Professional Documents
Culture Documents
Prepared By
Kunjal Shah
Roll No : 41
Under Guidance Of
Prof. Mrs. Shruti Chavarkar
Executive Summary
2
Life insurance in its modern form came to India from England in 1818 with the formation of
Oriental Life Insurance Company. The Government of India nationalized the life insurance
industry in January 1956 by merging about 245 life insurance companies and forming Life
Insurance Corporation of India (LIC), which started functioning from 01.09.1956. For years
thereafter, insurance remained a monopoly of the public sector. It was only after seven years of
deliberation and debate that R. N. Malhotra Committee report of 1994 became the first serious
document calling for the re-opening up of the insurance sector to private players.
The sector was finally opened up to private players in 2001.The Insurance Regulatory and
Development Authority, an autonomous insurance regulator set up in 2000, has extensive powers
to oversee the insurance business and regulate in a manner that will safeguard the interests of the
insured. Insurance is a federal subject in India. There are two legislations that govern the sectorThe Insurance Act-1938 and the IRDA Act- 1999. The insurance sector in India has come a full
circle from being an open competitive market to nationalization and back to a liberalized market
again.
Objectives:
To compare cost efficiency and financial performance of Life Insurance Corporation of
India and private sector life insurance companies in India.
To understand the concept and mechanism of insurance
To predict the volume of new business and total premium of life insurance sector in
India.
To encourage the expansion of capital markets,
To enable the investors to take a close view of the fund performance over the years,
To monitor the insurance schemes transactions.
INDEX
3
Sr
no.
Chapter names
1 Introduction
1.1 Brief history of Insurance
1.2 Principles of Insurance
1.3 Functions of Insurance
Page
no.
6-17
9
10
16
1823
19
21
22
3 Life Insurance
3.1 Life Insurance in India
3.2 Features of Life Insurance Contract
3.3 Types of Life Insurance Policies
3.4 Profile of Life Insurance Companies in India
2432
25
28
29
32
3336
3739
4056
4148
41
43
45
47
4955
6.2 Prediction of New Business & Total Premium
49
6.2.1 Prediction of New Business for Public Sector
6.2.2 Prediction of New Business for Private Sector 50
6.2.3 Prediction of Total Premium for Public Sector 52
6.2.4 Prediction of Total Premium for Private Sector 54
6.3 Cost efficiency of Life insurnce Companies
56
5759
58
59
60
8 Conclusion
61
Biblography
5
CHAPTER 1.
INTRODUCTION
An individual
buys an
insurance
policy
Individual pays a
premium to the
insurance
company
Insurance refers to the market for insurance in India which covers both the public and private
sector organisations. It is listed in the Constitution of India on the in the Seventh Schedule
meaning it can only be legislated by the central government.
Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange
for payment. It is a form of risk management primarily used to hedge against the risk of a
contingent, uncertain loss.
An insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder,
is the person or entity buying the insurance policy. The amount of money to be charged for a
certain amount of insurance coverage is called the premium. Risk management, the practice
of appraising and controlling risk, has evolved as a discrete field of study and practice.
The transaction involves the insured assuming a guaranteed and known relatively small loss in
the form of payment to the insurer in exchange for the insurer's promise to compensate
(indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract,
called the insurance policy, which details the conditions and circumstances under which the
insured will be financially compensated.
The insurance sector has gone through a number of phases by allowing private companies to
solicit insurance and also allowing foreign direct investment. India allowed private companies in
insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014.
[1]
However, the largest life-insurance company in India, Life Insurance Corporation of India is
still owned by the government and carries a sovereign guarantee for all insurance policies issued
by it.
Definition
In financial sense:
According to Reegel and Miller, Insurance is a social device whereby the uncertain risks
of individuals may be combined in a group and thus made more certain,small periodical
contributions by the individuals providing a fund,out of which,those who suffer losses may be
reimbursed.
In legal sense
Insurance is a contracted agreement whereby one party agrees in consideration of the price paid
to him (premium) to compensate another party for losses.
By 1870, 174 companies ceased to exist, when British Parliament enacted Insurance Act 1870.
These companies however, insured European lives. Those Indians who were offered insurance
cover were treated as sub-standard lives and were accepted with an extra premium of 15% to
20%. By the end of the 18th century, Lloyd's had brewed enough business to become one of the
first modern insurance company.
making a full disclosure of al material facts rests primarily on the insured. Examples of material
facts are:
a) In life insurance : Information relating to age, income, health, diseases, family
history, nature of business or profession.
b) In fire insurance, it is relating to activities of firm, condition of godown, the detailsof
the goods stored, whether such goods are of hazardous nature. In motor insurance,
details of the drivers, condition of vehicle etc.
The whole truth must be disclosed about the subject matter of insurance, so that the
underwriter may know the extent of his risk and the amount he must charge for the insurance
policy as a premium. It is the duty of the insurer to disclose all the relevant facts about the
policy conditions and benefits. The facts should be disclosed at the time of entering into the
contract and if there are some changes subsequently, then the same should be intimated to the
insurer by the insured.
law.
c) The policy holder should have monetary relationship with the subject matter and the
insured risk must be capable of financial evaluations.
d) The relationship between the policy holder and the subject matter should be such that the
insured is economically benefited by the survival existence of the subject matter or will
suffer economic loss by the death or non- existence of the subject matter.
e) The insurable interest must exist both at the time of the proposal and at the time of
claims in the fire insurance but in the case of life insurance it may not be present at the
time of claim, if the policy is assigned. In case of marine insurance it must exist at the
time of claim.
Insurable interest is the basis of legality of insurance contracts. In the absence of the
insurable interest, the insurance contract becomesvoid and such void contracts are contracts
against public interests.
Principle of indemnity:
The very foundation of every rule which has been applied to insurance law is that the
contract of insurance contained in a marine or fire policy is a contract of indemnity only. If ever
a preposition is brought forward which is in variance with it, that is to say, which either will
prevent the assured from obtaining a full indemnity or which gives the assured more than a full
indemnity, that proposition must certainly be wrong.
The principle of indemnity implies that on the happening of an event insured against, the
insurer undertakes to place the insured, in the same pecuniary (monetary) position that he
occupied immediately before the event. Indemnity means the exact financial compensation,
which is paid to the insured. According to this contract, the insured should be neither better off
nor worse off after receiving the insured amount in case of loss due to eventualities.
The main object of this principle is to ensure that the insured is not able to use this contract
for speculation or gambling. The indemnity prevents the insured from benefiting under the
contract and to reduce the impact of moral hazards. The principle is applicable to all types of
contract except life insurances, personal accident and sickness insurance. Under the contract of
12
insurance, the sum assured will be paid by the insurer when the person dies, due to the fact that
life cannot be indemnified. The principle of indemnity does not apply to personal insurance
because the amount of loss is not easily calculable there.
The measure of indemnity is decided, at the time of entering into the contract itself. In the
event of claim the insured must:
a) Prove that he / she has sustained a monetary loss.
b) Prove the extent and value of his / her loss.
c) Transfer any rights which he / she may have for recovery from another source to the
insurer, if he / she has been fully indemnified.
Principle of subrogation:
This principle is also a corollary to the principle of indemnity. Subrogation may be
defined as the transfer of rights and remedies of the insured to the insurer who has compensated
the insured in respect of the loss.
a) It literally means, to stand in place of. It is the right of one person to stand at law in the
place of another and to avail all rights and remedies of that other person.
b) Often when a claim occurs there may be two avenues of recovery. Suppose A drives
negligently and causes an accident damaging Bs car. If Bs car is insured then two
options are open to B to recover his loss. B can sue A for damages or he can claim
from his insurer. If B pursues both avenues he will receive double compensation. To
prevent B from profiting from his loss subrogation is used in terms of which once the
insurer has paid B the insurer assumes all Bs rights to sue A. this ensure that principle of
indemnity is preserved.
13
a) The insurer cannot be subrogated to the insureds right of action until it has paid the
insured and made good the loss.
b) The insurer can be subrogated only to actions, which the insured would have brought
him.
c) The insurer must not prejudice the insurers right of subrogation. Thus the insured may
not compromise or renounce any right of action he has against the 3 rd party, if by doing
so he could diminish his loss.
d) Subrogation against the insurer. Just as insured cannot profit from his loss the insurer
may not make a profit from the subrogation rights. The insurer is only entitled to recover
the exact amount they paid as indemnity nothing more. If they recover more the balance
should be given to the insured.
e) Subrogation gives the insurer the right of salvage.
Principle of Contribution:
The principle is applicable to all types of insurance contracts, except life insurance.
Where an insurer gets the subject matter insured with more than one insurer, in case of loss or
damage to the insured property, the insurers shall contribute towards the claim in proportion to
the sum assured with each.
Contribution condition is a corollary to the principle of indemnity. If an insured obtains
more than one policy covering the same risk, he cannot recover in total more than a full
indemnity. The essentials of this principle are:
a)
b)
c)
d)
16
Insurance relieves the businessmen from security investments, by paying small amount of
premium against larger risks and uncertainty.
Contributes towards the development of large industries
Insurance provides development opportunity to large industries having more risks. Even the
financial institutions may be prepared to give credit to sick industrial units which have insured
their assets including plant and machinery.
Source of Earning Foreign Exchange
Insurance is an international business. The country can earn foreign exchange by way of issue of
insurance policies.
Risk Free Trade
Insurance promotes exports insurance, which makes the foreign trade risk free with the help of
different types of policies under marine insurance cover.
17
CHAPTER 2
REGULATORY AUTHORITY OF
INSURANCE
competitive financial system suitable for the requirements of the economy keeping in mind the
structural changes currently underway and recognising 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 stake in the insurance Companies to be brought down to 50%. 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.
33
(iv) Investment
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 (their current
holdings to be brought down to this level over a period of time)
(v) Customer service
LIC of India should pay interest on delays in payments beyond 30 days. Insurance companies
must be encouraged to set up unit linked pension plans. Computerisation of operations and
updating of technology to be carried out in the insurance industry. The committee emphasised
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. Hence, it was decided to allow competition in a limited way by stipulating the
19
minimum capital requirement of Rs.100 crores. 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.
21
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.
The regulatory body for insurance IRDA has been established with the following mission:
To protect the interests of the policy holders, to regulate, promote and ensure orderly growth of
the insurance industry and for matters connected therewith or incidental thereto.
CHAPTER 3
LIFE INSURANCE
23
companies grew, the government began to exercise control on them. The Insurance Act was
passed in 1912, followed by a detailed and amended Insurance Act of 1938 that looked into
investments, expenditure and management of these companies' funds.
In 1914 there were only 44 companies; by 1940 this number grew to 195. Business in force
during this period grew from Rs.22.44 crores to Rs.304.03 crores (1628381 polices). Life fund
steadily grew from Rs.6.36 crores to Rs.62.41 crores. In 1938, the insurance business was
heavily regulated by enactment of insurance Act 1938 (based on draft bill presented by Sir
N.N.Sarcar in Legislative Assembly in January 1937). From here onwards the growth of life
insurance was quite steady except for a setback in 1947-48 due to aftermath of partition of India.
In 1948, there were 209 insurances, with 712.76 crores business in force under 3,016, 000
policies. The life fund by then grew to 150.39 crores.
By the mid-1950s, there were around 170 insurance companies and 80 provident fund societies
in the country's life insurance scene. However, in the absence of regulatory systems, scams and
irregularities were almost a way of life in most of these companies. Despite the mushroom
growth of many insurance companies, the per capita insurance in Indian was merely Rs.8.00 in
1944 (against Rs.2,000 in US and Rs.600 in UK), besides some companies were indulging in
malpractices, and a number of companies went into liquidation. Big industry houses were
controlling the insurance and banking business resulting in interlocking of funds between banks
and insurance companies. This shook the faith of the insuring public in insurance companies who
were seen as custodians of their savings and security. The nation under the leadership of Pandit
Jawaharlal Nehru was moving towards socialistic pattern of society with the main aim of
spreading life insurance to rural areas and to channelize huge funds accumulated by life
insurance companies to nation building activities. The Government of India nationalized the life
insurance industry in January 1956 by merging about 245 life insurance companies and forming
Life Insurance Corporation of India (LIC), which started functioning from 01.09.1956. After
completing the arduous task of integration of about 245 life insurance companies, LIC of India
gave an exemplary performance in achieving various objectives of nationalization. The non-life
insurance business continued to thrive with the private sector till 1972. Their operations were
restricted to organized trade and industry in large cities. The general insurance industry was
nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four
companies- National Insurance Company, New India Assurance Company, Oriental Insurance
25
Company and United India Insurance Company. These were subsidiaries of the General
Insurance Company (GIC). For years thereafter, insurance remained a monopoly of the public
sector. It was only after seven years of deliberation and debate that R. N. Malhotra Committee
report of 1994 became the first serious document calling for the re-opening up of the insurance
sector to private players. The sector was finally opened up to private players in 2001.The
Insurance Regulatory and Development Authority, an autonomous insurance regulator set up in
2000, has extensive powers to oversee the insurance business and regulate in a manner that will
safeguard the interests of the insured. Insurance is a federal subject in India. There are two
legislations that govern the sector- The Insurance Act- 1938 and the IRDA Act- 1999. The
insurance sector in India has come a full circle from being an open competitive market to
nationalization and back to a liberalized market again. Tracing the developments in the Indian
insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.
26
3. Utmost good faith: The principle of utmost good faith should be observed by both the
parties in life insurance. At the time of taking a policy, the policy holder should disclose
27
all the material facts. Similarly the insurer is bound to exercise same good faith in
disclosing facts.
4. Warranties: Warranties are an important feature of life insurance contract. Warranties
are integral part of contract i.e. they form the basis of the contract between proposer and
insurer. The contract shall become null and void if any statement whether material or non
material facts are untrue. The policy insured will contain that the proposal and the
personal statement will form part of the policy and be the basis of the contract.
5. Assignment and nomination: Assignment and nomination are essential features of life
insurance policy. In the case of nomination, a person or persons to whom the money
secured by the policy shall be paid on the death of insured against but the rights of
insured are not transferred. In the case of assignment, the rights are transferred to the
assignee for some legal cconsideration or love and affection.
6. Premium: Premium is the price paid by the insured for the risk or loss undertaken by the
insurer. The premium is paid monthly, quarterly, half yearly or in annual instalment for a
certain period.
7. Certainty of event: In life insurance policy the insurer has to pay the insured amount at
the time of death of the insured or at maturity which is certain.
28
Whole life insurance policies do not have any fixed term or end date and is only payable to
the designated beneficiary after the death of the policy holder. The policy owner does not get
any monetary benefits out of this policy. Because this type of insurance involves fixed known
annual premiums, it's a good option to ensure guaranteed financial benefits for surviving
family members.
Money Back Plan
With a money back plan, policyholder receives periodic payments, which are a percentage of
the entire amount insured, during the lifetime of policy. It's a plan that offers insurance
coverage along with savings. These policies provide for periodic payments of partial survival
benefits during the term of the policy itself. A unique feature associated with this type of
policies is that in the event of death of the insured during the policy term, the designated
beneficiary will get the full sum assured without deducting any of the survival benefit
amounts, which have already been paid as money-back components. Moreover, the bonus on
such policies is also calculated on the full sum assured.
Pension Plan
Pension plans are different from other types of life insurance because they do not provide any
life insurance cover, but ensure a guaranteed income, either for life or for a certain period.
The Policyholder makes the investment for a pension plan either with a single lump sum
payment or through installments paid over a certain number of years. In return, he gets a
specific sum every year, every half-year or every month, either for life or for a fixed number
of years. In case of the death of the insured, or after the fixed annuity period expires for
annuity payments, the invested annuity fund is refunded, usually with some additional
amounts as per the terms of the policy.
Endowment Policy
It is the most popular life insurance plan. This policy combines risk cover with objective of
savings and investment. If the policy holder dies during the policy period, he will get the
assured amount. Even if he survives he will receive the assured amount. The advantage of
this policy is if the policy holder survives after the completion of policy tenure, he receives
assured amount plus additional benefits like bonus from the insurance company. Designed
primarily to provide a living benefit, along with life insurance protection, the endowment
29
policy makes a good investment if policyholder wants coverage, as well as some extra
money.
30
PUBLIC SECTOR
Life Insurance Corporation of India
Life Insurance Corporation of India (LIC) is an autonomous body authorized to run the
life insurance business in India with its Head Office at Mumbai. About 154 Indian
insurance companies, 16 non-Indian companies and 75 provident fund societies were
operating in India at the time of nationalization. Nationalization was accomplished in two
stages; initially the management of the companies was taken over by means of an
Ordinance, and later, the ownership by means of a comprehensive bill. The Parliament of
India passed the Life Insurance Corporation Act on the 19 th of June 1956, and the Life
Insurance Corporation of India was created on 1 st 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.
PRIVATE SECTOR
The Government having tried various models for the insurance industry such as privatization
with negligible regulation (pre 1956) and nationalization (1956-2000) and having observed sub
optimal performance of the sector, resorted to adopting a hybrid model of both these, resulting in
privatization of the sector with an efficient regulatory mechanism (post 2000). This was initiated
31
with the aim of making the industry competitive so that there are more players offering a greater
variety of products over a large section of the population. The following companies are entitled
to do insurance business in India.
CHAPTER 4
LIFE INSURANCE CORPORATION OF
INDIA
( Public sector company)
32
33
Indian Mercantile
General Assurance
The first 150 years were marked mostly by turbulent economic conditions. It witnessed, India's
First War of Independence, adverse effects of the World War I and World War II on the economy
of India, and in between them the period of world wide economic crises triggered by the Great
depression. The first half of the 20th century also saw a heightened struggle for India's
independence. The aggregate effect of these events led to a high rate of and liquidation of life
insurance companies in India. This had adversely affected the faith of the general public in the
utility of obtaining life cover.
Nationalisation in 1955
In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by owners of private
insurance agencies. In the ensuing investigations, one of India's wealthiest businessmen, Sachin
Devkekar, owner of the Times of India newspaper, was sent to prison for two years.
Eventually, the Parliament of India passed the Life Insurance of India Act on June 19, 1956
creating the Life Insurance Corporation of India, which started operating in September of that
year. It consolidated the life insurance business of 245 private life insurers and other entities
offering life insurance services, this consisted of 154 life insurance companies, 16 foreign
companies and 75 provident companies. The nationalisation of the life insurance business in
India was a result of the Industrial Policy Resolution of 1956, which had created a policy
framework for extending state control over at least seventeen sectors of the economy, including
life insurance.
Growth as a monoply
From its creation, the Life Insurance Corporation of India, which commanded a monopoly of
soliciting and selling life insurance in India, created huge surpluses, and by 2006 was
contributing around 7% of India's GDP
The Corporation, which started its business with around 300 offices, 5.7 million policies and
acorpus of INR 45.9 crores (US$92 million as per the 1959 exchange rate of roughly 5 for
34
US$1),[5] had grown to 25,000 servicing around 350 million policies and a corpus of over
800000 crore (US$130 billion) by the end of the 20th century.
Liberalisation post 2000s
In August 2000, the Indian Government embarked on a program to liberalise the Insurance
Sector and opened it up for the private sector. Ironically, LIC emerged as a beneficiary from this
process with robust performance, albeit on a base substantially higher than the private sector.
In 2013 the First Year Premium compound annual growth rate (CAGR) was 24.53% while Total
Life Premium CAGR was 19.28% matching the growth of the life insurance industry and also
outperforming general economic growth.
The Economic Times Brand Equity Survey 2012 rated LIC as the No. 6 Most Trusted
Service Brand of India.
From the year 2006, LIC has been continuously winning the Readers' Digest Trusted
brand award.
Voted India's Most Trusted brand in the BFSI category according to the Brand Trust
Report for 4 continuous years - 2011-2014 according to the Brand Trust Report
Category of employees
Total Number
35
No. of Women
Class-I Officers
31,420
6,292
Development Officers
26,621
1,033
62,347
17,542
Total
1,20,388
24,867
Agency
LIC had 11,95,916 agents as on 31 March 2014, out of which the number of active agents were
11,32,677 (94.71%)
As per IRDA Annual Report 2012-13 the Total Life Fund of the Life Insurance Industry
was Rs.17,44894 crore. The increase in Life Funds during 2013-14was Rs.1,94,300 crore
compared to Rs.1,80,000 crore in 2012-13 showing a growth of 7.94 %
36
CHAPTER 6
HDFC Life Insurance
( Private sector company )
HDFC Life (HDFC Standard Life Insurance Company) is a long-term life insurance provider with its
headquarters in Mumbai, offering individual and group insurance.
It is a joint venture between Housing Development Finance Corporation Ltd (HDFC), one of India's
leading housing finance institution and Standard Life plc, leading well known provider of financial
37
savings & investments services in the United Kingdom. HDFC Ltd. holds 72.37% and Standard Life
(Mauritius Holding) Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others.
Corporate History
The Insurance Regulatory and Development Authority (IRDA) was constituted in
1999 as an autonomous body to regulate and develop the insurance industry. The
IRDA opened up the market in August 2000 with the invitation for application for
registrations. HDFC Life was established in 2000 becoming the first private sector
life insurance company in India
By 2001, the company had its 100th customer, strengthened its employee force to
100 and had settled its first claim. HDFC Life launched its first TV advertising
campaign 'Sar Utha Ke Jiyo' in 2005. In 2006, a study conducted by the Brand Equity
Economic Times had put HDFC Life at 29th rank in the most trusted Indian Brands
amongst the Top 50 Service Brands of 2010
The Insurance Regulatory and Development Authority (IRDA) gave accreditation to
HDFC Life for 149 training centres housed in its branches to cater to the mandatory
training required to be given as well as for other sales training requirements in
2009.
In 2012, it the first private life insurance company to bring back pension plans
under the new regulatory regime, with the launch of two pension plans - HDFC Life
Pension Super Plus and HDFC Life Single Premium Pension Super.
38
39
CHAPTER 6
DATA ANALYSIS FOR LIFE
INSURANCE COMPANIES.
40
41
This table shows the market share of public and private sector life insurance companies based on
total premium.
The total premium of Life Insurance Corporation of India increased continuously since 2000-01
to 2009-10.However a significant decline is noticed in market share from 99.98% in 2000-01 to
70.10% in 2009-10. While in case of private sector, the total premium income and market share
of total premium have both increased.
The market share of private sector life insurance companies on the basis of total premium has
increased from 0.02% in 2000-01 to 29.90% in 2009-10. It reflects that the private sector has
been successful in capturing the market share from Life Insurance Corporation of India.
42
43
This table shows the market share of public and private sector life insurance companies based on
Renewal premium.
The public sector recorded 99.99% market share based on renewal premium in the year 2000-01
but it has decreased to 73.64% in the year 2009-10. While that of the private sector recorded
0.01% in the year 2000-01 which increased to 26.36% in the year 2009-10. Private sector has
managed to take away nearly 26% of the market share from LIC of India. LIC of India is still the
market leader in this segment.
44
45
This table shows the market share of both the public and the private sector life insurance
companies based on total policies. The market share of LIC of India was 99.23% in the year
2000-01.It has decreased to 73.02% in the year 2009-10. While that of the private sector was
0.77% in the year 2000-01 and increased to 26.98% in the year 2009-10.
There are concerns over Life Insurance Corporation of Indias declining market share based on
total policies and concurrent rise of private insurers who have just entered ten years ago.
Innovative products, smart marketing and aggressive distribution channels has enabled private
life insurance companies to sell policies. As of today, Life Insurance Corporation of India has
retained the market share based on total policies.
46
47
This table shows the market share of public and private sector life insurance companies based on
New Business.
The market share of Life Insurance Corporation of India on the basis of the first year premium in
the year 2000-01 was 99.93% but it declined to 60.89% in 2008-09 and has slightly risen to
65.08% in 2009-10 while the market share of private sector life insurance companies was only
0.07% in 2000-01, which increased up to 39.11% in 2008-09 and slightly declined to 34.92% in
2009-10.The growth in first year premium of private sector was fuelled by sales of unit linked
products.
48
49
6.2.2
50
51
6.2.3
52
53
6.2.4
Sector
54
55
56
CHAPTER 7
SWOT ANALYSIS OF INSURANCE
INDUSTRY IN INDIA
57
1. Premiums rates will remain under pressure due to intense competition on more profitable
lines. Falling premium income without a corresponding reduction in claims is likely to
drive down profits.
2. Public and private sector insurers greater reliance on their investment portfolios to
generate sufficient income and gains for net profits would subject them to the volatility of
the financial markets.
3. Private insurers need to raise more capital otherwise growth could be constrained since
reliance on reinsurance for capital relief is not always viable or available.
4. Traditional distribution channels, especially tied agents, need to improve to match the
new product offerings.
5. There is general lack of transparency as financial and operational data for insurers are not
readily available as none of Indias insurers are directly listed on stock exchanges.
6. Like all developing economies on a fast track, the shortage of trained insurance
professionals and technicians at all levels cannot be remedied in the short term.
7. Natural catastrophes will always be present; the Indian sub-continent is vulnerable to
cyclones, floods, hurricanes and earthquakes, and until there is a national capacity
(similar to the terrorism pool) to manage losses, dependence on overseas reinsurers will
continue.
CONCLUSION
59
Insurance plays an important role in general life. Risk exist every where, to cover these
risk Insurance is very important. But the method or procedure of insurance need to be
change. As days goes needs & requirements of the people get change. Insurance includes
different-different products to fulfill the need of the people.
In our daily lives we encounter lot of risks which results in fiscal losses. One of the
excellent ways to safeguard these losses is through insurance. The insurance firms in
India take entire charge of any such losses against the payment forfeited every month in
the form of premium. Insurance is a commercial means for relocating risks and covering
fiscal losses.
Insurance is an integral part of any personal financial plan. The type of insurance and the
amount of coverage you obtain all depends on your unique financial and family
circumstances, and must be evaluated carefully.
Thus Insurance is a needy financial instrument that every individual should pursue for
covering the risk of his life and providing safety against life, property, liability, disability,
etc.
Bibliography
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Webliography
1)
2)
3)
4)
www.insuremagic.com
www.finance.cch.com
www.wikipedia.com
www.IRDA.org.in
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