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A Project on child planINSURANCE INDUSTRY India Insurance Industry: - New Avenues For Growth With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market (200405) is estimated at Rs.450 billion (US$10 billion). According to government sources, the insurance and banking services
contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part. The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense growth potential of the insurance sector.
The year 1999 saw a revolution in the Indian insurance sector, as major structural changes took place with the ending of government monopoly and the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Though, the existing rule says that a foreign partner can hold 26% equity in an insurance company, a proposal to increase this limit to 49% is pending with the government. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 21 private companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning
to the private sector and snapping up the new innovative products on offer.
The life insurance industry in India grew by an impressive 36%, with premium income from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff competition from private insurers. RNCOSs report, Indian Insurance Industry: New Avenues for Growth 2012, finds that the market share of the state behemoth, LIC, has clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. But this was still not enough to arrest the fall in its market share, as private players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04. Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared to the previous one, its market share came down from 87.04 to 78.07%. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. The share of LIC
for this period has further come down to 75 percent, while the private players have grabbed over 24 percent.
There are presently 12 general insurance companies with four public sector companies and eight private insurers. According to estimates, private insurance companies collectively have a 10% share of the non-life insurance market. Though the focus of this market research report is on the potential growth on the Indian Insurance Sector, it also talks about the market size, market segmentation, and key developments in the market after 1999. The report gives an instant overview of the Indian non-life insurance market, and covers fire, marine, and other non-life insurance. The data is supplied in both graphical and tabular format for ease of interpretation and analysis. This report also provides company profiles of the major private insurance companies.
Gains of Liberalization in Indian Insurance Sector
Indian Insurance Market Segmentation By Products
Size of the Market and Market Share Of Life Insurers, In INR
Market Share Of Non-Life Insurers Forecast of Life Insurance Growth Up to 2012 Forecast of Non-Life Insurance Growth Up to 2012 Market Revenue of Both Public and Private Insurers Policies and Measures Taken By IRDA To Develop The
Research and Development Activities Regulation of insurance and reinsurance companies Major Challenges That Indian Insurance Sector is Facing Profiles of the Major Players
LIFE INSURANCE IN INDIA With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 percent to the countrys GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India. It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation Malhotra Committee was constituted by the government in 1993 to examine the various aspects of the industry. The key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more efficient and competitive financial system suitable for the requirements of the economy was the main idea behind this reform.
Since then the insurance industry has gone through many sea changes .The competition LIC started facing from these companies were threatening to the existence of LIC. Since the liberalization of the industry the insurance industry has never looked back and today stand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run.
A Brief History The origin of insurance is very old .The time when we were not even born; man has sought some sort of protection from the unpredictable calamities of the nature. The basic urge in man to secure himself against any form of risk and uncertainty led to the origin of
insurance. The insurance came to India from UK; with the establishment of the Oriental Life insurance Corporation in 1818.
The Indian life insurance company act 1912 was the first statutory body that started to regulate the life insurance business in India. By 1956 about 154 Indian, 16 foreign and 75 provident firms were been established in India. Then the central government took over these companies and as a result the LIC was formed. Since then LIC has worked towards spreading life insurance and building a wide network across the length and the breath of the country. After the liberalization the entrance of foreign players has added to the competition in the market. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. In 1957 General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. In 1972 The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973.
It was after this that 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
Present Scenario The government of India liberalized the insurance sector in march 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) bill. Lifting all entry restrictions for private players to enter the market with some limits on direct foreign ownership. premium rate of most general insurance. Policies come under the purview of the government appointed Tariff Agenty Committee. The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also
restructuring and revitalizing of the public sector companies. A host of private insurance companies operating in both life and non life segments have started selling their insurance policies since 2001.
Non life insurance market, In December 2000, the GIC subsidiaries were restructured as independent insurance companies. At the same time, GIC was converted into national re-insurer. In July2002, Parliament passed a bill, delinking the four subsidiaries from GIC. Presently there are 12 general insurance companies with 4 public sector companies and 8 private insures. Although the public sector companies still dominate the general insurance business, the private insurance companies have a 10 percent share of the market, up from 4 percent in 2001. In the first half of 2002, the private companies booked premium worth 6.34 billion. Most of the new entrants reported losses in first yr of their operation in 2001. Insurance costs constitute roughly around 1.2 2 % of the total project costs. Under the existing norms, insurance premium payments are treated as part of the fixed costs. Consequently they are treated as pass through costs for tariff calculations.
For projects costing up to Rs.1 billion, the tariff Agent committee sets the premium rates, for projects between 1 billion and 15 billion, the rates are set in keeping with committees guideline