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A
MANAGEMENT
RESEARCH PROJECT
ON
INSURANCE INDUSTRY
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Strategic Analysis of Indian Life Insurance Industry
As whole insurance industry is a very large field for research we have chosen
life insurance industry of the booming segment of insurance industry, for research
purpose.
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Strategic Analysis of Indian Life Insurance Industry
Research methodology
We have done exploratory research and for that purpose we had used
secondary data.
We had collected this secondary data from various published materials like
newspapers, magazines, books etc and from Internet web sites. From these various
information and data we had done qualitative and quantitative analysis to find out
impact of various forces, effect of macro environmental factors, major trends and
future of the industry.
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Strategic Analysis of Indian Life Insurance Industry
Insurance at a Glance
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Strategic Analysis of Indian Life Insurance Industry
expected to die during the year, expected amount of death claim to be paid to the
family of four persons would come to Rs. 2, 00,000. The contribution to be paid by
each of the 1,000 persons will come to Rs. 200 per year. Thus, all the 1,000 persons
share loss caused to the 4 unfortunate families. 996 persons who survived till one year
have not lost anything as they have secured peace of mind and a feeling of security for
their family. While insurance cannot prevent accidents or premature death, it can help
protect the family of the decreased against the loss of the death of the main
breadwinner. In return for specified payments, insurance will provide protection
against the incidents of an uncertain event- such as premature death.
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Strategic Analysis of Indian Life Insurance Industry
Enter companies...
The first stock companies to get into the business of insurance were chartered
in England in 1720. The year 1735 saw the birth of the first insurance company in the
American colonies in Charleston, SC. In 1759, the Presbyterian Synod of Philadelphia
sponsored the first life insurance corporation in America for the benefit of ministers
and their dependents. However, it was after 1840 that life insurance really took off in
a big way. The trigger: reducing opposition from religious groups.
In 1835, the infamous New York fire drew people's attention to the need to
provide for sudden and large losses. Two years later, Massachusetts became the first
state to require companies by law to maintain such reserves. The great Chicago fire of
1871 further emphasized how fires can cause huge losses in densely populated
modern cities. The practice of reinsurance, wherein the risks are spread among several
companies, was devised specifically for such situations.
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Strategic Analysis of Indian Life Insurance Industry
Classification of Insurance:
Insurance business can be divided into two broad categories,
i. Life, and
ii. Non-life.
Life insurance is concerned with making provision for a specific event
happening to the individual, such as death where as non life (or general
insurance) is more commonly concerned with the provision for a specific
event, which affects a property, such as fire, flood, theft etc.
PRODUCTS:-
As for latest information get in touch with the current insurers –
website information of insurers is provided at the web page for insurers:
Life Insurance: Popular Products: Endowment Assurance (Participating) and
Money Back (Participating). More than 80% of the life insurance business is
from these products.
Tariff Advisory Committee (TAC) lays down tariff rates for some of
the general insurance products. 2001: life insurers have launched new
products. These include linked-products. For details, please visit the websites
of life insurers.
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Strategic Analysis of Indian Life Insurance Industry
INSURANCE IN INDIA
Introduction:
Insurance in India can be traced back to the Vedas. For instance, yogakshema,
the name of Life Insurance Corporation of India's corporate headquarters, is derived
from the Rig Veda. The term suggests that a form of "community insurance" was
prevalent around 1000 BC and practiced by the Aryans.
Burial societies of the kind found in ancient Rome were formed in the
Buddhist period to help families build houses, protect widows and children. Bombay
Mutual Assurance Society, the first Indian life assurance society, was formed in 1870.
Other companies like Oriental, Bharat and Empire of India were also set up in the
1870-90s. It was during the swadeshi movement in the early 20th century that
insurance witnessed a big boom in India with several more companies being set up.
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Strategic Analysis of Indian Life Insurance Industry
opening up of the insurance sector to private players -- that the sector was finally
opened up to private players in 2001.
The Insurance Regulatory & Development Authority, an autonomous
insurance regulator set up in 2000, has extensive powers to oversee the insurance
business and regulate in a manner that will safeguard the interests of the insured.
The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market again. Tracing
the developments in the Indian insurance sector reveals the 360-degree turn witnessed
over a period of almost two centuries.
The business of life insurance in India in its existing form started in India in
the year 1818 with the establishment of the Oriental Life Insurance Company in
Calcutta. Some of the important milestones in the life insurance business in India are:
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 to by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalized. LIC formed by an Act of Parliament, viz. LIC
Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
The above definition captures the original, basic, and intention of life
insurance: i.e. to provide for one’s family and perhaps others in the event of death,
especially premature death. Originally, policies were to provide for short periods of
time, covering temporary risk situations, such as sea voyages. As life insurance
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Strategic Analysis of Indian Life Insurance Industry
becomes more established, it was realized what a useful tool it was for a number of
situation including:
iii. Investment:
Put simply, the building up of savings while safeguarding it from the ravages of
inflation. Unlike regular saving products, investment products are traditionally lump
sum investments, where the individual makes a one-time payment.
iv. Retirement:
Provision for one’s own later years become increasing necessary, especially in a
changing culture and social environment. One can buy a suitable insurance policy,
which will provide periodical payments in one’s old age. This simple example
illustrates the impact premature death can have on a family, where the main earner
has no life cover.
A simple life insurance policy (term assurance) could have provided Mr. Atol’s
family with a lump sum that could have been invested to provide an income equal to
all or part of his income. We will discuss how to analyze the need for life cover and
the value of life later in the course.
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Strategic Analysis of Indian Life Insurance Industry
such as fixed deposits, the only return would be the amount invested plus any interest
accrued.
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Strategic Analysis of Indian Life Insurance Industry
1. Protection:
Savings through life insurance guaranteed full protection against risk
of the saver. In life insurance the full sum assured is payable with bonus whenever
applicable whereas in other savings schemes, only the amount saved with interest
is payable.
2. Liquidity:
Saving can be made in a relatively “painless” manner because of the
easy installment facility built into the scheme.
3. Tax relief:
Tax relief in Life insurance is available to the insurer for amount paid
by way of premium for life insurance subject to it rates in force.
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Strategic Analysis of Indian Life Insurance Industry
Risks and uncertainties are part of life's great adventure -- accident, illness,
theft, natural disaster - they're all built into the working of the Universe, waiting to
happen.
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Strategic Analysis of Indian Life Insurance Industry
First and foremost, insurance is about risk cover and protection - financial
protection, to be more precise - to help outlast life's unpredictable losses. Designed to
safeguard against losses suffered on account of any unforeseen event, insurance
provides you with that unique sense of security that no other form of investment
provides. By buying life insurance, you buy peace of mind and are prepared to face
any financial.
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Strategic Analysis of Indian Life Insurance Industry
EMERGENCE OF IRDA
The other decisions taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies were the launch of the
IRDA’s 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, which are expected to be introduced by early next year.
Since being set up as an independent statutory body the IRDA has put in a
framework of globally compatible regulations. In the private sector 12 life insurance
and 6 general insurance companies have been registered.
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Strategic Analysis of Indian Life Insurance Industry
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Strategic Analysis of Indian Life Insurance Industry
Regulatory Issues:
The IRDA Bill lies down that the Indian promoter must dilute the stake in the
private insurance firms from 74 per cent to 26 per cent in ten years. The bill stipulates
tough solvency margins -- Rs 500 million for life insurance firms, Rs 500 million or a
sum equivalent to 20 per cent of net premium income for general insurance and Rs 1
billion for reinsurance business.
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Strategic Analysis of Indian Life Insurance Industry
One of the reasons for nationalization of the insurance industry (LIC in 1956
and GIC in 1973) was the mismanagement and malpractice of erstwhile private
players. But if the statements of IRA officials are anything to go by, the new
regulations are expected to be on the right track. N I Rangachary, chairman, IRA, has
already provided the timetable for the changes once the Bill is passed. The IRA has
already indicated that it will have tough norms for new participants.
This is the most compelling reason why private sector (and foreign) companies,
which will spread the insurance habit in the societal and consumer interest, are
urgently required in this vital sector of the economy.
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Strategic Analysis of Indian Life Insurance Industry
The Malhotra committee was set up with the objective of complementing the
reforms initiated in the financial sector.
The reforms were aimed at “creating a more efficient and competitive financial
system suitable for the requirements of the economy keeping in mind the structural
changes currently underway and recognizing that insurance is an important part of the
overall financial system where it was necessary to address the need for similar
reforms…”
In 1994, the committee submitted the report and some of the key
recommendations included:
Structure:
• Government stake in the insurance Companies to be brought down to 50%
• Government should take over the holdings of GIC and its subsidiaries so that
these subsidiaries can act as independent corporations
• All the insurance companies should be given greater freedom to operate
Competition:
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Strategic Analysis of Indian Life Insurance Industry
Regulatory Body:
• The Insurance Act should be changed
• An Insurance Regulatory body should be set up
• Controller of Insurance (Currently a part from the Finance Ministry) should be
made independent
Investments:
• Mandatory Investments of LIC Life Fund in government securities to be
reduced from 75% to 50%
• GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time)
Customer Service:
The committee emphasized that in order to improve the customer services and
increase the coverage of the insurance industry should be opened up to competition.
But at the same time, the committee felt the need to exercise caution as any failure on
the part of new players could run the public confidence in the industry.
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Strategic Analysis of Indian Life Insurance Industry
ECONOMIC LIBERALIZATION
Recent economic liberalization started few years ago have started bringing in
new investments from global giants and the government was hard pressed to facilitate
global integration by lowering trade barriers for the free flow of technology,
intellectual and financial capital. Additionally, reforms are essential if the Indian
economy is to achieve and sustain a growth rate of 7 to 8 per cent per annum.
Reaching a faster growth path also implies attracting foreign direct investment
inflows of $ 10 Billion every year, up from the current level of $ 3 to $ 3.5 Billion.
Thus liberalization of insurance creates an environment for the generation of long-
term contractual funds for infrastructural investment. Report on Infrastructure says
that 85% of funds for infrastructure development have to come from the domestic
industry. It further says that India would need $ 100 Billion over the next five years to
meet its infrastructure needs. Given the rate of savings in India, there is much more
room to grow and one can expect an additional revenue of about $ 10 Billion a year
entering the market to enhance infrastructure. Insurance is definitely going to be one
area that will assist in mobilization of these funds.
Multinationals' interest:
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Strategic Analysis of Indian Life Insurance Industry
many of the UK’s largest life and general insurers derived 40 per cent to 60 per cent
of their total premium from outside their home markets. The figure at Commercial
Union was 76 per cent in that year.
Yet, new entrants find insurance attractive because even a small share of a
large and growing market can be profitable. The Korean insurance market for
example, was only the 30th largest market in the world by premium volume in 1971.
It moved up to 6th largest in 1996. In any case, in India multinational insurers will be
restricted to a minority shareholding in new companies. The new entrants will
therefore be private Indian companies.
The other reason why these large MNCs are interested in India is the
economies of the insurance market. Insurance companies survive on the principle of
spreading of risk. No matter what the size of each player, an insurer cannot afford to
operate in a niche market. Operating in a particular region would expose them to the
economic downtrends in the region and derail their profits.
Insurance companies, being long-term players, also have to avoid sudden dips
in earnings to inspire confidence among investors to invest long-term funds. This can
be achieved by spreading their operations over a wide geographical area. Moreover,
for them, big is not just beautiful, but essential for survival. Which brings us to the
avenues for growth?
According to the Sigma report on global insurance brought out by the world’s
second largest reinsurer Swiss Re - the international market is completely saturated.
In the developed world, the growth in life insurance premium has been a meager
1.5%. As compared to this, LIC despite all its handicaps has been growing at a
healthy clip of around 20%.
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Strategic Analysis of Indian Life Insurance Industry
This might seem a logical strategy from the point of view of new players.
Start-up costs-such as those of setting up a conventional distribution network-are
large and high-end niches offer better returns. However, in the long run 'middle-
market' offers the greatest potential as in terms of it is the second largest market in the
world. This may still be an urban market but goes beyond the affluent segment.
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Strategic Analysis of Indian Life Insurance Industry
GIC has already identified the areas that need to be activated and given a shape
through the four subsidiary companies. Foremost is the area of providing health
insurance services. A change in the GIC Act will enable the corporation to float a
joint venture company for health insurance. Other areas that the GIC is looking at are
savings-linked insurance products and use of alternate distribution channels including
banc assurance. Also in progress is the co-ordination of all foreign operations of the
group.
Even state-owned entities, SBI and UTI have serious plans for insurance sector
as the banks have unsurpassed advantages over any other player. The intermediaries
are also getting more organized with a little nudging from the IRA. The Reinsurance
Consultants Association is planning to convert itself into the Insurance Brokers
Association of India in anticipation of the laws being amended to allow insurance
broking.
Cross-country experience shows that nowhere in the world have the entry of
foreign firms threatened the position of domestic companies. Whether it is Malaysia,
where the insurance sector has been open for more than 50 years and foreign
companies account for about 10 per cent of market penetration or it is Indonesia,
Thailand, China or the Philippines, where the market has been opened more recently,
the total market share of foreign companies is less than 10 per cent except in
Indonesia where it is about 20 per cent. Closer home, we have the experience of the
banking sector where despite the presence of 42 foreign banks, their share in total
banking assets is less than 10 per cent.
Today hardly 20 per cent of the population in India is insured and insurance
premium (life as well as non-life) account for just 2 per cent of GDP as against the G-
7 average of 9.2 per cent. Consequently, the fear that new companies will displace
public companies is misplaced. There is room for more for not only the existing
companies but also for any number of competitors.
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Strategic Analysis of Indian Life Insurance Industry
In China, insurance premium accounted for just over 1 per cent of China's GDP
in 1995 but in the four years since the market has been liberalized (albeit partially),
spending on insurance has grown at a compound annual rate of 33 per cent. It is not
just foreign companies alone that have grown but also the national PICC as well. The
story is no different in S Korea. There, the opening of the sector saw the Big Six
domestic players, who initially controlled the entire market, increase their business
from 7 to 37 trillion won by 1997. Meanwhile foreign companies were not able to
capture more than a miniscule 0.7 per cent of the market.
1. Positive implication:-
It helps transfer of technology in the field of life insurance. New techniques and
methods can be used for assessment of risk, fixation of reasonable premium and
provide new investment opportunities. This will help in expansion and
development of business.
It helps in adopting a flexible price policy on new life insurance policies
developed and introduce now onward. It will make available in all countries of the
world the service of efficient management and financial experts. It can help in
development of knowledge of insurance business. Many educational and training
institution stand fast functioning this lead to availability of professional managers.
It will enlarge the scope of insurance. It will help spread it in rural and small
villages also. The life insurance market will become global. The productivity as
well as the efficiency also increases. The international competition in the field
itself will play an important roll in this direction. Competing ability will increase
due to liberalization. All categories of employees serving in life insurance sector
will get more satisfaction through good opportunity for training, higher opening in
jobs and higher income.
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Strategic Analysis of Indian Life Insurance Industry
The general public will also be benefited from liberalization of life insurance
sector:
They can get better choice of selection of policy and insurer.
When there is large number of insurer, the insurer is able to select such an insurer
whose premium rate is reasonable.
The insurers play more attention to the interest of insured. This way interest of the
insured is well protected.
There will be number of policies based on social security brought out by different
insurers. Such schemes include plan like pension scheme, gratuity scheme,
medical claim etc.
Good employment opportunity in the life insurance sector when a number of new
institutions are established in these fields.
The employee will also benefit from liberalization life insurance sector:
2. Negative implication:-
Cut throat competition liberalization will create acute competition in the life
insurance market, which is not in the interest of the industry, customers or the
country. This type of acute competition may sometime leads to insolvency of life
insurance companies and thereby the policy holders may face serious
consequences. This seems far from truth, as the experience shows that nowhere
the competition has threatened anybody. The experience of banking sector in our
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Strategic Analysis of Indian Life Insurance Industry
own country testifies to this effect that despite presence of 42 foreign banks, the
balance is not distributed. Total investment assets of the foreign banks are about
10 %. But the impact of the competition has increased the size of the market.
End of government monopoly: This liberalization of life insurance sector brings
an end to the government monopoly in life insurance sector and private companies
may exercise their domination.
Dominance of outside companies: foreign companies capture the life insurance
sectors as a whole under their dominance, because they possess more efficient
insurance techniques, knowledge. As such Indian companies cannot survive
before these foreign companies.
Shortage of funds for social cause: It is estimated that at present the LIC and GIC
invest a total of Rs 90,000 crores to the public/ social sector. This amount is
nearly 70-80 % of their total fund available. Although the government is making
rules for the private sector companies to invest certain percentages of their
premium income in the social sector, the availability of such huge fund is
doubtful.
Policies of heavy amount – the insurance companies issues policies of heavy
amount when at present a policy is available for an insured sum even below Rs.
1,00,007/- where the sum assured against a policy becomes very heavy,
economically backward people cannot benefit of insurance.
More attention towards profitable policies:- the private sector life insurance
companies develop and introduce only those policies that involve the minimum
risk burden and more profitable of them. They overlook the interest of the
common people. They want taken any special attention to insured the lives of
woman, physically handicapped etc. which involve more risk.
Neglect the rural lives:- the people who are against the concept of liberalization of
insurance sector believe that the domestic as well as foreign private companies
neglect the rural areas, by giving more attention in getting people insured from
urban areas. This because of the average cost incurred on policies is less in urban
areas.
Problem of exercising control over insurance companies: it becomes very
difficult to control Indian and foreign private insurance companies by the
government.
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Strategic Analysis of Indian Life Insurance Industry
But this argument is proved to be incorrect in view of the fact that the government
has already announced its decision in parliament that it won’t reinvest share of LIC.
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Strategic Analysis of Indian Life Insurance Industry
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Strategic Analysis of Indian Life Insurance Industry
GLOBAL SCENARIO
Life insurance not plays an important role in national economy but also in
international economy. Marine cargo insurance provides risk coverage for shippers
and the banks, which finance international trades. This role becomes all the more
important in the context of an active government policy to encourage exports. Indian
life insurer operates in more than 30 countries through agencies, branches, associates
companies. These operations earn foreign exchange.
By region’s North America and western Europe are growing moderately while
oceanic, Latin America, eastern Europe and Africa display growth above lone –term
trends to a global context globalization of life insurance helps companies practices
underwriting discipline in one regions globalization of the insurance industry received
a big boost.
Countries Insurance Penetration Insurance Density (Per Capita
(premium as a% of GDP) Premiums in USD)
United Kingdom 12.71 3028.5
Japan 8.70 3165.1
United States 4.48 1611.4
South Africa 14.04 392.9
Australia 6.04 1193.5
South Korea 9.89 935.6
India 1.77 7.6
China 1.12 9.5
Malaysia 2.13 86.4
Indonesia 0.54 4.0
Brazil 0.36 12.9
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Strategic Analysis of Indian Life Insurance Industry
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Strategic Analysis of Indian Life Insurance Industry
Since being set up as an independent statutory body the IRDA has put in a
framework of globally compatible regulations. In the private sector 12 life insurance
and 6 general insurance companies have been registered than after remaining
companies are registered.
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Strategic Analysis of Indian Life Insurance Industry
VISION
MISSION
"Explore and enhance the quality of life of people through financial security by
providing products and services of aspired attributes with competitive returns, and by
rendering resources for economic development."
Allianz Bajaj life insurance company ltd with a capital base of RS.1.5 billions
is a joint venture between ALLIANZ AG and BAJAJ AUTO LTD. The company was
incorporated on MARCH 12, 2001 and received the IRDA certificate of registration
on august 3, 2001 to conduct life insurance business in India.
Bajaj auto ltd. The flagship company of Bajaj group is one of the largest two
and three- wheeler manufactures, and forth-largest manufacturer of two- wheelers in
the world, with annual turnover of RS. 42.16 billion. The company enjoys a very
strong brand image in this industry.
Founded in 1890, the Allianz Group is one of the world’s leading insurance
companies with over a 100 years’ experience in insurance and related services. With a
presence in over 70 countries, it is also the largest insurer in Europe. The key business
areas of Allianz group include General Insurance (property, engineering, marine,
motor, casualty and miscellaneous), reinsurance, risk management, life and health
insurance, asset management and pension funds management. Rated ‘AAA’ by
Standard & Poor, it has assets over 670 billion DM (Rs 17,160 billion) under its
management.
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Strategic Analysis of Indian Life Insurance Industry
The Aviva Life Insurance Company, a joint venture between Dabur India and
CGU, a wholly owned subsidiary of Aviva Plc., is capitalized at Rs 1 billion.
Aviva plc. is the largest life and general insurance group of the UK, and the
world’s seventh largest insurer with world-wide premium income and retail
investment sales of ₤28 billion and more than ₤200 billion in assets under
management. Aviva plc. is the holding company of the Aviva group of companies
which is involved in the life assurance business, log-term savings, all classes of
general insurance business and fund management.
The Birla Sun Life Insurance Company, is a 74.26 joint venture between the
Aditya Birla Group and Sun Life Financial Services of Canada, and has an equity
capital of Rs 1.5 billion.
The Aditya Birla Group is one of India’s largest business houses, with a
turnover of over $4.75 billion and an asset base of $3.8 billion. The Group is a well-
diversified conglomerate spanning 40 companies spread across 17 countries.
Sun Life Assurance Co., of Canada, established in 1871, has a strong presence
in Canada, the USA, the Philippines, Hong Kong, and the UK. Its major lines of
business are life insurance, annuities and mutual fund and investment services. In
Canada, the company is especially strong in the corporate life and health insurance
and savings markets.
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Strategic Analysis of Indian Life Insurance Industry
HDFC Standard Life Insurance Company Ltd. was incorporated o August 14,
2000. HDFC is the majority stakeholder with an 81.4 per cent stake. Standard Life
holds a stake of 18.6 per cent.
Incorporated in 1977 with a share capital of Rs 100 million, HDFC has since
emerged as the largest residential mortgage finance institution in the country, raising
its capital to Rs 1.19 billion and an asset base of Rs 150 billion. It operates through 75
locations throughout India, and has an international office in Dubai, UAE, with
service associates in Kuwait, Oman and Qatar.
Standard Life, which has been in the life insurance business for the past 175
years, is Europe’s largest mutual life assurance company. With an asset base of Rs
6000 billion, it has the distinction of being accorded the ‘AAA’ rating by Standard &
Poor for the past six years.
The World Bank, the Government of India and the Indian Industry, to promote
industrial development in India by providing project and corporate finance to the
Indian industry, established ICICI LTD., in 1944. Since its inception, it has grown
from a development band to a financial conglomerate and has become one of the
largest public financial conglomerates and has become one of the largest public
financial institutions in India, financing all the major sectors of the economy.
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Strategic Analysis of Indian Life Insurance Industry
Founded in 1848, Prudential plc. has grown to become one of the largest
providers of a wide range of savings products for the individual, including life
insurance, pensions, annuities, unit trusts and personal banking. It has a presence in
over 15 countries, and manages assets of over US $259 billion (approximately Rs 11,
3956 billion) as of December 31, 1999. in fact, Prudential’s first overseas operation
was in India, way back in 1923, to establish life and general insurance branch
agencies.
As per the joint venture agreement, Vysya Bank holds 49 per cent, ING 26 per
cent, and the GMR Group, which has wide ranging interests in fields which as power
generation, infrastructure, manufacturing, software and banking, holds 25 per cent.
This joint venture is expected to be the first Banc assurance venture in the country.
The Vysya Bank, which has equity participation from Bank Brussels
Lamberts, is one of the largest private banks in India with 480 retail outlets, the bank,
given its significant branch penetration, has a high degree of retail focus.
The ING Group, with an asset base of over Rs 284.2 billion is a global
financial institution of Dutch origin, which is active in the field of banking, insurance
and asset management in over 60 countries. ING Insurance is the world’s second
largest life insurance company as per the latest Fortune rankings. It is the third largest
financial services company in Europe, and the tenth largest financial services
company in the world.
Max New York Life is a partnership between Max India Limited, one of
India’s leading multi-business corporations and New York Life. The paid-up capital
of the joint venture is Rs 2.5 billion.
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Strategic Analysis of Indian Life Insurance Industry
Max India has significant presence in the most vital and fast growing sectors
of the Indian economy, viz., telecommunication services, Electronic components
distribution, specialty plastic films and bulk pharmaceuticals. It is also active in the
emerging knowledge-based areas of health care, financial services and IT.
In 1998, New York Life International Inc., had total revenues amounting to
almost US $20 billion, and was rated the number one provider of new life insurance
policies in the USA. In the same year, New York Life was also the leader in insurance
sales to the growing Indian community in the USA.
The Met Life India Insurance Company, joint venture between the US
insurance major Metropolitan Life Insurance Co., the Jammu and Kashmir Bank Ltd.,
the Pallonji Group and some high net worth individuals, was incorporated in India on
April 11, 2001. The company started its operation with an initial capital of Rs 1.25
billion.
The joint venture OM KOTAK MAHINDRA life insurance started off with an
initial capital of Rs. 1.5 billions, with a 74:26 stake between Kotak Mahindra life
insurance and old mutual plc.
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Strategic Analysis of Indian Life Insurance Industry
Kotak Mahindra finance ltd is one of the India’s premier financial groups,
with a range of highly specialized products and services, and a very large client base
of Indian and international firms. Starting as are non-product company in the mid
eighties, it has evolved into a full service financial conglomerate, covering auto and
consumer finance, assets management, investment banking, securities trading and
equity research. It operates across 30 centers in India and in Dubai, London, New
York and Mauritius.
This joint venture has 74% capital participation from the state bank of India
(SBI), with Cardiff contributing 26% in the paid capital of Rs. 2.5 billion.
The SBI is the largest bank in the country with more than 9000 branches. It
has seven associate banks and together they have 30% of the Indian market share. It
net worth as on March 2000 stood at Rs. 121.46 billion, with a deposit base of Rs.
196.803 billion. The insurance venture, SBI life, is a step aimed at being a universal
bank as the SBI already as subsidiary for housing finance, merchant banking, mutual
fund and primary dealership in government papers and factoring businesses.
BNP paribus, which is one among the three largest banks in Europe, is the
holding company of Cardiff, its insurance arm. It was set up in 1973 and specialized
in long term savings, protection products and creditors insurance. In 1999, its
premium income stood at US $ 4 billion, with assets worth over US $ 23 billion under
its management. Based in France, it has the expertise for selling insurance products
through bank and as operation in over 20 countries.
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Strategic Analysis of Indian Life Insurance Industry
Tata AIG life insurance company ltd, is capitalized at Rs. 1.85 billion of which
74% has been brought in by Tata sons and 26% by the American partner.
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Strategic Analysis of Indian Life Insurance Industry
CURRENT SCENARIO
LIC
40
Strategic Analysis of Indian Life Insurance Industry
41
Strategic Analysis of Indian Life Insurance Industry
12. Met Life 348.36 1522.8 0.21 3164 1048 0.14 5618 84501 3.27
4 9
13. LIC 127451 58447 82.4 153424 7023 91.6 60959 1799441 69.59
.85 1.09 0 1 186 3 8
Total 158022 71014 100 168004 7665 100 79170 2585751 100
.55 3.06 2 083 6
100000
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42
Strategic Analysis of Indian Life Insurance Industry
The life insurance industry underwrote new business premium of Rs.1, 86,605.46 lakh
during the month of July 2004, taking the cumulative premium underwritten during
the current year 2004-05 to Rs.5, 52,515.95 lakh. LIC underwrote premium of
Rs.4, 57,019.23 lakh i.e., a market share of 82.72 per cent, followed by ICICI
Prudential and Birla Sun Life with premium underwritten (market share) of Rs.31,
173.97 lakh (5.64 per cent) and Rs.13, 591.67 lakh (2.46 per cent) respectively.
While LIC’s market share declined from 90.12 per cent for the period ended
July 2003, all new life insurers increased their market share, over the corresponding
previous year numbers.
The accompanying table does not include the numbers for Varishtha Pension
Bima Yojana. Premium underwritten by LIC under this pension scheme during the
period April - July 2004 was Rs.1, 07,264.83 lakh towards 54,740 policies.
43
Strategic Analysis of Indian Life Insurance Industry
44
Strategic Analysis of Indian Life Insurance Industry
45
Strategic Analysis of Indian Life Insurance Industry
46
Strategic Analysis of Indian Life Insurance Industry
Finally, some potential Indian entrants into insurance hope to ride their
existing distribution networks and customer bases. For example, financial
organizations like ICICI, HDFC or Kotak Mahindra intend to tap the thousands of
customers who already buy their deposits, consumer loans or housing finance.
Other hopeful entrants anticipate specific alliances such as with hospitals to
provide health cover.
Summery:
Over the past three years, around 40 companies have expressed interest in
entering the sector and many foreign and Indian companies have arranged
anticipatory alliances. The threat of new players taking over the market has been
overplayed. As is witnessed in other countries where liberalization took place in
recent years we can safely conclude that nationalized players will continue to hold
strong market share positions, but there will be enough business for new entrants
to be profitable.
Opening up the sector will certainly mean new products, better packaging and
improved customer service. Both new and existing players will have to explore
new distribution and marketing channels. Potential buyers for most of this
insurance lie in the middle class. New insurers must segment the market carefully
to arrive at appropriate products and pricing. Recognizing the potential, in the past
three years, the nationalized insurers have already begun to target niches like
pensions, women or children.
47
Strategic Analysis of Indian Life Insurance Industry
MARKETING PERSPECTIVE
It has been over two years since the Indian insurance market has opened up,
and the new entrants in market have set up shop in every major city. The public sector
companies have already established themselves in the market. But there are multiple
challenges faced by these insurance companies, of which two are critical:
While the companies have been quite successful in dealing with the first of these
challenges using and technical know how of the partners, most are still grappling with
the right channel mix for the reaching potential customers.
This paper discuss the distribution channel from the prospective of the socio-
cultural
Ethos of the market and channels fit into it, along with where the various
companies face challenges and bottlenecks. Whenever any debate arises about the
intermediaries and distribution channels, the discussion veers to: technology and its
impact on distribution. However, die authors believes that the basic existential
problems being faced by the channels in this market need to be looked in to first, and
then the queans of enablers-technology, tools, training, learning to be taken up.
Insurance has to be sold the world ever, and the Asian market is to no exception.
The Touch point with the ultimate customer is the distributors or the producers, and
the role played by them in insurance market is critical.
48
Strategic Analysis of Indian Life Insurance Industry
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 Asian
markets, with their distinct cultural and social ethos, these conditions will play a
major role in shaping the distribution channels and their effectiveness.
This calls for leveraging multiple distribution channels in a cost effective and
customer friendly manner. For example, in the developed markets, producers form the
major channels of distribution, while the web as a complementary channel is catching
up slowly. According to a Forrester survey, 88% of the life insurance executives
responding identified agents as the primary channel of distribution.
Traditionally, tied agents have been the primary channels for insurance
distribution in the Indian market; the public sector insurance companies have their
49
Strategic Analysis of Indian Life Insurance Industry
branches in almost all parts of the country and have attracted local people to become
their agents. The agents are from various segments in society and collectively cover
the entire spectrum of society. A person who has lived in the locality for many years
sells the products of the insurance company with a local branch nearby. This ensures
the last mile touch point being closer to the customer. Of course, the profile of the
people who acted as agents suggests they may not have been sufficiently
knowledgeable about the different products offered, and may not have sold the best
possible product to the client. Nonetheless, the customer trusted the agent and
company. This arrangement worked adequately in the absence of completion.
In today’s scenario agents continue as the prime channel for insurance distribution
in India, as is the case in most market, supported by call centers to a small extent.
almost all the new players follow this model primarily because the regulation for
other channels are yet to be put in place.
However, there is great excitement in the industry over the impending broker’s
regulations, and companies are planning possible channels in their enthusiasm to
increase volumes. The beliefs that all these channels will grow and seamlessly
integrate to bring in business seem a fallacy.
What have emerged are a much more difficult and evolving market scene with
exiting players, more new players coming in, and global practices and ideas being
tested. But none of this has changed the fundamental character of the market, which
we believe will take more time than expected.
Summary:
Launched on the other hand they are trying the corporate models of
intermediaries. In addition, the traditional models in the markets.
50
Strategic Analysis of Indian Life Insurance Industry
There is no right and wrong in all this. The success of marketing insurance
depends on understanding the social and cultural needs of the target population, and
matching the market segment with the suitable intermediary segment.
All intermediaries cannot sell all lines of business profitability in all market. There
should be clear demarcation in the marketing strategies of the company from this
perspective. Client should also receive price differentials for using different channels.
This not a new concept, as the public sector property $ casually companies are giving
discounts in lieu of agency commission. The channel composition should not be
homogeneous but should reflect the larger society. For example:
Agents from different economic, social strata, and different age and gender.
Brokers stretching from corporate to NGO ARE to milk co-operative.
These intermediaries need to be empowered with the right learning, training and
development tools and technology enablers. Coupled with the right product mix, this
will help the insurers to survive and flourish in this competitive market.
The LIFE insurance industry has witnessed limited competition till now. But
with the entry of private sector insurance companies the scene will change and
competition among various insurance companies will become the name of the game.
Insurance companies have to face and deal with competition not only in terms of
investments performance but also customer service.
51
Strategic Analysis of Indian Life Insurance Industry
Hence an aggressive competitive strategy is the need of the day for the
insurance companies in order to gain a competitive niche, survive and proliferate in
the insurance industry. To be successful in one’s area of business in the presence of
competitive forces the following model may adopt to fulfill the purpose.
52
Strategic Analysis of Indian Life Insurance Industry
Sources of risk:
Designing any strategy to manage future risks of any organization need the
understanding of the risk and their Origin and direction – linked to our environment,
which is quite dynamic. The world changes so fast that neither information systems
nor management practices are able to capture the potential trend and the direction of
the change. This leads to uncertainty and inability to initiate proactive measures. The
major changes that have been noticed are: changes in demographic structure –
mortality, life style, killer diseases (like AIDS and SARS) impacting the demographic
composition; impact on financial services of rapid globalization, Information
explosion and unanticipated volatility in financial markets. These changes have made
the Law of Averages, which has been traditionally used by Life Insurance
Corporation (LIC) to discount the impact of risks, has become nearly redundant and
therefore, there is a search for a new model methodology and Management strategies
to face the challenges of various types of risks that are being confronted by life
insurance companies. As we proceed to discuss strategy, let us examine the import
types of risks.
Types of risks:
53
Strategic Analysis of Indian Life Insurance Industry
2. Asset Risks:
Arising from default of borrowers causing or decline in market value of
investment assets.
3. Pricing Risks:
Arising from uncertainty in mortality, claims, leakages, management expenses
and income from premium, investment and real estate.
4. Miscellaneous Risks:
Arising from changes in regulatory regime and requirements, taxation,
malpractices at operational level and inefficiency in management practices, lack of
accountability and fiduciary responsibility.
1) Actuarial Risks:
Associated with issuance of insurance policies and related liabilities. These
risks arise due to higher cost of raising funds, higher underwriting losses than
projected etc.
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Strategic Analysis of Indian Life Insurance Industry
3) Credit Risks:
Associated with default of borrowers of funds.
4) Liquidity Risks:
Associated with funding crisis arising out of unforeseen demand for funds to
meet obligations.
Measuring Risk:
Risk management however, calls for risk identification and risk measures. A
number of methods have been in use to measure the risks in an insurance company,
though there is no single best measure yet like VaR (Value at Risk), which is widely
used for banking industry. Most widely used measures in life insurance companies
are:
Actual and Expected Experience Monitoring
Risk Based Capital (RBC)/Ratios/ Target
Scenario Analysis
Stress Testing
Cash Flow Testing (CFT)
Cash Flow Matching (CFM)
Duration and Convexity Analysis
Performance Attribution/Exchanges by Source
In A/E ratio analysis actual experience to budget plan and pricing is monitored to
see to what extent liability Assumptions are met. In RBC analysis ‘the ratio of RBC to
adjusted statutory surplus is used as the standard for Surplus adequacy related to risk’.
In scenario analysis liabilities and assets of a portfolio is examined under different
Macro-economic assumption, while stress testing is conducted by using scenario to
find out extraordinary losses arising out of a particular widely used to examine the
whether asset in matching the liabilities of a portfolio. Under CFT analysis, basic
55
Strategic Analysis of Indian Life Insurance Industry
asset/liability analyses are undertaken to verify that sufficient reserves are maintained
particularly for generated income controls (GICs) and annuity products, while under
CFM liabilities are matched with cash flows. There are many other measures to
monitor the portfolio risks – and normally a company simultaneously uses a set of
measures. While in convexity analysis the price sensitivity of duration to a change in
the interest rate is monitored, in duration analysis price sensitivity of portfolio or
security is examined in return to change in interest rates. Performance attribution test
is conducted to find out the risk factors
Like Risk management methods there are a variety of techniques used by the life
insurance companies to manage risks. According to Babbel and Santomero of
Wharton School, ‘it appears that a common practice has Evolved such that four
elements have become key steps to implementing broad based risk management
system.’
56
Strategic Analysis of Indian Life Insurance Industry
on the list of risk management technique is the Asset Liability Management (ALM)
because it not only covers interest rate volatility but also non-interest risks arising out
of embed options in the policy. Further, ALM is used to manage product specific risks
as well as companywide risks. A survey of global consulting firm, Milliman USA, of
Risk Management Practices of US Life Insurance companies shows that more than 75
per cent of the companies indicated that they use the following Risk Management
practices:
Risk Insurance:
Diversification of Assets
Diversification of Liabilities
Selective underwriting
Continual Process Improvement
Hedging via Capital Market
Stochastic Pricing
Risk Adjusted Pricing Targets.
Risk limits set the maximum exposure to risk factors and risk tolerance of the
Management. Reinsurance allows risk transfer to another party through a reinsurance
agreement. Diversification of assets minimizes the impact of unsystematic risks on the
portfolio while diversification of liabilities is achieved by offering diverse products.
Hedging in capital markets is aimed at reducing the adverse impact of interest rate
fluctuation achieved through derivatives, futures, forward trading, options and swaps.
It may be mentioned here that insurance supervision, to strengthen the risk
management practices, focuses more and more on the capital of an insurance
company against the benchmark of assured risks in addition to the statutory solvency
margin. In the US, the risk based capital laws now in effect in all states require
commissioners to take specified actions when a firms’ risk based capital ratio, defined
as the ratio of actual ratio to risk based capital, falls below a certain threshold
(Cumming, Philips and Smith 1997). Even in Europe, the solvency project is centered
on the risk based capital model: In a capital based solvency system, risk bearing
business will be linked to more risk capital.
57
Strategic Analysis of Indian Life Insurance Industry
So far in India, very scanty attention has been given to risk management in life
insurance companies. Neither is any systematic and structured risk management
practice followed in insurance companies nor have any specific guidelines on risk
standards, techniques and risk management been developed. Of course IRDA
guidelines on Investment Management and Asset, Liabilities and Solvency margin of
insurers indirectly deal with Risk Management. The risk management prevailing in
Indian companies is of a very rudimentary type. Indian financial markets, particularly
during the post-liberalized era have witnessed significant understanding. Global
intervention, changes in interest rate etc. have increased the risk exposure. It is
therefore necessary to create awareness about the necessity of risk management as
well as to develop expertise in this discipline.
Risk standards:
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Strategic Analysis of Indian Life Insurance Industry
independent risk oversights. For these, there is need for adequate education and
training, which also may preferably be uniform industry wide.
Oversight:
Risk Governance :
The risk management system to protect assets from depletion may be made
stronger through implementation of risk governance. Risk governance can be
established either through ‘risk control’ or through ‘risk reward’. In either of these
models, there is a necessity for improving risk knowledge, risk information and
59
Strategic Analysis of Indian Life Insurance Industry
competitive risk Practices. Genuine risk reporting and starting of risk information will
strengthen risk governance. However, the goal of risk governance can be achieved if
the top management and board are truly interested and sincere. Risk management
should not be thought and the regulatory requirement, but an integral part of strategy
and way of corporate life.
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Strategic Analysis of Indian Life Insurance Industry
PEST ANALYSIS
Certain type of political risk at the international level has serious implications
for exporters. The term ‘political risk’ has a wider connotation than commonly
understood or assumed. It covers events arising not just from politics, but risks in the
course of international transactions. In this connection, it may be noted that export
credit insurance has evolved out of uncertainties relating to international trade,
particularly due to problems arising out of foreign legal jurisdiction, political changes
and currency exchange difficulties faced by many developing countries.
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Strategic Analysis of Indian Life Insurance Industry
• After taking into account the nature of business and to protect the interest
of the policyholders, issue directions to insurers relating to time, manner
and other conditions of the investments provided the latter are given a
reasonable opportunity of being heard.
Capital requirement: -
The paid up equity of an insurance company applying for registration to carry
on life insurance business should be Rs 100 Crores.
Renewal of registration: -
An insurer, who has been granted a certificate of registration, should have the
registration renewed annually with each year ending on March 31 after the
commencement of the IRDA Act. The application for renewal should be accompanied
by a fee as determined by IRDA regulations, not exceeding one forth of one percent
of the total gross premium income in India in the preceding year or Rs 5 Crores or
whichever is less, but not less than Rs 50000 for each class of business as per Section
3-A.
Requirements as to Capital: -
The minimum paid up equity capital, excluding required deposits with the RBI
and any preliminary expenses in the formation of the country, requirement of an
insurer would be Rs 100 crore to carry on life insurance business and Rs 200 crore to
exclusively do reinsurance business as per Section 6.
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Strategic Analysis of Indian Life Insurance Industry
Government has power to change the tax policy against life insurance
industry.
• Health insurance rebate,
• Pension saving rebate,
• Mede claim premium rebate,
• P.P.F., E.P.F., NSC all are tax exempted saving,
• All life insurance policy are tax exempted saving ,
• Agricultural income is tax exempted,
• House rent allowances,
• Post office saving,
• Expenses on dreaded diseases are tax exempted.
• Recently there is issue to increase FDI level from 26% to 49%.
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Strategic Analysis of Indian Life Insurance Industry
Two governments in India have fallen over the issue of liberalization of the
insurance sector (which was nationalized in 1971). But the government of A.B.
Vajpayee as gone ahead to announce the liberalization of this sector announcement
was made in November 1998.
Important government guidelines for private players for entering into Indian life
insurance market:
1. Private companies with a minimum paid-up capital of Rs. 1bn should be
allowed to enter the industry.
2. No company should deal in both life and general insurance through a single
entity.
3. Foreign companies may be allowed to enter the industry in collaboration with
the domestic companies.
4. Postal life insurance should be allowed to operate in the rural market.
5. Only one state level life insurance company should be allowed to operate in
each state.
6. Foreign investors can invest up to 26% of the equity of their joint venture with
Indian firms.
Government will prevail on grounds that the Rs. 4.5 billion India needs for
infrastructure development in the five years from 1997-98, cannot materialize if the
insurance sector is not opened up.
64
Strategic Analysis of Indian Life Insurance Industry
The IRA is also preparing an internal rating system to screen all applications,
as entry will be in phases. The joint venture status of life insurance companies
(with majority holding of the domestic partner) is likely to be approved by the
parliament. Consensus also seems to be emerging on the minimum of Rs. 1 bn
capital stipulations for new insurance companies.
The IRA has stipulated a minimum rural presence for all companies. The
exhaustive guidelines have been issued for the appointment of intermediaries
(brokers, agents, surveyors and actuaries).
Feature of IRA:
1. The Bill allowed for up to 26% foreign equity participation in the insurance
sector.
2. The current India monopoly companies were required to bring down their
equity holding to 26% within a period of 10 years.
65
Strategic Analysis of Indian Life Insurance Industry
Government pronouncement:
1. IRA will be sole Authority, which will be responsible for awarding of, licenses
i.e. little or no government or political interference in licensing process.
2. No restriction on the number of licenses.
3. No composite license for life insurance business.
4. Licensing to be only on national basis (no city by city approach)
5. IRA allowed for up to 26% foreign equity participation in the life insurance
sector.
6. The current Indian monopolies companies are required to bring down their
equity holding to 26% within a period of 10 years.
IRA proposals:
Business Requirement:-
A company will not be issued a license unless the IRDA is satisfied with the
sound financial condition, the general character of management, the volume of
business, the capital structure, earning prospects for the insurers and that the interests
of the general public will be served if registration is granted to the insurer.
66
Strategic Analysis of Indian Life Insurance Industry
Foreign insurance companies have been allowed to have a maximum 26% share
holding. No life insurance company can be registered under the Act unless they have
a paid up capital of Rs. 100 crores. Every life insurer shall deposit with the reserve
bank of India one percent of the total gross premium written in India in any financial
year, not exceeding Rs. 10 crores.
This amount would not be susceptible to any assignment or charge nor would
it be available for the discharge of any liabilities other than liabilities arising out of
policies issued, so long as any such liabilities remain undercharged.
Investment of Assets:-
Every insurer is required to invest, and keep invested, assets equivalent to not
less than the net liabilities as follows: (a) 25 % in government securities, (b) a least
25% of the said sum in government securities or other approved securities and (c) the
balance in any approved investment rated as “very stron” or more by reputed rating
agencies, which include various debt instruments on which dividend on its ordinary
shared for the five years immediately preceding or for at least five out of the six or
seven years immediately preceding have been paid and which have priority in
payment over ordinary shares of the company in winding up.
The IRDA may in the interest of the policyholder’s directions relation the
time, manner and other conditions and investments of assets to be held by an insurer.
The IRDA may also direct the insurer to realize the investment, if it sees the
investments to be unsuitable or undesirable. The Act prohibits an insurer from directly
or indirectly investing policyholder funds outside India.
Further, every insurer has to always maintain an excess of the value of his
assets over the amount of his liabilities of not less than Rs. 50 crores in the case of an
insurer carrying of life insurance business. If at any time an insurer does not maintain
the required solvency margin, he is required to submit a financial plan, as per
directions issued by the IRDA, indicating a plan of action to correct the deficiency
within three months.
67
Strategic Analysis of Indian Life Insurance Industry
In order to ensure that the company does not risk the money of the
policyholder’s, the Act provides that an insurer who does not comply with the
aforesaid provisions may be deemed to be insolvent and may be would up by the
court.
Consequences of non-compliance: -
A company failing to comply with the act shall be liable for panel action.
Further, IRDA is empowered to investigate into the affairs of the company. Failure to
comply with the directions may lead to cancellation of the license for the company.
Also, if the IRDA has reason to believe that a company is doing business in a manner
likely to be prejudicial to the interest of policyholders, it is required to report to the
central government.
The court may also wind up the company if it fails to deposit or keep deposits
as per the requirements of the act or if the continuance of the company is prejudicial
to the interest of the policyholders or public interest. But an insurance company
cannot be wound up voluntarily or on the grounds that by reasons o its liabilities it
cannot continue its business, except for the purpose of affecting an amalgamation or a
68
Strategic Analysis of Indian Life Insurance Industry
The four amendments, made in the life insurance Bill by the Lok Sabha, are as
under:
1. The Insurance Regulatory and Development Authority should give priority
to health insurance.
2. Policyholder’s fund will be invested in the social sector and infrastructure.
The percent may be specified by the IRDA and such regulations will apply
to all insurers operating in the country.
3. Insurers will be expected to undertake a certain percent of business in rural
areas, and cover workers in the unorganized and informal sectors and
economically backward classes.
4. In the event of insurers failing to fulfill the social sector obligations, a fine
of Rs. 25 lakh would be imposed the first time. Subsequent failures would
result in cancellation of licenses.
The tariff advisory committee established under the Act is empowered to control
and regulate the rates, terms, and etc. that may be offered by insurers in respect of any
risk or of any category of risks. It is provided that in fixing, amending or modifying
such rates etc. the committee shall try to ensure as far as possible that there is no
unfair discrimination between risk of essentially the same hazard and also that
consideration is given to past and prospective loss experience. Every insurer is
required to make payment to the TAC of the prescribed annual fees.
Another factor, which affects the insurance sector, is the tax policy. The tax reforms
in India are such that it encourages the citizens to invest in the insurance sector.
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Strategic Analysis of Indian Life Insurance Industry
The tax policy of the government is particular relevant for life insurance which
is a long-term contract and inculcates among the policyholders the habit of saving.
Taxation of returns on investment influences, investment decisions and high rates of
taxation will discourage the desire to save. Already in India there are complaints that
the rates of return on life policies are not what they could be. Therefore tax incentives
play a vital role in determining the attractiveness of such policies. Such tax breaks are
available in many countries and have helped in the development of their life sector. In
western countries the gain from the proceeds of a life insurance policy is paid free of
tax. Provided the policy satisfies certain qualifying conditions. Non-qualifying
policies get basic rate tax relief, though higher rate taxpayers may still have to pay tax
on the gain, although at a reduced rate. The insurance companies can use such tax
concessions rate. The insurance companies can use such tax concessions to design
products for different categories of taxpayers.
The other factors, which affect the insurance sector, are the employment law, and
government stability. These are the factors, which affect the insurance industry.
70
Strategic Analysis of Indian Life Insurance Industry
71
Strategic Analysis of Indian Life Insurance Industry
Interest rate at bank and interest rate of P.F variation very much affect to life
insurance industry, because people always attract by higher return. Therefore, they do
not prefer lower return policy. Unemployment also affects insurance industry, because
the unemployment people will not have earning, so saving also affect to life insurance
sector Life insurance industry will directly affected by Earthquake, Monsoon, and
Natural calamity. Because of these events turns into lots of death, so the life insurance
companies have to pay claim against policy. Infant mortality rate and maternity
mortality rate are also affecting to life insurance. Typical Indian want luxurious
product against low income, so that they prefer installment or annuity (EMI), so that
they may not have extra saving to invest in life insurance.
Adequacy of capital:
Capital adequacy is a matter of attention in view of the nature of the life insurance
business, where in the case a contingency arises, the insurers should be in a position
to meet its long-term contractual obligations and pay up the dues or claims. In that
sense, life insurance is a capital-intensive business and must be backed by an adequate
capital base on the part of the owners and the companies should not be running their
business purely on other people’s money. So minimum start up amounts and long
running capital adequacy norms are absolutely essential, in consideration of this, the
Malhotra committee suggested and subsequently the IRDA stipulated a minimum
capital base of Rs 1 bn for any entity wanting to enter the life insurance business.
Although economic activity has slowed down since 1996, sooner or later there will be
an upswing. The increase in the growth rate in various sectors accompanied by the
growth in trade in the context of fulfilling of commitments to the WTO will signal a
growth in the demand for insurance covers of new types. For example, aviation
insurance cover will be on an increasing scale in view of the need for more frequent
72
Strategic Analysis of Indian Life Insurance Industry
air travel for men and for transporting materials. This would necessitate substantial
property, liability and personal insurance.
Interest Rates: -
During the last years the government has rationalized interest rate creates better
business opportunities for the life insurance sector because the substitute products are
graded lower by the customers. On the other hand the value of the holdings of the
insurance companies will increase.
Rationalized of the interest rates is still expected, and it is an opportunity for the
company.
Low interested rates mean low investment return for reinsures causing negative
impact on their overall net profitability as pricing is to a certain extent sensitive to
interest rate fluctuations. The negative impact therefore, lead to higher pricing level
for reinsures in order to sustain their profitability. But, in reinsurance market, which is
characterized by over capitalization a resulting intense competition. The opportunity
for such rate increases practically remains very slim and even non-existent. As a
result, reinsures are under tremendous pressure to cut their operational cost to
safeguard profitability. Furthermore, low interest rates discourage and even prevent
any outflow of capital from reinsurance business to capital markets, causing current
over capitalization in reinsurance market to continue. A positive outcome is that low
inflation rates, if sustained for a considerable period, usually bring some relief to
reinsures from the resulting lower than forecast claims payment. Also, this can lead
stability to reinsures administrative cost.
73
Strategic Analysis of Indian Life Insurance Industry
As interest rates fall, bond value rise, and insurers feel richer. On the liability side,
reserves are not explicitly discounted so lower interest rates do not increase reserves,
lower inflation means lower expected future claims payments which lowers required
reserves. This in turn increase surplus, again allowing insurers to feel richer.
Therefore, low interest rates and low inflation result in higher assets, lower liabilities,
hence greater surplus and greater risk capacity resulting in less demand for, and
greater surplus of reinsurance.
Low interest rates and low inflation reduce the ability of reinsures to off set
technical losses by using financial products and should, as a consequences, force
market competition downloads. However, this will also serve to weaken the balance
sheets of insurers and create an increase in the demand for balance sheet protections.
Lastly, these conditions move risk from the liability side of the balance sheet to the
asset side while actually generating new needs for cover.
Inflation rate: -
Inflation can also be one of the causes to change the scenario of the insurance
sector. High inflation for instance, would tend to reduce the insurance business,
particularly life, because the real value of the money paid back to the policyholder on
maturity of the policy would go down and would, therefore, lose its attraction for the
investor. At the most, the insuring public may prefer pure risk plans (terms insurance),
which have a low premium outlay.
The response to an inflationary situation will depend on what benefit the insured
is looking for. In a situation of high inflation, clients would prefer policies where the
savings portion is periodically returned while the risk portion is maintain for the
duration of the contract. Those who prefer risk protection are likely to opt for long
term policies, which may also be preferred because they are likely to be low premium
policies. A flexible system, under which the sum insured, is increased from time to
time so that the real value of the cover is maintained, and could give a boost to the
market under conditions of high inflation. Fortunately, the rate of inflation in India
74
Strategic Analysis of Indian Life Insurance Industry
has been contained to less than 5 percent for a fairly long time and unless it goes out
of hand, it is not likely to dampen the market.
These are the factors, which governs the entire life insurance sector. This includes
internal as well as the external factors. We have seen the various factors like
technological, economical and will see the political and government factors,
environmental factors and competitive analysis of insurance sector in the next session.
These all factors have changed the trend of life insurance sector, which is shown
in the following figure.
Closed market, Barriers to entry Barriers to entry Entry costs are low
Entry is controlled are high expertise reduced systems and capital
by state. to operate is expertise can be requirements are
essential, license brought. same for all.
can be obtained.
From the above figure we can see that now day’s strength of brand is very
important aspect for the success in this sector. Of course you should have strong
distribution channel without which growth is not possible.
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Strategic Analysis of Indian Life Insurance Industry
Customer satisfaction: -
Since the customer is the focus of any service industry, every such industry
continuously strives for greater variety and better quality of products, improvement in
its delivery system, cost effectiveness, easy access, and quick response to perceived
needs – in short qualitatively superior service. Indian life insurance companies already
have a sizable line up of the products. The difference between them and the foreign
operators perhaps lies in the service provided, because there is still not enough
concern on the part of the Indian companies, with customer satisfaction, on time
renewals, claims settlements, etc. if high standards have been achieved else where, it
is not impossible to attain the same in India too.
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Strategic Analysis of Indian Life Insurance Industry
The basic social factors that affect the life insurance sector are as under: -
Population
Life style
Educational level
Level of earning
Societal benefits
These are the major social factors, which affect the life insurance sector. We will
discuss all of them in brief>
Population:
Growth in the population is a major factor pushing up the demand. It is also going
to exert a special influence on the life insurance market in other ways. Apart from
exerting pressure on demand for goods and services, and through that, ill effects of
uncontrolled growth of population also could spur the growth of demand. For
example, overcrowding in public places of entertainment, public support, or too many
vehicles on the road can result in hazards like stampedes and pollution, which require
covers and still are not sold on a large scale today. Thus the positive as well as the
negative aspects of population growth are going to spur demand.
Life style:
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Strategic Analysis of Indian Life Insurance Industry
on the roads for people commuting to their jobs or business would mean larger
incidence of accidents. This will increase the demand for life insurance products.
Of course, there is also the other possibility that wherever it is possible, some
people will try to spend a part of their time working at home either because they
would like to be with their families or because they find it more convenient. Activities
like life insurance and financial services are particularly well suited for such
arrangements.
With time becoming scarcer for most people who pack in a full day, there is a
higher demand for convenience and service. Companies will respond by trying to
shorten the transaction time for the delivery of products and services and creating
distribution systems that can reach clients wherever they are and whenever they want
to use them, so as to ensure convenient access to service providers.
In recent times, there has been a surge in the high end business of the LIC. For
instance, as against 90 policies each worth more than Rs 10 million in 1999-2000, the
number was as high as 900 policies in the next year. Or again, the number of jeevan
shri policies jumped from 88,000 to a total of 2,33,000 policies in the same period.
Crumbling social values, the deteriorating law and order situation, the growing
incidence of crime, extortion, abduction, etc., are posing a new category of risks
which need to be covered through suitably designed policies.
Thus these are how changing life style of the citizens is affecting the life insurance
industry.
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Strategic Analysis of Indian Life Insurance Industry
Level of education:
India is one of the developing countries: the level of education is very low here.
The literacy rate is very poor. More than 50% of the population is still uneducated or
more or less not educated. Thus the people are not able to understand the concept of
the life insurance. Among the educated people the quality of the education is still a
big question mark. Thus the awareness is not created and it has become a big
challenge for the industry. Thus one of the factors, which affect the life insurance
sector, is low level of education.
Level of earning:
Another factor, which affects the life insurance sector, is the level of earning. In
India the rule of 80-20 is working. The 80% of the total population is having the 20%
of the wealth and the 20% of the total population is having 80% of total wealth. Thus
the richer are richer and poorer are poorer. Due to this the life insurance sector is
affected very much.
Societal benefits:
In view of the fact that large sections of India have inadequate life insurance
cover, an important social responsibility of the government relates to spreading it far
and wide. In addition, the government attempts to extent life insurance with certain
social obligations in view in both urban and the rural areas through such means
special schemes for the weaker sections, and by tilting of the life insurance
companies’ investments in favour of social developments.
The social changes emerging in the country provide opportunities for insurers to
sell financial services products such as family health care programmed, retirement
plans disability insurance, long-term care for senior citizens and different employee
benefit plans.
It is not the total population but the insurable population which is material for the
conclusion of potential. Apart from the usual demographic and other well known
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Strategic Analysis of Indian Life Insurance Industry
factors such as age group, income level, sex-wise distribution, and literacy level, a
realistic assessment of this potential has to be based on several other relevant factors.
Many invisible factors like religious faiths and social values too need to be
considered. As such, there is considerable difficulty in accurately estimating the
potential and crude estimates can be misleading. The estimate will also vary
according to the criteria used to measure if.
In addition, the cost of reaching out to a very large number of customers, if they
are dispersed, becomes important. In that sense, the cost and profitability of exploiting
the potential, which is otherwise attractive, limit the opportunity. The sheer size of the
numbers, there fore is not crucial itself.
For assessing the practical business potential of life insurance, the eligible
population needs to be “Qualified” in relation to other factors including those
mentioned above. Thus, in the opinion of some experts, out of the population in the
insurable age group,
Only the main workers (i.e., excluding marginal workers) with adequate income
may be considered as the actual insurable population.
The population in the age group 15-55 is usually regarded as the insurable
population, since this can be considered as the main “active” age group ( in the sense
of working, earning. And supporting others), and beyond this range life risk may be
considered to be not worth insuring.
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Strategic Analysis of Indian Life Insurance Industry
There is one opinion, which suggests that in our country the age group 15-55 as
the base is not totally suitable. Due to various factors including the unemployment
problem, real earning starts from around the age of 25 for salaried persons. For others,
particularly small entrepreneurs, traders and businessman, the starting age is a little
higher. Only in the affluent sector of society life insurance can be taken before
personal earning starts. Thus, number wise life insurance below the age of 25 is not so
significant (although amount wise it need not be so). On the other hand, people over
the age of 50 rarely apply for fresh life insurance, mainly because in India the normal
retirement age is around 60 years. Also, a high percentage of the population in the
lower income group does not remain “insurable” after the age of 50. thus, in our
country the practical age range for insurable population actually narrows down to 25
to 50.
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Strategic Analysis of Indian Life Insurance Industry
Product development and target marketing through the Internet: with increase in
the number of insurance companies there will be a need for market segmentation and
subsequently product designed for each of them. In such a scenario Internet can be a
effective channel for pushing product specific information to a particular market
segment. Consumer feedback about a particular product as well as suggestions for
different types or covers can also be generated through the Internet.
Retail marketing is a commonly expected concept and the providers of the retail
products and service will try out for larger market and market share. There would be
cut through competition and the real benefit would be to the customers in terms of
better products, distribution, pricing, post transaction service and technology.
Technology will perhaps be the single largest driver of the retail thrust. The entire
strategy will evolve around the absolute ability of the organization. The customer will
demand for greater convenience of excess to the product/ service and all at low cost of
delivery. There fore the use of technology and specifically the Internet with realigned
strategies would be one of the key factors to success. Constraints of locations, timing
and accessibility would not be a hurdle for either customers or businesses.
The most important facto that is affecting the insurance industry is the marinating
the database of the customers. The insurance industry having a huge list of the
customers.
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Strategic Analysis of Indian Life Insurance Industry
In order to maintain it in manual format it is really the work of stupidity. With the
change in time the computers has taken the work of this things. Thus with the
development of the technology it has becoming possible to maintain such huge
database very easily. A person can switch over to the computer and get the details of
the customer very easily. Thus maintaining the database has really become easy due
to the development in technology.
The Internet has played a vital role in transforming the business of the 21st
century. Computers are now being used extensively for creating a storing data,
information with the help of complex and sophisticated technological tools in every
kind of business. This change having been widely accepted, the advantages are
numerous such as fast processing improved. Efficiency, cost reduction among several
other benefits. However, with every positive change, there is an evil attached and
technology is no exception. In technical is an evil attached and technology is no
exception. In technical terms, increased sophistications of technology brings with it,
an increased factor of risk involved. The risk can be of various attributes, for example,
the risk of data being lost due to a virus attack, the theft of important and confidential
information and so on, which ultimately results in losses for the business entity. With
this change in the business process, insurers have to devise new methods for
assessing, underwriting and servicing claims for the so-called e-business insurance.
Insurers face challenges to ascertain risks, in order to quantify them because such
risks don’t have any past data, which makes it all the more difficult for actuaries.
Moreover, what financial impact a particular risk can have is very difficult to be
determined. For example, if some hackers obtain credit card information of few
customers, it’s a loss for banks, their credibility, customers and also their brand. Will
an insurance policy cover all of this is million dollar question hence; the difficulty is
to design a cover first of all, which really answers the needs of customers. But even
after designing and pricing such products with difficulty, the challenge to underwrite
and handle claims for such policies remains existent.
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Strategic Analysis of Indian Life Insurance Industry
Distribution channels are the most important part of the insurance industry. The
scenario is continuously changing in this industry. In future the customers are
expected to be more technology – oriented, better informed, more knowledgeable and
more demanding. The insurers will have to offer all types of channel to customer and
it is the customer who will have the right to choose the channel suiting him/ her. Dual
income families with young children, singles with long working days and flexi-timers
all demand high level of sophistication and ease when it comes to service. Hence the
companies have to be very careful and cautious in catering to the needs of these
customers who provides a good amount of business to the insurers.
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Strategic Analysis of Indian Life Insurance Industry
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Strategic Analysis of Indian Life Insurance Industry
Firms in othe r
industry offe ring
substitute products
Suppliers Rivalry
Of among Buyers
Raw-materials, competing
inputs sellers
Firms in othe r
industries offering
substitute products
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Strategic Analysis of Indian Life Insurance Industry
The future of life insurance market scenario will be marked by the active
presence of many international players, beside several Indian players. As far as
life insurance industry there would be fewer entries due to more specialized firm
with lower expenses ratios and better capitalization.
Threat of entry is determine by the entry barriers which act to prevents firms
from entering the industry. In life insurance industry entry barriers is moderate
so that it becomes profitable, it attracts new entrants, thereby increasing the
number of competitors.
The Indian market is highly brand oriented, it is difficult to introduce new brand.
The acceptability of new brand is also very low.
The capital requirement in life insurance is Rs. 100 crores, which attract more
companies to invest in. promoters, can hold paid up equity capital up to 26% in
an Indian insurance company. In case promoters hold more than 26% of the paid
up equity capital, they shall divest the excess shares in the phased manner within
a period of ten year.
Tax exemption structure makes the industry attractive.
High level of competition in life insurance industry become giant player came
into the market.
High profit in life insurance industry act as a magnet to firms outside the
industry motivating potential entrants to commit the resources needed to hurdle
entry barriers.
But again due to potential market, private giants and international player try to
enter in to the market in the large scale with their proper homework with
customized and products too. An Indian private are well – developed and has
capacity to face challenges, foreign companies foresee good prospects for new
business by alliances and partnership with domestic outfits .
Registration: Every insurer is required to obtain a certificate of registration from
the controller of insurance. The registration is required to be renewed after a
period of three years.
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Strategic Analysis of Indian Life Insurance Industry
Policy designer tend to have less leverage to bargain over premium and other
terms of sale when the company they are supplying a major customer.
Suppliers bargaining power increase if reduced administrative cost and also
reduced claim procedure time.
Insurance is tax exempted so that suppliers bargaining power increases.
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Strategic Analysis of Indian Life Insurance Industry
Suppliers then have a big incentive to protect and enhance their customer’s
competitiveness via reasonable premium, better service and on going advances
in the technology of the item supplied.
Supplier’s ability to integrate forward: the private players can integrate forward
to increase the volumes of business by providing customized and tailor-made
policies whereas existing players whereas lack on this point.
Brand identity: there is certainty among the minds of people in relation to
existence and payment of claims from the existing players whereas the solvency
of private players is not certain.
Life insurance sector can be featured in three factors. They are saving, risk and
tax benefit.
SAVING:
As far as saving are concerned, Existences of a large number are saving through
PPF, EPF. Most of customer saving their money in bank, post deposit. Many
customers invest their money in share market, purchase Gold & Silver also.
The substitute products for the industry are as follow:
Term deposits in bank (5.25-8 %)
Investment in government securities. (4-5%)
Money market investment (for corporate)
Capital market (around 13% p.a. for developing country like India)
There is threat of increasing market potential of NSC, Government
debenture etc.
If investments in insurance policies are made with the objective of tax
benefits then there are other investment avenues, which offer similar
benefits.
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Strategic Analysis of Indian Life Insurance Industry
RISK COVERAGE:
For risk coverage, there is no close substitute of the products. The risk
protection is provided by this sector only. No other instrument provides
assurance against risk.
TAX BENEFIT:
There are various substitute of this feature of life insurance. Some of the
substitute which provides tax benefit is:
• PPF
• NSE
• POST OFFICE SECURITIES.
• INVESTMENT IN THE MUTIAL FUND.
• OTHER TAX SAVING INSTRUMENT.
Thus these are the substitute of the life insurance industry. But the core
competency of this sector is the risk protection providing capacity, which no
other sector can provide.
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Strategic Analysis of Indian Life Insurance Industry
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Strategic Analysis of Indian Life Insurance Industry
OT ANALYSIS
OT- analysis of the industry shows opportunity and threat the industry is likely
to face. OT analysis of Indian life insurance industry shows the comparative strengths
and weakness of Indian life insurance industry with rest of the world and also major
opportunities and threats the Indian life insurance industry is facing.
Opportunities:
Today’s human life becomes full uncertain, so they prefer protection against the
risk. Therefore they prefer life insurance. This is the opportunity for the life
insurance sector.
Easy accesses to development in the more advance market provide further
opportunity to upgrade their working. Technological, financial or specific area
based avenues of absorbing improved system are also now more easily available.
So, that insurance companies working efficiently and fast service.
Increased economic activities: increase in the economic activity has become the
opportunity for the life insurance sector. The activity such as development in the
automobile industry, development in the shipping industry. The growth in the
GDP shows the opportunity for this industry. The growth rate expected this year
7-7.5%. So this is also one of the opportunities for the life insurance sector.
Uncovered market:
The Indian insurance market is the one of the least markets in the world. India
has a population 1044.15 million out of which only 77.7 million have a life insurance
policy. Almost 300 million people in the country can afford to buy life insurance but
of this only 20 % have an insurance cover. Thus there lies a big opportunity for the
life insurance industry. No doubt lots of marketing and promotional efforts have to be
done for trapping the uncovered portion of the huge market. India’s insurance has
long way to catch up with the rest of the world. According to the institute of charted
financial analyst of India. India is the 23rd largest insurance market in the world. India
accounts for just 0.4% of the global insurance market which is very low. the ratio’s of
premium to GDP for India stands at only 3% against 5.2% in US ,6.5%in UK.
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Strategic Analysis of Indian Life Insurance Industry
To enter into rural market where customer awareness about insurance is low by
effective and efficient marketing strategies.
To sell insurance products through electronic Medias.
Natural calamities: natural calamities taking place now days have created a
concern for life insurance among the public. Because of natural calamities like
earthquake, flood, and cyclone people have become conscious about benefits
and need of insurance. Thus through a calamity it has become a considerably big
opportunity for the industry.
Growing population: the growth in the population (approximately 1.7%) is very
high. It is said that one Australia is added in our country every year. Thus
potential customers for the life insurance industry. It has become an opportunity
for the life insurance industry.
The lack of comprehensive social security system combined with a willingness
to save means that Indian people demand for pension products will be large.
Thus, it has become an opportunity for the life insurance industry.
India has traditionally been a highly savings oriented country. Needless to say, if
the insurance market is properly tapped, it is possible to raise life insurance
premium as a percentage of GDP from its existing level. Thus, it has become an
opportunity for the life insurance industry.
To use Internet and e-commerce technologies to dramatically cut the costs
and/or to pursue new sales-growth opportunities. With the help of technology it
has become easy for the companies to reach the customer quickly, easily,
efficiently and in a better way. Also the companies can cut down the cost of
operation up to considerable level. Thus technology has thrown lots of
opportunity for the company.
Liberalized government policy toward insurance sector: the government has
liberalized the government policy in the life insurance sector. Now a day role of
government has changed. Due to liberalized policy of government the country is
benefited in earning foreign inflows: the domestic company can also collaborate
with foreign country and can create synergy. Thus there is great opportunity for
those who can trap it. Exist the option of joint venture& alliance etc. for
companies to create Synergy, value as well as competitive capabilities for the
firms.
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Strategic Analysis of Indian Life Insurance Industry
Threats:
Private entrants are naturally targeting the profitable and more lucrative segments,
by providing better service, new products and flexibility. They are targeting the
bigger corporate the other clients in the well established metropolitan center.
These new entrants succeeded in eating share of the existing entities. This creates
threat among rival firms itself.
Decreased in bank rate: the decreased bank rate is the biggest threat for the life
insurance sector. Fluctuation in the bank rate makes big difference for the life
insurance industry. It has become threats for the life insurance industry.
Interest rate of P.F and bank saving create threat to insurance sector. All other
saving is obviously the threat for life insurance sector.
Increasing intensity of competition among industry rivals-may cause squeeze
(fall) on profit margins. Consumer’s education- consumers are more and more
confused because the market players are offering large number of product range.
As at present the awareness level is not much, it is only because the education
level is only 62 %( in which only 10% are well educated).
Fraud in insurance sector: the major problem fraud, which affects the life
insurance sector.
The flight of talent to new entrants is already in evidence, and could be on the
rise for some time to come. Retaining qualified and competent executives will be
considerable challenges for existing companies.
One very serious danger that the government on units is likely to face is that even
if at some point of time, the government does decide to disinvest a portion of its
equity; they may not be fully free from government interference. They could face
a peculiar problem that although paper and in terms of legal definition they would
not be public sector units. In effects, their working could be no different from
what it was before their ownership pattern change. This could be genuine threats
since they would be competing with units which are free from such artificial and
unnecessary restrictions.
The new units, equipped with state of arts equipment and innovative procedure
would have an in-built edge over the erstwhile public sector units, which until
recently had no such opportunity and incentives. Due to possible negative impact
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Strategic Analysis of Indian Life Insurance Industry
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Strategic Analysis of Indian Life Insurance Industry
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.
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.
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Strategic Analysis of Indian Life Insurance Industry
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.
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.
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Strategic Analysis of Indian Life Insurance Industry
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.
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Strategic Analysis of Indian Life Insurance Industry
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.
Company should concentrate on the quality of the premium received this will
help the companies to reduce its underwriting losses. Appointing of proper and
efficient agent as well as effective direct marketing could do this.
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Strategic Analysis of Indian Life Insurance Industry
BIBLIOGRAPHY
Magazine
Web site: -
www.irdaindia.org
www.equitymaster.com
www.licindia.com
www.iciciprulife.com
www.incometaxindia.gov.in
Newspaper: -
Economic times
Times of India
Business standard
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