Contents

What is Insurance?
Evolution Division of Insurance

What is INSURANCE?
Insurance, in law and economics, is a form of risk management

primarily used to hedge against the risk of a contingent loss.

Insurance is defined as the equitable transfer of the risk of a potential

loss, from one entity to another, in exchange for a premium.

Insurance rate is a factor used to determine the amount, called the

premium, to be charged for a certain amount of insurance coverage

Risk management, the practice of appraising and controlling risk, has

evolved as a discrete field of study and practice

Evolution India
1818 - Oriental Life Insurance Company 1st Insurance Company.

1870 - Bombay Mutual Life Assurance Society 1st Life Insurance Company.
1912 - The Indian Life Assurance Companies Act enacted the 1st Law to Regulate the Life Insurance Business. 1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life & non-life insurance businesses.

Contd..

1938: Earlier legislation consolidated & amended the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian & foreign insurers & provident societies are taken over by the central government & nationalized.

LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The first General Insurance Company established in the year 1850 in Calcutta by the British.

DIVISION OF INSURANCE SECTOR

INSURANCE

GENERAL INSURANCE

LIFE INSURANCE

FIRE INSURANCE

MARINE INSURANCE

MEDICLAIM

MOTOR VEHICAL

Factors affecting service sector

Five environmental variables that affect all industries

Customers Competitors Government Technology and Globalization -are forcing rapid changes in the service sector.

In addition, there are four factors of particular

importance to service providers

change in how quality is perceived cost control customer services and the new definitions of the customer.

Milestones in GIC
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. The United India Insurance Company Ltd. GIC incorporated as a company.

Contributors
Life Insurers: Allianz Bajaj Life Insurance Co. Ltd. AMP Sanmar Assurance Co. Ltd. Birla Sun Life Insurance Co. Ltd. Dabur CGU Life Insurance Company Pvt. Ltd. HDFC Standard Life Insurance Co. Ltd. ICICI Prudential Life Insurance Co. Ltd. ING Vysya Life Insurance Co. Pvt. Ltd. Life Insurance Corporation of India. Max New York Life Insurance Co. Ltd. Metlife India Insurance Co. Pvt. Ltd. Om Kotak Mahindra Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. Tata AIG Life Insurance Co. Ltd.

Contributors
Non-Life Insurers: Bajaj Allianz General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd. IFFCO Tokyo General Insurance Co. Ltd. National Insurance Co. Ltd. New India Assurance Co. Ltd. Oriental Insurance Co. Ltd. Reliance General Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd. Tata AIG Life Insurance Co. Ltd. United India Insurance Co. Ltd Reinsurers: General Insurance Corporation of India.

Contribution to growth:
Currently, the insurance sector size is estimated at

Rs.500 billion. On account of intense marketing strategies adopted by private insurance players, the market share of state owned insurance companies like GIC, LIC and others have come down to 70% in last 4-5 years from over 97%. The private insurance players despite the sector is still regulated has been offering rate of return (RoR) to its policy holders which is estimated at about 35% as against 20% of domestic insurance companies.

Contribution to growth:
LIC and GIC have limited number of policies to offer to

their subscribers Private insurance companies offer many policies and the premium amount as well as the maturity period is much competitive as against those of government insurance companies. The private sector insurance players have started exploring the rural markets in which until recently, the state owned companies had the monopoly. Indias life insurance premium, as a percentage of GDP is 1.8%

Future of the Sector:

Indian insurance sector is likely to register unprecedented growth of 200% and attain a size of Rs. 2000 billion by 2009-10 A private sector insurance business will achieve a growth rate of 140% as a result of aggressive marketing technique being adopted by them against 35-40% growth rate of state owned insurance companies. In rural markets, the share of private insurance players would increase substantially as these have been able to generate a faith among their rural consumers.

Insurance Sector - Emerging Areas:

Demand for Pension Plans Two relatively modern trends affect life insurance business in India significantly: Joint Family System and elderly are increasingly having to fend for themselves Separateness of Banking and Insurance Bank assurance Role of Information Techno-logy Using Postal Network Creating Insurance awareness Innovative Products

CHANGE IN TRENDS
From price point of view
Different companies are providing polices of insurance

at competitive prices Even the allocation charges under policies is also decreased The insurance agent commission is also fixed and reduced so that the customer can get the best.

FROM CUSTOMER AND SERVICE POINT OF VIEW Globalization - "The Dynamic Force"
MNCs - "The New Path Maker"
More customer oriented Mostly better service oriented

More competitive
Better satisfaction More value addition

Strategic development

FROM PROMOTION POINT OF VIEW

Computerization
Internet Electronic Clearance Service (ECS) Call Centers and SMS services

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 2002: Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode 2007: First Online Insurance portal, https:/// 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 (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Minimum capital requirement for direct life and Non-life Insurance company is INR1000 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