72.48 per cent) is the contribution by traditional
products. The share of ULIP funds in total investments has continued to grow in
recent years reflecting the public preference for these products. During 2009-10,
ULIP funds contributed 55 per cent of the incremental investments (26.39 per
cent in 2008-09). While ULIP funds contributed 1,58,856 crore (39,686 crore in
2008-09) of the incremental investments, the contribution by the traditional
products was 1,29,934 crore (` 1, 10,710 crore in 2008-09).
vi. Initiatives at enhancing public disclosures: With a view to improving
transparency in operations, the Authority has been working towards enhancing
disclosures to be made by insurance companies on periodic basis. A major step
in this direction has been the issuance of disclosure guidelines in January, 2010.
The stipulations on disclosures to be made by insurance companies have been
strengthened by the Authority to fill the gap in availability of information in the
public domain. These disclosures are required to be made through (i) Publication
in Newspapers; and (ii) Hosting on the respective company websites, effective
from the period ended 31st March, 2010. This initiative has placed the insurance
companies, which are presently not publicly listed entities, at par with the listed
entities in the corporate world in terms of public disclosures.
vii. Data Warehouse: The Authority has constituted the Insurance
Information Bureau (IIB), an advisory body which is collecting, processing and
disseminating data. IIB has been formed to ensure that the business data of
insurance companies is collected and processed in an orderly manner and is
made available at regular intervals. Hence, it is useful for the various market
95
players, researchers, policyholders as well as the public at large for real time
decision making. IIB functions as a single point official reference for the entire
data requirement on the insurance sector.
viii. Grievance Redressal: The Consumer Affairs Department of IRDA
handles policyholder grievances, apart from carrying out awareness campaigns
on insurance. The Grievance Cell looks into the complaints from policyholders
against life and General insurance companies. Prospects and policyholders are
advised to first file their complaints with the respective insurance companies. The
Grievance Cell facilitates redressal by taking up the complaints with the
company. Where required, investigations and enquiries are carried out by IRDA.
Recently, IRDA has provided an alternative channel for prospects and
policyholders to lodge complaints with the Grievance Cell by launching the IRDA
Grievance Call Centre (IGCC). The IGCC receives and registers complaints
through a Toll Free number. Complainants can also track the status of their
complaints through IGCC.
ix. ULIPs: With a view to protecting the interests of policyholders, the
IRDA has taken a number of initiatives. The objective of these initiatives is to
rationalize the product features through such clauses as (i) minimum lock-in
period being increased from three years to five years, with the stipulation being
applicable to even top-ups; (ii) charges on Unit Linked Insurance Products
(ULIPs) have been mandated to be spread evenly over the lock-in-period; (iii)
ULIPs, other than single premium products, to have a minimum premium paying
term of five years; (iv) individual products to have a minimum policy term of five
years, although group products continue to be on annual renewable basis; (v) all
products including pension/annuity must have a minimum sum assured payable
on death; (vi) ULIP pension/annuity products shall offer a minimum guaranteed
return of 4.5 per cent per annum or as specified by IRDA from time to time; (vii)
top up premium must also have insurance cover; (viii) the facility of partial
withdrawal to be permissible only after the fifth policy anniversary for individual
products. Partial withdrawals in case of pension/annuity products are not allowed
and the insurer shall convert the accumulated fund value into an annuity at
96
maturity; and (ix) all ULIPs, other than pension and annuity products must
provide the prescribed minimum mortality/health cover.
x. Variable Insurance products: Guidelines have been issued by the
Authority on Variable Insurance products (VIP) on 23rd November, 2010. Under
the guidelines, all VIPs shall only be offered under non-unit linked platform either
as participating or nonparticipating products and shall not be permitted under unit
linked platform. The guidelines provide that benefits under these products would
be payable either on death or maturity. The guidelines further require that only
regular premium products with minimum policy and payment terms of 5 years are
allowed. Single premium, limited premium and group insurance contracts are not
allowed under these products.
3.12 Potential of Life Insurance Business in India: India’s life insurance market has grown rapidly over the past six years,
with new business premiums growing at over 40% per year. The premium income
of India’s life insurance market is set to double by 2012 on better penetration and
higher incomes.
Insurance penetration in India is currently about 4% of its GDP, much
lower than the developed market level of 6-9%. In several segments of the
population, the penetration is lower than potential. For example, in urban areas,
the penetration of life insurance in the mass market is about 65%, and it’s
considerably less in the low-income unbanked segment. In rural areas, life
insurance penetration in the banked segment is estimated to be about 40%, while
it is marginal at best in the unbanked segment. The total premium could go up to
$80-100 billion by 2012 from the present $40 billion as higher per capita income
increases per capita insurance intensity.
The average household premium will rise to Rs 3,000-4,100 from the
current Rs 1,300 as will penetration by the existing and new players. India’s ratio
of life insurance premium to its GDP is around 4 per cent against 6-9 per cent in
the developed world. It could rise to 5.1-6.2 by 2012 in tandem with the country’s
demographic profile. India has 17 life insurers and the state-owned Life Insurance
97
Corp. of India dominates the industry with over 70 percent market share, though
private players have been growing aggressively.
Considering the world’s largest population and an annual growth rate of
nearly seven per cent, India offers great opportunities for insurers. US based
online insurance company ebix.com plans to enter the Indian market following
deregulation of its insurance sector. Online insurer ebix.com’s expansion into
India is a major step for the company to become a global supplier of internet-
based insurance tools for consumers and insurance professionals.
In a diverse country such as India it is imperative that a universal
insurance infrastructure be created to maximize efficiency in the insurance
industry. Online insurer ebix.com offers the Indian market a business-to-
consumer internet portal where consumers have more choice while purchasing
insurance and an internet-based agency management system that will help
agents work more efficiently with multiple carriers.
Foreign holding in Indian insurance companies is limited to 26 per cent.
The government wants to increase the cap to 49 percent, but its communist allies
oppose such a move. The market is moving beyond single-premium policies and
unit linked insurance products which are easier to sell. The agency model is the
dominant sales channel accounting for more than 85 per cent of fresh premiums
but overall inactivity and attrition is much higher at 50-55 per cent than the global
average of 25 per cent.
Opportunities include health insurance and pensions, the report said;
adding only 1.5-2 percent of total healthcare expenditure in India was currently
covered by insurance. A life insurance policy covers one’s personal self. Unlike
with general insurance, it is not like insuring a vehicle. Having said this if we
consider that India’s population is over one billion and growing, we get a picture
of the true potential of the life insurance sector in India.
LIC has been in business for 50 years now and has not covered the entire
population base yet. About 250 to 300 million Indians are still insurable. LIC has
98
issued about 120 million policies till now, with new premium income of US$ 1
billion. Its assets have been estimated at $37 billion and in the last quarter it
reported a 60 per cent growth in new business. LIC’s business is growing at the
rate of 20 per cent every year. That is the kind of potential one is talking about in
life insurance in India.
3.13 Conclusion: Thus, from the above deliberations one can understand that Indian
insurance sector is one of the vibrant sectors of the economy, with all its
stakeholders, viz, Insurance Regulatory & Development Authority (IRDA),
insurers (both life and non-life), policyholders, reinsurers actively functioning for
the betterment of the industry. New innovations, in the form of new products and
delivery mechanisms, and new regulations, in the form of increase in the FDI limit
for insurance industry are the encouraging factors for both insurers and insureds.
Though, the watchdog of the Indian Insurance Industry, the IRDA is so vigilant, to
ensure the rights of the policyholders, and to promote insurance as an alternate
investment avenue, insurance density and penetration is still poor.