PRESENTATION BY:

AMIT KUMAR SINGHSIMS 2014-16

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EARLY HISTORY

Most ancient recording of insurance is the Code of Hammurabi around the 1750 BC

In 4th century BC the Ancient Athenians practiced “maritime loan” with floating premiums

600 BC gave rise to health and life insurance in the Roman Empire

The first known insurance contract dates from Genoa in 1347

The first insurance company was set up in London under the name "Insurance Office for Houses“

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INDIAN CONNECTION

The earliest mention of Insurance in India is in our Arthashastras

The birth of modern insurance in India was with the set up of the “Oriental Life Insurance Company” in 1818 in Kolkata

Contractual insurance travels from LONDON coffee houses to INDIA with East India Company.

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DEFINITION In simple terms insurance is an arrangement bound by a contact in which a

company or state guarantees compensation for an uncertain loss (illness, death etc.) by charging a certain amount of premium

Insurance is a pivotal part of risk mitigation and transfer of risk

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VERTICALS OF INSURANCE

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INSURANCE IN INDIA

1956, life insurance companies were nationalized to form LIC (Life Insurance Corporation of India)

1972, non-life insurance companies were nationalized to form General Insurance Corporation of India (GIC)

1999, Insurance Regulatory and Development Authority created under the IRDA Act, making it the sole body responsible for regulating, promoting, and ensuring order in the insurance & re-insurance sector in India.

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INSURANCE IN INDIA

1999, Malhotra Committee allowed for privatization in the insurance sector

Prior 2000, there were only six insurance companies viz., LIC, four public sector general insurers and GIC

Cap of 26% for FDI’s (Foreign Direct Investment) to boost growth and promote insurance in the country

For private players to enter into the insurance sector a deposit of Rs.100 crore had to be made in the reserve of the government

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INSURANCE IN INDIA 52 companies as at end-March 2014

Life insurance: 24 insurers (1 in public sector and 23 in private sector)

Non-life insurance:28 insurers (6 in public and 15 in private sector)

1 re-insurance company viz., General Insurance Corporation of India in the public sector

Of the 21 life insurance companies set up in the private sector since 2000,19 are in joint venture with foreign partnersOut of which 15 new private insurers in the non-life segment, 14

have been opened in collaboration with the foreign partners.

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INDIA’s INSURANCE MARKET SHARE - FY 2013

9Source: Business Today

CURRENT SCENARIO IN INDIA

o Proposal to increase the cap on foreign direct investment to 49% from 26% has been passed recently

o India is ranked 10th among 147 countries in the life insurance sector with a 16.6% CAGR during financial year 2013 (US$ 53.3 billion)

o Non-life insurance sector market touched US$ 13.1 billiono 36 crore issued policies in the Indian life Insurance Sector

o Compounded Annual growth rate of 12-15%o To touch a staggering US$ 1 trillion market value by 2020

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CURRENT SCENARIO IN INDIA Insurance in India remains at an early stage of development It can be postulated that by 2014 the penetration of life

insurance in India will increase to 4.4% and that of non-life insurance to 0.9%

Indian insurance market is the 19th largest globally and ranks 5th in Asia

The public sector Insurance companies have continued to dominate the insurance market

Enjoying over 90 per cent of the market share in life insurance sector LIC has continued to dominate .

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CURRENT SCENARIO IN INDIA

The Indian insurance market it accounts for only 2.5% of premiums in Asia, it has the potential to become one of the biggest insurance markets in the region

India is among the most promising emerging insurance markets in the world

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PUBLIC - PRIVATE COMAPRISON OF MAJOR SHAREHOLDERS

Type ofBusiness

NOS OF PUBLIC SECTOR

COMPANIES

NOS OF PRIVATE SECTOR

COMPANIES

TOTAL

Life insurance 01 12 13

General insurance 06 08 14

Reinsurance 01 - 01

Total 08 20 28

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THE STAGE IS ALL SET FOR 49%

EXPECTATIONS ???

WHAT DOES IT MEAN ???

WHAT WILL BE THE OUTCOME??

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REGULATORY BODY

Role of IRDA :

o Protecting the interest of policyholders.o Establishing guidelines for the operations of insurers, and brokers.

o Specifying the code of conduct, qualifications, and training for insurance intermediaries and agents.

o Promoting efficiency in the conduct of insurance business.o Regulating the investment of funds by insurance companies.

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PEST ANALYSIS

Political factors affecting insurance industry

Insurance business in rural/ social sector Capital requirement Renewal of registration Requirement as to capital Investment of funds outside India Power to investigation or inspection Tax policy and insurance sector

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PEST ANALYSIS

Economical factors affecting insurance industry

Adequacy of capitalIncreased economical activityInterest ratesInflation rateMarket related factorsCustomer satisfaction

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PEST ANALYSIS

Socio-Cultural factors affecting insurance industryPopulationLife styleEducational levelLevel of earningSocietal benefits

Technological factors affecting insurance industryMaintaining the databaseE-business insurance in India

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SWOT ANALYSIS

STRENGTH

NEW INSURANCE INSTRUMENTS

INCREASED INCOME

HUGE POPULATION

INCREASED LITRACY RATE

WEAKNESS

ONLY ONE REINSURANCE COMPANY

FEW FOREIGN COMPANIES

NON LIFE INSURANCE UNDERDEVELOPED

OPPORTUNITY

30-40 YEARS FOR THE INDUSTRY TO REACH SATURATION

DEVELOPING ECONOMY

RISING HOUSEHOLD INCOME

THREAT

CATASTROPHIC EVENTS (HIGH OCCURANCE)

QUESTIONABLE REPUTATION OF FOREIGN PARTNERS

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SUGGESTIONS

o To begin with, India needs to further liberalize investment regulations on insurers to strike the right balance towards growth of this industry

o Furthermore, both the life and non-life insurance sectors would benefit from less invasive regulations

o In addition, price structures need to reflect product risk. Obsolete regulations on insurance prices will have to be replaced by risk-differentiated pricing structures

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SUGGESTIONS

o There is huge untapped potential, for example, in the largely undeveloped private pension market. At the moment, less than 11% of the working population in India is eligible for participation in any formal old-age retirement scheme. Private insurers will have a key role to play in serving the large number of informal sector workers.

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CONCLUSION

o On the regulatory side, there are outstanding issues concerning liberalizing of investment rules, caps on foreign equity shareholdings as well as the enforcement of price tariffs in the non-life insurance sector

o The proliferation of bancassurance is rapidly changing the way insurance products are distributed in India. This will also have strong implications on the process of financial convergence and capital market development in India

o Health insurance is still underdeveloped in India but offers huge potential, as there will be increasing needs to purchase private health cover to supplement public programmes

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CONCLUSION

o Likewise, the deficiencies in current pension schemes should offer significant opportunities to private providers

o With the majority of the population still residing in rural areas, the development of rural insurance will be critical in driving overall insurance market development over the longer term

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THANK YOU !

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