Porters 5 Force New

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INTRODUCTION
In today's dynamic and competitive business environment, survival, growth and

profitability are the essence goals of all industries. Porter's Five Forces model is currently
being adopted as the powerful management tool of choice by many organizations. The
essence of this model is that it can help senior managers to make right decision and build and
sustain competitive advantages in the organization level. This document presents the
overview approach of Porter’s five forces framework across organizations. And critically
evaluation of porter’s five forces model mainly focused on identifying the benefits and
limitations of it and exploring some perceived issues or problems regarding implementation.
India’s rapid rate of economic growth over the past decade has been one of the more
significant developments in the global economy. This growth has its roots in the introduction
of economic liberalization in the early 1990s, which has allowed India to exploit its economic
potential and raise the population’s standard of living.
Health insurance and pension systems are fundamental to protecting individuals against
the hazards of life and India, as the second most populous nation in the world, offers huge
potential for that type of cover. Furthermore, fire and liability insurance are essential for
corporations to keep investment risks and infrastructure projects under control. Private
insurance systems complement social security systems and add value by matching risk with
price. Accurate risk pricing is one of the most powerful tools for setting the right incentives
for the allocation of resources, a feature which is key to a fast developing country like India.
By nature of its business, insurance is closely related to saving and investing. Life
insurance, funded pension systems and non-life insurance, will accumulate huge amounts of
capital over time which can be invested productively in the economy. In developed countries
(re)insurers often own more than 25% of the capital markets. The mutual dependence of
insurance and capital markets can play a powerful role in channeling funds and investment
expertise to support the development of the Indian economy.
OBJECT OF THE STUDY

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PRIMARY OBJECTIVE
To study the Porter’s Five Forces analysis of general insurance industry with special
reference to L & T General Insurance limited, Chennai.
SECONDARY OBJECTIVES
• To trace out the threat of new entrants in insurance industry.
• To study the bargaining power of buyers in insurance industry.
• To measure the competitive rivalry within the insurance industry.

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NEED FOR THE STUDY:
Larsen & Turbro Finance Limited is a 16 years old company, it was initially
incorporated as a Non-Banking Financial Company. L&T Finance offers number of financial
products and services for trade, industry and agriculture. The company focus segments are
corporate products, construction products, commercial vehicles and Tractors. Recently L&T
extended their business into insurance industry and they are interested to identify their
opportunity to excel in the general insurance industry. Hence the researcher is interested to do
“the porter’s five force analysis of insurance industry with special reference to L&T
Insurance” focuses on
• To identify the entry level problems

• To know the bargaining power of buyer
• To measure the competitive rivalry with in the industry
SCOPE OF STUDY:
The study titled “The porters five force analysis of insurance companies in Chennai
with special reference to L&T Insurance Ltd”. Outcome of this analysis may help the growth
of their business in future. The study further help to manage the competitors in market focuses
on the various factors which facilitates for starting an insurance company and threat which
may block the entry of insurance companies.
On analyzing all the five forces the researcher had sort out only the following three
forces, which is applicable for insurance industry.
• Entry level problems of insurance companies

• Bargaining power of buyers
• Competitive rivalry with in the industry
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INDUSTRY PROFILE
AN OVERVIEW OF INDIA’S INSURANCE MARKET
Insurance in India used to be tightly regulated and monopolised by state-run insurers.

Following the move towards economic reform in the early 1990s, various plans to revamp the
sector finally resulted in the passage of the Insurance Regulatory and Development Authority
Act of 1999. Significantly, the insurance business was opened on two fronts. Firstly, domestic
private-sector companies were permitted to enter both life and non-life insurance business.
Secondly, foreign companies were allowed to participate, albeit with a cap on shareholding at
26%. With the introduction of the 1999 IRDA Act, the insurance sector joined a set of other
economic sectors on the growth march.
INSURANCE DEVELOPMENT AND POTENTIAL
Notwithstanding the rapid growth of the sector over the last decade, insurance in India
remains at an early stage of development. At the end of 2003, the Indian insurance market
was the 19th largest in the world, only slightly bigger than that of Denmark and comparable
to that of Ireland. This was despite India being the second most populous country in the world
as well as the 12th largest economy. Yet, there are strong arguments in favour of sustained
rapid insurance business growth in the coming years, including India’s robust economic
growth prospects and the nation’s high savings rates.
The dynamic growth of insurance buying is partly affected by the income elasticity of
insurance demand. It has been shown that insurance penetration and per capita income have a
strong non-linear relationship. Based on this relation and other considerations, it can be
postulated that by 2014 the penetration of life insurance in India will increase to 4.4% and
that of non-life insurance to 0.9%.
HISTORY OF INSURANCE DEVELOPMENT IN INDIA

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MODERN INSURANCE CAME WITH A BRITISH ACCENT
Insurance in its modern form first arrived in India through a British company called
the Oriental Life Insurance Company in 1818, followed by the Bombay Assurance Company
in 1823, and the Madras Equitable Life Insurance Society in 1829. They insured the lives of
Europeans living in India. The first company that sold policies to Indians with “fair value”
was the Bombay Mutual Life Assurance Society starting in 1871. The first general insurance
company, Triton Insurance Company Limited, was established in 1850.
History of insurance
In India, insurance has a deep-rooted history. It finds mention in the writings of Man
(Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings talk in
terms of pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern day insurance.
Ancient Indian history has preserved the earliest traces of insurance in the form of marine
trade loans and carriers’ contracts. Insurance in India has evolved over time heavily drawing
from other countries, England in particular.
It came to India as a legacy of British occupation. General Insurance in India has its
roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by
the British. In 1907, the Indian Mercantile Insurance Limited was set up. This was the first
company to transact all classes of general insurance business. In 1957 saw the formation of
the General Insurance Council, a wing of the Insurance Association of India. The General
Insurance Council framed a code of conduct for ensuring fair conduct and sound business
practices. In 1968, the Insurance Act was amended to regulate investments and set minimum
solvency margins.
In 1972 with the passing of the General Insurance Business Act, general insurance
business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated
and grouped into four companies, namely National Insurance Company Ltd., the New India
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Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a
company in 1971 and it commence business on January 1st 1973.
This millennium has seen insurance come a full circle in a journey extending to nearly
200 years. The process of re-opening of the sector had begun in the early 1990s and the last
decade and more has seen it been opened up substantially. In 1993, the Government set up a
committee under the chairmanship of R. N. Malhotra, former Governor of RBI, to propose
recommendations for reforms in the insurance sector. The objective was to complement the
reforms initiated in the financial sector. The committee submitted its report in 1994 wherein,
among other things, it recommended that the private sector be permitted to enter the insurance
industry. They stated that foreign companies are allowed to enter by floating Indian
companies, preferably a joint venture with Indian partners.
Following the recommendations of the Malhotra Committee report, in 1999, the

Insurance Regulatory and Development Authority was constituted as an autonomous body to
regulate and develop the insurance industry. The IRDA was incorporated as a statutory body
in April, 2000. The key objectives of the IRDA include promotion of competition so as to
enhance customer satisfaction through increased consumer choice and lower premiums, while
ensuring the financial security of the insurance market.
The IRDA opened up the market in August 2000 with the invitation for application for
registrations. Foreign companies were allowed ownership of up to 26%. The Authority has
the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from
2000 onwards framed various regulations ranging from registration of companies for carrying
on insurance business to protection of policyholders’ interests.
In December, 2000, the subsidiaries of the General Insurance Corporation of India

were restructured as independent companies and at the same time GIC was converted into a
national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July,
2002. Today there are 24 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 23 life insurance companies operating in the country.
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The insurance sector is a colossal one and is growing at a speedy rate of 15-20%.
Together with banking services, insurance services add about 7% to the country’s GDP. A
well-developed and evolved insurance sector is a boon for economic development as it
provides long- term funds for infrastructure development at the same time strengthening the
risk taking ability of the country.
PROBLEMS WHICH ARE FACED BY INSURANCE COMPANIES
By Flora Richards-Gustafson, How Contributor updated:

Factors in the economy, risk management, keeping costs low and retaining business in
a competitive market are issues insurance companies face on a regular basis, According to
Price Waterhouse Coopers. Uncertainty regarding the economy along with changes in how
people do business keep this industry on its toes as it strives to meet the demands of
consumers and ensure long-term success.
• Maintaining Funds in Hard Economic Times
Price Waterhouse Coopers stated that instead of seeing collapsing assets, insurance
companies have to deal with problems relating to collapses in hedge funds, structured
securities and equities, according to the company's "Top Nine Insurance Industry Issues in
2009" publication. As a result, credit markets seized sales in life insurance policies dropped,
asset management fees lowered and bond and mortgage insurers lost significant amounts of
capital.
In an effort to hold on to whatever funds they have, insurance companies are doing
what they can to deny claims, pay less in settlements and defend their claim decisions in
court, a battle that can take several years, according to a 2007 CNN article.
• Solvency:
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Companies that offered whole and term life insurance began offering "market-sensitive"
products in an effort to expand product portfolios, according to Price Waterhouse Coopers.
This gave policyholders competitive returns and gave insurance companies an edge in the
financial service market. Consequently, reserve calculations are subjective, more complex and
the investment portfolios require more attention in order to manage them so returns and cash
flow align with future liabilities. Market sensitive products that involve long- and short-term
investments for companies that sell life insurance are seeing low returns. As a result,
insurance companies need to look at other avenues to ensure solvency and increase retention
efforts.
• Reducing Costs:
Cost cutting efforts can have devastating consequences to insurance companies, but is
an issue they face in an effort gain capital. Insurance companies, as they determine which
costs to cut, must look at forces behind costs. This helps them ensure a cut in one area does
not increase the cost in another, which can make an insurance company less competitive. For
example, cutting employee benefits reduces employee retention, or cuts in staff can lead to
long turn-around times. Financial Web states that as insurance company costs increase, their
capital decreases. Additionally, insurance companies face difficulties when it comes to
creating improvement plans that reduce costs when the plans lack a basis in resources,
priorities, dependencies and the integration of the human element, such as training,
communication and performance management.
COMPANY PROFILE
Larsen & Toubro Limited (L&T) is India’s largest engineering and construction
conglomerate with additional interests in electrical, electronics and IT. A strong customer-
focus approach and constant quest for top-class quality have enabled L&T to attain and
sustain leadership over 6 decades. EPC project business constitutes a critical part of the
L&T’s engineering core. L&T has integrated its strengths in basic and detailed engineering,
process technology, project management, procurement, fabrication and erection, construction
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and commissioning, to offer single point responsibility under stringent delivery schedules.
Strategic alliances with world leaders enable L&T to access technical know-how and execute
process intensive, large scale turnkey projects to maintain its leadership position.
L&T’s international presence is on the rise, with a global spread of over 30 offices
and joint ventures with world leaders. Its large technology base and pool of experienced
personnel enable it to offer integrated services in world markets. L&T enjoys a brand image
in India and several countries offshore. With factories and offices located all over the country
and abroad, L&T operations are supplemented by a comprehensive distribution network and
nationwide ramifications for customer service and delight.
The Company’s businesses have been classified into 6 Operating Division, viz.,
 Engineering Construction & Contracts Division (ECCD)

 Engineering & Construction Projects Division (E&C-Projects)
 Heavy Engineering Division (HED)
 Electrical & Electronics Division (EED)
 Machinery & Industrial Products Division (MIPD) and
 Technology Services Division.
HISTORY:
Larsen & Toubro Limited is the biggest legacy of two Danish Engineers, who
built a world-class organization that is professionally managed, and a managed and a leader in
India’s engineering and construction industry. It was the business of cement that brought the
young Mr. Henning Holck-Larsen and Mr. S.K. Toubro into India. They arrived on Indian
shores as representatives of the Danish engineering firm F L Smith & Co in connection with
the merger of cement companies that later grouped into the Associated Cement Companies.
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Together, Mr. Holck-Larsen and Mr. Toubro founded the partnership firm of L&T in
1938, which was converted into a limited company on February 7, 1946. Today, this has
metamorphosed into one of India’s biggest success stories. The company has grown from
humble origins to a large conglomerate spanning engineering and construction. ECC was
conceived as Engineering Construction Corporation Limited in April 1944 and was
incorporated as wholly owned subsidiary of Larsen & Toubro Limited. L&T’s founders Mr.
Holck – Larsen and Mr. Toubro laid the foundation for ECC. It has today emerged as India’s
leading construction organization.
VISION:
L&T shall be a professionally-managed Indian multinational, committed to total
customer satisfaction and enhancing shareholder value.
L&T shall be an innovative, entrepreneurial and empowered team constantly
Creating value and attaining global benchmarks.
L&T shall foster a culture of caring, trust and continuous learning while meeting
expectations of employees, stakeholders and society.
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L&T INSURANCE
OVER VIEW
L&T General Insurance Company Limited (L&T Insurance) is a wholly owned

subsidiary of Larsen & Toubro Limited - one of the world's top 50 most reputed companies in
the June 2009 issue of Forbes-Reputation Institute’s “World’s Most Reputable
Companies” survey.
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COMPANY VISION
Our vision is to be an insurance company distinct in character, calibre and capability.

We are committed and equipped to offer the same levels of service in the insurance space that
our parent (Larsen & Toubro Limited) is renowned for, in its other fields of business. We
bring to the table the credibility, financial strength and expertise, backed by a world class
brand and seven decades of unmatched leadership of the L&T Group. We will cater to all
lines of general and health insurance throughout the country.
L&T Insurance will be a state-of-the-art technology-driven company that delivers

world-class services. We seek to create a single technological platform that integrates all the
key functions to provide seamless services to our customers through any interface of their
choice.
Finally, it is our people who will help us achieve our vision. L&T Insurance comprises
of an array of top notch Insurance Professionals who have come together to combine their
experience and expertise to create an entity which will lead by innovation, backed by a
prudent underwriting approach.
Our Heritage
Larsen & Toubro Ltd is a USD 9.8 billion technology, engineering and construction
group with operations spread across the globe. It was ranked as 14th by the Economic
Times in their survey of the Top 500 Companies in India. Another feather in its cap was
added when L&T was ranked 47th in the world in the June 2009 issue of Forbes-Reputation
Institute’s “World’s Most Reputable Companies” survey. In this survey, L&T was the only
engineering and construction company in the world to have made it to the top 200.
Having established its foothold in engineering and construction, electrical and

electronics, industrial products and information technology, L&T forayed into the financial
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services space. Financial Services has been identified as a strategically important business for
L&T Group. It has been L&T’s vision to become a ‘wholesome’ player in this area of
business. With an entire range of products and service offerings, L&T’s ‘Financial Services’
initiative will cater to an entire spectrum of customers, and their various financial needs. The
launch of the General Insurance business is a major step in this direction.
Philosophy
 Creating a world-class insurance company by constantly maintaining exalted quality standards

in all their endeavors.
 Providing sustained innovation by working towards ever-evolving solutions. Customer
satisfaction has always been their ultimate goal and they remain committed to constantly delivering
customer needs with their innovative products and services.
 Focusing on different customer segments. They endeavor to provide a complete range of
general insurance products and specialized services for various customer segments across Individuals,
Small and Medium Enterprises, Corporate with business lines that include Property & Casualty,
Automobile, Health, and a special focus on Rural and Micro Insurance.
 Following a disciplined underwriting approach, in the competitive market conditions prevailing
today. This discipline and its importance to the company have been ingrained in all our employees.
They work hard to constantly reinforce customer trust in us.
Our Values
In order to become an insurer of choice, they believe in building their business on
• Integrity – by conducting our business with utmost fairness and honesty
• Transparency – by maintaining clean records accessible to all our customers and stakeholders
• Professionalism - through building strong relationships based on tolerance, trust and mutual
cooperation
• Active social responsibility - by ensuring that the growth of our society and nation parallels
the growth of the business
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• High customer focus – by anticipating and proactively responding to all your priorities and
needs
• Providing mutual value – by constantly working towards building a relationship based on
mutual value and respect, thereby ensuring optimal usage of your financial resources
CORPORATE GOVERNANCE
Governance is a key component of corporate leadership. At L&T, every action is

filtered through integrity and fairness. With a ‘trust crisis’ emerging across sectors, the only
antidote is transparency. Highest priority is given to visible accountability across financial
and non-financial segments – without making any exceptions.
They consistently adopt innovative approaches for leveraging resources, fostering a healthy
growth, converting opportunities into achievements and development of human resources to
take the company forward.
GOVERNANCE STRUCTURE
To run a transparent and accountable business requires effective upholding of the

principles that they stand for. This responsibility is vested in company experienced and
erudite team of executive and non-executive directors, the highest decision-making body
within the organization.
Our four-tier governance structure ensures greater management accountability and

credibility, increased public confidence and a well performing management in place.
FOUR TIER GOVERNANCE STRUCTURE

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Board of directors
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TYPES OF INSURANCE
Health Insurance
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A health insurance policy will provide a cover to you and your family against sudden
medical contingency or bodily injury.
Every human being is exposed to various health hazards. Medical emergency can strike
anyone without pre-warning.
The reasons why health insurance is a must:

• Medicines have become quite expensive
• Private hospitals are too expensive
• Diagnostic charges are beyond common man’s reach
• Specialists come at a price
• People opt for Travel Insurance which covers them against medical expenses they may incur
while travelling abroad (outside country of residence)
Health risk is a personal risk, which could arise from various factors viz.
• Physical condition
• Accident related
• Occupational related
• Environment related
• Life style related
• Travel related
Motor Insurance
Motor insurance protects you against damage caused to your vehicle or third party if
you have an accident. It is a contract between you and the insurance company. You agree to
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pay the premium and the insurance company agrees to pay your losses as defined in your
policy. Motor insurance provides property, liability and medical coverage
Property coverage pays for damage to or theft of your car.
Liability coverage pays for your legal responsibility to others for bodily injury or property
damage.
Home Insurance
Your most important asset is your home. Fire, earthquakes, and floods are all too often
a part of our life today. With natural disasters and man-made accidents not just a possibility,
but an eventuality, it is essential that you secure your home from natural and man-made
disasters. Home insurance policy makes sure you have a peace of mind by protecting the
structure and/or the contents of your home. Home insurance provides compensation for loss
of or damage to a home and it’s contents.
Travel Insurance
Travel insurance policies have been intended to insure you against certain events when
you take a holiday or trip to make your trip stress-free. Before going on a trip you need to
address all your travel worries. Medical treatment abroad can be costly and one never knows
when one would require it. There might also be other situations, which one might face like
loss of passport, flight delay, and baggage and so on. Without appropriate travel insurance,
you may be exposed to significant financial liability.
Personal Accident Insurance

Accidents occur unexpectedly, many individuals choose to purchase insurance coverage
to help family members and loved ones deal with the associated financial instability.
Personal Accident is an insurance cover which is recommended to you and your family in the
event of accidental death, but also to cover disablement, leading to loss of earning capacity.
Personal accident policies cover you for four contingencies in the event of an accident: death,
permanent total disability, permanent partial disability and temporary total disability.
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Personal Accident Insurance is inexpensive and it is recommended that you select the highest
level of cover available. Even if you already have permanent health insurance, you should
also have Personal Accident insurance to provide cover in case of accidents.
Commercial Insurance
Large corporations or even Smaller Companies have varied needs for insurance. Most
insurance companies offer a comprehensive set of products designed to protect business,
assets, liabilities, vehicles, construction/engineering/marine cargo/logistics activity &
employees against sudden and unforeseen loss or damage.
Group Health
Comprehensive health insurance solutions, designed for the employees of your
company and their family members.
It covers your employees and their family members from hospital and medical expenditure
that arise out of an illness or accident. Family members include spouse and two dependent
children.
Fire (property)
Fire Insurance is designed to cover your business assets against sudden and accidental
loss or damage due to wide range of perils. You can also insure Consequential loss of profits
following damage to your assets due to insured perils.
Engineering
Engineering Insurance provides comprehensive insurance solutions for Construction
and Erection projects as well as Operational insurance covers like Contractor’s Plant and
Machinery, Electronic Equipments, Machinery Breakdown Insurance.
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Marine
Marine insurance protects your assets against loss or damage while in transit by
Rail/Road/Air/Sea.
Liability
Provides complete range of business and commercial insurance liability policies,
covering the legal liability of your company and your directors towards third parties and
employees.
Group Personal Accident

Accidents can happen to anyone anytime, anywhere. Medical expenses could pile up,
adding to the financial burden of your employee. Group Personal Accident Insurance provides
cover to your employees against accidental bodily injury, death or disablement. Cover can be
arranged on a 24 hours basis or only to cover accidents occurring during the period of
employment. It doesn’t just cover your employees; it also covers their dependants which
include their spouse, dependent children and parents if they choose to cover.
Casualty
Casualty insurances encompass a wide range of insurances like Money, Burglary,
Fidelity Guarantee & Plate glass and Neon Sign Board.
TECHNOLOGY
In this shrinking, fast paced world, time is money. They truly understand this and this is
what has prompted us to build a state-of-the art technology-driven company that delivers
world-class services to all our stakeholders. As a step towards this, they have envisaged a
state-of-the-art technological platform that integrates all the key business functions to build a
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deeper customer connect and create uniform brand experience. A single window will allow
you to purchase new policies, renew your policy, manage your policies and view the status of
claims, etc.
This innovative technology platform will provide the following features in a phased
manner
• Anytime, Anywhere customers can access their account through our 24X7 support on L&T
Insurance website
• Company system has the capability to contact customer through Internet, Mobile and
Telephone
• Capacity to help customers generate ‘Quick quotes’ and issue on-the-spot policies for select
products
• Management of Business Process on ‘real-time’ basis
• They having an Integrated Claims System for Motor & other portfolios
• Ability to connect to various health care Networks like Hospitals etc., using our IT platform to
give customer seamless automated services
• Single View of customer account which includes customer contact details, family members and
their details, claims management, all in a single window
• Risk Management Systems that deploys different techniques to understand, manage and most
importantly mitigate ‘Risk’
REVIEW OF LITERATURE
Michael E. Porter has made immense contribution in the development of the ideas of
industry and competitor analysis and their relevance to the formulation of competitive
strategies. He advocates that a structural analysis of industries be made so that a firm is in a
better position to identify its strengths and weaknesses. A model has been proposed
consisting of five competitive forces – threat of new entrants, rivalry among competitors,
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bargaining power of suppliers, bargaining power of buyers and threat of substitute products –
that determine the intensity of industry competition and profitability.
THREAT OF NEW ENTRANTS
Any industry that is perceived as being profitable tends to attract new entrants. These
new entrants are firms that are interested in investing in the industry to share the growth
prospects. Such new entrants augment the existing production capacity and often possess a
desire to make large investments and secure substantial market share. The existing firms have
either to share a growing market pie with a larger number of competitors or part with some of
their own market share to the new entrants. Either way, new entrants may case comparatively
lesser sales volume and revenue and lower the returns for all the firms in the industry.
The chance that new entrants will enter into an industry depends on two factors: the
entry barriers to an industry and the expected retaliation from existing firms. Of these, entry
barriers are significant demotivators for new entrants. The concept of entry barriers implies
that there are substantial costs involved in entering into a new industry. The higher the entry
barriers in an industry, the less likely are the new entrants to enter that industry. So, higher
entry barriers serve to keep out potential entrants into an industry.
• Capital requirements being very high may prevent new entrants from making
CAPITAL REQUIREMENTS OF NEW INSURANCE COMPANIES
Any new life insurance company or non-life insurance company will not be registered
unless the company has a paid-up equity capital of a minimum Rs. 100 crores. In the case of a
re-insurance company the minimum paid-up equity capital will have to be Rs. 200 crores
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(Sec. 6 of the Insurance Act, 1938). Further, Sec. 6 provides that in determining the paid-up
capital requirement, the deposit to be made under Sec. 7 and any preliminary expenses
incurred in the formation and registration of the company shall be excluded.
Equity capital held by a foreign company
The IRDA has issued detailed guidelines regarding the manner in which the quantum of
foreign investment will be calculated. The calculation of the holding of equity shares by a
foreign company either by itself or through its subsidiary companies or nominees in the
applicant company, shall be the aggregate of the quantum of paid-up equity share capital held
by the foreign company either by itself or through its subsidiary companies or nominees in the
applicant company; the quantum of paid-up equity share capital held by other foreign
investors, non-resident Indians, overseas corporate bodies and multinational agencies in the
applicant company; and the quantum represented by that proportion of the paid-up share
capital to the total issued equity share capital of an Indian promoter company held or
controlled by the category of persons mentioned in (i) and (ii) above.
However, for purposes of calculation referred to above, account need not be taken of
the holdings of equity in an Indian promoter company held by foreign institutional investors,
other than the foreign promoters of the applicant and their subsidiaries and nominees, and
Indian mutual funds.
On account of the above guidelines, in the case of the HDFC- Standard Life insurance
venture, the equity holding of the foreign company in the Indian insurance venture has been
reduced from the maximum allowable 26 per cent. The IRDA had to issue such strict
guidelines as the upper cap on foreign equity limit in the new insurance companies was
insisted upon by Parliament. This also means that any dilution of norms would also have to be
passed by Parliament. This makes the insurance industry different from other industries where
foreign direct investment norms can be changed by administrative fiat.
Deposits
Sec. 7 of the amended Insurance Act, 1938 provides that every insurer shall, in respect
of the insurance business carried out by him in India, deposit with the Reserve Bank of India
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(RBI) either in cash or in approved securities estimated at the market value of the securities
on the day of deposit:
* In the case of life insurance business, a sum equivalent to one per cent, of his total gross
premium written in India in any financial year commencing March 31, 2000, not exceeding
Rs. 10 crores.
* In the case of general insurance business, a sum equivalent to three per cent, of his total
gross premium written in India, in any financial year commencing March 31, 2000, not
exceeding Rs. 10 crores.
* In the case of re-insurance business, a sum equivalent to Rs. 20 crores; solvency margin;
assets and liabilities how to be valued; Sec. 64V provides the details and valuation of
liabilities (general insurance).
*In the case of reserves for unexpired risks for general insurance business, the following
provisions are required to be made in addition to those listed in the Section: fire and
miscellaneous business 50 per cent; marine cargo business 50 per cent; and marine hull
business 100 per cent of the premium, net of re- insurances, during the preceding 12 months.
Sufficiency of assets
The new IRDA Act (Sec. 64VA of the Insurance Act) has introduced detailed
provisions regarding the levels of solvency margins to be maintained by insurance companies.
However, on a simple level the following solvency margins have to be maintained:
Life Company: The minimum amount of the value of assets over liabilities will be a
sum of a percentage of mathematical reserves and a percentage of the sum at risk. The IRDA
has to specify the percentages. The minimum solvency margin shall be Rs. 50 crores.
Non-life Company: The required solvency margin shall be the highest of the following
amounts. Twenty per cent of net premium income; 30 per cent of net incurred claims Rs. 50
crores. No risk to be assumed unless premium is received in advance.
• Switching costs from the existing products or services to a new one may discourage
customers from making new commitments owing to the costs incurred in buying new ancillary
equipment, retraining employees or establishing a new network of relationship.
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• Product differentiation by existing firms based on perceived distinctiveness by the

customers based on effective advertising, reputation as a service provider, brand loyalty of
customers towards existing firms or some such other factor.
• Access to distribution channel can be monopolized by the existing firms on the basis
of their long–terms relationship with the distributors.
• Government policies through licensing and other means can prevent the entry of new
firms to an industry.
• Existing loyalty to major brands
Besides the entry barriers, the expected retaliation to the new entrants from the existing
firms may be a potential threat to entry. Any potential entrant to an industry would have to
predict the likely moves that the existing firms could make. For instance, an existing firm
with a large stake in the industry may lower its price to create a difficult situation for the new
entrant. Or an existing firm with substantial resources may attempt to alter the basis of
competition so that the new entrant is discouraged from making a foray.
Despite the formidable hurdles posed by existing firms, new firms do enter industries if
they find them to be promising. The popular strategy for doing so is finding market niches
not served by existing firms and to gradually build up a presence in the industry.
RIVALRY AMONG COMPETITORS
Competitor is a game in which normally, one player loses at the expense of the other.
A move on the part of a player may cause other players to make countermoves or initiate
efforts to protect themselves from the danger posed by the initial move. In this manner, firms
within an industry are mutually dependent. The situation in an industry keeps changing with
the actions and reactions of the constituent firms. The desire to be market leader or to corner
a larger market share leads to rivalry among competitors. The extent of the rivalry among
competitors in an industry affects the competition within the industry. When the rivalry is
weak, there is likely to be lesser competition; when such rivalry is high, the level of
competition is higher. This has implications for existing firms as well as those firms
contemplating entry into the industry.
26
The dimensions of rivalry among competitors are several. Some of the major ones are
described below:
 Competitive structure
It refers to the number of competitors, their size and diversity. Different types of
competitive structures have different implications for the existing firms and for the new
entrants. Structures could either be fragmented or consolidated. A fragmented structure
means that there are a large number of small or medium – sized companies, one of them in a
position to dominate the industry. This structure is characterized by low entry barriers and
less or no differentiation, leading to products becoming commodities. Competition is intense
and the industry faces booms and busts, leading to frequent changing of the structure. A
consolidated structure consists of a few large companies (an oligopolistic market) or of just
one large firm (a monopoly). Such a structure has a closely knit group of companies whose
actions and reactions are matched: the actions of one lead to reactions from others.
Competitive actions of the competitors are under close watch by the others as they affect the
distribution of market share. The intensity of competition may range from benign tolerance to
fierce rivalry. In some industries, the competitors may adopt a policy of ‘live and let live’,
while in others, there might be cutthroat competition leading to underpricing or severely
fought competitive battles on the basis of other factors such as delivery, advertising or after –
sale service. Diversity among competitors means that different firms in an industry have
different ideas on the basis of which to compete, different set of goals to achieve, or different
organizational culture. An industry with greater diversity poses a higher potential challenge
to existing firms or new entrants for devising competitive strategies.
 Competitors
Any person or entity which is a rival against another. In business, a company in
the same industry or a similar industry which offers a similar product or service. The presence
of one or more competitors can reduce the prices of goods and services as
the companies attempt to gain a larger market share. Competition also requires companies to
become more efficient in order to reduce costs. Fast-food restaurants McDonald's and Burger
King are competitors, as are Coca-Cola & Pepsi, and Wal-Mart & Target.
27
 Industry growth rate
General Insurance
According to data released by IRDA, the general insurance industry recorded 22.76 per
cent year-on-year (y-o-y) growth in gross premium underwritten during April–October 2010.
The industry collected gross premium of US$ 5.29 billion during April–October 2010
compared with US$ 4.31 billion in the same period last year.
The public sector players posted 21.09 per cent y-o-y growth in gross premium during
April–October 2010 over the corresponding period last year. At the same time, private players
recorded a 25.19 per cent y-o-y increase in gross premium.
The state-run insurers fared better than their private counterparts, with New India
Insurance collecting the maximum premium of US$ 916.77 million during April-October
2010, compared to US$ 770.25 million in the same period last year, growing by 19.04 per
cent.
According to the IRDA's Summary Reports of Motor Data of Public and Private Sector
Insurers - 2009-10, nearly 28.4 million policies were issued and a total premium of US$ 2.31
billion was collected.
 Diversity of competitors.
As we described these factors constituting the force of competitive rivalry within an

industry, you must have noticed that business strategies are critically dependent on the
industry environment. The nature of industry environment varies across industries and also
with time. There might be embryonic or introductory industries, growth or sunrise industries,
mature or stable industries and declining or sunset industries. Each of these industries would
require a different approach to the formulation of business strategies, as described in section
8.5. It is also important to note that industries respond to time and follow a life cycle. An
industry in the mature stage today might be a declining industry tomorrow. Here again, it is
important for firms to align their business strategies to the changing conditions in the industry
environment. The competitive equations change, so do the demand conditions. Entry barriers
erected today may fall by the wayside as soon as some new development takes place. Such is
the dynamic nature of strategic management where anything that a firm might do today does
28
not guarantee success tomorrow, unless there is a willingness to respond to environmental

conditions as they arise in between.
BARGAINING POWER OF BUYERS
The bargaining power of buyers constitutes the ability of the buyers, individually or
collectively, to force a reduction in prices of products or services, demand a higher quality or
better service or to seek more value for their purchases in any way. A high buyer bargaining
power constitutes a negative feature for existing firms or new entrants of an industry. A low
buyer bargaining power enables a firm to pass on the cost escalation to buyers or to make the
buyers accept a lower quality of product and service at a higher price.
The bargaining power of buyers is high under these conditions:

 When the few buyers place large orders individually.
 When the switching costs of buyers from one supplier to the other is low.
 Product differentiation
 Product innovation
BARGAINING POWER OF SUPPLIERS
Like the bargaining power of buyers, suppliers to have a level of bargaining power.
The bargaining power of suppliers constitutes their ability, individually or collectively, to
force an increase in the price of products or services or make the buyers accept a lower quality
of product or level of service. A high supplier bargaining power constitutes a positive feature
for the existing firms or new entrants of an industry. A low supplier bargaining power
prevents a firm from passing on its cost increases to the buyers or to make the buyers accept a
lower quality of product and service at a higher price.
THREAT OF SUBSTITUTE PRODUCTS

29
Substitute products or services are those that apparently are different, but satisfy the
same set of customer needs. We referred to the example to tea and coffee as substitutable
products in the beginning of this section. We could also include aerated drinks as another
form of substitute products and services could be alternative modes of transportation, postal,
fax and courier services and electrical gadgets like bulbs and tube lights. The platform for
substitutability in every case is the serving of the customer need.
The availability of close substitutes constitutes a negative competitive force in an

industry. In other words, those industries which have no close substitutes are more attractive
than those that have one or more of such substitutes, obviously, firms in an industry having no
close substitutes can charge a higher price and earn higher returns. For industries where close
substitutes are available, the level of price of products chargeable is restricted by the price of
the substitute available. Thus, firms have to formulate their business strategies keeping in
view the intensity of the competitive force arising out of the presence or absence of the threat
of substitutes.
The purpose of an industry analysis, in the context of strategic choice, is to determine

the industry attractiveness and to understand the structure and dynamics of the industry with a
view to finding out the continued relevance to strategic alternatives that are there before a
firm. It follows that, for instance, if the industry in not, or is no longer sufficiently attractive
(i.e., it does not offer long – term growth opportunities) then the strategic alternatives that lie
within the industry should not be considered. It also means that alternatives may have to be
sought outside the industry, calling for diversification moves.
Using the five forces model of industry competition, a firm can analyze its critical
strengths and weaknesses, its position within the industry, the areas where strategic changes
may yield the maximum profits and the significant opportunities and threats.
USE OF THE INFORMATION FROM FIVE FORCES ANALYSIS:

30
Five Force’s Analysis can provide valuable information for three aspects of corporate
planning:
Statistical Analysis:
The Five Forces Analysis allows determining the attractiveness of an industry. It

provides insights on profitability. Thus, it supports decisions about entry to or exit from and
industry or a market segment. Moreover, the model can be used to compare the impact of
competitive forces on the own organization with their impact on competitors. Competitors
may have different options to react to changes in competitive forces from their different
resources and competence’s. This may influence the structure of the whole industry.
Dynamical Analysis:
In combination with a PESTLE Analysis, which reveals drivers for change in an
industry, Five Forces Analysis can reveal insights about the potential future attractiveness of
the industry. Expected Political, Economical, Social, Technological, Legal and Environmental
changes can influence the five competitive forces and thus have impact on industry structures.
Analysis of Options:
With the knowledge about intensity and power of competitive forces, organizations can
develop options to influence them in a way that improves their own competitive position. The
result could be a new strategic direction, e.g. a new positioning, differentiation for competitive
products of strategic partnerships
Porter’s model of Five Competitive Forces allows a structured and systematic analysis
of market structure and competitive situation. The model can be applied to particular
companies, market segments, industries or regions. Therefore, it is necessary to determine the
scope of the market to be analyzed in a first step. Following, all relevant forces for this market
31
are identified and analyzed Hence, it is not necessary to analyzer all elements of all
competitive forces with the same depth.
The Five Forces Model is based on microeconomics. It takes into account supply and
demand, complementary products and substitutes, the relationship between volume of
production and cost of production, and market structures like monopoly, oligopoly or perfect
competition.
Influencing the Power of Five Forces

After the analysis of current and potential future state of the five competitive forces, managers
can search for options to influence these forces in their organization’s interest. Although
industry-specific business models will limit options, the own strategy can change the impact
of competitive forces on the organization. The objective is to reduce the power of competitive
forces.
Analyst Insight
There are three major factors that we must consider when analyzing an insurance
company. Coincidently, these are the same ones that the A.M. Best taken into account.
Leverage
The first things you want to check when considering an insurance company are the
quality and strength of the balance sheet. Everyday insurers are taking in premiums and
paying out claims to policyholders. The ability to meet their obligations toward these policy
holders is extremely important. Companies should strike a balance between high returns while
keeping leverage intact. A company that is highly leveraged might not be able to meet
financial obligations when a large catastrophic event occurs.
The following three things act to increase leverage:

*Writing more insurance policies
* Dependence on reinsurance
* Use of debt
32
Reinsurance allows a company to pass off some of the risk exposure to other insurers (usually
a good thing), but be careful. Too much dependence on reinsurance means that the company
is not keeping a fair portion of responsibility for each premium dollar.
Liquidity
The first test of an insurer's ability to meet financial obligations is the acid test. It tests
whether a firm has enough short-term assets (without selling inventory) to cover its immediate
liabilities. Also take a close look at cash flow. An insurer should almost always have a positive
cash flow. Other things to keep an eye on are the investment grades of the company's bond
portfolio. Too many high and medium risk bonds could lead to instability.
Profitability
As with any company, profitability is a key determinant for deciding whether to invest.
For an insurance company, there are two components of profits that we must consider:
premium/underwriting income and investment income.
Underwriting income is just that any revenue derived from issuing insurance policies.
By averaging the premium's growth rates of several past years, you can determine the growth
trends. Growing premium income is a "catch 22" for insurance companies. Ideally, you want
the growth rate to exceed the industry average, but you want to be sure that this higher growth
does not come at the expense of accepting higher-risk clients. Conversely, a company whose
premium income is growing at a slower rate might be too picky, looking for only the highest
quality insurance opportunities. The one thing to remember is that higher premium collections
do not equate to higher profits. Lower numbers of claims (via low risk clients) contribute more
to the bottom line.
The second area of profitability that you need to include in your analysis is
investment income. As we mentioned earlier, a greater proportion of an insurer's income comes
from investments. To evaluate this area, take a look at the company's asset allocation strategy
(usually mentioned in the notes of the financial statements). You aren't likely to find any
secrets in this area. A majority of the assets should be invested in low-risk bonds, equities
or money market securities. Some insurers invest a substantial portion of their assets in real
33
estate. If this is so, take a look at what type of property it is and where it is located. A building
in New York City is much more liquid than one in Boise, Idah
RESEARCH METHODOLOGY
The project study mainly focuses on analysis of General Insurance companies through
porter’s five forces analysis.
Meaning of Research
Research in common parlance refers to a search for knowledge. One can also define
research as a scientific and systematic search for pertinent information on a specific topic. In
fact, research is an art of scientific investigation. Research is an academic activity and as such
the term should be used in a technical sense.
 Systematic and organized effort to investigate a scientific problem.

 Identify the problem.
 Gather information.
34
 Analyze the data.

 Take corrective action and solve the problem.
Definition of Research
The advanced learner’s dictionary of current English lays down the meaning of
research as “a careful investigation or inquiry especially through search for new facts in any
branch of knowledge”. According to Redman and Mory define research as a “systematized
effort to gain new knowledge.”
Research Design
Research is an organized activity focused on specific objective with the support of
data collection involving tools for analysis deriving logically sound inferences.
Research Design is purely and simply the framework or plan for a study that guides
the collection and analysis of data. The function of researcher is to ensure that required the
data collected or accurate and economically.
Research Method
The research is analytical in nature.
Analytical research
The researcher has to use information already available and analyze those details to
make a serious assessment of the Receivable Management.
Data collection Method
 Nature of Data
The data collected is secondary in nature. This is due to the nature of analysis, which
only identify for secondary data.
35
 Source of Data
The source of data is the various year’s balance sheet, profit and loss account and
statements provided by the L&T Insurance Limited. It used for the analysis and for preparing
reports. The records maintained by the company where referred to get the required
information.
Secondary Data
The secondary data are collected mainly from Annual Reports, Balance Sheet, Income
and Expenditure and other broachers of the company.
The data for the analysis are collected and collected from the printed reports of L&T
Insurance Limited like annual reports, official files from IRDA records and other available
related material from related sites.
Period of study:
The period of study will be carried out from last four financial years.
Tools and Techniques for Analysis:
Various tools and techniques are used for the analysis are as follows.
Industry Concentration
The concentration of firms in an industry is of interest to economists, business

strategists, and government agencies. Here, we discuss two commonly-used methods of
measuring industry concentration:
The Concentration Ratio and
36
The Herfindahl - Hirschman Index.
Concentration Ratio (CR)
The concentration ratio is the percentage of market share owned by the largest m firms
in an industry, where m is a specified number of firms, often 4, but sometimes a larger or
smaller number. The concentration ratio often is expressed as CRm, for example, CR4.
The concentration ratio can be expressed as:
CR m = s1 + s2 + s3 + ...... + sm
where si = market share of the ith firm.
If the CR4 were close to zero, this value would indicate an extremely competitive
industry since the four largest firms would not have any significant market share.
In general, if the CR4 measure is less than about 40 (indicating that the four largest firms own
less than 40% of the market), then the industry is considered to be very competitive, with a
number of other firms competing, but none owning a very large chunk of the market. On the
other extreme, if the CR1 measure is more than about 90, that one firm that controls more than
90% of the market is effectively a monopoly.
Herfindahl-Hirschman Index (HHI)
The Herfindahl-Hirschman Index provides a more complete picture of industry

concentration than does the concentration ratio. The HHI uses the market shares of all the
firms in the industry, and these market shares are squared in the calculation to place more
weight on the larger firms. If there are n firms in the industry, the HHI can be expressed as:
HHI = s12 + s22 + s32 + ...... + sn2

37
where si is the market share of the ith firm.
Unlike the concentration ratio, the HHI will change if there is a shift in market share
among the larger firms.
The Herfindahl-Hirschman Index is calculated by taking the sum of the squares of the
market shares of every firm in the industry. For example, if there were only one firm in the
industry, that firm would have 100% market share and the HHI would be equal to 10,000
-- the maximum possible value of the Herfindahl-Hirschman Index. On the other extreme, if
there were a very large number of firms competing, each of which having nearly zero market
share, then the HHI would be close to zero, indicating nearly perfect competition.
 Fish bone tool

 Trend analysis
ANALYSIS AND INTERPRETATION
The data after collection has to be processed and analyzed in accordance with the
outline laid down for the purpose at the time of developing the research plan. Technically
speaking, processing implies editing, coding, classification and tabulation of the collected
data so that they are easy to analysis.
Interpretation refers to the task of drawing inference from the collected facts after an
analytical and/or experimental study.
The analysis was restricted to three excluding suppliers and substitute product because
there is no suppliers for insurance and no substitutes for GI. It has been done with the
assistance of the secondary sources such as four years gross premium data collected from
IRDA. Tools such as trend analysis and fish bone diagram are used to have a clear analysis.
38
It is a device through which the factors that seems to explain what has been observed
by researcher in the course of study can be better understood and it also provides a theoretical
conception which serve as a guide for future research.
TABLE NO: 4.1
Fire Insurance Gross Premium hold by top six Private
General Insurance companies
(Rupees in Crores)
Years
S. No Companies
2007 2008 2009 2010
1 Royal sundaram 99.08 69.65 33.2 37.43
2 TATA-AIG $ 130.25 133.25 126.59 153.72
3 Reliance 146.16 127.81 105.72 75.81
4 IFFCO TOKIO 294.76 234.8 160.48 176.76
5 ICICI Lombard 403.05 438.25 234.19 244.49
6 Bajaj Allianz 381.19 287.53 176.53 193.18
Source: www.irda.gov.in
CHART NO: 4.1

39
INTERPRETATION:
From the above table it is clear that, past four years ICICI Lombard having high gross
premium compared with others competitors.
All the six companies having good gross premium in the year 2007 compared to 2010,
all six companies gross premium were started to decrease from 2008.
2010 TATA-AIG had good gross premium than 2007. Gross premium Increased up to
18%.
But, in 2010 ICICI Lombard had lesser gross premium than 2007. Gross premium
decreased up to 39%.
40
TABLE NO: 4.2
Marine Insurance Gross Premium hold by top six Private
(Rupees in Crores)
Years
S. No Company
2007 2008 2009 2010
1 Royal sundaram 18.44 18.27 15.73 18.49
2 TATA-AIG $ 71.31 97.92 86.86 114.16
3 Reliance 24.92 42.41 37.45 33.49
4 IFFCO TOKIO 129.96 69.45 101.83 102.42
5 ICICI Lombard 155.25 224.55 118.07 125.43
6 Bajaj Allianz 72.99 76.41 53.13 57.32
CHART NO: 4.2

41
INTERPRETATION:
In the year 2007 ICICI Lombard and IFFCO TOKIO had good premium range, ICICI
Lombard had high premium than IFFCO TOKIO With some 16.29% difference.
In 2008 ICICI Lombard and TATA-AIG had good premium compare to other
competitors, but difference was 56.39% between them.
In 2009 ICICI Lombard and IFFCO TOKIO had good premium range, ICICI Lombard
had high premium than IFFCO TOKIO With some 13.75% difference.
42
TABLE NO: 4.3
Marine Cargo Insurance Gross Premium hold by top six Private
General Insurance Companies
(Rupees in Crores)
Years
S. No Company
2007 2008 2009 2010
1 Royal sundaram 17.85 17.87 15.67 18.49
2 TATA-AIG $ 71.31 97.92 86.86 114.16
3 Reliance 16.45 31.64 22.7 18.65
4 IFFCO TOKIO 52.24 56.88 53.42 65.14
5 ICICI Lombard 56.23 67.27 62.18 80.22
6 Bajaj Allianz 60.43 67.49 47.99 53.81
CHART NO: 4.3

43
INTERPRETATION:
From the above table it is clear that, past four years TATA-AIG having high gross
In the years 2007 and 2008 TATA-AIG and BAJAJ ALLIANZ had good competition in
premium.
In 2007 premium difference was 15.26%, in 2008 31.07%
In the years 2009 & 2010 TATA-AIG & ICICI Lombard had good premium.
Premium difference between these companies in 2009 was 28.31% & in 2010 was
29.73%.
44
TABLE NO: 4.4
Engineering Insurance Gross Premium hold by Top six Private General Insurance
Companies
(Rupees in Crores)
Years
S. No Company name
2007 2008 2009 2010
1 Royal sundaram 40.13 41.1 27.37 27.51
2 TATA-AIG $ 26.29 29.29 31.58 32.05
3 Reliance 93.68 103.54 61.36 34.63
4 IFFCO TOKIO 90.91 89.12 72.66 44.63
5 ICICI Lombard 177.54 179.51 125.72 116.33
6 Bajaj Allianz 154.6 145.92 72.69 76.48
CHART NO: 4.4

45
INTERPRETATION:
premium compared with others competitors in Engineering insurance and followed by Bajaj
Allianz had high gross premium.
In the year 2007 premium difference was 12.92%, in 2008 18.71 per cent.
Premium difference between these companies in 2009 was 42.18% & in 2010 was
34.26 per cent.
TABLE NO 4.5
Motor Insurance Gross Premium hold by top six Private General Insurance companies
(Rupees in Crores)
Year
S. No Company
2007 2008 2009 2010
1 Royal sundaram 303.39 410.18 440.24 556.72
2 TATA-AIG $ 288.09 265.01 158.78 279.92
3 Reliance 455.06 1,267.37 1,047.96 756.9
4 IFFCO TOKIO 448.9 582.24 515.99 682.46
5 ICICI Lombard 1,143.34 1,279.77 987.05 1,105.96
6 Bajaj Allianz 843.87 1,385.82 1,030.20 1,254.44
CHART NO: 4.5

46
INTERPRETATION:
From the above table it is clear that, past four years Reliance, ICICI Lombard & Bajaj
Allianz had perfect competition among them compare to others competitors.
In the year 2007 ICICI Lombard and Bajaj Allianz had good premium, ICICI Lombard
had high premium than Bajaj Allianz With some 26.19% difference.
In 2008 Bajaj Allianz and ICICI Lombard had good premium compare to other
In 2009 Reliance and Bajaj Allianz had good premium, Reliance had high premium
than Bajaj Allianz With some 1.7% difference.
47
TABLE NO 4.6
Motor OD Insurance Gross Premium hold by Top six Private

(Rupees in Crores)
Years
S. no Company name
2007 2008 2009 2010
1 Royal sundaram 266.68 330.74 341 441.95
2 TATA-AIG $ 262.21 221.52 135.55 239.22
3 Reliance 408.67 916.23 722.54 518.32
4 IFFCO TOKIO 348.63 352.7 354.43 474.99
5 ICICI Lombard 956.73 906.48 680.55 807.59
6 Bajaj Allianz 668.39 1,002.86 745.13 947.66
CHART NO: 4.6

48
INTERPRETATION:
From the above table it is clear that, past three years Bajaj Allianz and in 2007 ICICI
Lombard having high gross premium compared with others competitors.
In the year 2007 ICICI Lombard and Bajaj Allianz had good premium range, ICICI
Lombard had high premium than Bajaj Allianz with some 30.14% difference.
In 2009 Bajaj Allianz and Reliance had good premium, Bajaj Allianz had high premium
than Reliance with some 3% difference.
49
TABLE NO: 4.7
Motor TP Insurance Gross Premium hold by top six Private

(Rupees in Crores)
Years
S. No. Company name
2007 2008 2009 2010
1 Royal sundaram 36.71 79.44 99.24 114.78
2 TATA-AIG $ 25.88 43.48 23.24 40.7
3 Reliance 46.39 351.14 325.42 238.58
4 IFFCO TOKIO 100.27 229.55 161.56 207.47
5 ICICI Lombard 186.6 373.29 306.5 298.36
6 Bajaj Allianz 175.48 382.96 285.07 306.78
CHART NO: 4.7

50
INTERPRETATION:
In the year 2007 ICICI Lombard and IFFCO TOKIO had good premium range, ICICI
Lombard had high premium than IFFCO TOKIO With some 16.29% difference.
In 2009 ICICI Lombard and IFFCO TOKIO had good premium range, ICICI Lombard
had high premium than IFFCO TOKIO With some 13.75% difference.
51
TABLE NO: 4.8
Liability Insurance Gross Premium holds by top six Private

(Rupees in Crores)
Years
S. No. Company name
2007 2008 2009 2010
1 Royal sundaram 8.62 6.28 9.11 10.99
2 TATA-AIG $ 73.47 102.73 114.89 114.43
3 Reliance 10.03 14.1 15.75 14.6
4 IFFCO TOKIO 12.7 32.19 37.23 47.3
5 ICICI Lombard 84.02 78.78 81.26 89.42
6 Bajaj Allianz 29.73 47.91 52.79 76.36
CHART NO: 4.8

52
INTERPRETATION:
From the above table it is clear that, past three years TATA-AIG and in 2007 ICICI
Lombard having high gross premium compared with others competitors.
In the year 2007 ICICI Lombard and TATA-AIG had good premium, ICICI Lombard
had high premium than TATA-AIG with some 12.56% difference.
In 2008 TATA-AIG and ICICI Lombard had good premium compare to other
In 2009 TATA-AIG and ICICI Lombard had good premium range, TATA-AIG had
high premium than ICICI Lombard with some 29.27% difference.
In 2010 TATA-AIG and ICICI Lombard had good premium compare to other
53
TABLE NO: 4.9
Other Insurance Gross Premium holds by top six Private

(Rupees in Crores)
Years
S. No. Company name
2007 2008 2009 2010
1 Royal sundaram 7.94 10.29 21.78 29.2
2 TATA-AIG $ 27.15 9.83 12.24 19.04
3 Reliance 91.07 55.47 33.96 27.81
4 IFFCO TOKIO 79.03 87.19 68.17 87.49
5 ICICI Lombard 158.59 109.72 106.27 215.41
6 Bajaj Allianz 129.07 157.21 127.42 140.19
CHART NO: 4.9

54
INTERPRETATION:
In the year 2007 ICICI Lombard and Bajaj Allianz had good premium, ICICI Lombard
had high premium than Bajaj Allianz with some 18.61% difference.
competitors, Bajaj Allianz had high premium than ICICI Lombard with some 30.21%
difference.
In 2009 Bajaj Allianz and ICICI Lombard had good premium, Bajaj Allianz had high
premium than ICICI Lombard with some 16.6% difference.
In 2010 ICICI Lombard and Bajaj Allianz had good premium compare to other
55
TABLE NO 4. 10
Capital required starting insurance company
(Rupees in Crores)
S No COMPANY CAPITAL
1 Life and Non-life Insurance 100
2 Re insurance 200
CHART NO: 4.10

56
INTERPRETATION:
Non-life insurance company will not be registered unless the company has a paid-up
equity capital of a minimum Rs. 100 crores. In the case of a re-insurance company the
minimum paid-up equity capital will have to be Rs. 200 crores.
TABLE NO: 4.11
Diversity of competitors in other products than what L&T Insurance offers
(Rupees in Crores)
Years
S. No. Company name
Marine hull Health Aviation Personal accident
1 Royal Sundaram 0 120.59 0 28.38
2 TATA-AIG $ 0 87.49 0 94.21
3 Reliance 14.84 191.71 45.27 37.89
4 IFFCO Tokio 37.28 131.1 31.91 20.93
5 ICICI Lombard 45.21 1,080.05 71.68 74.9
6 Bajaj Allianz 3.51 235.95 20.94 39.57
7 L&T 0 0 0 0
CHART NO: 4.11
57
INTERPRETATION:
From the above table it is clear, that competitors offering some other insurance
segments which was our offering. Like Marine hull, it was offered by four competitors in that
segment ICICI Lombard had high premium than others.
Health insurance was offered by all our competitors in that ICICI Lombard had very
high premium than others. Aviation insurance was offered by four competitors in that
segment ICICI Lombard had high premium than others.
Personal accident insurance was offered by all our competitors in that TATA-AIG had
high premium than other competitors.
TABLE NO: 4.12
Market share of companies’ in general insurance industry
(Rupees in Crores)
S. No Insurer Market Share
1 Royal Sundaram 2.69
2 TATA-AIG $ 2.90
3 Reliance 3.95
4 IFFCO Tokio 4.30
5 ICICI Lombard 10.14
6 Bajaj Allianz 6.80
7 HDFC ERGO 3.06
8 Cholamandalam 2.33
9 Future Generali 1.43
10 Universal Sompo 0.69
11 Shriram 1.70
58
12 Bharti Axa 1.21

13 Raheja QBE* 0.02
14 SBI 0.05
15 L&T 0.01
16 New India 17.23
17 National 13.99
18 United India 14.86
19 Oriental 12.64
20 Grand Total 100.00
CHART NO: 4.12

59
INTERPRATATION:
From the above table it is clear that new India having more market shares,
secondly united India followed that national, oriental and ICICI Lombard. SBI, Raheja QBE
and L&T having least market shares.
TABLE NO: 4.13
Growth rate of general insurance industry in past four years

(Rupees in Crores)
60
S. No. Insurer 2007 2008 2009 2010
1 Fire
4,157.14 3,516.80 2,980.31 3,557.97
2 Marine
1,633.93 1,835.72 1,623.87 1,896.96
3 Marine Cargo
885.61 1,051.62 911.62 1,142.69
4 Marine Hull
748.32 784.10 712.25 754.27
5 Engineering
1,376.40 1,432.34 1,172.50 1,324.11
6 Motor
10,678.50 12,803.71 10,767.63 12,888.66
7 Motor OD
7,585.70 8,186.01 6,880.55 8,486.03
8 Motor TP
3,092.80 4,617.70 3,887.08 4,402.63
9 Health
3,197.57 4,969.01 5,191.39 7,082.29
10 Aviation
421.61 303.44 304.48 341.48
11 Liability
464.49 582.96 669.11 774.89
12 Personal Accident
591.95 722.10 626.07 835.95
13 All Others
2,476.83 1,960.33 1,835.03 2,111.49
14 Total
24,998.41 28,126.41 25,170.39 30,813.80
15 Industry growth rate 0 12.51 0.69 23.26
CHART NO: 4.13

61
INTERPRETATION:
From the above table it is clear that growth rate of the insurance industry, increased in
2008 up to 12.51 points, in 2009 it was reduced in to 0.69 points & in 2010 it was increased at
23.26 points based on 2007 total value.
TABLE NO: 4.14

Insurance Products offered by L&T Insurance
(Rupees in Crores)
62
Insurance products L&T Insurance Percentage
1 Fire 0.69 12.2
2 Marine 0.08 1.32849
3 Marine Cargo 0.08 1.32849
4 Marine Hull 0 0
5 Engineering 0.73 12.78412
6 Motor 1.77 31.19708
7 Motor OD 1.35 23.8146
8 Motor TP 0.42 7.382481
9 Health 0 0
10 Aviation 0 0
11 Liability 0.29 5.101602
12 Personal Accident 0 0
13 All Others 0.28 4.859891
14 Total 5.69 100

CHART NO: 4.15

63
INTERPRETATION:
From the above table it is clear that, L&T Insurance offering 9 insurance products.
In total L&T insurance, 31% was covered by Motor insurance segment.
Motor OD insurance covers 24%.
Engineering insurance covers 13% from total.
Fire insurance covers 12%.
Motor TP insurance covers 8%.
Liability insurance covers 5%.
Marine & Marine cargo insurances both cover 1%.
PRODUCT INNOVATION
L & T GENERAL INSURANCE IS PLANNING FOR NEW PRODUCTS

64
L&T General Insurance Company is planning to launch some new health insurance
products to make growth inroads in the general insurance market in the next financial year.
L&T General Insurance is the latest entrant in the Indian general insurance sector and so far
launched 25 products and registered Rs.7-8 crores in premium.
The company is focusing itself into health insurance and micro insurance, this is why
they all planning for compressive products for health insurance sector. L&T General
Insurance was launched by engineering company L&T with a paid-up capital of 175 crores
and has already set up 10 branches.
Company is also tapping corporate part of L&T eco-system which includes corporate
customers of L&T, borrowers of L&T finance and investors in L&T Mutual Fund. By end of
March, 2011, company is expecting to gross a written premium of 14-15 crores.
Currently they have 430 licensed agents in L&T General Insurance and they are
planning to include more agents in Tier-2 and Tier-3 cities. There are agents already working
in smaller cities as we perceive micro insurance to be another focus area. As the general
insurance industry has rated growth rate of 22.1% in first nine months of current financial
year, this is a tremendous potential for L&T General Insurance to establish itself in general
insurance market.
TABLE NO: 4.16
Number of Competitors available to L&T Insurance in various segments
(Rupees in Crores)
65
S. No. Types Number of substitutes

1 Fire 18
2 Marine 17
Marine
3 17
Cargo
4 Engineering 18
5 Motor 18
6 Motor OD 18
7 Motor TP 18
8 Liability 18
9 All Others 19
CHART NO: 4.16
INTERPRETATION:
L&T insurance offering 9 segment of insurance every segment having many

competitors.
In other insurance segment 19 competitors are available.
In Fire, Engineering, Motor, Motor OD, Motor TP & Liability 18 competitors are
available.
In Marine & Marine Cargo 17 competitors are available.
TABLE NO: 4.17
Consolidated Gross premium amount of seven general insurance companies details

including L&T Insurance
66
Insurers
S. Insurance
No. Segments Royal TATA- IFFCO ICICI Bajaj
Sundaram AIG $ Reliance Tokio Lombard Allianz L&T
1 Fire 37.43 153.72 75.81 176.76 244.49 193.18 0.69
2 Marine 18.49 114.16 33.49 102.42 125.43 57.32 0.08
Marine
3 18.49 114.16 18.65 65.14 80.22 53.81 0.08
Cargo
4 Engineering 27.51 32.05 34.63 44.63 116.33 76.48 0.73
5 Motor 556.72 279.92 756.90 682.46 1,105.96 1,254.44 1.77
6 Motor OD 441.95 239.22 518.32 474.99 807.59 947.66 1.35
7 Motor TP 114.78 40.70 238.58 207.47 298.36 306.78 0.42
8 Liability 10.99 114.43 14.60 47.30 89.42 76.36 0.29
9 All Others 29.20 19.04 27.81 87.49 215.41 140.19 0.28
CHART NO: 4.17

67
Interpretation:
ICICI Lombard have high gross premium in four insurance segments, that was fire,
motor, engineering and in other insurance.
TATA-AIG have high gross premium in two segments, which are marine cargo and
liability.
Royal sundaram, Reliance, IFFCO Tokio and L&T don’t have high gross premium in
any segment.
Bajaj Allianz have high gross premium in three segments, which are Motor, Motor
OD and Motor TP.
TOOLS:
68
Fish bone diagram
Threat of
Power of Power of
new
buyers suppliers
entrance
Switching cost Capital requirement Money
Need for insurance Brand equity
Competitor’s available Existing loyalty

Porter's five
forces
analysis
Product differentiation Number of competitors
Settlement Rate of industry growth
Product innovation Diversity of competitors
Threat of Competitive
substitutes rivalry
TREND ANALYSIS
(Rupees in Crores)
S. No. Insurer 2007 2008 2009 2010

69
1 Fire 4,157.14 3,516.80 2,980.31 3,557.97
2 Marine 1,633.93 1,835.72 1,623.87 1,896.96
3 Marine Cargo 885.61 1,051.62 911.62 1,142.69
4 Marine Hull 748.32 784.1 712.25 754.27
5 Engineering 1,376.40 1,432.34 1,172.50 1,324.11
6 Motor 10,678.50 12,803.71 10,767.63 12,888.66
7 Motor OD 7,585.70 8,186.01 6,880.55 8,486.03
8 Motor TP 3,092.80 4,617.70 3,887.08 4,402.63
9 Health 3,197.57 4,969.01 0.00 0.00
10 Aviation 421.61 303.44 0.00 0.00
11 Liability 464.49 582.96 0.00 0.00
12 Personal Accident 591.95 722.1 0.00 0.00
13 All Others 2,476.83 1,960.33 0.00 0.00
14 Total 24,998.41 28,126.41 0.00 0.00
15 Trend value 100 112.51 100.67 123.26
CHART NO: 4.1

70
INTERPRATATION:
From the above table it is clear that, based on general insurance industry premium
underwritten the companies data. I calculated trend analysis base year data is 2007.
Consider that 2007 industry growth was 100%.
Year 2008 insurance industry rate was increased up to 112.51%.
Year 2009 insurance industry rate was decreased than 2007 growth rate, the growth rate
was 100.67%.
In the year 2010 insurance industry rate was increased than past years123.26%.
CONCENTRATION RATIO:
71
S1= New India insurance

S2= National insurance
S3= United India insurance
S4= The Oriental insurance
CR m = s1 + s2 + s3 + ...... + sm
=17.23+13.99+14.86+12.64
=58.72
In general insurance industry most of the market shares are hold by four major
companies. So the general insurance industry is monopoly in nature.
HERFINDAHL-HIRSCHMAN INDEX (HHI):
HHI = s12 + s22 + s32 + ...... + sn2

72
Insurer Market Share X=MS/100 X²
Royal Sundaram 2.69 0.02691383 0.00072361

TATA-AIG $ 2.90 0.029046123 0.000841
Reliance 3.95 0.0395313 0.00156025
IFFCO Tokio 4.30 0.043000139 0.001849
ICICI Lombard 10.14 0.101372858 0.010201
Bajaj Allianz 6.80 0.067970157 0.004624
HDFC ERGO 3.06 0.030569064 0.00093636
Cholamandalam 2.33 0.023311505 0.00054289
Future Generali 1.43 0.014323197 0.00020449
Universal Sompo 0.69 0.006891956 0.0004761
Shriram 1.70 0.017005928 0.000289
Bharti Axa 1.21 0.012127498 0.00014641
Raheja QBE* 0.02 0.000185242 0.00000004
SBI 0.05 0.000466924 0.00000025
L&T 0.01 0.000124519 0.00000001
New India 17.23 0.172348344 0.0297
National 13.99 0.139873114 0.01957201
United India 14.86 0.148587665 0.0221

Oriental 12.64 0.126350639 0.0159
Grand Total 100.00 1 0.1096664
Value in per cent 10.926592%
Based on HERFINDAHL-HIRSCHMAN INDEX (HHI) value is closer. So the general

insurance industry is a purely monopoly in nature.
SUMMARY AND CONCLUSION
The study attempts to analyze the insurance companies using “the porter’s five forces
analysis”. The analysis had been done by using information collected from IRDA’s insurance
73
industry gross premium data of past four years. The following are the findings, on the basis of
the findings the researcher also suggested some valuable points to overcome the problems
faced by the insurance companies in industry.
Findings:
 It is found that. Due to the entrance of 7 new general insurance companies within 3
years from 2007. As a impact all six companies gross premium started to decreased compared
to the gross premium in 2007.
 In Marine insurance, ICICI Lombard had high gross premium compared to other
competitors for all the past four year. This may be due to ICICI Lombard having good brand
image in marine insurance.
 In Marine cargo insurance, from past four years TATA-AIG was the only company
which had high gross premium. This company having good market image in this segment.
 In Engineering insurance, for the past four years ICICI Lombard had high gross
premium followed by Bajaj Allianz is also having high premium. Both companies having
good market power in in Engineering insurance.
 The need for motor insurance is increasing due to increase vehicle insurance. Since the
industry is going in increasing trend. ICICI Lombard, Bajaj Allianz and Reliance had high
gross premium.
 In Motor OD insurance, ICICI Lombard, Bajaj Allianz & Reliance had high premium
compared to other competitors. But the trend of gross premium decreasing because of new
entrance to the industry.
 In Motor TP insurance, ICICI Lombard, Bajaj Allianz & Reliance had high premium
compared to other competitors.
 In liability insurance, past four years TATA-AIG had good gross premium compare to
other competitors.
 In other insurance, 2007 & 2010 ICICI Lombard had high premium and in 2008 & 2010
Bajaj Allianz had high gross premium.
 Capital requirement for starting life and non-life insurance company is 100 crores and
for starting of re-insurance company is 200 crores.
74
 Health and personal accident schemes are offered by all six companies and marine and
aviation offered by four companies. These products not offered by L&T Insurance.
 Majority of the market shares are owned by four companies. This is due to those
companies having huge experience in GI industry, this may be a plus point to the companies.
United India Insurance Company Limited was incorporated on 1938. Oriental Insurance
Company Ltd was incorporated on 1947.New India Incorporated on 1919. National
Insurance Company Limited was incorporated on 1906, presently operating as a Government
of India undertaking.
 Industry growth rate in 2008 increased 12.51 per cent. 2009 it reduced in to .69 per
cent. And 2010 it increased into 23.2 per cent.
 L&T Insurance mostly covers, motor insurance 31 per cent, 24 per cent in motor OD,
13 per cent in engineering, 12 per cent in fire insurance, 8 per cent in motor TP, 5 per cent in
liability and same 5 per cent in other insurances and finally marine & marine cargo having
both 1 per cent.
 L&T Insurance offering 9 products, in other insurance 19 competitors is available, in
marine and marine cargo insurance 17 competitors available and for other 6 insurance 18
competitors are available.
 Trend values of insurance industry in 2008 was 112.51 per cent, in 2008 was 100.67 per
cent and in 2010 was 123.26 per cent.
 Concentration ratio is 58.72 per cent. So the industry is purely monopoly in nature.
 HERFINDAHL-HIRSCHMAN INDEX (HHI) value is 10.926592 per cent, it is closer.
So the insurance industry is purely monopoly in nature.
Suggestions
The study reveals that good market image is the one main reason for increasing the
market share. The top four private companies like ICICI Lombard, Bajaj Allianz, IFFCO
Tokio and Reliance holding a good market share as a result of their reputation. Hence, it is
observed the L&T being reputed company in other business, their brand image can help them
to capture more market share in future.
75
Though the study is confined only to private insurance companies, in concentration

ratio it is identified that government companies like New India, National, United India and
Oriental are holding the majority of market shares. This is due to the trust of customers
towards the company. Hence L&T may take more steps to build a strong trust in the mind of
customer to increase the market share in future.
Among the various general insurance, motor insurance is identified to have a high
growth rate. L&T may give some attractive schemes to capture more potential motor
insurance customers in future.
Just like motor insurance, health insurance is also having high growth opportunity.
From the study it is found that majority of gross premium is hold by ICICI Lombard , Hence
L&T as it haves a new proposal to enter health insurance may benchmark the schemes offered
by ICICI Lombard to capture more gross premium in the initial stage.
CONCLUSION:
“A study on the porters five forces analysis of general insurance industry with special
reference to L&T Insurance Limited, Chennai” helps to know the competitive intensity in
general insurance industry. The study also gives a clear view about the possibilities to
increase the market share in future. As suggested in the study, the reputation of company of
may help the company to capture more market share in futures.
76
The outcome of the study may also applicable other insurance company. The study may
be extended to other industries also.
Gross premium underwritten by non-life insurers with in India

(Segment wise): for the period of four years
(Rupees in Crores)
Marin
S Marin e Marin Engineeri
Insurer Year Fire
No. e Carg e Hull ng
o
Royal
1 2010 0.00 0.00 0.00 0.00 0.00
Sundaram
2009 33.20 15.73 15.67 0.07 27.37
77
2008 69.65 18.27 17.87 0.4 41.1

2007 99.08 18.44 17.85 0.59 40.13
2 TATA-AIG $ 2010 37.43 18.49 18.49 0.00 27.51
2009 33.20 15.73 15.67 0.07 27.37
2008 133.25 97.92 97.92 0 29.29
2007 130.25 71.31 71.31 0 26.29
3 Reliance 2010 153.72 114.16 114.16 0.00 32.05
2009 126.59 86.86 86.86 0.00 31.58
2008 127.81 42.41 31.64 10.77 103.54
2007 146.16 24.92 16.45 8.47 93.68
4 IFFCO Tokio 2010 75.81 33.49 18.65 14.84 34.63
2009 105.72 37.45 22.70 14.75 61.36
2008 234.8 69.45 56.88 12.57 89.12
2007 294.76 129.96 52.24 77.73 90.91
5 ICICI Lombard 2010 176.76 102.42 65.14 37.28 44.63
2009 160.48 101.83 53.42 48.41 72.66
2008 438.25 224.55 67.27 157.28 179.51
2007 403.05 155.25 56.23 99.02 177.54
6 Bajaj Allianz 2010 244.49 125.43 80.22 45.21 116.33
2009 234.19 118.07 62.18 55.89 125.72
2008 287.53 76.41 67.49 8.92 145.92
2007 381.19 72.99 60.43 12.56 154.6
7 HDFC ERGO 2010 193.18 57.32 53.81 3.51 76.48
2009 176.53 53.13 47.99 5.15 72.69
2008 7.09 3.14 3.14 0 6.69
2007 7.65 2.37 2.37 0 5.98
Marin
Marin e Marin Engineeri
S No. Insurer Year Fire
e Carg e Hull ng
o
Cholamandala
8 2010 39.39 31.50 30.56 0.94 17.94
m
2009 53.47 23.32 23.32 0.00 17.99
2008 70.1 32.66 31.18 1.48 29.91
2007 80.54 26.56 25.66 0.9 23.72
Future
9 2010 26.58 11.12 11.12 0.00 10.58
Generali
2009 38.61 3.99 3.99 0.00 4.10
2008 3.37 0.72 0.72 0 0.99
2007 0 0 0 0 0
Universal
10 2010 28.02 3.09 3.09 0.00 2.58
Sompo
2009 2.70 0.17 0.17 0.00 1.38
2008 0.48 0 0 0 0
78
2007 0 0 0 0 0
11 Shriram 2010 1.09 0.00 0.00 0.00 0.90
2009 27.94 8.26 8.26 0.00 8.32
12 Bharti Axa 2010 20.54 3.43 3.43 0.00 9.52
2009 0.89 0.04 0.04 0.00 0.25
13 Raheja QBE* 2010 0.08 0.01 0.01 0.00 0.00
2009 4.69 0.00 0.00 0.00 0.91
14 SBI 2010 0.69 0.08 0.08 0.00 0.73
15 L&T 2010 824.78 418.73 193.19 225.53 242.78
16 New India 2010 700.21 369.31 148.21 221.10 220.85
2009 428.59 199.71 125.03 74.68 155.23
2008 743.42 437.28 182.7 254.58 222.64
2007 909.98 321.02 158.71 162.31 210.38
17 National 2010 325.83 183.51 103.21 80.30 118.47
2009 594.60 385.32 209.09 176.23 292.60
2008 377.52 188.52 139.2 49.32 145.71
2007 491.21 196.97 120.29 76.68 134.95
Marin
Marin e Marin Engineeri
S No. Insurer Year Fire
e Carg e Hull ng
o
United
18 2010 0.00 0.00 0.00 0.00 0.00
India
2009 0.00 0.00 0.00 0.00 0.00
2008 524.3 300.83 192.1 108.74 216.68
2007 674.77 264.35 135.31 129.05 203.96
19 Oriental 2010 0.00 0.00 0.00 0.00 0.00
2009 0.00 0.00 0.00 0.00 0.00
2008 499.72 343.54 163.5 180.04 221.23
2007 538.5 349.78 168.76 181.02 214.27
Grand
20 2010 0.00 0.00 0.00 0.00 0.00
Total
2009 0.00 0.00 0.00 0.00 0.00
2008 3,516.80 1,835.72 1,051.62 784.1 1,432.34
2007 4,157.14 1,633.93 885.61 748.32 1,376.40
79
Motor Motor Healt Aviatio

S. No. Insurer Motor
OD TP h n
Royal
1 0.00 0.00 0.00 0.00 0.00
Sundaram
440.24 341.00 99.24 91.62 0.00
410.18 330.74 79.44 108.61 0
303.39 266.68 36.71 96.18 0
2 TATA-AIG $ 441.95 114.78 120.59 0.00 10.99
341.00 99.24 91.62 0.00 9.11
265.01 221.52 43.48 68.91 0
288.09 262.21 25.88 45.35 0.25
3 Reliance 239.22 40.70 87.49 0.00 114.43
135.55 23.24 53.85 0.00 114.89
1,267.37 916.23 351.14 275.62 7.42
455.06 408.67 46.39 67.69 7.23
4 IFFCO Tokio 518.32 238.58 191.71 45.27 14.60
722.54 325.42 181.98 39.88 15.75
582.24 352.7 229.55 114.02 6.38
448.9 348.63 100.27 71.89 4.74
ICICI
5 474.99 207.47 131.10 31.91 47.30
Lombard
354.43 161.56 91.57 26.59 37.23
1,279.77 906.48 373.29 884.61 41.32
1,143.34 956.73 186.6 735.85 32.07
6 Bajaj Allianz 807.59 298.36 1,080.05 71.68 89.42
680.55 306.50 628.80 53.05 81.26
80
1,385.82 1,002.86 382.96 243.25 13.95

843.87 668.39 175.48 158.26 9.44
7 HDFC ERGO 947.66 306.78 235.95 20.94 76.36
745.13 285.07 220.46 26.54 52.79
134.8 119.34 15.45 28.1 0
132.36 123.83 8.53 10.18 0
Motor Motor Aviatio

S No. Insurer Motor Health
OD TP n
Cholamandala
8 233.72 95.46 122.02 0.00 10.46
m
165.06 62.80 73.08 0.00 9.65
263.56 210.26 53.3 109.38 -0.15
97.16 80.53 16.63 38.6 0.4
Future
9 100.55 39.85 40.13 0.00 5.95
Generali
92.81 26.48 16.51 0.00 1.49
1.77 1.54 0.23 0 0
0 0 0 0 0
Universal
10 31.85 5.33 12.02 0.00 0.52
Sompo
270.91 245.51 0.00 0.00 0.31
0 0 0 0 0
0 0 0 0 0
11 Shriram 124.86 130.58 0.00 0.00 0.11
214.85 62.75 35.26 0.00 1.64
12 Bharti Axa 77.92 24.05 22.59 0.00 1.87
0.13 0.02 0.00 0.00 4.03
13 Raheja QBE* 0.11 0.02 0.00 0.00 0.87
0.00 0.00 0.00 3.20 0.00
14 SBI 1.35 0.42 0.00 0.00 0.29
15 L&T 962.49 690.80 1,540.47 52.50 121.15
16 New India 853.44 650.45 1,171.28 38.60 97.57
1,321.70 620.71 1,075.98 23.51 56.88
2,034.36 1,097.30 937.05 1,209.42 78.44
2,034.73 1,233.71 801.02 765.29 118.08
17 National 980.68 578.50 698.31 33.69 42.98
814.33 692.19 1,193.90 6.12 74.93
2,143.69 1,352.65 791.03 684.7 50.97
1,980.16 1,310.14 670.03 333.12 84.49
81
Motor Motor
S No. Insurer Motor Health Aviation
OD TP
United
18 625.36 536.44 772.56 69.86 78.43
India
8,486.03 4,402.63 7,082.29 341.48 774.89
1,434.90 707.5 727.4 694.94 26.13
1,219.18 767.3 451.88 434.64 45.36
19 Oriental 6,880.55 3,887.08 5,191.39 304.48 669.11
0.00 0.00 0.00 0.00 0.00
1,600.25 966.88 633.37 547.44 78.98
1,732.26 1,158.88 573.39 440.53 119.54
Grand
20 0.00 0.00 0.00 0.00 0.00
Total
0.00 0.00 0.00 0.00 0.00
12,803.71 8,186.01 4,617.70 4,969.01 303.44
10,678.50 7,585.70 3,092.80 3,197.57 421.61
82
All
S Personal Grand
Insurer Liability Other
No. Accident Total
s
Royal
1 10.99 28.38 29.20 829.32
Sundaram
9.11 21.19 21.78 660.26
6.28 30.77 10.29 695.16
8.62 26.8 7.94 600.58
2 TATA-AIG $ 29.20 829.32 2.69 0.00
21.78 660.26 2.62 0.00
102.73 106.46 9.83 813.39
73.47 79.4 27.15 741.56
3 Reliance 19.04 895.02 2.90 0.00
12.24 658.09 2.61 0.00
14.1 52.68 55.47 1,946.42
10.03 16.47 91.07 912.31
4 IFFCO Tokio 27.81 1,218.11 3.95 0.00
33.96 1,563.74 6.21 0.00
32.19 20.43 87.19 1,235.83
12.7 17.44 79.03 1,150.32
5 ICICI Lombard 87.49 1,325.00 4.30 0.00
68.17 1,089.48 4.33 0.00
78.78 108.18 109.72 3,344.69
84.02 113.74 158.59 3,003.45
6 Bajaj Allianz 215.41 3,123.68 10.14 0.00
106.27 2,399.64 9.53 0.00
47.91 46.35 157.21 2,404.34
29.73 24.2 129.07 1,803.34
7 HDFC ERGO 140.19 2,094.42 6.80 0.00
127.42 1,800.45 7.15 0.00
5.17 5.38 26.21 216.58
4.76 7.69 19.17 190.16
83
Liabilit Personal All Grand

S No. Insurer
y Accident Others Total
Cholamandal
8 25.24 597.83 2.38 0.00
am
14.83 441.35 1.43 0.00
13.88 12.55 31.77 563.67
14.7 7.63 25.27 314.59
Future
9 7.63 252.07 1.00 0.00
Generali
25.40 212.37 0.69 0.00
0.1 3.43 0.25 10.64
0 0 0 0
Universal
10 22.32 115.15 0.46 0.00
Sompo
1.24 524.02 1.70 0.00
0 0 0 0.48
0 0 0 0
11 Shriram 0.25 259.05 1.03 0.00
3.46 373.69 1.21 0.00
12 Bharti Axa 1.92 170.12 0.68 0.00
0.03 5.71 0.02 0.00
13 Raheja QBE* 0.00 1.18 0.00 0.00
0.19 14.39 0.05 0.00
14 SBI 0.28 3.84 0.01 0.00
15 L&T 364.66 5,310.71 17.23 0.00
16 New India 312.62 4,488.99 17.83 0.00
334.03 4,310.02 13.99 0.00
95.65 83.08 373.06 5,277.35
60.65 79.39 517.68 5,017.20
17 National 267.91 3,298.40 13.10 0.00
436.35 4,578.55 14.86 0.00
41.17 63.77 334.75 4,030.80
36.42 55.24 501.84 3,814.42
Personal All
S No. Insurer Liability Grand Total
Accident Others
18 United India 379.27 3,411.44 13.55 0.00
2,111.49 30,813.80 100.00 20,67,940.46
74.18 100.82 366.76 3,739.56
67.79 95.31 504.59 3,509.95
84
19 Oriental 1,835.03 25,170.39 100.00 16,82,029.48

0.00 0.00 0.00 0.00
70.81 88.2 397.82 3,847.99
61.61 68.62 415.43 3,940.53
20 Grand Total 632.52 632.52 0.00 0.00
594.97 594.97 0.00 0.00
582.96 722.1 1,960.33 28,126.41
464.49 591.95 2,476.83 24,998.41

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1

In today's dynamic and competitive business environment, survival, growth and

OBJECT OF THE STUDY

• To trace out the threat of new entrants in insurance industry.

• To study the bargaining power of buyers in insurance industry.

• To measure the competitive rivalry within the insurance industry.

NEED FOR THE STUDY:

• To identify the entry level problems

• Entry level problems of insurance companies

AN OVERVIEW OF INDIA’S INSURANCE MARKET

Insurance in India used to be tightly regulated and monopolised by state-run insurers.

INSURANCE DEVELOPMENT AND POTENTIAL

HISTORY OF INSURANCE DEVELOPMENT IN INDIA

MODERN INSURANCE CAME WITH A BRITISH ACCENT

Following the recommendations of the Malhotra Committee report, in 1999, the

In December, 2000, the subsidiaries of the General Insurance Corporation of India

PROBLEMS WHICH ARE FACED BY INSURANCE COMPANIES

By Flora Richards-Gustafson, How Contributor updated:

• Maintaining Funds in Hard Economic Times

 Engineering Construction & Contracts Division (ECCD)

L&T General Insurance Company Limited (L&T Insurance) is a wholly owned

Our vision is to be an insurance company distinct in character, calibre and capability.

L&T Insurance will be a state-of-the-art technology-driven company that delivers

Having established its foothold in engineering and construction, electrical and

 Creating a world-class insurance company by constantly maintaining exalted quality standards

Governance is a key component of corporate leadership. At L&T, every action is

To run a transparent and accountable business requires effective upholding of the

Our four-tier governance structure ensures greater management accountability and

FOUR TIER GOVERNANCE STRUCTURE

The reasons why health insurance is a must:

Personal Accident Insurance

Group Personal Accident

THREAT OF NEW ENTRANTS

CAPITAL REQUIREMENTS OF NEW INSURANCE COMPANIES

Equity capital held by a foreign company

• Product differentiation by existing firms based on perceived distinctiveness by the

 Industry growth rate

As we described these factors constituting the force of competitive rivalry within an

not guarantee success tomorrow, unless there is a willingness to respond to environmental

BARGAINING POWER OF BUYERS

The bargaining power of buyers is high under these conditions:

THREAT OF SUBSTITUTE PRODUCTS

The availability of close substitutes constitutes a negative competitive force in an

The purpose of an industry analysis, in the context of strategic choice, is to determine

USE OF THE INFORMATION FROM FIVE FORCES ANALYSIS:

The Five Forces Analysis allows determining the attractiveness of an industry. It

Influencing the Power of Five Forces

The following three things act to increase leverage:

 Systematic and organized effort to investigate a scientific problem.

 Analyze the data.

The research is analytical in nature.

Data collection Method

Tools and Techniques for Analysis:

The concentration of firms in an industry is of interest to economists, business

The Herfindahl - Hirschman Index.

Concentration Ratio (CR)

where si = market share of the ith firm.

Herfindahl-Hirschman Index (HHI)

The Herfindahl-Hirschman Index provides a more complete picture of industry

HHI = s12 + s22 + s32 + ...... + sn2

where si is the market share of the ith firm.

 Fish bone tool

ANALYSIS AND INTERPRETATION