INTRODUCTION:

 Insurance = Collective bearing of

Risk.
 Basic Human trait is to be averse to
the idea of risk taking.
 Insurance, whether life or non-life,
provides people with a reasonable
degree of security and assurance
that they will be protected in the
event of a calamity or failure of any
sort.
  Fiveenvironmental variables that
affect all industries-
 Customers
 Competitors
 Government
 Technology and
SECTOR

 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.
ORIGIN AND GROWTH OF INSURANCE
SECTOR:
 Insurance in modern form originated in the
Mediterranean during the 13th century. (The
earliest references to insurance- found in
Babylonia, the Greeks and the Romans).
 Marine insurance is the oldest form of insurance
followed by life insurance and fire insurance.
 The history of life insurance in India dates back
to 1818 when it was conceived as a means to
provide for English Widows.
 A higher premium was charged for Indian lives
than the non-Indian lives (considering to be
more riskier for coverage).
ORIGIN AND GROWTH OF INSURANCE
SECTOR:
 Oriental life Insurance Company was
incorporated at Calcutta in 1818, followed by
Bombay Life Assurance Company in 1823 and
Triton Insurance Company for General
Insurance in 1850. By 1938 there were 176
insurance companies.
 Insurance regulation formally began in India
through the passing of two acts
 the Life Insurance companies Act of 1912 and
 the Provident Fund Act of 1912.
 However the first comprehensive legislation
was introduced with the Insurance Act of 1938
that provided strict state control over insurance
business in the country.
ORIGIN AND GROWTH OF INSURANCE
SECTOR:
 The business of India Insurance grew at
a faster place as competition amongst
the Indian companies intensified.
 The decision of nationalization of life
insurance business took place in 1956
when 245 Indian and foreign insurance
provident societies were first merged
and then nationalized.
 It paved the way towards the
establishment of one nationalized
monopoly corporation called Life
Insurance Corporation (LIC)
ORIGIN AND GROWTH OF INSURANCE
SECTOR:
 Nationalization was justified on the grounds
that it would create the much needed funds
for rapid industrialization and self-reliance
in heavy industries.
 General Insurance followed suit and 1968;

 The Insurance Act was amended to allow for

social control over the general insurance
business.
 Subsequently in 1973, non-life insurance
business was nationalized and the General
Insurance Business (Nationalization) Act,
1972 was promulgated.
ORIGIN AND GROWTH OF INSURANCE
SECTOR:
 Till
end of FY 1999-2000, two state-run
insurance companies, namely, Life
Insurance Corporation (LIC) and
General Insurance Corporation (GIC)
were the monopoly insurance
providers in India.
 Under GIC there were four subsidiaries
 National Insurance Company Ltd.
 Oriental Insurance Company Ltd.
 New India Assurance Company Ltd.
 United India Assurance Company Ltd.
ORIGIN AND GROWTH OF INSURANCE
SECTOR:
 In fiscal 2000-01, the Indian federal
government lifted all entry restrictions
for private sector investors.
 Foreign investment insurance market
was also allowed with 26 percent cap.
 GIC was converted into India's national
reinsure from December, 2000
 All the subsidiaries working under the
GIC umbrella were restructured as
independent insurance companies.
INSURANCE SECTOR REFORMS
 In 1993, Malhotra Committee-
headed by former Finance
Secretary and RBI Governor R.N.
Malhotra- was formed
 To evaluate the Indian insurance
industry and recommend its future
direction.
 The Malhotra committee was set up
with the objective of
complementing the reforms
initiated in the financial sector.
INSURANCE SECTOR REFORMS

The reforms were aimed at:

 Creating a more efficient and
competitive financial system suitable
for the requirements of the economy
 Keeping in mind the structural
changes currently underway and
 Recognizing that insurance is an
important part of the overall financial
system where it was necessary to
address the need for similar reforms.
  Structure
 Government should take over the holdings of GIC
and its subsidiaries.
RECOMMENDATIONS

 All the insurance companies should be given

greater freedom to operate.
 Competition
 Private Companies with a min 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.
  Regulatory Body
 The Insurance Act should be changed.
 An Insurance Regulatory body should be set up.
RECOMMENDATIONS

 Controller of Insurance- a part of the Finance

Ministry- should be made independent.
 Investments
 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
 Customer Service
 LIC should pay interest on delays in payments
beyond 30 days.
 Must be encouraged to set up unit linked pension
plans.
 Computerization of operations and updating of
 The Committee:
 Emphasized that in order to improve the
customer services and increase the coverage
RECOMMENDATIONS

of insurance policies, industry should be

opened up to competition.
 Felt the need to exercise caution as any
failure on the part of new players could ruin
the public confidence in the industry.
 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.
 Proposed setting up an independent
regulatory body- The Insurance Regulatory
and Development Authority.
  1912 - The Indian Life Assurance Companies
Act enacted as the first statute to regulate the
life insurance business.
 1928 - The Indian Insurance Companies Act
MILESTONES IN LIC

enacted to enable the government to collect

statistical information about both life and non-
life insurance businesses.
 1938 - Earlier legislation consolidated and
amended to by the Insurance Act with the
objective of protecting the interests of the
insuring public.
 1956 - 245 Indian and foreign insurers and
provident societies taken over by the central
government and 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.
  1907 - The Indian Mercantile Insurance Ltd.
set up, the first company to transact all
classes of general insurance business.
MILESTONES IN GIC

 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.
 1968 - The Insurance Act amended to regulate
investments and set minimum solvency
margins and the Tariff Advisory Committee set
up.
 1972 - The General Insurance Business
(Nationalization) Act, 1972 nationalized the
general insurance business in India with effect
from 1st January 1973.
 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.

 Life Insurers:
 Allianz Bajaj Life Insurance Co. Ltd.

 AMP Sanmar Assurance Co. Ltd.

 Birla Sun Life Insurance Co. Ltd.

CONTRIBUTORS

 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.

 Non-Life Insurers:
 Bajaj Allianz General Insurance Co. Ltd.

 ICICI Lombard General Insurance Co. Ltd.

 IFFCO Tokyo General Insurance Co. Ltd.

CONTRIBUTORS

 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.
 India’s 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
 Bancassurance
 Role of Information Techno-logy
 Using Postal Network

 Creating Insurance awareness

 Innovative Products