report on private Insurance Industry

7/30/2019 report on private Insurance Industry

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GENERAL ECONOMIC ENVIRONMENT

The Indian economy grew at the rate of 6.5 per cent in 2011-12. It is the lowestgrowth rate achieved in the past nine year period. Such dismal growth was

preceded by two successive years of robust growth of 8.4 per cent. The slowdownin economy was reflected across all sectors of the Indian economy, but the weakest

performance was reported in the industrial sector. During 2011-12, the agriculturalsector grew at the rate of 2.8 per cent, substantially lower than the growth of 7.0

per cent recorded in the previous year. The year 2010-11 saw simultaneousoccurrence of a normal and well distributed south-west monsoon as also an excessnorth-east monsoon, which was not observed in the last decade. The north-eastmonsoon witnessed a deficit by 48 per cent in 2011-12, although the south-westmonsoon remained normal during 2011-12. With this the production level of food

grains stood at 257.4 million tonnes in 2011-12 (244.8 million tonnes in 2010-11).

The industrial sector reported a growth rate of2.6 per cent during 2011-12, as compared to 6.8 per cent of previous year and anaverage growth rate of 6.3 per cent in the last five years. The slowdown inindustrial production appeared to be across all subsectors except electricity leadingto the slowdown in overall growth of the economy during 2011-12. Various macro-economic factors, such as, the moderation in demand (both domestic and external),hardening of interest rates, slowdown in consumption expenditure, especially ininterest rate sensitive commodities, subdued business confidence and global

economic uncertainty contributed to the weakening of Indian economy.

The services sector, the main contributor of Indias success story in recent years,reported slower growth of 8.5 per cent compared to 9.2 per cent growth achievedin the previous year. The deceleration in services sector appeared to be on accountof both weakening demand as well as inter-linkages with the industrial sector. Thesavings and investment rates continued to decline. The average savings rate haswitnessed consistent decline since 2008-09, led by a sharp decline in public sectorsavings rate, which was not offset by private savings. As per the preliminary

estimates of RBI, the net financial savings of the household sector reduced to 7.8per cent of GDP in 2011-12 from 9.3 per cent in the previous year and 12.2 percent in 2009-10. This moderation in the net financial savings rate of the householdsector during the year mainly reflected an absolute decline in small savings and

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slower growth in households holdings of bank deposits, currency as well as lifefunds. Furthermore, with real interest rates on bank deposits and instruments suchas small savings remaining relatively low on account of the persistent highinflation, and the stock market adversely impacted by global developments,households seemed to have favoured investment in valuables such as gold, whichimpacted the pace of their investment in physical assets such as housing in 2011-12(RBI Annual Report, 2011-12).

The headline inflation rate continued to rule at high levels. It remained high at 9.6per cent and 8.9 per cent during 2010-11 and 2011-12 respectively, as measuredthrough annual average Wholesale Price Index (WPI). These levels appeared to bevery high as compared to the same for the average of last 10 years (2000-01 to2009-10), which remained at a substantially low level at 5.4 per cent. Due to highInflation rate, Reserve Bank continued its stance of high interest rates.

Comparatively, interest rates hovered at higher levels in 2011-12, as compared to2010-11. the average Call Money rate stood at 8.2 per cent in 2011-12 compared to5.8 per cent in the previous year. The yield on 10-year Government Securitieshovered at around 8.4 per cent in 2011-12, higher from the 7.9 per cent of previousyear. The weighted average interest rate on Central Government Borrowings wentup from 7.9 per cent in 2010-11 to 8.5 per cent in 2011-12.

The benchmark deficit indicators widened in 2011-12 on account of many externaland domestic factors. The year 2011-12 witnessed surge in international crude oil

prices as also decrease in the indirect taxes on petroleum products. On domestic

front, the shortfall in revenue due to more than anticipated slowdown in economicgrowth and lower than budgeted disinvestment receipts contributed to the fiscalslippage leading to the gross fiscal deficit (GFD)-GDP ratio to a level of 5.8 percent in 2011-12. The ratio stood at 4.6 per cent in 2010-11.

WORLD INSURANCE SCENARIO

As per World Insurance Report published by reinsurance major Swiss Re, theglobal direct premium during 2011 fell by 0.8 per cent (Year 2010: grew by 2.7 per

cent). The growth situation varied significantly by regions. While in the advancedmarkets, premium volume slipped by 1.1 per cent, the same grew in the emergingmarkets at 1.3 per cent. The growth also varied by lines of business. In the WesternEurope, life premiums dropped steeply by 9.8 per cent. The North America

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witnessed a positive growth of 2.3 per cent in its life premium. In the emergingmarkets, though life premium dropped by 5.1 per cent partly due to newdistribution regulations in China, non-life insurance reported a smart growth of 9.1

per cent.

Out of total global insurance premium, life insurance premiums accounted for 57per cent (USD 2627 billion). This share is higher in advanced economies (58 percent) than in emerging markets (52 per cent) mainly due to the low share of lifeinsurance in the Middle East and Central & Eastern Europe.

During 2011, global life insurance premium shrank by 2.7 per cent to USD 2627billion. However, remarkable differences appeared to be in the development ofpremium income across various markets. In advanced economies, life insurancepremium declined by 2.3 per cent, thereby reversing their short-lived recovery in

2010. In the United States, where in-force life premium continued to decline tilllast year, the premium accelerated modestly in 2011, driven by a rebound insavings products. However, in Western Europe, premiums declined by 9.8 per cent.Premium continued to slip in the United Kingdom and in-force premiums fellsharply in Germany, Italy, Portugal and France. Among the advanced Asianeconomies, growth in Japan accelerated on account of good sales of individualwhole life policies and a recovery in sales of annuity products. Hong Kong andSingapores life markets remained robust.

Amongst the emerging markets, life premium income fell sharply as premium

volume shrank in China and India. The introduction of tighter regulationsgoverning banc assurance in China and the distribution of unit-linked insurance

products in India resulted in a sharp fall in new life premium growth. Premiumunderwritten slipped by 15 per cent and 8.5 per cent in China and Indiarespectively. In contrast, other emerging regions witnessed good growth. Premiumunderwritten went up by 9.4 per cent in the Middle East and 9.5 per cent in theLatin America. Overall, emerging markets share of global life premiums decreasedslightly from 14.2 per cent in 2010 to 13.9 per cent in 2011. The growth in non-lifeinsurance premium stood at 1.9 per cent in 2011. Costly natural catastrophe events

in Japan, New Zealand, and Australia led to significant rate increases in propertymarkets. Rates increased in other advanced markets as well, partially off-settingthe effects of the weak economic environment. In emerging markets, premiumgrowth was mostly driven by robust economic growth.

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The non-life insurance markets in emerging economies grew faster than theadvanced economies in 2011. However, the year 2011 witnessed heavy naturalcalamities, such as the earthquake in Japan, the countrys worst on record in termsof magnitude.

REAL GROWTH IN PREMIUM DURING 2011

(In per cent)

COUNTRIES LIFE NON-LIFE TOTAL

Advanced Countries -2.3 0.5 -1.1Emerging Market -5.1 9.1 1.3

Asia 0.5 7.0 2.2

India -8.5 13.5 -5.5

World -2.7 1.9 -0.8Source: Swiss Re, Sigma No. 3/2012.Note: * calendar year ** financial year 2011-12.

Table 1.1

Indian Insurance in the global scenario

In the life insurance business, India ranked 10 th among the 156 countries, for whichthe data is published by Swiss Re. During 2011-12, the life insurance premium inIndia declined by 8.5 per cent (inflation adjusted). During the same period, theglobal life insurance premium declined by 2.7 per cent. The share of Indian lifeinsurance sector in global life insurance market stood at 2.30 per cent during 2011,

as against 2.54 per cent in 2010.

The non-life insurance sector witnessed a significant growth of 13.5 per centduring 2011-12. Its performance is far better when compared to global non-life

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premium, which expanded by a meagre 1. per cent during the same period. Theshare of Indian non-life insurance premium in global non-life insurance premiumincreased slightly from 0.57 per cent in 2010- 11 to 0.62 per cent in the year 2011-12. India stood at 19th rank in global non-life premium income.

Insurance penetration & density in IndiaThe measure of insurance penetration and density reflects the level of developmentof insurance sector in a country. While insurance penetration is measured as the

percentage of insurance premium to GDP, insurance density is calculated as theratio of premium to population (per capita premium). Since opening up of Indianinsurance sector for private participation, India has reported increase in insurancedensity for every subsequent year and for the first time reported a fall in the year2011. However, insurance penetration, which surged consistently till 2009, slippedin the consecutive second year on account of slower rate of growth in the lifeinsurance premium as compared to the rate of growth of the Indian economy.

INSURANCE PENETRATION AND DENSITY IN INDIA

Year Life Non-Life IndustryDensity

(USD)

Penetration

(Percentage)

Density

(USD)

Penetration

(Percentage)

Density

(USD)

Penetration

(Percentage)

2007 40.4 4.0 6.2 0.6 46.6 4.7

2008 41.2 4.0 6.2 0.6 47.4 4.62009 47.7 4.6 6.7 0.6 55.3 5.2

2010 55.7 4.4 8.7 0.71 64.4 5.1

2011 49.0 3.4 10.0 0.70 59.0 4.1

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 (in USDollars).3. The data of Insurance penetration is available with rounding off to one digit after decimal from2006.

Source: Swiss Re, Various Issues.

Table 1.2

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INSURANCE DENSITY IN INDIA

NEED OF INSURANCE:

People who are prone to the similar risks come together and agree to share and

compensate the losses of the particular person facing losses. Different kinds of

risks can be identified and separate groups made, including those prone to similar

risks. By this way, the loss on a particular person is divided among other member

of group. Thus risk is shared by the community and the particular person doesnt

have to face the impact of such a heavy loss. There are some rules and principles,

which make it possible for insurance to remain a fire- arrangement. It is difficult

for any individual to bear the result of the risk that he is pone to. It will become

manageable when the community shares the loss. And that the peril should happen

unexpectedly and not be deliberately created by the insured person.

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The loss should be proportionally divided amongst the members of the community

who are prone to similar risks, and this method must be predetermined. The share

can be collected before or after the losses arise or at the time of admission to the

group.

Insurance companies collect in and create a fund from which the losses are paid.

From the past experiences of the individuals, assumptions are made and collections

are determined accordingly.

Therefore, Insurance is necessary to aid those depending on the income and he

who would have made arrangements on the basis of some expectation. If of these

expectation do not come true, the original arrangement would become inadequate

and there could be problems, which need to be protected against.

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Thus, The Need Of Insurance Can Be Classified As:

1 Protection of the interest of the faculty of the loss of income due to death of

the breadwinner.

1 Provision for the education & marriage of children.

1 Post retirement income for self & dependent.

1 Special needs like loss of income due to disabilities, accidents, treatment of

diseases, sickness etc.

1 To protect against future inflation.

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INSURANCE IN ECONOMIC DEVELOPMENT:

Investments are made out of savings and they are necessary for further economic

development. A life insurance company is a quit important in mobilizing savings of

people, especially from the middle and lower income group and these savings are

channeled into investment for economic growth.

Most of the life insurance companies have large funds that are accumulated

through the payments of small amounts of premium of individuals and these funds

further the economic development of the countries in which they do business.

These funds are collected and held in trust for the benefit of the policyholders. The

managements of life insurance companies have to remember this aspect and take

decision keeping in mind the benefit of the community.

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Business and trade also benefit through insurance. Without insurance, trade and

commerce is exposed to perils and it will find it difficult to face the impact of such

events.

MAJOR PLAYERS OF INSURANCE IN VARANASI

The new face of the insurance industry is craving for attention in Varanasi. Before

the entry of the private sector the insurance market in Varanasi is an

underdeveloped market that was only ruled and tapped by the state owned LIC.

Today, the dozen-odd life and non-life companies in the private sector are fightinga quiet but intense battle to make their presence felt to the general mass of Varanasi

through advertisements in newspapers and on television, insurance agents and

direct mailers form part of the campaign vehicle.

However, the biggest players of insurance sector which have captured the market

and gained trust, and built faith in the minds of people with their immense

marketing strategy, aggressive and penetrative distribution channel, and innovativeproducts in Varanasi.

The following, therefore, are the major players of insurance business in the

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city, are as under:-

1. LIFE INSURANCE CORPORATION

1. ICICI PRUDENTIAL LIFE INSURANCE

1. BAJAJ ALLIANZ LIFE INSURANCE

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LIFE INSURANCE CORPORATION OF INDIA

Life Insurance Corporation of India (LIC) is an autonomous body authorized to runthe life insurance business in India with its Head Office at Mumbai. It has been

established by an act of the Parliament and started functioning from 1/9/1956.

LIC is the biggest insurance player in the country. Out of the total premium of Rs

3766 crore generated by the insurance industry through group business in the year

2005-06, LIC alone accounted for Rs 3051 crore. As it is the giant Life Insurance

Corporation in Public Sector and enjoys the life insurance monopoly. The

corporation has been fully carrying out the role assigned to it and justifying the

confidence of people by offering the following benefits to them, which are:-

1 Absolute Security

1 Better Policy

1 Condition

1 Cheaper Rates

1 Dependable Service and Better Economic Management

1 Favorite Returns to the People

In the financial year 2005-06, LIC has grown at 30.68%. In respect of number of

lives insured, LIC has shown a growth of over 152%. In respect of number of

schemes, LIC has a growth of 2%. LIC market share in number of individuals

covered and number of policies stands at 77% and 81%, respectively.

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ICICI PRUDENTIAL LIFE INSURANCE

ICICI Ltd. was established in 1955 by the World Bank, the Government of India

and the Indian Industry, to promote and lend money for industrial development.

ICICI Prudential Life Insurance Company Limited was incorporated on July 20,

2000. It is a joint venture between ICICI Bank, a premier financial powerhouse and

Prudential plc, established in 1848 is a leading international financial services

group and is presently the largest life insurance company in the UK.

Today, it has diversified into retail banking and is the largest private bank in the

country. ICICI Prudential is currently the No. 1 private life insurer in the country.

For the financial year ended March 31, 2005, the company garnered Rs 1584 crore

of new business premium for total sum assured of Rs 13,780 crore and wrote

nearly 615,000 policies.

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BAJAJ ALLIANZ LIFE INSURANCE

Bajaj Allianz is a joint venture between Allianz AG one of the world's largest

insurance companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler

manufacturers in the world. Bajaj Allianz is into both life insurance and general

insurance.

Allianz Group is one of the world's leading insurers and financial services

providers. Founded in 1890 in Berlin, Allianz is now present in over 70 countries

with almost 174,000 employees. Bajaj group is the largest manufacturer of two-

wheelers and three-wheelers in India and one of the largest in the world.

Today, Bajaj Allianz is one of India's leading and fastest growing insurance

companies. Currently, it has presence in more than 550 locations with over 60,000

Insurance Consultants.

EMERGING PLAYERS OF INSURANCE IN1414141414


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VARANASI

Competition has well and truly set in the fast-growing insurance sector in Varanasi

although the new breeds of companies are showing their presence in the market.

Therefore, the stress is beginning to show on the key players of the market to

compete with the emerging players in order to be in market and can create impact

on the minds of people with better investment schemes and insurance policies.

The new players of insurance business have attracted the attention of people in

Varanasi due to following reasons:-

1 Innovative and wide range of products which are designed according to the

needs of customer.

1 Higher return

1 Convenient and better distribution channel

The following, therefore, are the new players of insurance business in

Varanasi city:-

1. RELIANCE LIFE INSURANCE COMPANY

2. MAX NEW YORK LIFE INSURANCE

3. TATA AIG LIFE INSURANCE COMPANY

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RELIANCE LIFE INSURANCE COMPANY

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the

Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of Indias

leading private sector financial services companies, and ranks among the top 3

private sector financial services and banking companies, in terms of net worth.

Reliance Capital has interests in asset management and mutual funds, stock

broking, life and general insurance, proprietary investments, private equity and

other activities in financial services.

Reliance Life Insurance Company had acquired 100 per cent shareholding in AMP

Sanmar Life Insurance Company in August 2005. Taking over AMP Sanmar Life

provided Reliance Life Insurance a readymade infrastructure and a portfolio.

AMP Sanmar Life Insurance was a joint venture between AMP, Australia and the

Sanmar Group. Headquartered in Chennai, AMP Sanmar had over 90 offices across

the country, 9,000 agents, and more than 900 employees.

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MAX NEW YORK LIFE INSURANCE

Max New York Life Insurance Company Limited is a joint venture between Max

India Limited, a multi-business corporate, and New York Life International, a

global expert in life insurance.

New York Life is a Fortune 100 company that has over 160 years of experience in

the life insurance business. Max India Limited is a multi-business corporate

dealing in Clinical Research, IT and Telecom Services, and Specialty Plastic

Products businesses.

Max New York Life Insurance started its operations in India in 2000. It is the first

life insurance company in India to be awarded the IS0 9001:2000 certifications.

Max New York offers customized products tailored to suit individual's needs. With

its various Products and Riders, there are more than 400 product combinations to

choose from. Today, Max New York Life Insurance has a network of 57 offices

spread over 37 cities all over India.

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TATA AIG LIFE INSURANCE COMPANY

Tata AIG Life Insurance Company Limited is a joint venture between Tata Group

and American International Group, Inc. (AIG). Tata Group is one of the oldest and

leading business groups of India. Tata Group has had a long association with

India's insurance sector having been the largest insurance company in India prior to

the nationalization of insurance. The Late Sir Dorab Tata was the founder

Chairman of New India Assurance Co. Ltd., a group company incorporated way

back in 1919.

American International Group, Inc is the leading U.S. based international insurance

and financial services organization and the largest underwriter of commercial and

industrial insurance in the United States. AIG has one of the most extensive life

insurance networks in the world.

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NAME OF THE INSURANCE COMPANY AND THE SHARE HOLDING

PATTEN

Name of the Insurance Company Shareholding

Agricultural Insurance Co Bank and Public Ins Co

Bajaj Allianz General Insurance Co. Ltd. Privately Held

Cholamandalam MS General Insurance Co.

Ltd.Privately Held

Export Credit Guarantee Company Public Sector

HDFC Chubb General Insurance Co. Ltd. Privately Held

ICICI Lombard General Insurance Co. Ltd. Privately Held

IFFCO-Tokio General Insurance Co. Ltd. Privately Held

National Insurance Co. Ltd. Public Sector

New India Assurance Co. Ltd. Public Sector

Oriental Insurance Co. Ltd. Public Sector

Reliance General Insurance Co. Ltd. Privately Held

Royal Sundaram Alliance General InsuranceCo. Ltd.

Privately Held

Tata AIG General Insurance Co. Ltd. Privately Held

United India Insurance Co. Ltd. Public Sector

There are a total of 13 life insurance companies operating in India, of which

one is a Public Sector Undertaking and the balance 12 are Private Sector

Enterprises.

List of Companies are indicated below:-

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TABLE NO: 4 NAME OF THE LIFE INSURANCE COMPANY AND THE

SHARE HOLDING PATTEN

Name of the company Nature of Holding

Allianz Bajaj Life Insurance Co PrivateAviva Life Insurance Private

Birla Sun Life Insurance Co Private

HDFC Standard Life Insurance Co Private

ICICI Prudential Life Insurance Co Private

ING Vysya Life Insurance Co. Private

Life Insurance Corporation of India Public

Max New York Life Insurance Co. Private

MetLife Insurance Co. Private

Om Kotak Mahindra Life Insurance Private

Reliance insurance Private

SBI Life Insurance Co Private

TATA- AIG Life Insurance Company Private

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TABLE 5. NAME OF THE PLAYER MARKET SHARE (%)

Name of the Player Market share (%)

LIFE INSURANCE CORPORATION OF

INDIA82.3

ICICI PRUDENTIAL 5.63

BIRLA SUN LIFE 2.56

BAJAJ ALLIANZ 2.03

SBI LIFE INSURANCE 1.80

HDFC STANDARD 1.36

TATA AIG 1.29

MAX NEW YARK 0.90

AVIVA 0.79

OM KOTAK MAHINDRA 0.51ING VYSYA 0.37

MET LIFE 0.21

PRESENT SCENARIO OF INSURANCE INDUSTRY

India with about 200 million middle class household shows a huge

untapped potential for players in the insurance industry. Saturation of

markets in many developed economies has made the Indian market even

more attractive for global insurance majors. The insurance sector in Indiahas come to a position of very high potential and competitiveness in the

market. Indians, have always seen life insurance as a tax saving device, are

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now suddenly turning to the private sector that are providing them new

products and variety for their choice.

Consumers remain the most important centre of the insurance sector. After

the entry of the foreign players the industry is seeing a lot of competition

and thus improvement of the customer service in the industry.

Computerisation of operations and updating of technology has become

imperative in the current scenario. Foreign players are bringing in

international best practices in service through use of latest technologies

The insurance agents still remain the main source through which

insurance products are sold. The concept is very well established in the

country like India but still the increasing use of other sources is imperative.

At present the distribution channels that are available in the market are listed

below.

Direct selling

Corporate agents

Group selling

Brokers and cooperative societies

Bancassurance

Customers have tremendous choice from a large variety of products from

pure term (risk) insurance to unit-linked investment products. Customers are

offered unbundled products with a variety of benefits as riders from which

they can choose. More customers are buying products and services based on

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their true needs and not just traditional moneyback policies, which is not

considered very appropriate for long-term protection and savings. There is

lots of saving and investment plans in the market. However, there are still

some key new products yet to be introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity for

insurance products. A research conducted exhibited that the rural consumers

are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium

each year. In the insurance the awareness level for life insurance is the

highest in rural India, but the consumers are also aware about motor,

accidents and cattle insurance. In a study conducted by MART the results

showed that nearly one third said that they had purchased some kind of

insurance with the maximum penetration skewed in favor of life insurance.

The study also pointed out the private companies have huge task to play in

creating awareness and credibility among the rural populace. The perceived

benefits of buying a life policy range from security of income bulk return in

future.

APPLICATION OF INFORMATION TECHNOLOGY IN

INSURANCE SECTOR

There is a evolutionary change in the technology that has revolutionized the entire

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insurance sector. Insurance industry is a data-rich industry, and thus, there is a need

to use the data for trend analysis and personalization.

With increased competition among insurers, service has become a key issue.

Moreover, customers are getting increasingly sophisticated and tech-savvy. People

today dont want to accept the current value propositions, they want personalized

interactions and they look for more and more features and add ones and better

service

The insurance companies today must meet the need of the hour for more and more

personalized approach for handling the customer. Today managing the customer

intelligently is very critical for the insurer especially in the very competitive

environment. Companies need to apply different set of rules and treatment

strategies to different customer segments. However, to personalize interactions,

insurers are required to capture customer information in an integrated system.

With the explosion of Website and greater access to direct product or policy

information, there is a need to developing better techniques to give customers a

truly personalized experience. Personalization helps organizations to reach their

customers with more impact and to generate new revenue through cross selling and

up selling activities. To ensure that the customers are receiving personalized

information, many organizations are incorporating knowledge database-

repositories of content that typically include a search engine and lets the customers

locate the all document and information related to their queries of request for

services. Customers can hereby use the knowledge database to mange their

products or the company information and invoices, claim records, and histories of

the service inquiry. These products also may be able to learn from the customers

previous knowledge database and to use their information when determining the

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relevance to the customers search request.

GROWTH OF INDIAN INSURANCE INDUSTRY

Insurance acts as a catalyst in economic growth of a country. It is closely related to

savings and investment that comes from, life insurance, funded pension systems

and to some extent the non-life insurance industry.

LIC(Life Insurance Corporation) & GIC(General Insurance Corporation) had

monopoly prior to the expansion of insurance market to private companies. LICwas established in 1956 and controlled all life-insurance policies across the nation.

These were government run organizations. The Insurance business is divided into

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four classes :

1. Life Insurance business

2. Fire

3. Marine

4. Miscellaneous Insurance.

Following the Insurance Regulatory and Development Act in 1999, India

abandoned the public sector exclusivity of the insurance industry and switched to a

market-driven competitive industry. This shift has brought about many changes

and developments in the insurance industry in India. Domestic private-sectorcompanies were permitted to enter both the life and general insurance business and

foreign companies were allowed to participate and join these domestic companies

albeit with a cap of 26% investment.

The objectives of this report are to examine the current status of the insurance

industry, its prospective growth and the valuation methods used for insurance

companies in developed and under-developed countries.

CURRENT MARKET STRUCTURE

Today there are 16 private players with aggregate control of 27% of the life

insurance market and 15 private players in the general insurance industry. Entry of

private sector has fuelled the growth in the sector driven by new products and

aggressive marketing strategies. LIC still covers majority market share with other

private companies growing at alarming rates with market share of 48.1% . ICICIPrudential has the majority market share among the private companies and has

maintain its market leadership with an estimated market share of 19.2%, SBI

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life(10.7%),Bajaj Allianz (14.0%), HDFC Standard Life (8.6%), Birla Sun Life

(9.2%) , Reliance life(11.0%),max new york (5.9%) etc within the private sector in

FY09.

With low barriers to entry, there will be increased competition and better quality of

service within the next decade in the Indian insurance industry. An insurance

survey by LIC & KPMG showed that annual growth in average premium is 8.2%

in India compared to a global average of only 3.4%. The Associated Chambers of

Commerce and Industry of India (ASSOCHAM) has projected a 500% increase in

the size of current Indian insurance business from US$ 10 billion to US$ 60 billion

by 2010 particularly in view of contribution that the rural and semi-urbaninsurance will make to it.

Below is the distribution of companies in Life Insurance Industry:

COMPANIESFY

11

FY

12

ICICI Prudential 25.4 19.2

Allianz Bajaj 21.3 14.0

HDFC Standard

Life8.4 8.6

SBI Life 9.7 10.7

Birla Sunlife 6.5 9.2

Reliance Life 7.0 11.0

Max New York

Life4.9 5.9

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Aviva 3.7 2.4

Tata AIG 3.0 3.6

OM Kotak

Mahindra 3.6 4.4

ING Vysya 2.5 2.4

MetLife 2.9 4.0

Shriram 0.5 0.7

Bharti Axa 0.4 1.0

Canara HSBC 0.0 1.1

SOURCE:IRDA

LIFE INSURANCE

Life Insurance industry is under the phase of infancy after 50 years of monopoly.

LIC, the market leader in this segment, is a state owned organization and has had a

monopoly in the life insurance business for over four decades until 2001. LIC still

remains the market leader, by a wide margin, with an estimated market share of

48.1% (IRDA,FY09). However, at the margin, it has been loosing market share toprivate sector players.

Types of Insurance Policies

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a. Single Premium v/s Regular Premium

b. Unit linked v/s Traditional

c. Pure Risk Policies (Term) v/s Savings + Risk

d. Participating v/s Non Participating

US$31.7 billion assets were managed by the private players(June,2009) , whereas

LIC was able to manage with US$ 167.37 billion(march ,2009)

GENERAL INSURANCE

Gross direct premium income underwritten (GDPIU) by 21 generals insurance

insurers grew by 12.62% in FY09 as said by insurance regulator IRDA. Some new

entries in this field were Future Generali, Universal Sompo, Shriram General,

Bhart AXA, Raheja QBE, Apollo DKV and Star Health , combined collected a

total premium of INR11.47 bn. HDFC ERGO recorded a growth of 24%.

MARKET SHARE:

New india assurance secured 1st position and is enjoying market share of 14.80% ,

ahead of United india ny INR 1.78 billion. Among the private players ICICI

Lombard stood 1st with market share of 8.52%. . star heath and Apollo DKV were

new entrants.

MIX OF NON-LIFE BUSINESS & PRODUCTS

The mix of non-life business in India resembles most other developing regional

economies. Motor and fire policies are the backbone of non-life business in India.

They also contributed the most to overall premium growth in the last five years.

Compared to other markets, personal lines insurance is also relatively well-

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developed in India. This is mainly manifested in personal motor and private

residential fire policies. In fact, among emerging markets with a similar level of

per capita income, India has the highest share of personal lines business.

After the opening of the sector to private players, more new products were

introduced. To take an example, one joint-venture non-life insurer introduced 29

different products during one year, according to the IRDA. They included products

liability, corporate cover, professional indemnity policies, burglary cover,

individual and group health policies, weather insurance, credit insurance, travel

insurance and so on. Some of these products were completely new (e.g. weather

insurance) while others were already available through the public insurancecompanies.

REGULATION AND TARIFF

Before deregulation in 1999, non-life products that were available in the market

were rather limited and similar across the four GIC subsidiaries. They could also

be classified by whether they were regulated by tariffs: fire insurance, motor

vehicle insurance, engineering insurance and workers' compensation etc that came

under tariff; and burglary insurance, Mediclaim, personal accident insurance etc

that did not. In addition, most specialized insurance (e.g. racehorse insurance) did

not fall under tariff regulations.

SCOPE FOR EXPANSION OF INDIAN INSURANCE MARKET

Currently there is a huge scope for this industry to grow with increased disposable

income among the working class in India. Up to 80% of India's population is

uninsured today.

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CHANGING DEMOGRAPHICS

Life expectancy is growing with advances in medicine and technology. The rapid

rise in income levels and the high proportion of Indians below 30 years of age

(estimated at 60% of India's total population of 1bn) should be a significant driver

for life insurance in coming years.

The following table shows the age-wise distribution of population in future years:

Households earning over Rs5mn per year are growing the fastest (at 27%p.a.), and

many of them are still either uninsured or under-insured. Further incrementally

there is a shift happening from large joint families to nuclear families, which

increases the need insurance amongst these households as the dependency ratio

increases significantly. Aversion to debt by most of the new generation households

has also led to higher monthly debt servicing requirement. Increasing debt

servicing has also resulted in higher need for insurance as most of the families

have a single bread earner.

LOW PENETRATION

Currently there is very low penetration in India specially in rural places. Tapping

those markets will boost the insurance industry. Privatization of the insurance

industry in 2000 improved penetration from 1.4% of GDP in 2000 to 3.8% of GDP

in 2009 in India

SOURCE: Macquarie research, July 2009

Life insurance market in semi-urban and rural territories is expected to rise to US$

20 Billion mark in the upcoming four years from the existing value of less than

US$ five Billion. Life insurance industry has contributed to more than 3.5% to

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India's GDP growth whereas non life insurance sector has contributed to only 0.6%

over past 9 years. The non-life public sector insurers have been rather slow to

respond to the evolving competition. Both the Authority and the industry have been

playing an active role in increasing consumer awareness.

Large sections of rural India are still untouched because of long distances, poor

distribution and high return costs. To understand the prospects for insurance

companies in rural India, it is very important to understand the requirements of

India's villagers, their daily lives, their peculiar needs and their occupational

structures. There are farmers, craftsmen, milkmen, weavers, casual laborers,

construction workers and shopkeepers and so on. In the context of internationalcomparison, insurance penetration in India is low but commensurate with its level

of per capita income.

GENERATION OF EMPLOYMENT

There is a high demand for skilled insurance agents to explain the technicalities

and understand the various products offered in the market. With such high demand,

the insurance industry has created scope for expansion in the employment industry

too. Life insurance industry provides increased employment opportunities.

Brokers, corporate agents, training establishments provide extra employment

opportunities. Many of these openings are in rural sectors.

FOREIGN INVESTMENT

India differs from other Asian markets in the sense that its life insurance market is

still heavily dominated by indigenous players, partly reflecting the fact that de-

monopolization only took hold in 2000. In contrast, most Asian life insurance

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sectors are already heavily populated by foreign insurers. Foreign non-life insurers

have achieved penetration in India similar to those in other Asian markets. It can be

expected that foreign insurance companies will continue to expand their market

share in India in the coming years, notwithstanding the fact that public sector

insurers are also proactively strengthening their business strategies to fight rising

competition.

With the entry of private foreign firms, consumer knowledge is increasing through

international approach of advertising and marketing. With scope for foreign

investment to increase to 49% according to the planning of the government,

foreign companies will pay more attention to the Indian market but currentlyforeign direct investment (FDI) limit in the insurance sector for foreign investors is

26 per cent. Also most of the private sector players have set up a vast distribution

network, including over 250,000 agents (LIC has over a million agents), most of

whom are more qualified than LIC agents. A qualified work force and an extensive

distribution network has further helped the private insurance companies to increase

awareness about life insurance.

The mentality of Indian policy holders is only from an investment perspective, and

with foreign influence this is changing to awareness of insurance as security and

protection.

POTENTIAL IN PENSION AND HEALTH CARE MARKETS

The Indian insurance industry is still dominated by investment linked insurance

products like endowment and ULIP(Unit linked insurance plan). Pure insurance

products like term and health are not yet popular, largely owing to the mindset of

the average Indian consumer. This is predicted to change with more western

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exposure and awareness of other insurance products. Pension system and health

insurance are increasing with urbanization.

There are around 30 health insurance products in the market right now . owing to

growing awareness and rising health care costs has led to an increase in sale of

health insurance products by 30% in 2009.companies are launching new health

insurance products like tata launched Hospicashback' and metlife launched met

health care in 2009

TAX BREAKS

The tax structure in India is also favorable for the insurance industry in the form of

deductions and exemptions. Over the past several years, Government of India has

been offering various tax benefits to encourage individuals to buy life insurance.

Tax relief offered is

Under Section 80C of Income Tax Act, a portion of premiums paid for life

insurance policies are deducted from tax liability. Exemption is also

available for Health Insurance Policy premiums.

Money paid as claim including Bonus under a life policy is exempted from

payment of Income Tax. Under section 10(10D).

Tax Incentives have been a key growth driver for the life insurance business over

the past two decades, largely owing to the absence of awareness of other benefits

of life insurance. Historically LIC collected the bulk of its premium income in the

last quarter of the financial year, when people used to buy insurance to reduce their

tax liabilities. However the trend has changed in the past few years, with the

private insurance companies driving the growth by increasing the awareness.

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MARKET CHALLENGES AND DRAWBACKS

Some of the factors that have slowed down the growth of the industry are as

follows:

Slow down in single premium policies owing to a change in regulation

.Sustainability of single premium policies, especially post June'06 when the

new changes proposed by IRDA come into play which, in our view, could

negatively impact the growth of single premium policies.

Managing the distribution network, especially the agent attrition rates

Managing the cost as most of the insurance companies have already priced

in higher economies of scale in their load structure.

INCREASED WAGES

Rapid expansion of the insurance business and an attrition rate amongst life

insurance agents has resulted in an estimated 30-40% rise in wage bills. In

particular, the shortage of actuaries, specialized agents and marketing people has

meant life insurers are paying up almost 50% more than they had originallybudgeted when they had entered the sector, almost 5 years ago. This is partly due

to the much higher money that life insurers have to spend on training and on

retention of employees.

DISTRIBUTION

Distribution still appears to be a key challenge for insurers. Despite the large

branch network of Indian banks, bank assurance has still not fully evolved in

India.Bank branches still account for around 10% of all policies sold. In contrast,

most Insurers still rely on the agency model. Almost 80% of the policies are sold

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through agents who have to be well trained.

QUALITY OF AGENTS AND MANAGERS

Unfortunately for the industry, in the absence of skilled manpower, employee

turnover has emerged as one of the challenges facing the industry. According to

many of the insurers, employee turnover in the life insurance segment is running at

35-40%. The problem appears to stem from managing business managers'

(typically people who manage about 100 agents) aspirations and keeping pace with

the rise in salary levels offered by competitors. As a result, there is a concern that

having sufficient employees could be the biggest challenge for the larger players to

ensure that they face no capacity constraints while rapidly growing their business.

DECLINE OF ULIP'S

Decline in the growth of stock market , 2008 , due to global meltdown had also

adversely affected investor sentiments towards ULIP products. ULIP contributed to

around 60-70% of the business turnup of any private life insurance company. With

reviving economy in the 3rd quarter of 2009 and better stock market performance ,

investors again started showing confidence in ULIP products. Now ULIP growth is

expected to rise in the next 5 years.

OTHER FACTORS

On the regulatory side, there are outstanding issues concerning solvency

regulations, further liberalizing of investment rules, caps on foreign equity

shareholdings as well as the enforcement of price tariffs in the non-life insurance

sector.

The proliferation of bank assurance is rapidly changing the way insurance products

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are distributed in India. This will also have strong implications on the process of

financial convergence and capital market development in India.

IRDA AND REGULATIONS

IRDA(Insurance Regulatory Development Authority) Act was formed in 1999 to

promote market efficiency and ensure consumer protection of the insurance

industry. Several regulations were laid down to control ensure a fair market after

private companies were allowed to enter the market some of which are:

Capital Requirement:

A minimum capital requirement of INR 1 billion for new entrants and INR 2billion of reinsures. This helped insure that companies were well established with

long term goals.

Foreign Direct Investment:

is capped at 26% presently. This puts a strain on Indian promoters and blocks

foreign investment in the insurance industry. However, currently there is an

ongoing proposal to raise this cap to 49%. With this, there will be an influx of

foreign investment and expansion of the insurance industry further.

Company Listing:

All the new life insurers would have to compulsorily list their companies within 10

years of beginning their operations.

Rural sector requirement:

Life insurance players are required to issue minimum no of policies in rural areas

and in social sector.

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Solvency controls:

Insurers have to observe the required solvency margin (RSM).20. For general

insurers, this is the higher of RSM-1 or RSM-2, where RSM-1 is based on 20% of

the higher of (i) gross premiums multiplied by a factor A,21 or (ii) net premiums;

RSM-2 is based on 30% of the higher of (i) gross net incurred claims multiplied by

a factor B, or (ii) net incurred claims;

There is also a lower limit of INR 500 million for the RSM. Life insurers have to

observe the solvency ratio, defined as the ratio of the amount of available solvency

margin to the amount of required solvency margin. In addition, The required

solvency margin is based on mathematical reserves and sum at risk, and the assets

of the policyholders fund; The available solvency margin is the excess of the

value of assets over the value of life insurance liabilities and other liabilities of

policyholders' and shareholders' funds.

Investment:

In 1958, Section 27A of the Insurance Act was modified to stipulate the following

investment regime:

a. Central government market securities of not less than 20%;

b. Loans to National Housing Bank including (a) above should be no less than

25%;

c. In state government securities including (b) above should be no less than

50%; and

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d. In socially oriented sectors including the public sector, cooperative sector,

house building by policyholders, own-your-own-home schemes including

(c) above should be no less than 75%.

For General Insurance, The guideline for investment was set out as follows: (a)

central government securities of no less than 25%; (b) state government and public

sector bonds of no less than 10%; and (c) loans to state governments, various

housing schemes of no less than 35%. The remaining 30% investment could be in

the market sector in the form of equity, long-term loans, debentures and other

forms of private sector investment.

General insurance business lines that are subject to tariffs include fire, motor,

marine hull, tea crop, engineering, industrial all risks, business interruption,

personal accident and workers' compensation. Tariffs are managed by the Tariff

Advisory Committee.

VALUATION METHODS USED FOR INSURANCE COMPANIES

Different valuation methods are used for insurance companies in different

countries.

Embedded Value(Ev)

The widely used method for valuation of insurance companies worldwide is EV.

This is the addition of shareholders net worth and the value of in-force business.

Shareholders net worth equals the sum of net assets of life insurance companies

adjusted to reflect market values of these assets. Value of in-force business equals

the present value of projected future after-tax regulated profits to be generated

from policies in force. Appraisal value(AV) adds the value of future new

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business(goodwill) to the EV.

The embedded value is higher for life insurers that can deliver across all these

variables.

a. Investment Returns: Higher investment return will provide better investment

margins for insurers, lifting overall profitability and embedded value

b. Expenses: Better cost control, running under budgeted expense will provide

better expense profit

c. Persistency: This measures how successful insurers are able to retain its

customers

d. Claims: Better mortality and morbidity experience would deliver higher risk

profit

e. Product Mix: and lastly, product mix will affect all of the above.

For instance, insurers having a higher proportion of the traditional endowment and

whole life policies, (all else being the same) would have a higher embedded value

owing to the both the higher loading in these policies and also owing to the longerlife of the policy providing the insurers with a more extended cash flow. In contrast

ULIP's have lower loading and also shorter durations. The single premium policies

have the lowest embedded value having no renewal premiums.

In essence, EV is the present value of the current business base, while AV is EV

plus the value of the company's growth potential. Usually for a typical life insurer,

the EV would be the large component while the AV would be a much smaller

proportion. Usually in markets where there is a developed life insurance market,

the valuations would tend to range between the EV and AV.

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Problem with using EV and Appraisal Value for India

Unfortunately, the Indian insurance industry and has just spurted growth and

currently all private companies are incurring large losses and initial set-up costs,

hence the EV and Appraisal value methods of valuation are not useful. For most

life insurers, the expenses are likely to be still quite high owing to high start up

costs and money spent on creating a distribution network, marketing and

advertising and expanding agent network (as they all rely on the agency model) as

they are all rapidly scaling up their businesses. Further, owing to the high reserve

requirements and the high acquisition costs that most life insurers have to incur,

they are still making accounting losses. Most of these insurers could break even in

about another 2-3 years by around FY09.

Solution(NBAP)

The best suitable valuation method at the current phase of the insurance industries

is NBAP(new business achieved profit). It is the present value of the future profits

expected from the new business written through that policy. Each product carries

different NBAP margins. ULIP's for example have a NBAP margin of around 19-

20% v/s 30-33% margins for traditional endowment products. Single premium

policies, in contrast, are the least profitable with an estimated NBAP margin of

around 3-4%.

An insurance company like LIC, which is at an advanced stage of its life cycle,

would probably have EV accounting for 80-90% of total value of the firm, while

for new companies 80-90% of the value will come from the NBAP calculation.

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For the majority of the private insurers, the EV is likely to be very small owing to

the very small value of the in force business as they have been in existence for just

about 6-7 years. Thus, the value of the existing business (EV) will be only a small

proportion of the total actuarial value of the company with the new business

component of AV dominating. Hence, the valuation of these companies would

largely be a function of their AV and they could potentially trade at a premium to

their AV depending upon the likelihood of them being able to achieve the projected

growth rates and the underlying actuarial values.

VALUATIONS OF LIABILITIES IN LIFE INSURANCE

Valuation of liabilities for life insurers requires assumptions of the rate of interest,

rate of mortality, level of future expenses etc. Two methods to value liabilities of

insurance companies which are Gross Premium method and Net premium method.

Gross Premium Valuation

Liabilities= (P.V of the benefits contracted to be payable + P.V of the future

expenses likely to be incurred + P.V of bonuses likely to be declared in the future) -

(P.V of premium receivable)

An important feature of this method is its transparency. It is possible for any one

examining the valuation report to judge whether sufficient margins have been

provided for possible adverse developments. At the same time, the method has one

serious drawback, viz., its sensitivity to the various parameters used. A marginal

increase in the valuation rate of interest or a decrease in the expected level of

future bonuses could lead to a significant reduction in liability and release of larger

surplus for distribution than what could be considered as prudent.

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Net Premium Valuation

Liability under a policy = P.V of benefits contracted to be payable - P.V of the

true/net premium.

No explicit provision is made for either future expenses or future bonuses as under

the gross premium method.

Practices in Different Developed countries

1) United Kingdom: Currently, the United Kingdom may perhaps be the only

industrial country in which the net premium valuation is prescribed as the statutory

method of valuation.

2) Canada: The statutory method of valuation prescribed in Canada since 1992 is

known as the Policy Premium Method (PPM). The PPM is a gross premium

prospective method of valuation. Policy premium simply means the premium

charged under a policy, i.e., gross premium. The assumptions regarding valuation

parameters are based on the best estimates of future experience with provision for

adverse deviations. Though this method is similar to the gross premium valuation

discussed earlier, there are some significant differences.

3) Australia: The statutory method of valuation prescribed in Australia is the

'Margin on Services Method'. In this method, the liability is defined as the sum of

i) the best estimate value of policy liabilities, which is the amount required to meet

future expenses and benefits and ii) the value of future expected profit margins on

the services provided to policyholders such as insurance of mortality risks and on-

going expenses of administration.

4) Germany:The gross premium method of valuation that is generally used in

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Germany. The net premium method of valuation, with Zillmer adjustment, is also

permitted. Since 1986, the Indian insurance industry has been following the gross

premium method of valuation.

GENERAL INSURANCE

While well defined procedures are in place in almost all the countries for the

valuation of liabilities under the life insurance business, it is not so in case of the

general insurance business. The systems in vogue are more general than specific.

The only stipulation is that the system followed should be in accordance with the

GAAP. As per the European directives, the balance sheet needs only to show the

directors' opinion about the financial position of the general insurance company. In

the USA, the directors have liberty to place an appropriate value on the liabilities.

In general, it is the responsibility of the accounting profession to ensure that the

value placed on the liability is fair and reasonable. In many European countries, it

is the tax authorities and not the insurance regulators who require that the amount

of reserves shown be estimated scientifically.

Investments of insurance companies have been largely in bonds floated by GOI,

PSU's, state governments, local bodies, corporate bodies and mortgages of long

term nature. Liability (known as the Technical Reserve) under a general insurance

portfolio can be broadly defined as the sum of:

The amount of premium estimated as required to cover the risk during the

balance policy period falling after the balance sheet date (Unearned or Un-

expired Premium Reserve - UPR),

The amounts expected to be paid in future in respect of the claims already

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The amount expected to be paid in future in respect of claims that might

have occurred but could not be reported to the insurer till the balance sheet

date (Incurred But Not Reported - IBNR),

The direct expenses expected to be normally incurred for the settlement of

the above two classes of claims, and

Reserves required to be held on a prudent basis towards catastrophe losses or

a single incident giving rise to multiple claims.

INVESTMENTS VALUATION

Generally, under life insurance policies, premiums are received in advance and

after providing for acquisition and management expenses, the current cost of

claims and other outgo, the balance of premium is available for investment. These

balance premiums and the investment income is available to meet claims, which

would occur in later years.

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GROWTH AND FUTURE

With a large population and untapped market, insurance happens to be a big

opportunity in India. The insurance business is growing at the rate of 32-34%

annually .India's insurance sector is the 5th largest life insurance market, globally

worth US$ 41 billion. With alarming growth in the past, the insurance industry is

predicted to grow even faster in the coming years, with a business opportunity of

$70 billion in 2020 for private players.

Life Insurance

Life insurance industry recorded a premium income of US$ 24 billion during 2009

with a growth of 32-34% annually and non life insurance US$ 24 billion. The

contribution of first year premium, single premium and renewal premium to the

total premium was Rs.21275.75 crore (20.09 per cent); Rs.17509.78 crore (16.54

per cent); and Rs.67090.21 crore (63.37 per cent), respectively.

Total Sector Premiums are expected to grow at 16% p.a. for the next 5 years.

Private sector is expected to grow at 59% CAGR. Private players are expected to

gain market share of 45% by 2010. Life insurance sector has contributed to more

than 4% in the GDP whereas nonlife insurance has contributed to around 0.6%

Projection of life insurance and non life insurance premiums, 2004-2012:

Life insurance (INR m)Non life insurance (INR

m)

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2004 749971 203856

2005 871672 234323

2006

102595

7 271830

2007120142

5315522

2008140336

2368094

2009

166781

4 429750

2010198305

1496953

2011236657

6572727

2012

280456

1 651736

Average growth rate between 2004-

2012

Is

18.1%And 15.1%

Source: Swiss ReEconomic Research and Consulting

While the overall sector premium growth will continue to be in the 15-20% range,

premium income for the private sector is expected to grow at a much faster rate as

they are expected to continue to gain market share owing to:

Increasing demand for new products like health insurance and pension funds

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Aggressive expansion of distribution network

Low base effect

Rising share of private sector

Source:IRDA

Growth To Decelerate Near Term (FY12)

A sharp deceleration in the single premium' policies is expected as the regulator,

IRDA, has recently come out with regulations stipulating that from June'06

onwards, all ULIP's would have to have a life cover of at least 3 years and has also

lowered the maximum commission that can be paid on ULIP's. In particular, this

affects all unit linked policies which were structured as single premium policies.

Hence, the FYP growth my decelerate to 35% from a heady 85% last year. Players

like Bajaj Allianz and SBI Life that have a high proportion of single premium

policies may see sharper deceleration. We, however, expect traditional policies

(endowment / whole life) to grow at +40-50% pa. Hence, in FY12, the FYP (first

year premiums) growth is expected to decelerate to 30% (v/s 93% in FY06E)

driven by a sharp slowdown in single premium policies to under 20% from 120%

in FY11. However, traditional products (whole life and endowment) are expected

to gather more momentum and that should, help support overall industry growth

(private players) at +30%.

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RESEARCH OBJECTIVE

1. To study the awareness of insurance among different kind of Insurance

Company & Policy..

1. To study the customer preferences in the Insurance Segment.

1. To study the major players in the Insurance Segment.

2. To study the Reasons for the preference in the Insurance Sector.

1. To study the growth of insurance sector in past 10 years

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RESEARCH METHODOLOGY

The information required for the study was collected in the form of Secondary

data. The present research is of descriptive type. The information was gathered

from Media and Secondary based data.

RESEARCH DESIGN

A research design is the arrangement of conditions for the collection and analysis

of data in a manner that aims to combine relevance to the research purpose with

economy in procedure.

In fact, the research design is the conceptual structure within which research is

conducted. It constitutes the blueprint for the collection, measurement and analysis

of data.

Research design facilitates smooth sailing of various research operations, thereby

making research as efficient as possible yielding maximum with minimal

expenditure of effort, time and money.

Research design stands for advance planning of methods to be adopted for

collecting the relevant data and the techniques to be used in there analysis, keeping

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Secondary data required for the study was collected from various websites,

magazines, brochures, pamphlets and newspapers.

DATA - ANALYSIS

MARKET SHARE ANALYSIS

IRDA ranking in July 2012 showed that LIC has the higher market share in the

number of policies sold compared with premium income means private life

insurers are cornering a larger share of high premium policies.

Market share of private life insurance companies in new business in July 2012

stood at 37 per cent. Among the private life insurance companies, ICICI Prudential

Life Insurance Company is at the number one position in July 2012 and Bajaj

Allianz Life Insurance Company captured the second place in the IRDA rankings

of July 2012.

INSURER

MARKET SHARE

STRUCTURE

Total in (%)

LIC 66%

ICICI PRUDENTIAL 12%

BAJAJ ALLIANZ 7.5%

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HDFC SLIC 4.5%

TATA AIG 2.5%

MAX NEW YORK 3.5%

RELIANCE LIFE 4%

LIC

ICICI

BAJAJ

HDFC SLIC

TATA AIG

MAX

RELIANCE

The above chart shows the market share structure of the major players and new

players in the insurance business. LIC have the monopoly in the life insurance

whereas, ICICI and BAJAJ are the top rankers in private sector.

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Source IRDA Ranking in July 2012.

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012

TABLE No: 11 Net Worth Movement for the Past Ten Years

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FINDINGS

1. It was found that people are interested to invest their money in mutual fund

which is more than the percentage of the respondents who invest their money in

other investment plans.

2. The foremost factor which people consider while purchasing an insurance policy

is the company image and then they consider other factors.

3. People are satisfied with their investment and insurance policies

4. Everyone focuses on return at the time of investment in comparison of risk or

liquidity.

5. According to the survey I observed that good return can be obtained if the risk is

high.

6. Minimal knowledge about the investment schemes are being given.

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SUGGESTIONS

1. The company should educate people about their rigidity and longevity in

order to gain their confidence and built trust on them.

1. The company emphasize on their promotional tools to increase the

awareness level of people about their products.

1. Company should advertise and promote their emerging distribution

channels through various media, which would helpful in creating awareness

among the people.

1. The company should try to provide good return to the investors for creating

good level of satisfaction.

1. The company should mostly focuses on the quality of financial consultant

instead of the quantity.

1. The company should ensure that insurance policies should not be purchased

for the purpose of tax benefits but it should be purchased for future security,investment and return.

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However, the size of the existing insurance market is very large; thus, it shows

bright future of insurance industry. On the other hand, the primary success of

insurance sector depends upon to build trust and fulfill expectations of the people

that help in the growth of the industry.

LIMITATIONS

The sample taken may not be a true representative of the population. Thus, some

of the limitations are:-

As the universe is too large and to take opinion is very difficult.

Exact data is not given on net.

Due to shortage of time, response of countable sites and magzines are taken.

These information is totally correct and appropriate as it's purely made and

based on secondary data.

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CONCLUSION

India is among the most promising emerging insurance markets in the world. The

major drivers include sound economic fundamentals, a rising middle-income class,

an improving regulatory framework and rising risk awareness.

The groundwork for realizing potential was arguably laid in 2000 when India

undertook to open the domestic insurance market to private-sector and foreign

companies. Significantly, foreign players participated in most of these new

companies - despite the restriction of 26% on foreign ownership. Incumbent state-

owned insurance companies have so far managed to hold their own and retain

dominant market positions. Yet, their market share is likely to decline in the near to

medium term. Important steps have thus been already taken, but there are still

major hurdles to overcome if the market is to realize its full potential. To begin

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with, India needs to further liberalize investment regulations on insurers to strike a

proper balance between insurance solvency and investment flexibility. With the

current proposal in the parliament to raise the foreign investment cap to 49%, the

future has potential. Furthermore, both the life and non-life insurance sectors

would benefit from less invasive regulations.

In the life sector, insurers will need to increase efforts to design new products that

are suitable for the market and make use of innovative distribution channels to

reach a broader range of the population. There is huge untapped potential, for

example, in the largely undeveloped private pension market and the rural sector.

Private insurers will have a key role to play in serving the large number of informalsector workers. The same is true for the health insurance business. In addition, the

rapid growth of insurance business will put increasing pressure on insurers' capital

level. The current equity holding ceilings, however, could limit the ability of new

companies to rapidly inject capital to match business growth.

A key challenge for India's non-life insurance sector will be to reform the existing

tariff structure. From a pricing perspective, the Indian non-life segment is stillheavily regulated. Some 75% of premiums are generated under the tariff system,

which means that they are often below market clearing levels. Reinsurance in India

is mainly provided

by the General Insurance Corporation of India (GIC), which receives 20%

compulsory cessions from other non-life insurers.

As far as reinsurance is concerned, policymakers have to recognize that insuranceand reinsurance cannot be treated in the same manner. Due to the unique nature of

reinsurance, it is necessary to de-link the sector from regulations governing direct

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insurance companies. To allow branching of foreign reinsurers, for example, would

make the market more attractive for international players and secure cover for

natural catastrophe risks which, today, are mainly uninsured.

Finally, the largely underserved rural sector holds great promise for both life and

non-life insurers. To unleash this potential, insurance companies will need to show

long-term commitment to the sector, design products that are suitable for the rural

population and utilize appropriate distribution mechanisms.

WEAKNESS:

Lack of trustworthiness of customers on private companies.

Lack of good training programme.

Technical knowledge of financial consultant and development officers are

inadequate, thus, dont provide sufficient information to the customers.

The company mostly focuses on to increase the quantity of FC instead of quality.

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THREAT:

1. Lack of awareness level of various life insurance plans was quite limited even

amongst the policyholders, especially in rural areas.

2. The competitors of the company are of aggressive nature but Insurance

companies is of conservative nature so if the competitors of the company

continue doing aggressive nature in selling the Policies will loose their target

customers.

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BIBLIOGRAPHY

Books:

1. Marketing Management- Philip Kotler

1. Marketing Research- C.R. Kothari

Magazines and Journals:

1.Business Standard

1. The Economic Times

1. Outlook money

Web Site:

www.google.com

www.hdfcinsurance.com

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www.iloveindia.com

www.iciciprudential.com

Documents

report on private Insurance Industry