Indian Insurance

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Explains the concept of Indian insurance and the scope of the insurance sector in Indian economy.

Dr. A / Delhi

22 years of teaching experience

Qualification: Ph.D ( - 2012), M.Com ( - 2002), MBA/PGDM ( - 2010), B.Com ( - 2000)

Teaches: Accountancy, Economics, Costing, Financial Management, Statistics, BBA Subjects, Management Subjects

  1. Indian Insurance Sector :History Insurance in India has its history dating back until 1818, when Oriental Life Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of European community. The pre-independence era in India saw discrimination between the lives of foreigners (English) and Indians with higher premiums being charged for the latter. In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer 1/10/2018 Dr. Amit Gupta
  2. Important milestones in the Indian life insurance business 1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business. 1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses. 1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India. The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British. 1/10/2018 Dr. Amit Gupta 2
  3. Important milestones in the Indian general insurance business 1907: The Indian Mercantile Insurance Ltd. was set up which was the first company of its type to transact all general insurance business. 1957: General Insurance Council, an arm of the Insurance Association of India, framed a code of conduct for guaranteeing fair conduct and sound business patterns. 1968: The Insurance Act improved for regulating investments and set minimal solvency levels and the Tariff Advisory Committee was set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India. It was with effect from 1st January 1973. 107 insurers integrated 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 was incorporated as a company. 1/10/2018 Dr. Amit Gupta 3
  4. Insurance Companies in India Life Insurance Companies Aviva Life Insurance Bajaj Allianz Life Insurance Birla Sun-Life Insurance HDFC Standard Life Insurance ING Vysya Life Insurance Life Insurance Corporation Max New York Life Insurance MetLife Insurance 0m Kotak Mahindra Life Insurance Reliance Life Insurance Sahara India Life Insurance SBI Life Insurance TATA AIG Life Insurance 1/10/2018 Dr. Amit Gupta 4
  5. Insurance Companies in India General Insurance Companies Agriculture Insurance Amsure Insurance ANZ Insurance Bajaj Allianz General Insurance Cholamandalam General Insurance Employee State Insurance Export Credit Guarantee Corporation ICICI Lombard General Insurance IFFCO-Tokio General Insurance National Insurance Oriental Insurance Peerless Smart Financial Royal Sundaram Alliance TATA AIG General Insurance 1/10/2018 Dr. Amit Gupta 5
  6. PRIVATE SECTOR COMPANIES -Several leading private sector companies have entered in the field of insurance sector, both in life and non-life insurance. -There are several MNCs, in Joint Venture with Indian private sector firms, have started operations in a big way. Private Players in the Life Insurance Business Regd. 101 104 105 107 109 110 111 1/10/2018 Date of Regd. 23.10.oo 15.11.oo 24.11.00 10.01.01 31.01.01 12.02.01 30.03.01 02.08.01 Name of the Company HDFC Standard Life Max New York Life ICICI Prudential Life 0m Kotak Mahindra Birla Sunlife Tata AIG SBI Life ING vysya Who Owns it (in percentage) Standard Life, UK - 18 and HDFC - 82 New York Life - 26 and Max India — 74 Prudential, UK - 26 and ICICI Bank - 74 Old Maruthi, South Africa — 26 and Kotak Mahindra - 74 Sun Life of Canada—26 and Birla Capital— 74 AIG, US - 26 and Tatas - 74 Cardif SA, France — 26 and State Bank of India — 74 ING, Holland-26 and GMR Group, Hyd-54 and ING vysya Bank-20
  7. CURRENT SCENARIO contd Private Players in the Life Insurance Business Regd. 116 117 121 122 127 128 1/10/2018 Date of Regd. 03.08.01 06.08.01 03.01.02 03.01.02 06.02.04 07.11.05 Name of the Company Allianz Bajaj Metlife AMP Sanmar Aviva Reliance Life Bharathi AXA Who Owns it (in percentage) Allianz AG, Germany — 26 and Bajaj Auto — 74 Metiife, US-26, Shapoorji Pallonji-30 and Bank-25 AMP, Australia—26 and Sanmar Group, Chennai—74 Aviva PLC, UK— 26 and Dabur Investments 74 Sahara Insurance Shriram Insurance India Life Dr. Amit Gupta 7
  8. 1/10/2018 Basic functions of Insurance 1.Primary Functions 2.Secondary Functions 3.0ther Functions Dr. Amit Gupta 8
  9. Primary functions of insurance Providing protection — The elementary purpose of insurance is to allow security against future risk, accidents and uncertainty. Insurance cannot arrest the risk from taking place, but can for sure allow for the losses arising with the risk. Insurance is in reality a protective cover against economic loss, by apportioning the risk with others. Collective risk bearing — Insurance is an instrument to share the financial loss. It is a medium through which few losses are divided among larger number of people. All the insured add the premiums towards a fund and out of which the persons facing a specific risk is paid. Evaluating risk — Insurance fixes the likely volume of risk by assessing diverse factors that give rise to risk. Risk is the basis for ascertaining the premium rate as well. Provide Certainty — Insurance is a device, which assists in changing uncertainty to certainty. 1/10/2018 Dr. Amit Gupta 9
  10. Secondary functions of insurance Preventing losses — Insurance warns individuals and businessmen to embrace appropriate device to prevent unfortunate aftermaths of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc. ' Covering larger risks with small capital — Insurance assuages the businessmen from security investments. This is done by paying small amount of premium against larger risks and dubiety. ' Helps in the development of larger industries — Insurance provides an opportunity to develop to those larger industries which have more risks in their setting up. 1/10/2018 Dr. Amit Gupta 10
  11. Other functions of insurance Is a savings and investment tool — Insurance is the best savings and investment option, restricting unnecessary expenses by the insured. Also to take the benefit of income tax exemptions, people take up insurance as a good investment option. Medium of earning foreign exchange — Being an international business, any country can earn foreign exchange by way of issue of marine insurance policies and a different other ways. Risk Free trade — Insurance boosts exports insurance, making foreign trade risk free with the help of different types of policies under marine insurance cover. Insurance provides indemnity, or reimbursement, in the event of an unanticipated loss or disaster. There are different types of insurance policies under the sun cover almost anything that one might think of. There are loads of companies who are providing such customized insurance policies. 1/10/2018 Dr. Amit Gupta
  12. TYPES OF INSURANCE Life Insurance :-The life insurance sector of India has added up to 4.1% of the GDP in 2014, a considerable growth was recorded since the time the sector was opened for the private companies ' Credit Insurance:-Credit insurance takes care of the risk of payment of the organizations and not of the individuals. To get insured, the holders of the policy should have a credit limit on each of the buyers. 1/10/2018 Dr. Amit Gupta
  13. ' Aviation Insurance:-The main target of this sector are the people victim to accidents or loss of life due to air crash or similar to any such calamity Health Insurance :-Health insurance is the form of insurance that provides financial security against any unforeseen medical emergency 1/10/2018 Dr. Amit Gupta
  14. ' Crop Insurance:-Crop insurance is one of the various types of insurance that are offered to the people. This insurance is directed to the farmers and agriculturists ' Home Insurance:-Home Insurance is about the protective coverage provided by the general insurance companies against the natural calamities and unforeseen hazards like gas cylinder explosion, fire due to electric short circuit as well as man-made disaster like burglary 1/10/2018 Dr. Amit Gupta
  15. ' Medical Insurance:-MedicaI Insurance provides a cushion against medical exigencies. Insurance cover is provided in case of hospitalization, other medical expenses etc ' Pet Insurance:-pet insurance is slowly but surely catching up in India. Pet Insurance schemes essentially pay for the veterinary costs in case one's pet falls sick or suffers an accident or injury 1/10/2018 Dr. Amit Gupta
  16. ' Property Insurance:-Property insurance offers security and financial aid against any kind of property risks like natural disaster, theft and fire. The property contents are also covered under such insurance ' Car Insurance :-Auto Insurance in India deals with the insurance covers for the loss or damage caused to the automobile or its parts due to natural and man- made calamities. It provides accident cover for individual owners of the vehicle while driving and also for passengers and third party legal liability 1/10/2018 Dr. Amit Gupta
  17. ' Two Wheeler Insurance:-lndia two-wheeler Insurance is of 2 types, viz., Liability Only policy and Package Policy. Two wheeler insurance is obligatory in India and it is illegal to drive a two-wheeler in India without valid insurance ' Travel Insurance:-lndia Travel Insurance is one of the latest introductions that have come about in the Insurance Sector of India . 1/10/2018 Dr. Amit Gupta
  18. ' Weather Insurance:-Weather insurance covers the losses that may be caused to this sector due to abnormal weather conditions including variations in temperature, wind speeds and humidity or excess of rainfall and shortage in rainfall. 1/10/2018 Dr. Amit Gupta
  19. Project Insurance Insurance companies are also witnessing increasing demand for project insurance in the last few months. Corporates are beginning to demand project insurance across sectors such as power generation with the cover beginning right from the start of the project till it is declared ready for commercial use. Some of the big projects also take cover for financial loss arising out of delay in completion. Oriental Insurance Company Ltd will be offering comprehensive project insurance for the Tata Power Project at Mundra in Gujarat. 1/10/2018 Dr. Amit Gupta 19
  20. Latest updates related to insurance Prudential has decided to buy nationalized US insurer - American International Group's Asian business for about $35.5 billion MetLife Inc. finally sealed a deal with American International Group Inc. (AIG) to buy stake in American Life Insurance Co (Alico) for $15.5 billion The LIC Cards has informed that it is targeting to sell half million credit cards in the upcoming year 1/10/2018 Dr. Amit Gupta
  21. Olnsurance companies have been instructed by the Delhi State Consumer Commission to compensate medical expenses incurred by a patient within a year of taking mediclaim policy even though the exclusion clause is declared or not. The exclusion clause acknowledged that policy holders cannot claim their medical policy within a year of taking it. 1/10/2018 Dr. Amit Gupta
  22. The Insurance Regulatory and Development Authority (IRDA) have asked insurance companies to disregard the order from the Securities Exchange Board of India (SEBI) regarding the sale of ULIPs. While the investment in ULIPs is getting more criticism than other investment options by market regulator SEBI, but it has been noted then the money invested in the ULIPs may offer much more than the investor could have desired for. 1/10/2018 Dr. Amit Gupta 22
  23. Challenges for insurance companies *Consolidating savings *Boosting sales and distribution *Preparing for mergers and acquisitions + Leveraging new opportunities *Handling Regulatory reform 1/10/2018 Dr. Amit Gupta
  24. Indian Insurance In 21st Century 2000:IRDA starts giving licenses to private insurers: ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy. # 2001: Royal Sundaram Alliance first non life insurer to sell a policy . # 2007:First Online Insurance portal, set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt Ltd. # The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority flRDA) Bill, lifting all entry restrictions for private players and allowing oreign players to enter the market with some limits on direct foreign ownership. # Minimum capital requirement for direct life and Non-life Insurance company is INRIOOO million and that for reinsurance company is INR 2000 million. In the 2004-05 budgets, the Government proposed for increasing the foreign equity stake to 49%, this is yet to be effected. Under the current guidelines, there is a 26 percent equity cap for foreign partners in direct insurance and reinsurance Company. 1/10/2018 Dr. Amit Gupta 24
  25. Indian Insurance Sector General Insurance The total number of general insurers registered with IRDA has gone up to 22, with the registration of SBI General Insurance Company Limited, a joint venture general insurance company promoted by State Bank of India and Insurance Australia Group, Australia, as a general insurer in December 2009. Overall, the non-life insurance sector grew 9.95 per cent in April-December 2013, compared to the corresponding period last year According to IRDA data, out of the US$ 5.46 billion premium underwritten by the industry during the April-December 2013 period, US$ 3.24 billion came from the four public sector companies as compared to US$ 2.91 billion during the same period in 2012. The Gross Premium underwritten by public sector non-life insurers for the April- December 2013 period posted year-on-year growth of 11.37 per cent as compared to the year-on-year growth of 7.93 per cent posted by private sector non-life insurers 1/10/2018 Dr. Amit Gupta 25
  26. Insurance Job Profiles in India The Indian insurance industry churns out large volume of jobs every year. This industry is so vast that you would find attractive opportunities in the fields of general insurance, health insurance, finance insurance, travel insurance, online insurance and not to forget the life insurance. However, some of the specific areas of expertise in this industry include: Agent and Broker: Insurance agents/ brokers are the people who give product advice to the clients in order to sell company's product. Customer Service Agent: the person in-charge of this post needs to interact with the customer on daily basis in the agency to update policy as well as coverage details. Claims Adjuster: the office holder needs to ascertain the range of damage in case of accidents and see if the insurance policy can cover it. He/ she make way for settlement between the insurance company and its customers. Actuary: this is one of the very crucial insurance jobs. The person in-charge of this office needs to analyze the risks involved in creating the insurance policies in the areas of business, property or life & death of the person. To find a job in this area, the aspirant needs to be Mathematics, Econometrics, Statistics or Computer Science graduate. MBAs in finance can also apply for the post. Risk Manager: the person needs to spot the risk and suggest the ways to tackle such risks. Service Representatives: this profile demands an individual to act as a medium between the insurance companies and agents. Loss Control Specialist: the office holder needs to look into safety measures so that accidents at the workplace which can lead to financial losses can be avoided. Underwriter: the office holder needs to determine the applicant's chances of risks and whether the policy chosen by him/ her meets the insurance standard. 1/10/2018 Dr. Amit Gupta 26
  27. Indian Insurance Industry - Challenges New Comer poses threat - With more companies coming up everyday with the growing demand of the industry the markets very competitive. Until and unless the existing companies makes a mark and create their very own brand name it would be quite tough to sustain their position in the market. There is also a probability of big companies taking over the new emerging companies. Supplier Power: The people providing the capital don't act as big terror as opportunity always lies in the big hands and they can any day tempt good insurer from small companies to their own company. Buyer Power: Individual never stands a chance in front of big corporate sectors as they dominate the insurance industries with high potential of negotiation power. Presence of substitutes: The insurance industry is full of replacement option and the large insurance companies offers the same service as of others be it in any sector of home, commercial, auto, health or life. 1/10/2018 Dr. Amit Gupta 27

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