Awareness of Insurance in India

AWARENESS OF INSURANCE IN INDIA
1. THE INSURANCE INDUSTRY IN INDIA
AN OVERVIEW
With the largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India. Its a business growing at the rate of 15-
20 per cent annually and presently is of the order of Rs 1560.41 billion (for the
financial year 2006 2007). Together with banking services, it adds about 7% to
the countrys Gross Domestic Product (GDP). The gross premium collection is
nearly 2% of GDP and funds available with LIC for investments are 8% of the
GDP.
Even so nearly 65% of the Indian population is without life insurance cover while
health insurance and non-life insurance continues to be below international
standards. A large part of our population is also subject to weak social security and
pension systems with hardly any old age income security
A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and
strengthens the risk taking ability of individuals. It is estimated that over the next
ten years India would require investments of the order of one trillion US dollars.
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2. HISTORICAL PERSPECTIVE
The history of life insurance in India dates back to 1818 when it was conceived as
a means to provide for English Widows. Interestingly in those days a higher
premium was charged for Indian lives than the non - Indian lives, as Indian lives
were considered more risky to cover. The Bombay Mutual Life Insurance Society
started its business in 1870. It was the first company to charge the same premium
for both Indian and non-Indian lives.
The Oriental Assurance Company was established in 1880. The General insurance
business in India, on the other hand, can trace its roots to Triton Insurance
Company Limited, the first general insurance company established in the year
1850 in Calcutta by the British. Till the end of the nineteenth century insurance
business was almost entirely in the hands of overseas companies.
Insurance regulation formally began in India with the passing of the Life Insurance
Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during
the 1920's and 1930's sullied insurance business in India. By 1938 there were 176
insurance companies.
The first comprehensive legislation was introduced with the Insurance Act of 1938
that provided strict State Control over the insurance business. The insurance
business grew at a faster pace after independence. Indian companies strengthened
their hold on this business but despite the growth that was witnessed, insurance
remained an urban phenomenon.
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The Government of India in 1956, brought together over 240 private life insurers
and provident societies under one nationalized monopoly corporation and Life
Insurance Corporation (LIC) was born. Nationalization was justified on the
grounds that it would create the much needed funds for rapid industrialization. This
was in conformity with the Government's chosen path of State led planning and
development.
The non-life insurance business continued to thrive with the private sector till
1972. Their operations were restricted to organized trade and industry in large
cities. The general insurance industry was nationalized in 1972. With this, nearly
107 insurers were amalgamated and grouped into four companies- National
Insurance Company, New India Assurance Company, Oriental Insurance Company
and United India Insurance Company. These were subsidiaries of the General
Insurance Company (GIC).
3. KEY MILESTONES
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1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers along with provident societies were taken
over by the central government and nationalized. LIC was formed by an Act of
Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the
Government of India
4. INDUSTRY REFORMS
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Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory
body in April 2000 has fastidiously stuck to its schedule of framing regulations and
registering the private sector insurance companies. Since being set up as an
independent statutory body the IRDA has put in a framework of globally
compatible regulations.
The other decision taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of
the IRDA online service for issue and renewal of licenses to agents. The approval
of institutions for imparting training to agents has also ensured that the insurance
companies would have a trained workforce of insurance agents in place to sell their
products.
5. PRESENT SCENARIO - LIFE INSURANCE

INDUSTRY IN INDIA
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The life insurance industry in India grew by an impressive 47.38%, with premium
income at Rs. 1560.41 billion during the fiscal year 2006-2007. Though the total
volume of LIC's business increased in the last fiscal year (2006-2007) compared to
the previous one, its market share came down from 85.75% to 81.91%.
The 17 private insurers increased their market share from about 15% to about 19%
in a year's time. The figures for the first two months of the fiscal year 2007-08 also
speak of the growing share of the private insurers. The share of LIC for this period
has further come down to 75 percent, while the private players have grabbed over
24 percent.
With the opening up of the insurance industry in India many foreign players have
entered the market. The restriction on these companies is that they are not allowed
to have more than a 26% stake in a companys ownership.
Since the opening up of the insurance sector in 1999, foreign investments of Rs.
8.7 billion have poured into the Indian market and 19 private life insurance
companies have been granted licenses.
Innovative products, smart marketing, and aggressive distribution have enabled

fledgling private insurance companies to sign up Indian customers faster than
anyone expected. Indians, who had always seen life insurance as a tax saving
device, are now suddenly turning to the private sector and snapping up the new
innovative products on offer. Some of these products include investment plans with
insurance and good returns (unit linked plans), multi purpose insurance plans,
pension plans, child plans and money back plans. (www.wikipedia.com)
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6. INSURANCE INDUSTRY CLASSIFICATION
INSURANCE
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LIFE INSURANCE GENERAL INSURANCE
Fire Insurance Marine Insurance Mediclaim Motor Vehicle
Life insurance
Life insurance is a contract between the policy owner and the insurer, where the
insurer agrees to pay a designated beneficiary a sum of money upon the occurrence
of the insured individual's or individuals' death or other event, such as terminal
illness or critical illness. In return, the policy owner agrees to pay a stipulated
amount (at regular intervals or in lump sums). There may be designs in some
countries where bills and death expenses plus catering for after funeral expenses
should be included in Policy Premium. In the United States, the predominant form
simply specifies a lump sum to be paid on the insured's demise.
The value for the policyholder is derived, not from an actual claim event, rather it
is the value derived from the 'peace of mind' experienced by the policyholder, due
to the negating of adverse financial consequences caused by the death of the Life
Assured.
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Life policies are legal contracts and the terms of the contract describe the
limitations of the insured events. Specific exclusions are often written into the
contract to limit the liability of the insurer; for example claims relating to suicide,
fraud, war, riot and civil commotion.
Fire Insurance
Fire Insurance is one of the oldest forms of insurance and goes as far back as
Marine insurance. Its origins are in the the age-old fear of fire and human failing to
control fire. In the early development of industrial society fire was the main source
of energy. No industrial activity or commerce was possible without fire and the
need to insure the risk of uncontrolled fire became the integral part of society.
Fire insurance is designed to provide for financial loss to property due to fire and
few other related hazards. Fire insurance is governed by Tariff under the Tariff
Advisory Committee (TAC).
Marine Insurance
Marine insurance has been defined as a contract between insurers and insured
whereby the insurer undertakes to indemnify the insured in a manner and to the
interest thereby agreed, against marine losses incident to marine adventure. Section
2(13) A of Insurance Act 1938 defines it as follows:
Marine insurance business means the business of effecting contracts of insurance

upon vessels of any description, including cargoes freights and other interests
which may be legally insured in or in relation to such vessels, cargoes, freights,
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goods, wares, merchandise and property of whatever description insured for any
transit by land or water or both, and whether or not including warehouses risks or
similar risks in addition or as incidental to such transit and includes any other risks
customarily included among the risks insured in marine policies
Health Insurance
Health Insurance mainly covers two types of benefits: one is related to the
reimbursement of medical expenses related to specific diseases and the other is
related to the hospitalization. Globally, the health covers operate in two ways
cashless and cash reimbursable ones.
The health insurance has changed the way medicine is dispensed and sold in the
most parts of the world. In India, its impact has yet to be felt. However, the
introduction of the now famous Mediclaim policy made a huge difference to an
ordinary citizens usage of insurance for medical cover purpose.
Motor Insurance
Motor Insurance is one of the largest non-life insurance business in the world.
This is because it is statutorily mandated in most parts of world. All motor
vehicles are required to be registered with road transport authorities and insured
for third party liability. The basic premise is that motor vehicles could either cause
injury or be a subject to damage and injury and thus require insurance.
The Motor Vehicle Act of 1939 introduces compulsory insurance to take care of
those who may get injured in an accident. The insurance of damage to vehicle is
not mandatory
Insurance provides:
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Protection to investor.
Accumulation of savings.
Channeling these savings into sectors needing huge long term investment.
Functions of insurance:
Provide protection: The primary function of insurance is to provide

protection against future risk, accidents and uncertainty. Insurance cannot
check the happening of the risk, but can certainly provide for the losses of
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risk. Insurance is actually a protection against economic loss, by sharing the

risk with others.
Collective bearing of risk: Insurance is an instrument to share the

financial loss of few among many others. Insurance is a mean by which few
losses are shared among larger number of people. All the insured contribute
the premiums towards a fund and out of which the persons exposed to a
particular risk is paid.
Assessment of risk: Insurance determines the probable volume of risk

by evaluating various factors that give rise to risk. Risk is the basis for
determining the premium rate also.
Provide certainty: Insurance is a device, which helps to change from

uncertainty to certainty. Insurance is device whereby the uncertain risks may
be made more certain.
Small capital to cover larger risk: Insurance relieves the businessmen

from security investments, by paying small amount of premium against
larger risks and uncertainty.
Contributes towards the development of industrie s: Insurance

provides development opportunity to those larger industries having more
risks in their setting up. Even the financial institutions may be prepared to
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give credit to sick industrial units which have insured their assets including
plant and machinery.
Means of savings and investment: Insurance serves as savings and

investment, insurance is a compulsory way of savings and it restricts the
unnecessary expenses by the insured's For the purpose of availing income-
tax exemptions also, people invest in insurance.
Source of earning foreign exchange: Insurance is an international

business. The country can earn foreign exchange by way of issue of marine
insurance policies and various other ways.
Risk free trade: Insurance promotes exports insurance, which makes the
foreign trade risk free with the help of different types of policies under
marine insurance cover.
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7. CONSUMER AWARENESS
Consumer awareness is the mainspring of demand creation which runs the wheels
of industry any industry for that matter. To this demand curve, suppliers and
service providers respond, by making available to consumers what they want,
meeting their needs and expectations. This is the way two usages customer needs
and customer satisfaction emerged. And these later travelled to domains of
customer delight and customer ecstasy. Consumer awareness, thus, becomes the
genesis for business entities. For life insurers to initiate, expand, grow and sustain
by responding to larger and larger volumes of demand emerging with greater
awareness, and setting in place supply chain management. For life insurers to
penetrate significantly and forge ahead in the emerging market, enhancing
consumer awareness becomes the prime focus of all activities. As also strength and
competencies to compete for future
How they go about

Life insurers, both in public sector and private sector, should appreciate this
moment of truth so to say and galvanize their energies and resources intelligently
to bring about greater consumer awareness as a basic facilitator and an important
constituent of business strategy. This will create synergy all across the
organization. It should be appreciated that Consumer awareness provides a new
frame of reference for value creation as also an opportunity for innovation. It is
time to think out of In box and adopt novel strategies and measures to foster
awareness. To mention a few:
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launch awareness movement through various convenient people-oriented

programs through media, corporate publicity, rural camps and popular
communication channels including Radio, TV, Publicity Vans;
awareness of products and services though visuals that trigger curiosity and
manifest in terms of desire and later sale-purchase transactions;
beyond these stages, to take up awareness of other aspects such as product,
price, quality, service , convenience, status, pride, joy and ease;
campaigns to educate rural and semi urban masses on the need for security
that protects their livelihood, security for produce and belongings and create
feel-good feelings;
Engage NGOs with proven credentials and rural intermediaries.
In summary, as life insurers (and similarly non-life insurers) get into such massive
efforts to reach out to all and sundry, a new phenomenon will emerge to their
delight viz., opening up promising avenues for creation of new markets the
basic fundamental and prerequisite for sustainable growth. Market dynamics will
rule and unfold a stage through a process of evolution new value creation the
sum total of all innovations. Thereby a new phenomenon of co-creating unique
value with customers will emerge as so brilliantly in his later path-breaking Title
The Future of Competition: Co-creating Unique Value with Customers. Creating
Consumer Awareness in Life Insurance Let conclude by putting across two well-
known propositions that underline consumer awareness: customer is business,
business is people, people are customers satisfying a customer is everybodys
business This phenomenon creating Consumer awareness
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8. INSURANCE AWARENESS
INSURANCE AWARENESS
(Issued in Public Interest)
Why do you need to put your hard earned money in?
UNIT LINKED INSURANCE PLANS like
LIC ENDOWMENT plus, Money plus, Profit plus, Fortune plus, Bajaj Unit gain,
SBI Unit plus etc?
Term Insurance is the Cheap & Best form of Insurance recommended by Certified
Financial Planners all over the world!
Let Everyone Know about Term Insurance
And Help them to avoid losing their hard earned money in ULIPs!
The Best Term Insurance Plans in India
INSURANCE COMPANY POLICY NAME
IDBI Fortis Termsurance

TATA AIG Raksha
Reliance Life Term Plan
HDFC Life Term Assurance
Bajaj Allianz New Risk Care II
LIC Anmol Jeevan - 1
India First Life Plan
Bharti AXA Secure Confident
Sahara Life Sahara Kavach
INSURANCE IS NOT AN INVESTMENT
SEBI Securities Exchange & Board of India (NISM)
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9. INSURANCE AND ECONOMY
Indian economy is growing in reference to global market. Business of

insurance with its unique features has a special place in Indian economy.
It is a highly specialized technical business and customer is the most concern
people in this business, therefore this business is able to spur the growth of
infrastructure and act as a catalyst in the overall development of Indian
economy.
The high volumes in the insurance business help spread risk wider, allowing
a lowering of the rates of the premium to be charged and in turn, raising
profits. When there is a bigger base, the probabilities become more
predictable, and with system wide risks balanced out, profits improve. This
explains the current scenario of mergers, acquisitions, and globalization of
insurance.
Insurance is a type of savings. Insurance is not only important for tax
benefits, but also for savings and for providing security. It can be serving as
an essential service which a welfare state must make available to its people.
Insurance play a crucial role in the commercial lives of nations and act as the
lubricants of economic activities. Insurance firms help to spread the
potentially financial consequences of risk among the large number of
entities, to mobilize and distribute savings for productive use, facilitate
investment, support and encourage external trade, and protect economic
entities against external risk.
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Insurance and economic growth mutually influences each other. As the economy
grows, the living standards of people increase. As a consequence, the demand for
life insurance increases. As the assets of people and of business enterprises
increase in the growth process, the demand for general insurance also increases. In
fact, as the economy widens the demand for new types of insurance products
emerges. Insurance is no longer confined to product markets; they also cover
service industries. It is equally true that growth itself is facilitated by insurance. A
well-developed insurance sector promotes economic growth by encouraging risk-
taking. Risk is inherent in all economic activities. Without some kind of cover
against risk, some of these activities will not be carried out at all. Also insurance
and more particularly life insurance is a mobilize of long term savings and life
insurance companies are thus able to support infrastructure projects which require
long term funds. There is thus a mutually beneficial interaction between insurance
and economic growth. The low income levels of the vast majority of population
have been one of the factors inhibiting a faster growth of insurance in India. To
some extent this is also compounded by certain attitudes to life. The economy has
moved on to a higher growth path. The average rate of growth of the economy in
the last three years was 8.1 per cent. This strong growth will bring about
significant changes in the insurance industry.
At this point, it is important to note that not all activities can be insured. If
that were possible, it would completely negate entrepreneurship. Professor Frank
Knight in his celebrated book Risk Uncertainty and Profit emphasized that profit
is a consequence of uncertainty. He made a distinction between quantifiable risk
and non-quantifiable risk.
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According to him, it is non-quantifiable risk that leads to profit. He wrote It is a

world of change in which we live, and a world of uncertainty. We live only by
knowing something about the future; while the problems of life or of conduct at
least, arise from the fact that we know so little. This is as true of business as of
other spheres of activity. The real management challenges are uninsurable risks.
In the case of insurable risks, risk is avoided at a cost.
1O. DISTRIBUTION OF INSURANCE

PRODUCTS
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Insurance has to be sold the world over. The Touch point with the ultimate
customer is the distributor or the producer and the role played by them in insurance
markets is critical. It is the distributor who makes the difference in terms of the
quality of advice for choice of product, servicing of policy post sale and settlement
of claims. In the Indian market, with their distinct cultural and social ethics, these
conditions will play a major role in shaping the distribution channels and their
effectiveness. In today's scenario, insurance companies must move from selling
insurance to marketing an essential financial product. The distributors have to
become trusted financial advisors for the clients and trusted business associates for
the insurance Companies.
Different distribution channels in India
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A multi-channel strategy is better suited for the Indian market. Indian insurance
market is a combination of multiple markets. Each of the markets requires a
different approach. Apart from geographical spread the socio-cultural and
economic segmentation of the market is very wide, exhibiting different traits and
needs. Different multi-distribution channels in India are as follows
Internet: E-commerce sales through internet portals

Worksite: Marketing arrangements with entities to sell insurance to their
employees
Direct: Sales through call centres and/or direct mailing
Brokers: Representatives for buyers who deal with either agent or companies
in arranging for coverage
Corporate agents: Non-bank institutions involved in the sale of insurance
products
Banc assurance: Insurance products offered through banks
Tied agents: Insurance companies aligned agency force
In todays scenario, insurance companies must move from selling insurance to

marketing an essential financial product. The distributors have to become trusted
financial advisors for the clients and trusted business associates for the insurance
companies.
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The most prominent channel of insurance distribution are:
Agents: Agents are the primary channel for distribution of insurance. The
public and private sector insurance companies have their branches in almost
all parts of the country and have attracted local people to become their
agents. Today's insurance agent has to know which product will appeal to the
customer, and also know his competitor's products to be an effective
salesman who can sell his company, the product, and himself to the
customer. To the average customer, every new company is the same.
Perceptions about the public sector companies are also cemented in his
mind. So an insurance agent can play an important role to create a good
image of company.
Banks: Banks in India are all pervasive, especially the public sector banks.
Many insurance companies are selling their products through banks.
Companies which are bank owned, they are selling their products through
their parent bank. The public sector banks, with their vast branch networks,
are helpful to insurance companies. This channel of selling insurance is
known as Banc assurance.
INSURANCE COMPANY ASSOCIATE BANKS

ICICI prudential ICICI bank, bank of India,
Citibank, Allahabad bank, Federal
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bank, south Indian bank, Punjab

and Maharashtra cooperative
bank
SBI life State bank of India
Birla sun life Deutsche bank, Citibank, bank of
Rajasthan, Andhra bank
ING Vysya bank Vysya bank
Aviva life insurance ABN amro bank, canara bank
HDFC standard life Union bank, Indian bank
Met life Karnataka bank, j&k bank
Source: - Hindu Business Line, January 08, 2007
Brokers: Now a days different financial institution are selling insurance.

These financial institutions are known as brokers. They are taking some
underwriting charges from the insurance companies to sell their insurance
products.
Corporate agents: Corporate agency is a cross selling type of channel.

Insurance companies tie-up with business houses in other industries to sell
insurance either to their employees or their customers. Insurance industry,
during the past 2 years has witnessed a number of such strategic tie-ups and
alliances. Corporate agents have become a major force to reckon with in
distributing insurance products. Such as- Bajaj Allianz tied up with Maruti
Udyog and Ford for auto insurance and Tata AIG life has tied up with Tata
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tea, khaitans Williamson major and bridge foundation for selling rural
policies.
Internet: In this technological world internet is also a channel of selling
insurance. This can be as direct marketing.
Other Distribution Methods
Alternate distribution channels are needed for the following reasons:

To increase insurance penetration in the country
To differentiate on the basis of customer service; to retain and attract new
customers to expand business
To increase insurance awareness and knowledge among people
To satisfy the needs of more demanding customers
To improve cost efficiency in insurance distribution
Private players are exploring several alternatives to reduce the cost of replicating
the distribution network of public sector insurance companies. While third-party
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distribution in fast-moving consumer goods is a possibility, the complexity of

insurance products, especially given the low awareness levels, would necessitate
direct selling.
One potential channel is marketing through corporate employers, i.e., employers
purchase products on behalf of the employees or at least support the marketing
effort. The concept of worksite marketing, i.e., the sale of voluntary insurance
products to employees at the worksite through payroll deduction has become
common. Worksite marketing, which was once the realm of a few small
companies, selling just a few products, has now stretched to large companies,
offering a variety of worksite products.
11. CHANGING FACE OF INDIAN INSURANCE

INDUSTRY
After the Insurance Regulatory and Development Authority Act have been
passed there has been establishment of many private insurance companies in India.
Previously there was a monopoly business for Life Insurance Corporation of India
(L.I.C.) who was the only life-insurance company for the people till 2000. L.I.C.
still holds 71.4% of the market share in 2006. But after the introduction of private
life insurance companies there is a great competition in Indian market now.
Everyone is trying to capture the fresh market here and penetrate it with aggressive
marketing strategies. Today life-insurance is not only limited up to just life risk
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cover and maturity period bonuses but changed to greater return from the
investments. With the introduction of the unit linked insurance policies these
companies are investing the money in different investment instruments like shares,
bonds, debentures, government and other securities. People are demanding for
higher returns with the life risk cover and private companies are giving 30-40%
average growth per annum. These life-insurance companies have every kind of
policies suiting every need right from financial needs of, marriage, giving birth and
rearing up a child, his education, meeting daily financial needs of life, pension
solutions after retirement. These companies have every aspects and needs of our
life covered along with the death-benefit.
In India only 25% of the population has life

insurance. So Indian life-insurance market is the target market of all the companies
who either want to extend or diversify their business. To tap the Indian market
there has been tie-ups between the major Indian companies with other International
insurance companies to start up their business. The government of India has set up
rules that no foreign insurance company can set up their business individually here
and they have to tie up with an Indian company and this foreign insurance
company can have an investment of only 24% of the total start-up investment.
Indian insurance industry can be featured by:
Low market penetration.
Ever growing middle class component in population.
Growth of customers interest with an increasing demand for better

insurance products.
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Application of information technology for business.
Rebate from government in the form of tax incentives to be insured.
Today, the Indian life insurance industry has a dozen private players,
each of which are making strides in raising awareness levels, introducing
innovative products and increasing the penetration of life insurance in the vastly
underinsured country. Several of private insurers have introduced attractive
products to meet the needs of their target customers and in line with their business
objectives. The success of their effort is that they have captured over 28% of
premium income in five years.
The biggest beneficiary of the competition among life insurers has

been the customer. A wide range of products, customer focused service and
professional advice has become the mainstay of the industry, and the Indian
customers forms the pivot of each companys strategy. Penetration of life
insurance is beginning to cut across socio-economic classes and attract people who
have never purchased insurance before.
Life insurance is also now being regarded as a versatile financial

planning tool. Apart from the traditional term and saving insurance policies,
industry has seen the entry and growth of unit linked products. This provides
market linked returns and is among the most flexible policies available today for
investment. Now products are priced, flexible, and realistic and sustain so people
in better position to understand the risk and benefits of the product and they are
accepting these innovative products.
So it is clear that the face of life insurance in India is changing, but

with the changes come a host of challenges and it is only the credible players with
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a long term vision and a robust business strategy that will survive. Whatever the
developments, the future and the opportunities in this industry will surely be
exciting.
There are 12 private players in Indian life insurance market.
6 bank owned insurers: - HDFC standard life, ICICI prudential, ING Vysya,
MetLife, OM Kotak, SBI life.
6 independent insurers: - Aviva, ANP sanmar, Birla sun life, Bajaj Allianz, Max
New York life, Tata AIG.
Major international insurers are- Prudential and Standard

life from UK, Sun life of Canada, AIG, MetLife and New York life of the US.
Increasing growth since liberalization:
YEAR LIC (in bn rs.) PRIVATE PLAYER

FY03 110 10
FY04 120 20
FY05 130 40
FY06 140 60
FY07 240 160
Possibilities for insurance companies in India:
Further deregulation of the market.

Greater concern for the customers.
Newer products and services.
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Competition and quality consciousness.

Cost effective operations.
Restructuring of the public sector.
Consolidation of domestic insurance markets.
Technology driven shift in product design.
Actual operations and distribution.
Convergence of financial services.
Insurance Market- Present
The insurance sector was opened up for private participation four years ago. For
years now, the private players are active in the liberalized environment. The
insurance market have witnessed dynamic changes which includes presence of a
large number of insurers both life and non-life segment. Most of the private
insurance companies have formed joint venture collaborating well-recognized
foreign players across the globe.
There are now 29 insurance companies operating in the Indian market 14 private
life insurers, nine private non-life insurers and six public sector companies. With
many more joint ventures in the offing, the insurance industry in India today stands
at a crossroads as competition intensifies and companies prepare survival strategies
in a detariffed scenario.
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There is pressure from both within the country and outside on the Government to
increase the Foreign Direct Investment (FDI) limit from the current 26% to 49%,
which would help JV partners to bring in funds for expansion.
There are opportunities in the pensions sector where regulations are being framed.
Less than 10 % of Indians above the age of 60 receive pensions. The IRDA has
issued the first license for a standalone health company in the country as many
more players wait to enter. The health insurance sector has tremendous growth
potential, and as it matures and new players enter, product innovation and
enhancement will increase. The deepening of the health database over time will
also allow players to develop and price products for larger segments of society.
12. CHANGING PERCEPTION OF INDIAN

CUSTOMERS
Indian Insurance consumers are like Indian Voters, they are soft but when time is
right and ripe, they demand and seek necessary changes. De-tariff of many
Insurance Products are the reflection of changing aspirations and growing demand
of Indian consumers.
For historical years, Indian consumers were at receiving end. Insurance Product
was underwritten and was practically forced onto consumers on a Take-it-As-it-
basis. All that got changed with passage of IRDA act in 1999. New insurance
companies have come into existence leading to open competition and hence better
products for customers.
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Indian customers have become very sensitive to Coverage / Premium as well as the
Products (read Risk Solution), that is given to them. There are not ready to accept
any product, no matter even if that is coming from the market leader, should that
product is not serving the purpose. A case in point is ULIP Product / Group Life
and Credit Life in Life Insurance segment and Travel / Family Floater Health and
Liability Insurance in the Non-life segment are new age Avatar. The new products
are constantly being demanded by Indian consumers, which is putting huge
pressures on Insurance companies (Read Risk Under-writers) and Brokers to
respond.
Customers are looking at Insurance for covering Pure Risk now which I have
covered in my next section. Another good reason why we are seeing quick changes
in the buying behavior of Insurance from mere Investment to risk mitigation is the
cost of Replacement of Goods (ROG) or Cost of Services (COS).
Now Indian customers are aware of insurance industry and insurance products
provided by companies. They have become more sensitive. They would not accept
any type of insurance product unless it fulfills their requirements and needs. In
historic days customers looking at insurance products as a life cover which can
provide security against any unacceptable events, but now customers look at
insurance products as an investment as well as life cover. So todays customers
wants good return from the insurance companies. The Indian customers forms the
pivot of each companys strategy.
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13. KEY SUCCESS FACTORS
In order to succeed in any of the business it is very necessary to make and follow
the strategies. Strategies are very important for any of the business. Following are
the general strategies, which are recommending to the insurance sector. One
approach is to focus upon product quality, which will instill confidence in minds of
the customers that they would be offered best product from out of the several
available products. The other approach, is to focus on the customers need, would
involve a heavy investment in developing relationships with policyholders. Under
this approach, one can expect a range of products and services designed to give the
customer what he specially desires.
The third approach is of greater market segmentation under which the population
should be divided into several homogeneous groups and product, and services
would be targeted towards such selected markets. The effort would be to tie
clients to their company- by customized combination of coverage, easy payment
plan, risk management advice, and convenient quick claim handling.
33
Porter Generic Strategies:

One of the expert Michel porters has identified three internally consistent generic
strategies, which can be used singly or in combination: overall cost leadership is
clearly under stable. In a differentiation strategy, a company seeks to be unique in
its industry along some dimensions that are widely valuable by the customer. May
be the lowest cycle time for settling a claim under say, a med claim policy could be
differentiating factor. In a cost focus, a company seeks a cost advantage in its target
segment, while in differentiation focus; a company seeks a differentiation target.
Marginal Different Product:
Another strategy would be for the companies to design products that will make
comparison-shopping difficult. They could offer a wide variety of covers with
marginal differences and varying prices, whose terms and conditions are difficult
to compare for consumers who may not have sufficient experience in purchasing
insurance and who would find it difficult to make a clear choice. If the consumer is
offered a unique policy, he will have no alternative coverage with which can be
compared. Given the combination policy, which can offer protection against a
number of losses, the consumer will find comparison even more difficult.
Designing New Strategies:

The existing insurance companies cannot be satisfied with concentrating on the
consolidation of their existing markets, but have to achieve further growth and
penetration. They must, therefore, concentrating on strengthening existing points of
service, designing new channel of distribution, direct contact with their ultimate
customers, and front line employee empowerment. They also need to refresh their
marketing set up. The new comers, on the other hand give priority to tapping the
34
market, left unexploited by the public sector companies.
Move towards Rural Market:

It is one of the most important suggestions; data says that rural market is still
uncovered by this sector. We believe that the sector should move towards tie rural
market. Insurance penetration can be achieved by tapping the neglected Rural
Markets. There is vast potential for insurance growth in the rural sector. A recent
survey by foundation for research, training and Education in insurance (FORTE)
suggests that insurance can be sold profitably to rural communities in India. The
survey reveals that
There is distinct hierarchy of needs in rural areas.
Rural people find security in groups the saving habit is very strong in rural
areas.
Average saving across the most important socio-economic strata comes to
30-35% of annual income or Rs.13, 500 annually, which is significant.
There is high level of awareness about life insurance and fairly high-level
about 36% already own life insurance.
51% of these who own life insurance would like to buy more.
Amongst the savers, a significant percentage does not save through formal
financial modes or institutions.
Rural buyers of insurance prefer a half yearly mode of premium payment to
coincide with the time of the harvest. Thus there are very much chances for
any of the companies to work over this scenario. So we believe and suggest
all the players to move towards the rural areas.
Motivation of sales force:

35
A life insurance company should constantly be involved in the process of

motivating the sales force in the turbulent times. The following strategies are
recommending;
Building relationship is real perk. One should be sure to build in networking
times for agents during the program-in addition to entertainment and
education.
Web should be frequently used for creating gift ideas.
Hold sales contests in the forth quarter. It is the best times to motivates
agents who wants to qualify for a trip.
Consider a contrast within the contest for- top-tier producers; additional
rewards for additional milestones that are met, such as air and guest room
upgrades.
Use of Internet:
The present scenario is such that the products sold with the help of Internet. The
technological advancement is such that force the companies to take such steps. Still
the full-fledged use of Internet is not done in our country. As suggestion earlier the
Internet based life insurance will help the companies to reduce the transaction cost
and time. At the time it can improve the quality of service to its customers, which
is the mission of the company.
36
Marketing Tips of Advertise of Insurance Agency

which most companies follow and by which customer
are aware about their agency
Block line advertising in industry publications or trade

journals: Many companies like to advertise in the same areas.
Business opportunity advertising: Think of local newspapers such as
the Daily News Analysis (DNA), Times of India, and The HINDU etc. This
is a very effective way to advertise and market agency, since the company
needs to build brand name recognition.
Television Ads: The most obvious and expensive forms of advertising is

the television.
Local Movie Theatres: A local audience and a family type atmosphere

is a great way for marketing insurance business. Many types of insurance
37
come into play here when an individual or the family are out watching the
movie. All these things come into play when parents are out with their kids.
Direct Mail Advertising: There are companies out there that will do
direct mail by which people are aware.
Advertising outdoors: Transit systems, bus benches, neon and

electronic signs are becoming a great way for the agent to advertise. This is
affordable, unlike television ads. And this targets the exact audience as most
insurers provide insurance services to their local area.
Stationary advertising: A very great way of advertising is right through

business stationary and supplies. A nice way of showing good faith is giving
customers a pen of insurance office name and contact information
Website Advertising: A website tells customer about insurance agency

and it a quick and easy reference for customers looking for quotes of any
type of insurance such as, homeowners insurance, auto insurance, life
insurance and many others
Online advertising: Many insurance companies do online advertisement.

As today in 21st centaury it is very important.
38
RSS FEED COMMENTS

o ECONOMY
o MARKETS
Monday, April 21, 2008
Indias insurance sector poised for 200% growth by

2010
By Jo Black
Indian insurance sector is likely to register unprecedented growth of 200% and

attain a size of Rs. 2000 billion ($51.2 billion) by 2009-10, in which a private
39
sector insurance business will achieve a growth rate of 140% as a result of

aggressive marketing technique being adopted by them against 35-40% growth rate
of state owned insurance companies.
The aforesaid findings are made by The Associated Chambers of Commerce and
Industry of India (ASSOCHAM) on `Insurance in Next 2 Years, saying that in the
last couple of years, the insurance sector has grown by CAGR of around 175% and
the trend will emerge still better because of potential factor. Currently, the
insurance sector size is estimated at Rs.500 billion ($12.8 billion).
Releasing the ASSOCHAM findings, its President, Mr. Venugopal N. Dhoot said
that on account of intense marketing strategies adopted by private insurance
players, the market share of state owned insurance companies like GIC, LIC and
others have come down to 70% in last 4-5 years from over 97%.
The private insurance players despite the sector is still regulated has been offering
rate of return (RoR) to its policy holders which is estimated at about 35% as
against 20% of domestic insurance companies. This factor is mainly responsible
for hike in private insurance market share which will grow further which is why
the ASSOCHAM estimates that its growth rate could even exceed 140%.
Secondly, the state owned insurance companies such as LIC and GIC have limited
number of policies to offer to their subscribers while in case of private insurance
companies, their policy numbers are many more and the premium amount as well
as the maturity period is much competitive as against those of government
insurance companies. Interestingly, said Mr. Dhoot that the private sector insurance
players have started exploring the rural markets in which until recently, the state
owned companies had the monopoly.
The Chamber has projected that in rural markets, the share of private insurance
players would increase substantially as these have been able to generate a faith
among their rural consumers.
40
Estimating the potential of the Indian insurance market from the perspective of
macro-economic variables such as the ratio of premium to GDP, ASSOCHAM
reveals that Indias life insurance premium, as a percentage of GDP is 1.8% against
5.2% in the US, 6.5% in the UK or 8% in South Korea.
ASSOCHAM findings further reveal that in the coming years, the corporate
segment, as a whole will not be a big growth area for insurance companies. This is
because penetration is already good and companies receive good services. In both
volumes and profitability therefore, the scope for expansion is modest. The
Chamber has suggested that insurers strategy should be to stimulate demand in
areas that are currently not served at all. Insurance companies mostly focus on
manufacturing sector; however, the services sector is taking a large and growing
share of Indias GDP. This offers immense opportunities for expansion
opportunities.
To understand the prospects for insurance companies in rural India, it is very
important to understand the requirements of Indias 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. More often than not, they are into more than one profession.
The rural market offers tremendous growth opportunities for insurance companies
and insurers should develop viable and cost-effective distribution channels; build
consumer awareness and confidence. The ASSOCHAM found that there are a total
124 million rural households. Nearly 20% of all farmers in rural India own a
Kissan Credit cards. The 25 million credit cards used till date offer a huge data
base and opportunity for insurance companies. An extensive rural agent network
for sale of insurance products could be established. The agent can play a major role
in creating awareness, motivating purchase and rendering insurance services.
41
There should be nothing to stop insurance companies from trying to pursue their
own unique policies and target whatever needs that they want to target in rural
India. ASSOCHAM suggests that insurance needs to be packaged in such a form
that it appears as an acceptable investment to the rural people
National Summit
Indian Insurance: The Way Forward
29 January, 2009 Hotel Le-Meridien, New Delhi
Register Online
Summit Details
The Insurance industry in India has been progressing at a rapid pace since opening
up of the industry in 2000. Indian domestic insurance market would touch around
US$ 60.5 Billion by the year 2010 from existing size of about US$ 10.2 billion.
According to the Insurance Regulatory and Development Authority (IRDA), new
business premium income from April 2006 to February 2007 amounted to INR
579.38 billion (US$13.18 billion), registering an impressive 120% growth over the
same period last year.
The Insurance industry graph is definitely ascending. Distribution accounts for the
largest element in insurers cost and affects profitability. The size of the country
42
combined with problems of connectivity in the rural areas, makes insurance selling
in India a difficult proposition. The distribution capabilities strongly influence
product design in insurance. The distribution channels have a direct impact on the
insurers market image. Emergence of alternative channels such as Bancassurance
and Internet is reshaping the insurance industry. India with a population of more
than a billion people offers unlimited growth potential.
With a view to spreading the awareness of Insurance cover and discussing various
regulatory issues, ASSOCHAM is organizing a National Summit on Indian
Insurance The Way Forward at 10.00 a.m. on 29th January, 2009 at Hotel
Le-Meridien, New Delhi.
Shri P K Bansal, Hon'ble Minister of State for Finance & Parliamentary

Affairs has very kindly agreed to inaugurate the Summit. We have also invited
Shri J Hari Narayan, Chairman, IRDA and Shri Taun Bajaj, Joint Secretary
(B&I) Ministry of Finance, Govt of India to address the participants in the
Inaugural Session.
The Summit would provide an ideal forum for expert discussion, information
sharing and an excellent platform for business development. We expect a large
participation by all stakeholders - institutional investors, fund managers,
consultants, brokers, regulators, custodians, lawyers, banks, financial planners and
retail investors.
43
Insurance
Last Updated: December 2010
The US$ 41-billion Indian life insurance industry is considered the fifth largest life
insurance market, and growing at a rapid pace of 32-34 per cent annually,
according to the Life Insurance Council.
Life insurance companies have witnessed a 70 per cent jump in new premium
collection during the first five months of the financial year. According to data
released by the Insurance Regulatory and Development Authority (IRDA),
insurance companies garnered US$ 11.73 billion in new business premium during
April-August 2010, against US$ 6.90 billion in the corresponding period last year.
State-owned LIC gained the most, with an increase of 88 per cent in new business
premium income. At the same time, private sector insurance recorded a 34 per cent
increase in income from sales of new policies. New business income collected by
ICICI Prudential stood at US$ 576.60 million during April-August. SBI Life
remained in the third position after registering a 40 per cent increase in new sales
44
to US$ 531.87 million from US$ 379.20 million in April-August 2009. HDFC
Standard Life saw a robust 54 per cent increase in new business.
General Insurance
According to data released by IRDA, the general insurance industry recorded 22.76
per cent year-on-year (y-o-y) growth in gross premium underwritten during April
October 2010.
The industry collected gross premium of US$ 5.29 billion during AprilOctober
2010 compared with US$ 4.31 billion in the same period last year.
The public sector players posted 21.09 per cent y-o-y growth in gross premium
during AprilOctober 2010 over the corresponding period last year. At the same
time, private players recorded a 25.19 per cent y-o-y increase in gross premium.
The state-run insurers fared better than their private counterparts, with New India
Insurance collecting the maximum premium of US$ 916.77 million during April-
October 2010, compared to US$ 770.25 million in the same period last year,
growing by 19.04 per cent.
According to the IRDA's Summary Reports of Motor Data of Public and Private
Sector Insurers - 2009-10, nearly 28.4 million policies were issued and a total
premium of US$ 2.31 billion was collected.
Health Insurance
The Indian health insurance market has emerged as a new and lucrative growth
avenue for both the existing players as well as the new entrants. According to a
45
latest research report "Booming Health Insurance in India" by research firm

RNCOS released in April 2010, all emerging trends including the key factors
driving the market growth. Furthermore, the report also identifies what could be
the possible growth areas for expansion and gives a detailed overview of the
competitive landscape. The Indian health insurance market has continued to post
record growth in the last two fiscals (2008-09 and 2009-10).
Moreover, as per the RNCOS estimates, the health insurance premium is expected
to grow at a compound annual growth rate (CAGR) of over 25 per cent for the
period spanning from 2009-10 to 2013-14.
According to a report published by Yes Bank and an industry body in November

2009, the medical insurance sector would account for US$ 3 billion in the next
three years.
Health insurance premium collections were US$ 1.75 billion in 2009-10 compared
with US$ 893.76 million in the previous year, IRDA said in its annual report for
2009-10. It should, however, be noted that figures for 2009-10 include policies
served by third party administrators (TPAs) as well as those directly served by
insurers whereas figures for 2008-09 include policies served by TPAs only.
India Insurance Market: A decade old or dawn of a new era?
46
CONCLUSION
Insurance sector in India is one of the booming sectors of the economy and is
growing at the rate of 15-20 per cent annum. One of the key service industries in
India would be health and education. Insurance sector in India grew at a faster pace
after independence. In 1956, Government of India brought together 245 Indian and
foreign insurers and provident societies under one nationalized monopoly
corporation and formed Life Insurance Corporation (LIC) by an Act of Parliament,
viz. LIC Act, 1956, with a capital contribution of Rs.5 crore. The (non-life)
insurance business/general insurance remained with the private sector till 1972.
There were 107 private companies involved in the business of general operations
and their operations were restricted to organized trade and industry in large cities.
The insurance sector in India has come to a position of very high potential and
competitiveness in the market. Indians, have always seen life insurance as a tax
saving device.
47
BIBILOGRAPHY
WEBSITES REFFERED
www.irdaindia.org
www.licindia.in
www.wikipedia.org
www.answers.com
www.insuranceguru.com
REPORTS/ARTICLES REFFERED
Asia Economy Watch
India Infoline News Service
Birla SunLife Insurance Companys Article
48

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AWARENESS OF INSURANCE IN INDIA

1. THE INSURANCE INDUSTRY IN INDIA

A well-developed and evolved insurance sector is needed for economic

5. PRESENT SCENARIO - LIFE INSURANCE

Innovative products, smart marketing, and aggressive distribution have enabled

6. INSURANCE INDUSTRY CLASSIFICATION

LIFE INSURANCE GENERAL INSURANCE

Fire Insurance Marine Insurance Mediclaim Motor Vehicle

Marine insurance business means the business of effecting contracts of insurance

Provide protection: The primary function of insurance is to provide

risk. Insurance is actually a protection against economic loss, by sharing the

Collective bearing of risk: Insurance is an instrument to share the

Assessment of risk: Insurance determines the probable volume of risk

Provide certainty: Insurance is a device, which helps to change from

Small capital to cover larger risk: Insurance relieves the businessmen

Contributes towards the development of industrie s: Insurance

Means of savings and investment: Insurance serves as savings and

Source of earning foreign exchange: Insurance is an international

How they go about

launch awareness movement through various convenient people-oriented

The Best Term Insurance Plans in India

INSURANCE COMPANY POLICY NAME

IDBI Fortis Termsurance

9. INSURANCE AND ECONOMY

Indian economy is growing in reference to global market. Business of

According to him, it is non-quantifiable risk that leads to profit. He wrote It is a

1O. DISTRIBUTION OF INSURANCE

Different distribution channels in India

Internet: E-commerce sales through internet portals

In todays scenario, insurance companies must move from selling insurance to

The most prominent channel of insurance distribution are:

INSURANCE COMPANY ASSOCIATE BANKS

bank, south Indian bank, Punjab

Source: - Hindu Business Line, January 08, 2007

Brokers: Now a days different financial institution are selling insurance.

Corporate agents: Corporate agency is a cross selling type of channel.

Other Distribution Methods

Alternate distribution channels are needed for the following reasons:

distribution in fast-moving consumer goods is a possibility, the complexity of

11. CHANGING FACE OF INDIAN INSURANCE

In India only 25% of the population has life

Indian insurance industry can be featured by:

Low market penetration.

Ever growing middle class component in population.

Growth of customers interest with an increasing demand for better

Application of information technology for business.

Rebate from government in the form of tax incentives to be insured.

The biggest beneficiary of the competition among life insurers has

Life insurance is also now being regarded as a versatile financial

So it is clear that the face of life insurance in India is changing, but

There are 12 private players in Indian life insurance market.

Major international insurers are- Prudential and Standard

Increasing growth since liberalization:

YEAR LIC (in bn rs.) PRIVATE PLAYER

Possibilities for insurance companies in India:

Further deregulation of the market.

Competition and quality consciousness.

Insurance Market- Present

12. CHANGING PERCEPTION OF INDIAN

13. KEY SUCCESS FACTORS

Porter Generic Strategies:

Designing New Strategies:

market, left unexploited by the public sector companies.

Move towards Rural Market: