LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW

T.S.VIJAYAN

Chairman, LIC of India

President, Insurance Institute of India

THEME OF THE PRESENTATION

Future challenges in Life Insurance Business in

India

• India is the seventh largest country in the world with a

population of around 1100 million.
• India is the second most populous country in the world,
next only to China.
• It has 28 states and 7 Union Territories with distinct
cultural backgrounds.
• India is known for its diversity with multi varied socio-
economic conditions and languages. It has many

geographical features and a rich history .

• India is the largest democratic country in the world with a

strong judicial framework .

The middle class segment is 250 million strong. It has
aspirations and is ambitious.
India has the 4th largest economy based on Purchasing Power
Parity.

• Indian GDP is growing at an average of 9% over the last

few years.
 The total individual policies serviced by all life companies in
India are around 270 millions of which LIC alone has around
250 million.

• Total premium of all life companies is only about 4% GDP.

• It still leaves a lot of potential for the life companies to

grow and prosper in India.

Since Independence, in 1947 India had followed a socialistic

pattern of economy, wherein government intervention and
investment were high.

• Even then there was a strong private sector participation

since the time of Independence .

The history of Life Insurance in India

• The birth and growth of the Insurance sector in India is

quite breath taking.

• In the year 1818 the Oriental Life Insurance Company was

started at Kolkata.

• In 1912 the Indian Life Assurance Companies Act was

enacted as the first statute to regulate the Life Insurance
Business.

• In 1938 the earlier legislation was consolidated and

amended to become the Insurance Act with the objective
of protecting the interests of the insuring public.
 • In 1956, the LIC of India was formed under the LIC
Act,1956 with a capital contribution of Rs. 5 crores i.e $
1.2 million at current rates from the Government of India,

nationalising 245 life insurance companies .

• In 1999, the Insurance Regulatory and Development

Authority popularly known as IRDA was created by an act
of the Parliament to regulate all insurance companies and
businesses in India.
• IRDA has evolved into an effective regulator and it has
facilitated the entry and growth of private players in the
insurance sector.
• Since then the growth of the insurance industry in India
has never been the same again.

• Life Insurance is a sun rise industry in India.

• Many major international players are operating in
collaboration with Indian partners. The Joint Ventures are
backed by strong capital base and latest technology.
• The sector was opened up for private players in the year

.
2000 Currently there are 19 companies operating in
India in addition to LIC of India.
• I am proud to state that LIC is the dominant player.

LIC Highlights

Assets as on 31.03.2008 : $ 185 billion

No. of policies : 250 million

No. of employees : 1,13,000

No. of agents : 1.2 million

 • After opening up of the sector the life insurance industry
has grown leaps and bounds. The industry has earned $
45 billion total premium income during the F.Y 2007-08.

• The life insurance companies are the largest institutional

investors in India.

• The life insurance companies have brought in huge

capital for investment and expansion. They have
generated good employment opportunities, both direct
and in-direct.

• The latest technology is being introduced by all the

companies thereby improving the servicing standards .

• Innovative and market driven products are being offered

by all the companies.
• All companies are building the distribution channels with
strong tied agency network.
• Alternate distribution channels are also being developed in
order to strengthen the overall process of procuration of
business and deliver of service.
• India has a total of 2.5 million agents of which 50% are
with LIC alone.
• There is a sharp increase in the remuneration of life
insurance professionals

Challenges : Many

• Professionals and experts are in short supply. Man power

requirement has increased manifold.
Increase in salaries to employees leading to high levels of
attrition. Retention of employees is a major challenge.

India being a vast country and with huge population, is a

challenge for the life companies.

• Designing products for the people of various economic

strata is a daunting task indeed .

Prosperity of all companies depends upon their capability to
innovate and include all sections of the society into their
business portfolio.

• Micro Insurance and financial inclusion will be major

challenges for all the companies.
• There is a shift from traditional endowment policies to
unit linked policies.

There is a shift from long term policies to short term.

• Customers are expecting higher returns and thereby a

strong emphasis on unit linked plans.

• When stock markets are volatile can the life insurance

companies overcome the turbulence? Are they equipped
to tide over the storm?

• One of the key drivers of the Indian economy has been

the dramatic increase of the urban population .

• Urban India today is already more populous than the

entire United States. By 2025, it will exceed the current
population of the European Union.
Apart from this, the real potential lies in the rural India where
prosperity is on the rise

• Go Rural is the slogan for most of the companies in India

today.

Key Issues
• Building institutions for development of self regulation for better market
conduct
• Development professionalism and organizing research for industry to
develop on scientific lines
• Ensuring profitability and return to stakeholders by cost competitive

policies .
Thank You