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IS LIC OF INDIA LOSING ITS MARKET SHARE AFTER
LIBERALIZATION?
1 Mr. Bidyadhar Padhi, Asst Professor, Silicon Institute of
Technology, Bhubaneswar.2 Dr Mayadhar Satpathy, Senior Reader,
Finance, Institute of Management and Information
Technology, Cuttack.
ABSTRACT
The Government of India liberalized the insurance sector in
March 2000 withthe passage of the Insurance Regulatory and
Development Authority (IRDA) Bill, liftingall entry restrictions
for private players and allowing foreign players to enter themarket
with some limits on direct foreign ownership. After liberalization
of insurancesector private insurers are making waves. They have
beaten all the forecasts. The typeof growth rate they have achieved
for themselves has no parallel on the globe. In theyear 2000-01,
when the insurance industry was opened up to the players, the
lifeinsurance premium was Rs34898.48 crore. The premium income for
the life insurancesegment has grown 303% between 2000-01 and
2005-06. This paper will highlightthe market share of LIC of India
after the liberalization period. It uses a panel datasetof most of
the life insurance companies working in India over the period
200110, toevaluate the growth and market share.
KEY WORDS
IRDA, Liberalization, LIC, Market Share
INTRODUCTION
Insurance is the best form of fortification against risk that
has been formulated byman. Since its emergence, insurance has
become unavoidable to every aspect of human lifefrom health
disorders to building properties, from household articles to
multimillion-dollarprojects insurance is considered to be a social
device to meet uncertain losses, when theneed arises. In general,
it is clear that an insurance organization bears the responsibility
ofoffering world-class services to the ultimate users, which needs
innovative marketingpractices. Insurance in India started without
any regulations in the nineteenth century. Itwas a typical story of
a colonial era: a few British insurance companies dominating
themarket serving mostly large urban centers. After the
independence, the Life InsuranceCompany was nationalized in 1956,
and then the general insurance business was nationalizedin 1972.
The Life Insurance market in India is an underdeveloped market that
was onlytapped by the state owned LIC of India (the only public
sector life insurer) till the entry ofprivate insurers. The
penetration of life insurance products was 19 percent of the total
400million of the insurable population. The state owned LIC sold
insurance as a tax instrument,
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not as a product giving protection. Most customers were under-
insured with no flexibility ortransparency in the products. With
the entry of the private insurers the rules of the gamehave
changed. The Government of India liberalized the insurance sector
in March 2000with the passage of the Insurance Regulatory and
Development Authority (IRDA) Bill,lifting all entry restrictions
for private players and allowing foreign players to enter themarket
with some limits on direct foreign ownership. The bill was passed
to protect theinterest of the policyholders from private and
foreign players. Under the current guidelines,there is a 26 percent
equity cap for foreign partners in an insurance company. There is
aproposal to increase this limit to 49 percent.
OBJECTIVES OF THE STUDY
The objectives of the study are:
1. To study the growth of life insurance in India after
liberalization of insurance industryat national level
2. To make a comparative study of the growth and performance of
LIC of India andother private life insurers
HYPOTHESIS
The following hypotheses are proposed to be treated through the
study of this article
1. After liberalization of insurance industry, the numbers and
amount of insurance haveincreased significantly
2. LIC of India is losing its market share after
liberalization
3. Still LIC of India is the market leader in the insurance
industry and it has dominatedIndian Insurance Industry
GROWTH OF LIFE INSURANCE BUSINESS BEFORE AND
AFTERLIBERALIZATION
The insurance market was opened in August 2000 and the initial
batch of new registrationswas granted for the first time on 23rd
October, 2000. Many of the new companies had notstarted doing
business by the end of March 2001. The number of policies and the
amount ofpremium collected by the private insurers was very little.
Table-1 shows the performance ofonly public sector life insurance
company LIC of India before the liberalization i.e. during1996 to
2000. The corresponding graphs regarding the number of policies and
the amount ofsum assured during this period have been shown in
Figure 1 and 2.
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TABLE 1
INSURANCE BUSINESS OF LIC OF INDIA BEFORE LIBERALIZATION
14.685,24,58910.541,013.002000
14.664,57,4357.91916.41999
16.313,98,9599.33849.21998
16.543,43,0189.58776.71997
-2,94,336-708.81996
Annual growth rate in Sum assured (%)
Sum assured (Rs.cr)
Annual growth rate in No of policies (%)
No.of policies (in lakhs)
Year
14.685,24,58910.541,013.002000
14.664,57,4357.91916.41999
16.313,98,9599.33849.21998
16.543,43,0189.58776.71997
-2,94,336-708.81996
Annual growth rate in Sum assured (%)
Sum assured (Rs.cr)
Annual growth rate in No of policies (%)
No.of policies (in lakhs)
Year
Source: Annual Reports LIC of India
FIGURE-1
GROWTH OF NUMBER OF POLICIES AND SUM ASSURED OF LIC OFINDIA
BEFORE LIBERALIZATION
0
5
10
15
20
25
30
1996 1997 1998 1999 2000
S um As s ured
No. OfP olic ies
From the above table and graph it is observed that both the sum
assured and numberof policies issued by LIC of India was increasing
steadily in 1996. The annual growth rate ofnumber of policies was
around 10% where as the annual growth rate of sum assured wasaround
16% during the pre-liberalization period.
The performance of the life insurance sector was now measured in
post liberalizationperiod from 2001 to 2010 after entry of private
sector insurance companies in the market inTable -2.
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TABLE-2TREND OF LIFE INSURANCE BUSINESS IN INDIA IN THE POST
REFORM ERA
121772468.1359055467Total
19.69265450374.52532250002010
10.15221785480.10509240002009
29.012013514110.23508741572008
47.411560758630.14461515662007
27.7810587576.1535.29354621172006
24.998285479.80-8.44262111982005
18.916628792.8112.83286269162004
11.285574755.0912.62253706752003
310.575009445.9414.45225268382002
----1220,106.33---196830002001
Annual Growth
Percentage
Amount of Premium collected
in Rs Lakhs
Annual Growth
Percentage
Total No. of Policies
Year
121772468.1359055467Total
19.69265450374.52532250002010
10.15221785480.10509240002009
29.012013514110.23508741572008
47.411560758630.14461515662007
27.7810587576.1535.29354621172006
24.998285479.80-8.44262111982005
18.916628792.8112.83286269162004
11.285574755.0912.62253706752003
310.575009445.9414.45225268382002
----1220,106.33---196830002001
Annual Growth
Percentage
Amount of Premium collected
in Rs Lakhs
Annual Growth
Percentage
Total No. of Policies
Year
Source: Annual Report of Insurance Regulatory Development
Authority (IRDA)
FIGURE-2
NUMBER OF POLICIES IN POST REFORMS ERA
No. of P olic ies
0
10000000
20000000
30000000
40000000
50000000
60000000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
No. of P olic ies
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FIGURE - 3
TOTAL PREMIUM COLLECTED IN POST REFORMS ERA
T otal P remium C ollec ted
0.00
5,000,000.00
10,000,000.00
15,000,000.00
20,000,000.00
25,000,000.00
30,000,000.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Total P remium C ollec ted
The above table and graph shows that after the liberalization of
insurance industry,both the number of policies and annual premium
collected have increased significantly. Thetotal number of
insurance policies sold increased from 19683000 in 2001 to 22526838
in2002.This clearly indicates an increase of the total numbers of
policies by 14.45%. Theincrease has continued annually till 2004
and in 2004 the total numbers of policies sold byboth the Life
Insurance Corporation and other private insurers has reached
28626916.Surprisingly in 2005 the total numbers of polices sold has
reduced by 8.44%. But again theincreasing trend of numbers of
policies sold continued from 2006 to 2010. In 2010 the totalnumbers
of policies sold both by the public and private sector insurance
companies havereached to 53225000. Within the ten years of
liberalization there has been a growth in thenumbers of policies
sold by 170%, which shows that the annual average growth in issue
ofnumbers of policies is 17%. It is quite satisfactory achievement
and may be attributed to theimpact of liberalization policy
The premium collected is also correlated with the numbers of
policies issued. Thetotal insurance premium collected by the public
and private insurance companies has alsoincreased significantly
within the ten years starting from 2001 to 2010. In 2001 the
totalinsurance premium collected by the insurance industry was
1220,106.33 as against thecollection of premium of Rs 5009445.94 in
2002. In this year the growth in premium collectionwas 310% as
compared to 2001. However, thereafter, the total premium collected
hasincreased steadily at a moderate rate every year till 2010.I t
shows that after liberalizationthe private insurance companies have
contributed a lot to the insurance industry. The growth
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in the year 2003 and 2004 was 11.18% and 18.91% respectively. In
2005 even though thetotal numbers of policies sold shows a
decreasing trend the total insurance premiums amounthas increased
by 25% over the previous year and reached Rs 8285479.80 lakhs. It
showsthat the relationship between the numbers of policies issued
and the premium collected isnot positively correlated in that
particular year 2005. The increase in the total premiumcollected
were 27.78% in 2006, 47.41% in 2007, 29% in 2008, 10% in 2009 and
19.69% in2010. If we compare the total premium collected in 2001and
2010, the growth rate is 95%.It shows that the annual average
growth rate in premium collected at 9.5% every year from2001 to
2010.
COMPARATIVE STUDY BETWEEN LIC AND OTHER PRIVATE INSUERERSIN THE
POST REFORM ERA
Table-3 indicates the comparative performance of LIC of India
and the privateinsurance players as regards the number of Policies
sold and the Premium collected in thepost reforms era i.e. after
liberalization. The corresponding graphs have been indicated
inFigure 4 and Figure 5.
TABLE 3COMPARISION OF LIFE INSURANCE BUSINESS BETWEEN LIC OF
INDIAAND OTHER PRIVATE INSUERER IN INDIA IN THE POST REFORM ERA
Total
23.06793730618.3018607731-4.32143620008.21388630002010
25.0964497445.011572880413.1915011000-4.52359130002009
82.50515614217.191497899967.4013261558-1.61376125992008
87.31282530140.7912782284104.64792227421.01382292922007
95.191508353.7920.859079222.3673.37387141031.75315907072006
147.65772750.8218.937512728.9834.622233075-11.09239781232005
178.83312032.6315.636316760.18101.0516588479.87269680692004
310.59111906.159.655462848.94522.498250949.61245455802003
3727.5527254.81308.584982190.941225.4713254713.83223942912002
-712.07-1219394.26-10000-196730002001
Growth Rate
Amt of Premium by Pvt Insurers
(lakh Rs)
Growth Rate
Amount of Premium by
LICI(lakh Rs)
Growth Rate
No. of Policies by
private Insurers
Growth Rate
No. of Policies by LICI
Year
Total
23.06793730618.3018607731-4.32143620008.21388630002010
25.0964497445.011572880413.1915011000-4.52359130002009
82.50515614217.191497899967.4013261558-1.61376125992008
87.31282530140.7912782284104.64792227421.01382292922007
95.191508353.7920.859079222.3673.37387141031.75315907072006
147.65772750.8218.937512728.9834.622233075-11.09239781232005
178.83312032.6315.636316760.18101.0516588479.87269680692004
310.59111906.159.655462848.94522.498250949.61245455802003
3727.5527254.81308.584982190.941225.4713254713.83223942912002
-712.07-1219394.26-10000-196730002001
Growth Rate
Amt of Premium by Pvt Insurers
(lakh Rs)
Growth Rate
Amount of Premium by
LICI(lakh Rs)
Growth Rate
No. of Policies by
private Insurers
Growth Rate
No. of Policies by LICI
Year
Source: Annual Report of Insurance Regulatory Development
Authority (IRDA)
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FIGURE-4
COMPARATIVE STUDY OF NUMBER OF LIFE POLICIES FLOATED BYLIC OF
INDIA AND PVT SECTOR INSURANCE COMPANIES
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
40000000
45000000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
No. of polic ies by L IC
No. of polic ies by P vtIns uerers
FIGURE-5
COMPARATIVE STUDY OF NUMBER OF LIFE POLICIES FLOATED BYLIC OF
INDIA AND PVT SECTOR INSURANCE COMPANIES
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
16000000
18000000
20000000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
P remium collec ted byL IC
P remium collec ted byP vt ins uerer
From Table 2 and Figure 2 and Figure 3 it is clear that the
insurance industry hasgrown significantly after the liberalization
both in terms of the total numbers of policies and
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total premium collected by the insurance industry. Table 3 shows
the total numbers of policiesand total amount of premium collected
differently by Life Insurance Corporation of Indiaand other private
insurers. In 2001 out of the total numbers of policies issued by
the insuranceindustry, LIC has sold 19673000 numbers of policies
where as the private insurers wereable to sold only 10,000 numbers
of policies. This was so happened because the privateinsurers were
new to the insurance market and they have just started their
business in 2001.In 2002 the total numbers of policies sold by the
private insurers has increased significantlyand reached 132547. The
total numbers of policies issued by the private insurance
companieshave been in an increasing trend from the year 2001 to
2010. It shows that the privatecompanies are emphasizing to
increase the numbers of policies every year. In 2010 the
totalmembers of policies issued by the private insurance companies
has reached to 14362000. Ifwe compare this figure with 2001, it
shows that there is a growth of 143420%. The totalnumbers of
policies issued by LIC has also increased from 2001 to 2010 except
2005 and2009. The total numbers of policies sold by LIC in 2001 was
19673000 and it reached thefigure 38863000. The growth from 2001 to
2010 was 97.54%. It shows that every year thenumbers of policies
sold by LIC has been increasing showing an annual average
growthrate of 10%. The growth in issue of numbers of policies by
private insurance players ismuch more than LIC of India.
In collection of premium the private insurers have also changed
all possible predictions.Every year the total premium collected by
the private companies has been increasing constantlyat a
accelerated rate. In 2001 the total premium collected by the
private insurance companieswas only Rs 712.07 lakhs, which was
reached Rs 7937306 lakhs in 2010. This shows thatthe private
insurance companies have done a commendable job to increase their
numbers ofinsurance policies as well as the total premium
collection. The premium collected by LIC ofIndia has also increased
throughout the study period from 2001 to 2010 but not at the rate
atwhich the private players galloped. But looking at the figures of
total premium collected byLIC of India it has reached Rs18607731
lakhs in 2010 which was 70% of the total premiumcollected by the
insurance industries in that year. The rest 30% of the total
premium collectionin 2010 was collected by the all the private
insurances companies together. It shows thatLIC of India has still
dominated the insurance industry with the highest market share and
isundoubtedly the market leader.
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FIGURE-6
COMPARATIVE STUDY OF GROWTH RATE OF NUMBER OF POLICIESFLOATED BY
LIC OF INDIA AND PVT SECTOR INSURANCE COMPANIES
-200.00
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
1400.00
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
P V T s ectorG rowthL IC growth
The above graph shows the comparative growth rate of the number
of policies floatedby LIC of India and the private sector insurance
companies from 2001 to 2010. From theabove graph it is clear that
the growth rate of number of new policies by the private
sectorinsurance companies is much higher than LIC of India. In 2002
the growth looks exceptionallyhigh which is quite normal since in
2001 the number of policies done by the private sectorcompanies is
the lowest and it is the beginning of the reforms. That year is an
abnormal yearand should not be considered for comparison. Even
though the growth rate registered by theprivate sector insurance
companies is higher than the LIC of India the growth annual
numberof policies undertaken by LIC of India is steady over the
years.
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FIGURE-7
COMPARATIVE STUDY OF GROWTH RATE OF PREMIUMCOLLECTION BY LIC OF
INDIA AND PVT SECTOR INSURANCE
COMPANIES FROM 2001 TO 2010
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
G roth of P VT s ec torP remium
G rowth of L IC premium
Just similar to Figure 6 in the above graph it is clear that the
premium collectionannual growth is more in private sector than LIC
of India. The annual growth of LIC ofIndia is steady over the
years. After the liberalization an exceptionally high growth of
annualpremium was seen in 2002. This is because in 2000 the
insurance sector was liberalized andit is the beginning. So this
figure should not be considered for comparison. The lowestannual
growth in premium collection by LIC of India was registered in 2009
but after thatyear it shows an increasing trend. But it is clear
that the growth of annual premium collectionby the private sector
has been reducing constantly from 2002 to 2010. The growth in
privatesector annual premium was highest in 2003 and it was 310%,
but it was reduced to 83% bythe year 2010.
CONCLUSION
From the above analysis we can conclude that the insurance
industries have grownrapidly after the liberalization. Every year
both the private insurance companies and LIC ofIndia have been
increasing the numbers of policies sold and the total amount of
premiumcollected. Both the total numbers of policies sold and the
total amount of premium collectedby the insurance industries have
increased significantly. But the growth rate of Private
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insurance companies is more than that of LIC of India in terms
of number of Policies andtotal Premiums collected. After the
Insurance sector reforms, most of the private insurancecompanies
entered the Indian market as joint ventures with recognized foreign
players acrossthe globe. The increased consumer awareness and
competition has brought more productsand improved the customer
service. As a result the market shares of LIC of India havereduced
significantly. But while comparing the market shares of Public
sector Insurancecompany LICI with the private sector insurance
companies it is found that LICI still holds70% market share and
remains as the market leader in the insurance Industry.
Insuranceindustry in India is one of the flourishing sectors. The
concentration of insurance markets inmany developed countries of
the world has made the Indian insurance market more magneticin
terms of international insurance players. But this should not be
considered as an impossibleproposition on the part of private
insurance companies that with the tremendous potentialfor the
insurance sector they cannot penetrate the untapped market or they
cannot surpasstheir counterpart in public sector.
REFERENCES
1. Annual report of IRDA (www.irda.gov.in)
2. Annual report of LIC of India (www.licindia.in)
3. Bhattacharya, Anbil, (2005), Challenges before Life Insurance
Industry, LifeInsurance Today, 1 (8): 3-6, 2005
4. Chaudhary Sonika & Kiran Priti, (2011), Life Insurance
Industry in India - CurrentScenario, IJMBS Vol. 1, Issue 3,
September 2011
5. Dr. J. Paul Sundar Kirubakaran, (2012), Density and
Penetration of Insurance sectorin India - An Exploratory Study,
IJMBA, 2012; Vol 2 (3): July 2012 (023 - 029),International
Standard Serial Number 2230 8393
6. Kumar Vineet and Kumari Poonam, (2012), A Comparative study
on Public vs.Private Sector in Life Insurance in India, VSRD
International Journal of Businessand Management Research, Vol. 2
No. 10 October 2012
7. Tiwari Anshuja & Yadav Babita, (2012), Analytical Study
on Indian Life InsuranceIndustry in Post Liberalization,
International Journal of Social Science TomorrowVol. 1 No. 2,
April, 2012
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WHITHER INSURANCE INDUSTRY IN INDIA?
1P.Deepanvitha, MBA-IV semester Student, Alluri Institute of
Management Sciences,Warangal, A.P. can be reached at email:
[email protected], MBA-IV semester Student,
Alluri Institute of Management Sciences,Warangal, A.P.3Mohd.Manzoor
Ilahi, MBA-IV semester Student, Alluri Institute of
ManagementSciences, Warangal, A.P.
ABSTRACT
Insurance is a pooling of resources with a mutual understanding
of a group ofpeople in systematic way to protect from the natural
calamities, uncertainties and risk.Insurance industry not new in
Indian economy as it has started a in ancestors periodduring the
thirteen century Koutilya was written the concept in Arthashastra,
butorganised insurance has been started in 1850 Triton insurance
company in Calcuttaby British government. After that insurance acts
are amendments as growing of theindustry but still today it
industry not reaches to maturity, the present paper focusingon
journey of the industry, present status and future prospects, the
analysis the factorsinfluencing and its role in Indian economy.
KEY WORDS
Insurance, Growth, Economy
INTRODUCTION
Insurance has a long history in India life insurance in its
current form was introducedin 1818.When oriented life insurance
company began its operation in India general insurancewas however a
comparatively late entrant in 1850.When triton insurance company
setup itsbase in Kolkata history of insurance in India can be
broadly bifurcated into three as Prenationalization,
Nationalization and Post nationalization. Life insurance was the
first to benationalized in 1956.Conolidating the operation of
various insurance companies formed lifeinsurance corporation of
India. General insurance followed suit and was nationalized
in1973.General Insurance Corporation of India was setup as the
controlling broadly with newIndia united India national and
oriented as its subsidiaries. The process of opening up
theinsurance sector was initiated against the back ground of
economic reform process whichcommenced from 1991.For this purpose
Malhotra committee was formed during this yearwho submitted their
report in 1994 and insurance regulatory development act was passed
in1999.
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CONCEPT OF INSURANCE
A pool is created through contribution made by persons
selections to protect themselvesfrom common risk premium is
collected by insurance companies which also act as trustee tothe
pool. Insurance provides financial protection against a loss
arising out of happening of anuncertain event a person can avail
this protection by paying premium to insurance companies.
Insurance is a contract between two parties whereby one party
agrees to undertakethe risk of another in exchange for
consideration known as premium and promises to pay afixed sum of
means to the other party on happening of an uncertain event or
after the expiryof a certain period in case of life insurance or to
indemnify the other party on happing of anuncertain event in cases
of general insurance.
TYPES OF INSURANCE
1) LIFE INSURANCE :- ( long term) insurance guaranteeing
specific sum of moneyto a designated beneficiary upon the death of
the insured, or the insured if he or shelives beyond a certain
age.
2) HEALTH INSURANCE: - insurance against expenses incurred
through illness ofthe insured.
3) GENERAL INSURANCE: - general insurance is normally meant for
a short termperiod of twelve months or less. Recently longer term
insurance agreements havemade on entry into the general business of
general insurance but their term does notexceed five tears. General
insurance can be classified into follows Fire insurance,Marine
insurance and Miscellaneous
INDIAN INSURANCE INDUSTRY
India insurance is a flourishing industry, with several national
and international playerscompeting and growing at rapid rates.
Thanks to reform sector and easing of policyregulations, the Indian
insurance sector been allowed to flourish and as Indian become
morefamiliar with different products this growth can only increase
with the period from 2010-2015 projected to be the golden age for
the insurance industry. Indian insurance companiesoffer a
comprehensive range of insurance plans, a range that is growing as
the economymatures and the wealth of the middle classes increases.
The most common types include:term life policies, endowment
policies, joint life policies, whole life policies, loan cover
termassurance policies, unit linked insurance plans, group
insurance policies, pension plans andannuities. General insurance
plans are also available to cover motor insurance, home
insurance,travel insurance and health insurance.
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INDIAN INSURANCE IN THE GLOBAL SCENARIOIndian Insurance in the
global scenario has been changing a remarkable growth in the
life insurance business, India has been placing its position
10th among the world countries,during 2011-12, the life insurance
premium in India declined by 8.5 per cent and during thesame
period, the global life insurance premium declined by 2.7 per cent.
The share of Indianlife insurance sector in global life insurance
market stood at 2.30 per cent during 2011, asagainst 2.54 per cent
in 2010. The non-life insurance sector witnessed a significant
growthof 13.5 per cent during 2011-12. Its performance is far
better when compared to global non-life premium, which expanded by
a meager 1.8 per cent during the same period. The shareof Indian
non-life insurance premium in global non-life insurance premium
increased slightlyfrom 0.57 per cent in 2010-11 to 0.62 per cent in
the year 2011-12. India stood at 19th rankin global non-life
premium income.INSURANCE PENETRATION AND DENSITY IN INDIA
The performance of the industry measure of insurance penetration
and density reflectsthe level of development of insurance sector in
a country. Since opening up of Indian insurancesector for private
participation, India has reported increase in insurance density for
everysubsequent year and for the first time reported a fall in the
year 2011. Even though, insurancepenetration, which surged
consistently till 2009, slipped in the consecutive second year
onaccount of slower rate of growth in the life insurance premium as
compared to the rate ofgrowth of the Indian economy.
TABLE 1INSURANCE PENETRATION AND DENSITY IN INDIA
4.1059.00.7010.03.4049.02011
5.1064.40.718.74.4055.72010
5.2054.30.606.74.6047.72009
4.6047.40.606.24.0041.22008
4.7046.60.606.24.0040.42007
4.8038.40.605.24.1033.22006
3.1422.70.614.42.5318.32005
3.1719.70.644.02.5315.72004
2.8816.40.623.52.2612.92003
3.2614.20.673.02.5911.72002
2.7111.50.562.42.159.12001
Penetration %
Density (USD)
Penetration %
Density (USD)
Penetration %
Density (USD)
Year
industryNon lifeLife
4.1059.00.7010.03.4049.02011
5.1064.40.718.74.4055.72010
5.2054.30.606.74.6047.72009
4.6047.40.606.24.0041.22008
4.7046.60.606.24.0040.42007
4.8038.40.605.24.1033.22006
3.1422.70.614.42.5318.32005
3.1719.70.644.02.5315.72004
2.8816.40.623.52.2612.92003
3.2614.20.673.02.5911.72002
2.7111.50.562.42.159.12001
Penetration %
Density (USD)
Penetration %
Density (USD)
Penetration %
Density (USD)
Year
industryNon lifeLife
Source: Swiss Re, Various Issues.
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1. Insurance density is measured as ratio of premium (in US
Dollar) to total population.
2. Insurance penetration is measured as ratio of premium (in US
Dollars) to GDP (inUS Dollars) 3. The data of Insurance penetration
is available with rounding off to onedigit after decimal from
2006.
The insurance density of life insurance sector had gone up from
USD 9.1 in 2001 toUSD 49.0 in 2011 while reaching the peak at USD
55.7 in 2010. Similarly, life insurancepenetration surged from 2.15
per cent in 2001 to 4.60 per cent in 2009, before slipping to4.40
per cent in 2010 and further slipping to 3.40 per cent in 2011.Over
the last 10 years, thepenetration of non-life insurance sector in
the country remained steady within the narrowrange of 0.56-0.71 per
cent. However, its density has gone up from USD 2.4 in 2001 toUSD
10.0 in 2011.
INSURANCE MARKET PLAYERS
After open up of Indian economy IRDA was setup in 2000 to
promote the insurancein private players there are fifty-two
insurance companies operating in India; of whichtwenty four are in
the life insurance business and twenty-seven are in general
insurancebusiness. In addition, GIC is the sole national reinsure.
Of the fifty two companies presentlyin operations, eight are in the
public sector - two are specialized insurers, namely ECGC andAIC,
one in life insurance namely LIC, four in general insurance and one
in reinsurance.The remaining forty four companies are in the
private sector.
TABLE-2
INDIAN INSURANCE MARKET (No of Companies)
HEALTH INSURANCE COMPANIES
There is a huge potentiality in health insurance in India, which
unable to cover withpublic sector companies, the Indian Insurance
Regulatory Authority (IRDA) granted licenseto three insurance
companies to operate as stand-alone health insurance companies
exclusivelyin the Health insurance segment. These insurance
companies are authorized to underwritebusiness in health, personal
accident and travel insurance segments.
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GROWTH PERFORMANCE OF THE INDUSTRY
The performance of insurance sector in India has been suppressed
due to monopolypower of public sector last five decades, but
potentiality of insurance market in India unablecover by the public
sector then after setting up IRDA as apex regulatory body sector
isopen up for private and foreign players, the following table
gives an evidence of growth ofthe insurance business from 2001 to
2012 shown in table 3, the compounded growth rate ofnew policies
issues in life insurance has been increased by cumulatively nearly
100 percentby private and public sector from 2004-05 to 2006-07,
but it was gradually decreased due toglobal financial crisis many
foreign players were facing the norms of capital adequacy andshown
a negative impact.
TABLE-3
NEW ISSUE POLICIES LIFE INSURERS
-3.47357.51-24.04%84.422011-12
-4.69370.38-22.6%111.142010-11
8.21%388.63-4.32%143.622009-10
-4.513591266713.18%150107102008-09
-1.613761259967.39%132615582007-08
20.8038229292104%79222742006-07
31.743159070773.36%38714102005-06
2397812322330752004-05
GROWTH %LICGROWTHPRIVATE SECTORYEAR
-3.47357.51-24.04%84.422011-12
-4.69370.38-22.6%111.142010-11
8.21%388.63-4.32%143.622009-10
-4.513591266713.18%150107102008-09
-1.613761259967.39%132615582007-08
20.8038229292104%79222742006-07
31.743159070773.36%38714102005-06
2397812322330752004-05
GROWTH %LICGROWTHPRIVATE SECTORYEAR
GROWTH PERFORMANCE OF THE INDUSTRY
The performance of insurance sector in India in non life
insurance has shown apositive growth, the compounded growth rate of
new policies issues in life insurance hasbeen increased by
cumulatively nearly 100 percent by private and public sector from
2004-05 to 2006-07, but it was gradually decreased due to global
financial crisis many foreignplayers were facing the norms of
capital adequacy and shown a negative impact.
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TABLE-4
GROWTHRATE OF NEW POLICIES ISSUED NON LIFE INSURERS
4.42%528.1414.44%329.202011-12
16.52%505.7619.43%287.652010-11
-3.76%434.049.85%240.842009-10
17.09%4513718117.21%219229062008-09
13.46%3854704047.36%187032192007-08
-22.69%3397209241.85%126920532006-07
-1.5%4394528473.90%89469162005-06
4463404751447552004-05
GROWTH RATE
PUBLIC SECTOR
GROWTH RATE
PRIVATE SECTORYEAR
4.42%528.1414.44%329.202011-12
16.52%505.7619.43%287.652010-11
-3.76%434.049.85%240.842009-10
17.09%4513718117.21%219229062008-09
13.46%3854704047.36%187032192007-08
-22.69%3397209241.85%126920532006-07
-1.5%4394528473.90%89469162005-06
4463404751447552004-05
GROWTH RATE
PUBLIC SECTOR
GROWTH RATE
PRIVATE SECTORYEAR
CONCLUSION
The journey of insurance sector have long history in India but
still it unable to reach allcorners in India, one aspect can be
Indian government not open up insurance sector till2000, the
awareness of insurance concept still it is an imagination realising
investor returnonly at the end of life are time of maturity,
concept of pooling of funds for their mutualbenefit to face the
risk and uncertainty in life. The penetration of insurance has
rapidlyincreasing a competition among the public, private and
foreign players. But due to financialcrisis in USA and Europe has
shown impact on Indian insurance and financial sector.
REFERENCES
1. IRDA annual Reports
2 RBI reports
3. SEBI, statistics on Indian economy
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A COMPARATIVE STUDY OF LIC AND PRIVATE LIFE INSURERS IN
INDIA
1 P.S.Subha Prada, Research Scholar, University of Hyderabad.
A.P.2 Dr. K. Ramulu, Asst. Professor in Finance &
Accounting,School of Management Studies,University of Hyderabad.
A.P. He can be reached at email: [email protected]
ABSTRACT
The liberalization of financial sector following the economic
reforms in 1991had a significant impact on the direction and
magnitude of the Indian services sector.The sector which was not so
active has transformed itself over the past two decadesinto one
that is contributing more than 50% to the GDP. Along with many
other sectorsInsurance was also opened up for private participation
and this changed the Indianinsurance scenario. Today, as a result,
there are better insurance products leading togreater choice,
increased insurance penetration, increased premium collection
andbetter claim settlement among other things. This paper analyses
the performance ofthe Indian Life Insurance Industry from its
liberalization in the year 2000, in terms ofnew premium collection,
total premium collection and new policies issued.
KEY WORDS
Insurance Penetration, Claim Settlement, New Premium Collection,
New Policies.
THE SERVICES SECTOR
The Indian economy grew at 6.5% in 2011-12, the lowest in the
last decade, due to anunfavourable macroeconomic environment and
global slowdown prevalent across the world.When the industrial and
agricultural sectors were growing at a rate lesser than the
previousyears,
the contribution of the Services Sector to the GDP has been
increasing over theyears. The contribution of the services sector
stood at 68.8% to GDP in 2011-12. Amongthe service sector
components, the largest component remains the finance, insurance,
realestate and business. Its contribution to the Indian economy has
been increasing steadily. Inthis backdrop, the paper analyzes the
growth of the Indian life insurance sector looking at itsprospects
and contribution to the GDP in the last decade.
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Table 1
Contribution of finance, insurance, real estate andbusiness to
the economy
17.92011-12
17.42010-11
17.12009-10
16.92008-09
16.12007-08
Percentage contributionYear
17.92011-12
17.42010-11
17.12009-10
16.92008-09
16.12007-08
Percentage contributionYear
HISTORY OF INSURANCE IN INDIA
Manus Manusmrithi, Kautilyas Arthasastra mention about pooling
of assets thatwould be distributed among the needy during natural
calamities like floods, famine etc. Thiscould have been the
forerunner to the present day insurance. Marine trade loans
andcarriers contracts could have been the earliest forms of
insurance in ancient times.
The origin of life insurance in India can be traced to
establishment of the OrientalLife Insurance company in Calcutta in
1818. The company could not however sustain forlong. Several other
companies, of both domestic and foreign origin, emerged in life
insurancebusiness. The market was dominated by foreign players
which did good business comparedto the Indian companies. The
increased competition among the large number of players ledto
adoption of unfair trade practices by the operators which could not
be curbed even afterthe governments Indian Life Insurance Companies
Act, 1912; Indian Insurance CompaniesAct, 1928; Insurance Amendment
Act, 1938; Insurance Amendment Act 1950. It was inthis backdrop
that the Government of India decided to nationalize insurance
business.
Life Insurance Corporation came into existence in 1956 following
the nationalizationof Life Insurance in the same year. It was the
monopoly in life insurance in India as Insurancesector in India was
a closed sector with few public sector companies catering to the
needsin both life and non life insurance segments.
The insurance sector was a closed one. However, to complement
the financial reforms,facilitate liberalization of financial
services, accelerate the growth of the insurance sectorand to pave
way for reforms in the sector, the government constituted R.N.
MalhotraCommittee in 1993. Following the recommendations of the
committee the insurance sectorwas liberalized in August 2000, after
the establishment of insurance regulator InsuranceRegulatory and
Development Authority (April 2000). The sector was opened to
private
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players and Foreign insurers were allowed to enter into the
Indian market through JointVentures with an FDI of upto 26%. The
FDI limit was later increased to upto 49% inOctober 2012.
Another significant reason for liberalizing the insurance sector
was the abysmallylow rates of insurance penetration, which is the
ratio of insurance premium to GDP andinsurance density, which is
the ratio of premium to the total population, in comparison withthe
developed economies. The competition among the players, the
innovative products, newmarketing strategies brought in a
considerable rise in the penetration rates. Where a penetrationof
2.71% was recorded in 2001, it reached a high of 5.2% in 2009, an
increase of about91.88%. However, it has declined in 2010 and 2011
to reach 4.1% owing to global economicconcerns. The insurance
density also increased commendably from a nominal $11.5 in 2001to
$64.4 in 2010, a growth of about 460% over nine years. This also
has declined in 2011to $59.
Table 2
Insurance Penetration and Density in India
4.1590.7103.4492011
5.164.40.718.74.455.72010
5.254.30.66.74.647.72009
4.647.40.66.2441.22008
4.746.60.66.2440.42007
4.838.40.65.24.133.22006
3.1422.70.614.42.5318.32005
3.1719.70.6442.5315.72004
2.8816.40.623.52.2612.92003
3.2614.70.6732.5911.72002
2.7111.50.562.42.159.12001
Penetration (%)
Density (USD)
Penetration (%)
Density (USD)
Penetration (%)
Density (USD)
Year
IndustryNon LifeLife
4.1590.7103.4492011
5.164.40.718.74.455.72010
5.254.30.66.74.647.72009
4.647.40.66.2441.22008
4.746.60.66.2440.42007
4.838.40.65.24.133.22006
3.1422.70.614.42.5318.32005
3.1719.70.6442.5315.72004
2.8816.40.623.52.2612.92003
3.2614.70.6732.5911.72002
2.7111.50.562.42.159.12001
Penetration (%)
Density (USD)
Penetration (%)
Density (USD)
Penetration (%)
Density (USD)
Year
IndustryNon LifeLife
Source : IRDA Annual Report 2011-12
-
- 235 -
Chart 1
Life Insurance Density and Penetration
Chart 2
Non-Life Insurance Density and Penetration
-
- 236 -
OBJECTIVES
1. To analyze the life insurance sector in terms of new and
total premium collection andnew policies issued post
liberalization.
2. To compare the performance public and private life insurance
companies postliberalization.
HYPOTHESES
1. H1 - There is significant difference in the growth rate of
new business premiumbetween the public and private life
insurers.
2. H2 : There is significant difference in the growth rate of
total premium between thepublic and private life insurers.
3. H3 : There is significant difference in the growth of new
policies issued by public andprivate life insurers.
METHODOLOGY
The paper is analytical in nature and tries to analyze if there
is any significant differencein growth of premium collection and
new policies issued among the public and privateinsurance companies
using the non parametric Mann Whitney U test at 5% level
ofsignificance. The test is used as the samples are independent and
the sample size is small.
U= N1*N2 + N1(N1+1) - R12
where N1= number of samples from first population
N2= number of samples from second population
R1= sum of ranks of samples from first population
THE GROWTH OF THE INDIAN INSURANCE SECTOR
The opening of the sector contributed not only in terms on
increased number of playersin the market and growth of the sector,
but also offered a plethora of choices to the customers/investors.
Presently, there are fifty-two insurance companies operating in
India; of whichtwenty four are in the life insurance business and
twenty-seven are in non-life insurancebusiness. In addition,
General Insurance Corporation (GIC) is the sole national
reinsurer.
-
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Registered Insurers in India
Life Insurers Non Life Insurers
LIC Private (23)
Public (6) Private (21) Reinsurance (1)Public
Registered Insurers in India
Life Insurers Non Life Insurers
LIC Private (23)
Public (6) Private (21) Reinsurance (1)Public
Table 3
Registered Life Insurers in India
2001-02Allianz, Germany Bajaj Allianz 10
2001-02ING Insurance International B.V, NetherlandsING
Vysya9
2001-02BNP Paribas Assurance SA, France SBI Life8
2001-02American International Assurance Co., USATATA AIG7
2000-01Sun Life, Canada Birla Sun Life 6
2001-02Old Mutual, South AfricaKotak Mahindra Old Mutual5
2000-01Prudential Plc, UK ICICI Prudential 4
2000-01New York Life, USAMax New York3
2000-01Standard Life Assurance, UKHDFC Standard2
1956-57Life Insurance Corporation of India1
Year of operationsForeign PartnerInsurer
S.No
2001-02Allianz, Germany Bajaj Allianz 10
2001-02ING Insurance International B.V, NetherlandsING
Vysya9
2001-02BNP Paribas Assurance SA, France SBI Life8
2001-02American International Assurance Co., USATATA AIG7
2000-01Sun Life, Canada Birla Sun Life 6
2001-02Old Mutual, South AfricaKotak Mahindra Old Mutual5
2000-01Prudential Plc, UK ICICI Prudential 4
2000-01New York Life, USAMax New York3
2000-01Standard Life Assurance, UKHDFC Standard2
1956-57Life Insurance Corporation of India1
Year of operationsForeign PartnerInsurer
S.No
-
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2011-12Tokio Marine, JapanEdelWeiss Tokio24
2009-10Legal & General Middle East Limited,
UKIndiaFirst23
2008-09Dai-ichi Mutual Life Insurance,JapanStar Union Dai-ichi
22
2008-09Prudential of America, USA DLF Pramerica 21
2008-08Aegon ,Netherlands Aegon Religare 20
2008-09OBC HSBC, UK Canara HSBC 19
2007-08Ageas, EuropeIDBI Federal 18
2007-08Generali, Italy Future Generali 17
2006-07AXA Holdings, FranceBharti AXA 16
2005-06Sanlam, South Africa Shriram 15
2004-05Sahara 14
2002-03Aviva International Holdings Ltd., UK Aviva 13
2002-03Reliance12
2001-02Metlife International Holdings Ltd., USAMetlife 11
2011-12Tokio Marine, JapanEdelWeiss Tokio24
2009-10Legal & General Middle East Limited,
UKIndiaFirst23
2008-09Dai-ichi Mutual Life Insurance,JapanStar Union Dai-ichi
22
2008-09Prudential of America, USA DLF Pramerica 21
2008-08Aegon ,Netherlands Aegon Religare 20
2008-09OBC HSBC, UK Canara HSBC 19
2007-08Ageas, EuropeIDBI Federal 18
2007-08Generali, Italy Future Generali 17
2006-07AXA Holdings, FranceBharti AXA 16
2005-06Sanlam, South Africa Shriram 15
2004-05Sahara 14
2002-03Aviva International Holdings Ltd., UK Aviva 13
2002-03Reliance12
2001-02Metlife International Holdings Ltd., USAMetlife 11
Source: IRDA Annual Report 2011-12
PREMIUM COLLECTION IN LIFE INSURANCE
Though the market was dominated by LIC, private insurers were
still able to get afoot hold as there was market expansion and not
sharing alone.
TOTAL PREMIUM COLLECTION
Premium is the financial cost of obtaining an insurance cover
paid either as a lumpsum or in installments during the life of the
policy. Though the total premium collected in2000- 01 was only
Rs.6.45 crore, it increased considerably thereafter. The total
premiumcollection in 2003-04 was Rs.66,653.76 crore, as against Rs.
272.55 crore in 2001-02, which
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rose to Rs.2,65,450.37 crore in 2009-10, with a massive growth
of 298% over the six-yearperiod. It moved upward in 2010-11 as
well. However, both LIC as well as the privateinsurers reported a
drop in their premium collection in 2011-12 on account of
economicconcerns. The life insurance industry recorded a premium
income of 2, 87,072 crore during2011-12 as against Rs. 2,91,638.64
crore showing a decline in growth of 1.57 %.
Table 4
Total Premium (in crore)
287072.1184182.83202889.282011-12
291638.6488165.24203473.402010-11
265447.2579369.94186077.312009-10221785.4764497.43157288.042008-09
201351.4151561.42149789.992007-08
156075.8428253.00127822.842006-07105875.7615083.5490792.222005-06
82854.87727.5175127.292004-05
66653.753120.3363533.432003-0455747.551119.0654628.492002-03
50094.46272.5549821.912001-02
34898.476.4534892.022000-01
Total PremiumPrivateLICYear
287072.1184182.83202889.282011-12
291638.6488165.24203473.402010-11
265447.2579369.94186077.312009-10221785.4764497.43157288.042008-09
201351.4151561.42149789.992007-08
156075.8428253.00127822.842006-07105875.7615083.5490792.222005-06
82854.87727.5175127.292004-05
66653.753120.3363533.432003-0455747.551119.0654628.492002-03
50094.46272.5549821.912001-02
34898.476.4534892.022000-01
Total PremiumPrivateLICYear
Source: IRDA Annual Report 2011-12
-
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Chart 3
Total Premium Collection
FIRST YEAR PREMIUM
New premium refers to the first year premium collected premium
The private insurers,immediately after liberalization began with a
modest premium collection of Rs. 6.45 crore in2000-01. It continued
to grow swiftly year after year till 2010-11. In the year
2011-12,however both LIC as well as the private sector reported a
drop of 9.85% in the first yearpremium collection due to economic
concerns.
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Table 5First Year Premium
113942.1732079.9281862.252011-12
126398.1839385.8487012.352010-11
109893.9138372.0171521.902009-10
87331.0834152.0053179.082008-09
93712.5233715.9559996.572007-08
75649.2119425.6556223.562006-07
38785.5410269.6728515.872005-06
26217.645564.5720653.062004-05
19788.322440.7117347.622003-04
16942.45965.6915976.762002-03
19857.28268.5119588.772001-02
9707.436.459700.982000-01
TotalPrivateLICYear
113942.1732079.9281862.252011-12
126398.1839385.8487012.352010-11
109893.9138372.0171521.902009-10
87331.0834152.0053179.082008-09
93712.5233715.9559996.572007-08
75649.2119425.6556223.562006-07
38785.5410269.6728515.872005-06
26217.645564.5720653.062004-05
19788.322440.7117347.622003-04
16942.45965.6915976.762002-03
19857.28268.5119588.772001-02
9707.436.459700.982000-01
TotalPrivateLICYear
Source: IRDA Annual Report 2011-12
-
- 242 -
Chart 4
New Premium Collection
NEW POLICIES ISSUED
During 2011-12, LIC issued 358 lakh policies (80.90 per cent of
total policies issued)and the private life insurers issued 84 lakh
policies (19.10 per cent) out of life insurers issued442 lakh new
policies, while LIC suffered a decline of 3.47 per cent (4.70 per
cent declinein 2010-11) in the number of new policies issued
against the previous year, the private sectorinsurers continued the
previous years experience of significant decline and reported a
dipof 24.04 per cent (22.61 per cent decline in 2010-11) in the
number of new policies issued.Overall, the industry witnessed 8.22
per cent drop in the number of new policies issued.
-
- 243 -
Table 6
Number of New Policies Issued (in lakhs)
481.52111.14370.382010-11
532.25143.62388.632009-10
509.24150.11359.132008-09
508.75132.62376.132007-08
461.5179.22382.292006-07
354.6238.71315.912005-06
262.1122.33239.782004-05
286.2716.59269.682003-04
253.718.25245.462002-03
TotalPrivateLICYear
481.52111.14370.382010-11
532.25143.62388.632009-10
509.24150.11359.132008-09
508.75132.62376.132007-08
461.5179.22382.292006-07
354.6238.71315.912005-06
262.1122.33239.782004-05
286.2716.59269.682003-04
253.718.25245.462002-03
TotalPrivateLICYear
Source: IRDA Annual Report 2011-12
Chart 5New Policies Issued
-
- 244 -
DATA ANALYSIS AND INTERPRETATION
Table 7Mann Whitney U Test Results
Alternate Hypothesis , H3 accepted for new policies issued
0New Policies Issued
Alternate Hypothesis , H2, accepted for total premium
21Total Premium
Alternate Hypothesis, H1, accepted for new premium
34New Premium
ResultsCalculated U valuesParticulars
Alternate Hypothesis , H3 accepted for new policies issued
0New Policies Issued
Alternate Hypothesis , H2, accepted for total premium
21Total Premium
Alternate Hypothesis, H1, accepted for new premium
34New Premium
ResultsCalculated U valuesParticulars
The Mann Whitney U test is statistically significant when
obtained U is less than orequal to critical value.
1. Since the calculated U value for new premium , 34, is less
than the critical value 37for N1=12 and N2=12, the alternate
hypothesis, H1, that there is significant differencein the growth
rate of new business premium between the public and private life
insurersis accepted.
2. Since the calculated U value for total premium, 21, is less
than the critical value 37 forN1=12 and N2=12, the alternate
hypothesis, H2, that there is significant difference inthe growth
rate of total premium between the public and private life insurers
is accepted.
3. Since the calculated U value for new policies issued,0, is
less than the critical value17 for N1=9 and N2=9, the alternate
hypothesis, H3, that there is significant differencein the growth
of new policies issued by public and private life insurers is
accepted.
Thus it can be concluded that there is significant difference in
growth rate of newpremium collection, total premium collection and
new policies issued between LIC andprivate life insurers.
CONCLUSION
The liberalization of the insurance sector has brought with it
many players andinnovations. The sector has seen a good increase in
insurance density and insurancepenetration following the opening up
of the sector. The study suggests that the growth rate
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between LIC and private insurers, in total premium collection,
new premium collection andnew policies is significant. However, the
data suggests that the growth rate is higher inprivate sector given
that it takes about seven to eight years for an insurance company
tobreak even. In comparison with the half century old LIC, the
numbers might fade but theprivate sector looks promising. The
liberalization of the sector has made its mark in that theinsurance
density and insurance penetration has improved significantly over
the last decade.The innovation in marketing the insurance products
has allowed it to expand its reachcommendably.
REFERENCES
1. Annual report of IRDA, 2011-12.
2. Debabrata Das, Jasojit Debnath, Performance of Insurance
Companies in India : AComparison of public and private Insurers
,The IUP Journal of Risk and Insurance,Vol IX, No.1, 2012.
3. Selva Kumar M , Vimal Priyan J, A Comparative Study of Public
and Private LifeInsurance Companies in India , Indian Journal of
Commerce, Vol 65, No 1, January-March 2012.
4. Selva Kumar M , Vimal Priyan J, Indian Life Insurance
Industry : Prospect forPrivate Sector, The Journal of Insurance
Institute of India, No.XXXVI, Jan Jun 2010.
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MYOPIA IN LIFE INSURANCE BUSINESS IN INDIA A STUDY ON
LAPSATION
Suresh Chandra.Ch, Ph.D Research Scholar(UGC-NET JRF),
Department of Commerce& Business Management, Kakatiya
University, Warangal. Can be reached at
email:[email protected]
ABSTRACT
Life insurance business in India has started growing at a rapid
speed after theliberalization. The favorable policies and
supporting financial environment has createdthe growth of the
sector, but due to extreme expectations and short sighted ness
onsales and growth has created the companies to reach to the stage
of myopia. Theresult of myopia in life insurance companies in India
has resulted to see the pitfalls inmany directions right from
declining sales of the policies to lapsing of policies.
Thelapsation has created hurdles and gave a tough challenge to the
life insurance businessorganizations. The present paper will focus
on some of the factors contributed tomyopia in life insurance
business in India with special emphasis on lapsation of
thepolicies. The study further provides the survey results on
policyholders with referenceto lapsation.
KEY WORDS
Insurane density, IRDA, Lapse rate, Traditional policies,
ULIP.
INTRODUCTION
Life insurance business in India has changed the dimensions of
Indian economy. Thebeginning of the life insurance business in
India was happened in the era of Britishers. TheOriental Life
Insurance company in the year 1818 was regarded as the fist life
insurancecompany emerged in India. The favourable policy to
Britishers and the restricted environmenthas witnessed slow growth
to the life insurance sector. Though the Indian Insurance
Act,1938contributed for the sector growth, but overall the life
insurance industry in India has not beensuccessful till the year
1956. The emergence of Life Insurance Corporation(LIC) of
Indiathrough LIC Act,1956 has showed tremendous improvement. Ever
since, the life insuranceindustry has dominated by the monopoly
status as the LIC remained as only life insurancecompany in India.
The liberalization policies by the government in early 1990s gave
theboosting for the life insurance business. The enactment of IRDA
Act,1999 has resulted inthe formation of regulatory body in the
form of Insurance Regulatory DevelopmentAuthority(IRDA) and the
IRDA has opened the entry gates for the life insurance
business.
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The growth has opened an array of opportunities for global firms
to either set-up theirdivision in India or to enter into joint
ventures with the private insurance companies in India.The industry
has witnessed many alterations especially after 1999 when the
Indian governmentallowed the privatization of the sector to promote
insurance for attracting FDIs upto 26%.Since then the Indian
insurance industry is regarded as a booming market amongst
theinternational insurance firms. The entry of private life
insurance companies in the marketbrought the market as competitive
one and the life insurance companies in order to capturethe market
were started to increase its operations with variety of new
policies and attractivepackages to its insurance marketers. Growing
competition made the marketers to offervariety of policies and the
result of forced selling of policies without caring for matching
oflife insurance products to the requirements of the policy holders
played a vital role in lapsationof policies in the first year of
policy life. Further the rapid growth in the Unit LinkedInsurance
Plans(ULIPs) has encouraged private life insurance companies to
depend heavilyon market based policies. Further, lack of knowledge
by the policy holders has also given achance for the companies to
tap the market with heavy selling of ULIP policies. This
washappened due to the fact that beneficiaries are unaware about
the insurance products andtheir comparative merits and limitations.
In view of this scenario, the present paper will aimto the analyze
the factor contributing for myopia in life insurance business.
OBJECTIVES OF THE STUDY
The paper will focus thoroughly on the following objectives.
1. To study the factors contributing to the myopia in life
business in India.
2. To examine the lapsation scenario in life insurance business
with special reference toselect companies.
3. To present the perceptions of policyholders on myopia with
special reference tolapsation.
Finally, the paper will provide meaningful findings and
suggestions on the basis ofanalysis.
METHODOLOGY OF THE STUDY
The present paper is based on the research work carried on
Lapsation of policies inInsurance Sector A study of select life
insurance companies in A.P.. The primary data iscollected from the
policy holders and marketing intermediaries of select life
insurancecompanies. The secondary data is collected from annual
reports of IRDA and 3 select lifeinsurance companies (LIC, ICICI
Prudential and Bajaj Allianz companies). Further, variousjournal
articles, published articles in books, magazines and news papers
and internet sourceswere used for the collection of data. A sample
size of 300 is used which is selected on thebasis on determination
of sample size for unknown population size.
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ANALYSIS
The detailed analysis on the research objectives is given
below.
A) FACTORS CONTRIBUTING TO THE MYOPIA IN LIFE
INSURANCEBUSINESS
Myopia is a Greek letter which means nearsighted or
shortsightedness is generallyapplied to present the condition of
the eye where the light that comes in does not directlyfocus on the
retina but in front of it and it may cause wrong perception about a
particularobject. The concept of myopia with reference to marketing
is introduced by TheodoreLevitt in a published book on Marketing
myopia. The concept conceives that businesseswill do better in the
end if they concentrate on meeting customers needs rather on
sellingproducts.
Myopia in life insurance business refers to the lack of
understanding about the longterm business successes and focusing on
the short term gains by the life insurance companies.The life
insurance business in India especially after liberalization has
remarked tremendousgrowth. The growth opportunities in life
insurance business made the companies to focuson the policies which
have maximum momentum. The rise in the demand for ULIPs hasmade the
private sector life insurance companies to completely concentrate
on the marketbased ULIP policies. Especially, the following factors
contributed for the myopia in lifeinsurance business. They
include:
i. LACK OF INSURANCE AWARENESS &EDUCATION: Though the
majorityof the policies are sold to the educated Indians so far,
but the lack of awareness aboutthe insurance policies is the major
problem faced in India. Especially a life insuranceproduct requires
careful understanding of various pros and cons which
definitelyrequire the need for the proper educator. So far, the
life insurance service providersin India are using the services of
agents and various marketing intermediaries. Themajor concern for
these people (agents & marketing intermediaries) is to
motivatethe prospective customers to take the policies. But, the
basic awareness and educationis not been initiated by the
companies. In very few cases, the IRDA which is aregulatory body is
making effort to provide customer awareness through its
promotion.But majority of the actions taken by the companies and as
well as IRDA are restrictedto print media. The awareness campaigns
were not been implemented so far to thecustomers to gain knowledge
about the various life insurance products that are availablein the
market. The following data shows the field survey results on policy
holderssentience about policy chosen by them.
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Table No.1
CLASSIFICATION ON THE BASIS OF POLICY HOLDERS
EDUCATION AND SENTIENCE ON POLICIES
300146154Total
408(20%)32(80%)Professional
7227(37.5%)45(62.5%)Post Graduate
9536(38%)59 (62%)Graduate
6050(83.3%)10(16.7%)High School
3325(75.75%)8(24.25%)Illiterate
Not having sentienceabout the policy
Having sentience about the Policy Total
Sentience about thePolicy chosen by
themEducationalQualification
of the policyholders
300146154Total
408(20%)32(80%)Professional
7227(37.5%)45(62.5%)Post Graduate
9536(38%)59 (62%)Graduate
6050(83.3%)10(16.7%)High School
3325(75.75%)8(24.25%)Illiterate
Not having sentienceabout the policy
Having sentience about the Policy Total
Sentience about thePolicy chosen by
themEducationalQualification
of the policyholders
Source: Field Survey
From the survey results, it was found that 75.75% of illiterate
policy holders opinedthat they do not have sentience about the
policy chosen by them. 83.3% of the policyholders who belongs to
High School have opined that they do not have sentience about
thepolicy chosen by them. 62% of the policy holders from graduate
category opined that theyhave sentience about the policy. 62.5% of
the policy holders from post graduate categoryand 80% of the policy
holders from professional category have opined that they
haveawareness over the sentience about the policy chosen by them.
Chi-square test is performedin order to analyze the association
between educational qualification of the policy holdersand the type
of policy chosen by them.
From the test result, it was found that the calculated value of
2 (61.30) is less thanthe tabular value (9.49) at 5% level of
significance and 4 degrees of freedom, hence it isconcluded that
there is a significant association between educational
qualification of thepolicy holders and sentience about the policy
chosen by them.
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B) POLICY HOLDERS LEVEL OF DEPENDENCE ON POLICY MATTERS
Table No. 2Policy holders level of dependence on policy
matters
300214(70.3%)29
(9.6%)32
(10.6%)25
(8.3%)Policy claims5
300159(53.6%)65
(21.6%)45
(15%)29
(9.6%)
Services when the policy is in continuation
4
30015(5%)61
(20.3%)159
(53%)65
(21.6%)Payment of premium3
30010(2.66%)11
(3.6%)31
(10.3%)248
(82.66%)
Completing the formalities before taking policy
2
30019(6.6%)22
(7%)58
(19.33%)201
(67%)Policy selection1
TotalMostly
individual decision
On agent & branch office only
On agent & to some extent on branch
Completely on agentParticularsS.No.
300214(70.3%)29
(9.6%)32
(10.6%)25
(8.3%)Policy claims5
300159(53.6%)65
(21.6%)45
(15%)29
(9.6%)
Services when the policy is in continuation
4
30015(5%)61
(20.3%)159
(53%)65
(21.6%)Payment of premium3
30010(2.66%)11
(3.6%)31
(10.3%)248
(82.66%)
Completing the formalities before taking policy
2
30019(6.6%)22
(7%)58
(19.33%)201
(67%)Policy selection1
TotalMostly
individual decision
On agent & branch office only
On agent & to some extent on branch
Completely on agentParticularsS.No.
Source: Field Survey
Table No. 2 shows the policy holders level of dependence on
policy matters. Fropolicy selection, majority of the respondents,
i.e., 67% of the policy holders have preferredto depend completely
on agent for taking life insurance policy. For completing the
formalitiesbefore taking the policy, majority of the policy
holders, i.e, 82.66% of them are dependingcompletely on agent for
completing the formalities. For payment of premium, majority ofthe
respondents, i.e., 53% of them are depending on agent and some
extent on branch topay the premium. For services when the policy is
in continuation, majority of the respondents,i.e., 44% of them are
depending mostly branch office and to some extent on agent.
Forpolicy claims, majority of the respondents, i.e., 40.3% of them
are completely depending onbranch office services. Hence, from the
survey it is to point out that for policy selection,completing the
formalities before taking the policy majority of the respondents
are dependingcompletely on agent and for payment of premium and
services when the policy is in continuationmajority of them are
depending on both agent and branch and for policy claims majority
ofthe respondents completely depending on branch office.
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Iii. POOR PRODUCT DEVELOPMENT
Every product development successfully passes several
distinctive stages rightfrom idea screening, idea generation to
till concept testing and commercializingthe product successfully in
the market. Especially life insurance service productsare the
policies which are generally gives long term benefit and the
customerswhile selecting the these products makes a long term
estimation about theirneeds and forthcoming issues. But, the recent
statistics of major life insurancecompanies clearly showing that
the withdrawn life insurance policies are keepincreasing. The
following table shows the details of information on select
lifeinsurance companies.
Table No.3
LIST OF TOP 4 COMPANIES WHOSE POLICIES ARE WITHDRAWN
11112010-11
9141532009-10
28582008-09
62632007-08
9102642006-07
31122005-06
1612320004-05
SBI LifeBajaj AllianzICICI
PrudentialLIC
List of companies policies with drawn from market
Period
11112010-11
9141532009-10
28582008-09
62632007-08
9102642006-07
31122005-06
1612320004-05
SBI LifeBajaj AllianzICICI
PrudentialLIC
List of companies policies with drawn from market
Period
Source: IRDA reports on life insurance products of life
insurance companies
The above table clearly shows the list of policies which are
withdrawn from offeringin the market. For LIC, 2008-09 have shown
highest number of policies lapsed. For ICICIPrudential, 2006-07
have shown majority of the policies lapsed. For Bajaj Allianz,
2009-10have witnessed majority of the polices get lapsed and for
SBI Life insurance company,majority of the policies were lossed in
2006-07 and 2009-10 period. Overall, it is to understandthat all
the companies have shown number of polices withdrawn from the
market. This isalso suggesting that lack of proper life insurance
product development may also effect inachieving the rising number
in withdrawn policies.
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B) LAPSATION SCENARIO IN SELECT LIFE INSURANCE COMPANIES
The following table shows the detailed analysis on the survey
results on 4 select lifeinsurance companies, namely LIC, ICICI
Prudential, Bajaj Allianz and SBI Life insurancecompanies.
i. LAPSE RATE FOR LINKED & NON-LINKED POLICIES
a) The lapse rates for the non-linked products and linked
products over the last threeyears were as follows:
Table No. 4
LAPSE RATE FOR NON-LINKED &LINKED POLICIES
2.08%2.18%6.07%4.42%3.97%3.26%4-5 years
3.94%2.50%2.23%5.55%4.74%3.50%3-4 years
8.78%6.10%8.73%2.18%5.94%4.51%2-3 years
18.10%17.62%9.43%2.50%12.96%12.12%1-2 years
13.43%41.06%24.19%6.10%18.95%22.31%0-1 year
2006-072005-062004-052006-072005-062004-05
LinkedNon-linkedDuration elapsed in
years
2.08%2.18%6.07%4.42%3.97%3.26%4-5 years
3.94%2.50%2.23%5.55%4.74%3.50%3-4 years
8.78%6.10%8.73%2.18%5.94%4.51%2-3 years
18.10%17.62%9.43%2.50%12.96%12.12%1-2 years
13.43%41.06%24.19%6.10%18.95%22.31%0-1 year
2006-072005-062004-052006-072005-062004-05
LinkedNon-linkedDuration elapsed in
years
Source: Lapsation committee report of IRDA, 2008.
The above statistics given by IRDA clearly shows the lapsed rate
in non-linked andlinked policies for the period 2004-05 to 2006-07
period. From the data, it is clearly observedthat for non-linked
policies, the lapsed rate is high for the initial period of 0-1
year. For theperiod 2004-05, the lapsed rate is 22.31% for the
period of 0-1 year. It has gradually decreasedto 6.10% for the
financial year 2006-07 periods. For the period of 1-2 years, the
lapsed rateis high for the year 2005-06 periods. For the remaining
years, i.e., 2-3 years to 4-5 years,the lapse rate is low compared
to the initial period of 0-1 year period. For the linked
policiesalso, the lapse rate is high for the initial period of 0-1
year. For 2004-05 Period, the lapserate is situated at 24.19% and
it has increased to 41.06% and decreased to 13.43% for theperiod of
2006-07 period. The lapse rate for linked policies has shown high
for the initialperiod of 0-1 year and 1-2 years and it has declined
to 2.08% for the end of 4-5 yearsduration. Overall, from the
statistical figures, it is to conclude that, the lapse rate
foundhigh in the initial period of 0-1 year and 1-2 years and
decreased rapidly as the yearsprogressed.
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ii. POLICY WISE LAPSATION SCENARIO
The following table shows about the policy wise lapsation
scenario of select lifeinsurance policies which are in operation
under various life insurance companiesoperating in India.
Table No.5
Policy wise lapse rate
2.54%3.80%4.55%7.08%8.51%18.09%28.27%Lapse rate
PensionPolicy
NP-Whole
Life
NP-Endowment
WP-Endowment
WP-Whole
Life
Unit-Linked
TermPolicy
PolicyType
2.54%3.80%4.55%7.08%8.51%18.09%28.27%Lapse rate
PensionPolicy
NP-Whole
Life
NP-Endowment
WP-Endowment
WP-Whole
Life
Unit-Linked
TermPolicy
PolicyType
Source: Committee report of IRDA on Lapsation, 2008.
From the above table, it is evident that for the term life
insurance plan, the lapse rateis very high with 28.27%. For market
based ULIP plans, the lapse rate is situated at18.09% and For the
traditional plans including Whole life (including Whole premiumand
Net premium) the lapse rate is situated at 8.51% and 3.80%
respectively. ForEndowment types the lapse rate is situated at
7.08% and 4.55% respectively. And frothe pension, policies, the
lapse rate is situated at 2.54%. Overall, from the statistics,it is
clearly observed that for Term policy and Unit linked the lapse
rate shown veryhigh compared to traditional form of life insurance
policies.
iii. LAPSE RATE IN THE UNIT LINKED PRODUCTS VERSUSTRADITIONAL
PRODUCTS
Table No.6
LAPSATION RATE IN ULIP AND TRADITIONAL PRODUCTS
14.34%26.09%17.80%11.37%8.43%Unit Linked
6.59%7.48%7.69%7.70%5.58%Traditional
2006-072005-062004-052003-042002-03Type of policy
14.34%26.09%17.80%11.37%8.43%Unit Linked
6.59%7.48%7.69%7.70%5.58%Traditional
2006-072005-062004-052003-042002-03Type of policy
Source: Committee report of IRDA on Lapsation, 2008.As per the
above table, the industry lapse rate with respect to number
remainedwithin 4% to 6% whereas the linked products showed
increasing lapse rates since
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2004-05. With respect number of policies lapsed in unit linked
products, there is asharp increase in lapse rate from 17.8% to 26%
in 2005-06 but decreased to 14.34%in 2006-07. The lapse rates with
respect to number of policies under Unit linkedproducts are
observed to be considerably higher than those under conventional
productsas evident from the above figures. Excepting term assurance
products the followingresults using three years combined data
(2004-05 to 2006-07) reiterate the higherlapse rate in unit linked
products than traditional products.
iv) COMPARATIVE STUDY ON LAPSE RATIO OF SELECT LIFEINSURERS
The following table shows the statistics with reference to the
lapse ratio in select lifeinsurance companies for the period
2006-07 to 2010-11.
Table No.7
Comparative study on lapse ratios of select life insurance
companies
11.615.649.24.6Average lapse ratio for 5 years
7114652010-11
7178142009-10
9145342008-09
16194062007-08
19172642006-07
SBIBajaj AllianzICICI PrudentialLIC
Lapse ratio ( in percentages) for select life insurersPeriod
11.615.649.24.6Average lapse ratio for 5 years
7114652010-11
7178142009-10
9145342008-09
16194062007-08
19172642006-07
SBIBajaj AllianzICICI PrudentialLIC
Lapse ratio ( in percentages) for select life insurersPeriod
Source : IRDA Annual report from 2006-07 to 2010-11
The statistics on comparative study on lapse ratio for LIC as
well as 3 other privatelife insurance companies have clearly
showing that the lapse ratio for the LIC is steady asit recorded 4%
in 2006-07 and reached to 5% for the period 2010-11. For ICICI
Prudential,the lapse ratio is highly inconsistent as it has
recorded 26% in 2006-07 and reached to 46%for the period ended in
2010-11 period. Further, Bajaj Allianz Life have shown declining
rateof lapse ratio in the chosen 5 years period. It has reached to
11% for the period 2010-11period. For SBI, the lapse ratio is
decreasing from 19% in 2006-07 period to 7% in 2010-11period.
Hence, from the statistics, it is to conclude that for majority of
the life insurers the
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lapse ratio is steady except to ICICI Prudential life insurers.
And the average lapse ratio islow for LIC with 4.6% compared to
ICICI Prudential which has shown 49.2% recorded ashighest in the
select life insurance companies. Fro Bajaj Allianz, the average
lapse ratio hasrecorded as 15.6% and for SBI, the average lapse
ratio for 5 years is 11.6%.
C) PERCPETIONS OF POLICYHOLDERS
i. POLICYHOLDERS OPINION ON MIS SELLING AS A REASON
FORLAPSATION
The following table shows the filed survey results on the
opinion of policy holderswith reference to mis selling as a reason
for lapsation.
Table No. 8
POLICY HOLDERS OPINION ON MIS SELLING AS A REASONFOR
LAPSATION
72 (24%)228 (76%)Total
15 (25%)45 (75%)SBI Life
09 (15%)51 (85%)Bajaj Allianz
18 (30%)42 (70%)ICICI Pru
30 (25%)90(75%)LIC
Misselling is not evident for lapsation (No)
Misselling is evident for lapsation (yes)
Policy holders opinion on mis sellingas a reason for
lapsationType of
policyholder
72 (24%)228 (76%)Total
15 (25%)45 (75%)SBI Life
09 (15%)51 (85%)Bajaj Allianz
18 (30%)42 (70%)ICICI Pru
30 (25%)90(75%)LIC
Misselling is not evident for lapsation (No)
Misselling is evident for lapsation (yes)
Policy holders opinion on mis sellingas a reason for
lapsationType of
policyholder
Source: Field SurveyFrom the above table it was found that
majority of the LIC policy holders, i.e., 75%have opined yes with
reference to mis selling as a reason for lapsation. 70% of theICICI
Pru policy holders , 85% of them Bajaj Allianz policy holders, 75%
of the SBILife policy holders have opined yes which means that a
total 76% of the policyholders of all life insurance companies have
opined yes with reference to the opinionon mis selling is one of
the reasons for lapsation.
ii. CLASSIFICATION OF POLICY HOLDERS ON THE BASIS
MARKETINGINTERMEDIARIES INFLUENCE ON LAPSATION
The following table shows the classification of policy holders
on the opinion on agentsinfluence on lapsation.
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Table No. 9Marketing intermediaries influence on lapsation
77 (25.67%)223 (74.33%)Total
21 (35%)39 (65%)SBI Life
18 (30%)42 (70%)Bajaj Allianz
12 (20%)48 (80%)ICICI Pru
26 (21.67%)94 (78.33%)LIC
Influence of marketing intermediaries is not evident on
lapsation
Influence of marketing intermediaries is evident on
lapsation
Classification of policyholders
77 (25.67%)223 (74.33%)Total
21 (35%)39 (65%)SBI Life
18 (30%)42 (70%)Bajaj Allianz
12 (20%)48 (80%)ICICI Pru
26 (21.67%)94 (78.33%)LIC
Influence of marketing intermediaries is not evident on
lapsation
Influence of marketing intermediaries is evident on
lapsation
Classification of policyholders
Source: Filed SurveyThe above table shows the opinion of the
policy holders with reference to influenceof marketing
intermediaries on lapsation. 78.3% of the LIC policy holders
opinedthat that agents influence is evident on lapsation. 80% of
the ICICI Prudential policyholders, 70% of the Bajaj Allianz policy
holders, 65% of the SBI Life policy holdershave opined that
influence of agent is evident on lapsation.
iii. PERCEPTIONS OF POLICY HOLDERS ON INFLUENCE OF LACK OFFUND
PERFORMANCE RESULTING IN LAPSATION
The following table shows the opinion of the policy holders with
reference to the lackof performance of policy resulting in
lapsation.
Table No 10PERCEPTIONS WITH REFERENCE TO LACK OF POLICY
PERFORMANCE RESULTING IN LAPSATION
300 (100%)71 (23.64%)229 (76.33%)Total
60 (100%)17 (28.34%)43 (71.66%)SBI Life
60 (100%)21 (35%)39 (65%)Bajaj Allianz
60 (100%)15 (25%)45 (75%)ICICI Pru
120 (100%)18102 (85%)LIC
Influence of policy performance is not evident
in resulting of lapsation)
Yes (influence of policy performance is evident in
resulting of lapsation)
Total
Perceptions with reference to lack of policy performance
resulting in lapsation
Classification of policyholders
300 (100%)71 (23.64%)229 (76.33%)Total
60 (100%)17 (28.34%)43 (71.66%)SBI Life
60 (100%)21 (35%)39 (65%)Bajaj Allianz
60 (100%)15 (25%)45 (75%)ICICI Pru
120 (100%)18102 (85%)LIC
Influence of policy performance is not evident
in resulting of lapsation)
Yes (influence of policy performance is evident in
resulting of lapsation)
Total
Perceptions with reference to lack of policy performance
resulting in lapsation
Classification of policyholders
Source: Field Survey
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The above table shows the perceptions of policy holders on the
Lack of performanceof policy resulting in lapsation. 85% of the LIC
policy holders have opined yeswhich suggest that they are strongly
supporting to the statement that influence of lackof policy
performance resulting gin lapsation.
iv. POLICY HOLDERS PERCEPTION ON MEASURES TO
OVERCOMELAPSATION
The following table shows the responses of policy holders with
reference to themeasures to overcome from the problem of
lapsation.
Table No. 11
POLICY HOLDERS PERCEPTION ON MEASURES TOOVERCOME LAPSATION
31 (10.33%)48(16%)84 (28%)137 (45.66%)Total
06101529SBI Life
07111428Bajaj Allianz
07051632ICICI Prudential
11223948LIC
Creating strong communication channel for dues
Selection of proper market intermediaries
Choosing the policy based on financial capability
Getting awareness
about policy
Perceptions of policyholders on measures to overcome from
lapsation
Type of policyholders
31 (10.33%)48(16%)84 (28%)137 (45.66%)Total
06101529SBI Life
07111428Bajaj Allianz
07051632ICICI Prudential
11223948LIC
Creating strong communication channel for dues
Selection of proper market intermediaries
Choosing the policy based on financial capability
Getting awareness
about policy
Perceptions of policyholders on measures to overcome from
lapsation
Type of policyholders
Source: Field survey
From table No 11, the survey result on the perceptions of policy
holders with referenceto measures to overcome from the problem of
lapsation is obtained. From the policyholders of 4 select life
insurance companies, it was found that 45.66% of the policyholders
have opined that getting awareness about the policy is the measures
toovercome from the problem of lapsation. 28% of the policy holders
have given thatchoosing the policies based on financial capability
is the measure to overcome fromthe problem of lapsation. 16% of the
policy holders felt that selection of propermarket intermediaries
help to reduce the problem of lapsation and 10.3% of thepolicy
holders found that creating strong communication channel from the
companies
-
- 258 -
about policy dues is the measure to overcome from the problem of
lapsation. Hencefrom the results it is to conclude that majority of
the policy holders have opined thatgetting awareness about policy
is the measure to overcome from the problem oflapsation.
v. POLICYHOLDERS OPINION ON AWARENESS ON INSURANCEEDUCATION AS A
MEASURE FOR DIMINUTION OF LAPSE RATE
The following table shows the opinion of sample respondents with
reference to theawareness on insurance education helping for
reducing lapse rate.
Table No.12
POLICY HOLDERS OPINION ON INSURANCE EDUCATION AS AMEASURE FOR
DIMINUTION OF LAPSATION
300 (100%)77 (25.66%)223 (74.33%)Total
60 (100%)12 (20%)48 (80%)SBI Life
60 (100%)17 (29.34%)43 (71.66%)Bajaj Allianz
60 (100%)19 (31.67%)41 (68.33%)ICICI Pru
120 (100%)29 (24.17%)91 (75.83%)LIC
Insurance education did not helps in reducing lapse rate
Insurance education helps in reducing lapse rate
Total
Opinion on insurance education as a measure for diminution of
lapsationClassification of
policyholders
300 (100%)77 (25.66%)223 (74.33%)Total
60 (100%)12 (20%)48 (80%)SBI Life
60 (100%)17 (29.34%)43 (71.66%)Bajaj Allianz
60 (100%)19 (31.67%)41 (68.33%)ICICI Pru
120 (100%)29 (24.17%)91 (75.83%)LIC
Insurance education did not helps in reducing lapse rate
Insurance education helps in reducing lapse rate
Total
Opinion on insurance education as a measure for diminution of
lapsationClassification of
policyholders
Source: Field Survey
The above table shows the opinion of sample respondents with
reference to theinsurance education as a measure for reducing lapse
rate in life insurance policies. Fromthe field survey, it was found
that 75.83% of the LIC policy holders have opined that
insuranceeducation helps in reducing lapse rate. 68.33% of the
ICICI Prudential policy holders,71.665 of the Bajaj Allianz policy
holders, 80% of the SBI Life policy holders have opinedthat
insurance education will helps in reducing policy lapsation. Hence,
from the survey, itwas found that majority of the policy holders,
i.e., 223 out of 300, i.e., 74.33% of them haveopined that
insurance education have an impact on reducing lapse rate of life
insurancepolicies.
FINDINGS & SUGGESTIONS
Life insurance sector undoubtedly contributed for the growth of
the economy. Theemergence of various life insurance companies
resulted in the introduction of various typesof policies. But, due
to lack of understanding about long term benefits and needs, the
life
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insurance companies in India primarily focused on hedging on
profits. Lack of awarenessand education on life insurance policies
remained primary concern which resulted in myopiaby the policy
holders. And also, the dependence of policy holders completely on
agent andbranch remained high. It suggests that the policy holders
are highly depended on the adviceby the agents for taking policies.
Rising of withdrawn policies by the top 4 life insurancecompanies
clearly suggested that lack of proper planning in product (policy)
developmentmay also result in myopia by the companies. The lapse
rate clearly suggesting that in Termand Unit linked plans, the
lapse rate is high. And also, the companies dependence on
Unitlinked plans has resulted in high lapse rate. The lapse rate
especially in the private sector ishigh which shows that the
companies while aiming to sell its policies has heavily
concentratedon ULIP which also resulted in the problem of
lapsation. The survey results clearly showingthat misselling and
role of marketing intermediaries role is high which resulted in
lapsation.Lack of fund performance is also another factor which
resulted in lapsation. Majority of thepolicy holders opined that
getting awareness about the policy is the best measure to
overcomefrom the lapsation. Overall, the study clearly revealing
that the life insurance companiesespecially concentrated on unit
linked plans in the post liberalized era to increase their
sales.Further, lack of proper awareness campaigns, poor product
development have resulted inmyopia in life insurance business.
Overall, the myopia factor clearly showed its impact onlack of
sales and rising lapsation. Hence, it is to suggest that the
product developmentshould be made clearly studying the actual needs
and capabilities of the policy holders.Further, strengthening the
awareness and proper training to marketing intermediaries
willresult in best selection by the policy holders.
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