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SUBMITTED BY
BHAVSAR MANTHAN RAJENDRA
THIRD YEAR (BANKING AND INSURANCE (SEMESTER VI)
2011-2012
MODEL COLLEGE
DOMBIVLI
UNIVERSITY OF MUMBAI
APRIL 2012
A PROJECT REPORT ON
INDIAN INSURANCE INDUSTRY
SUBMITTED TO
THE UNIVERSITY OF MUMBAI
IN PARTIAL FULFILLMENT
FOR THE AWARD OF THE DEGREE OF
BACHELOR OF COMMERCE (BANKING AND INSURANCE)
(VI SEMESTER)
BY
BHAVSAR MANTHAN RAJENDRA
MODEL COLLEGE
DOMBIVLI
APRIL 2012
TABLE OF CONTENTS
SR.NO.
DESCRIPTION
PAGE NO.
1.
DECLARATION
2.
ACKNOWLEDGEMENT
3.
CHAPTER 1: INTRODUCTION
6-12
4.
13-33
5.
34-45
6.
CHAPTER 4: CONCLUSION
46-47
7.
BIBLOGRAPHY
48
8.
ANNEXURE
49-51
DECLARATION
ACKNOWLEDGEMENT
OF
ENTIRE
LIBRARY
DEPARTMENT
OF
OUR
CHAPTER 1
AN INTRODUCTION
Introduction
In 2003, the Indian insurance market ranked 19th globally and was
the fifth largest in Asia. Although it accounts for only 2.5% of
premiums in Asia, it has the potential to become one of the biggest
insurance markets in the region. A combination of factors underpins
further strong growth in the market, including sound economic
fundamentals, rising household wealth and a further improvement in
the regulatory framework.
The insurance industry in India has come a long way since the time
when businesses were tightly regulated and concentrated in the
hands of a few public sector insurers. Following the passage of the
Insurance Regulatory and Development Authority Act in 1999, India
abandoned public sector exclusivity in the insurance industry in favor
of market-driven competition. This shift has brought about major
changes to the industry. The inauguration of a new era of insurance
development has seen the entry of international insurers, the
proliferation of innovative products and distribution channels, and the
raising of supervisory standards.
There are good reasons to expect that the growth momentum can be
sustained. In particular, there is huge untapped potential in various
segments of the market. While the nation is heavily exposed to
natural catastrophes, insurance to mitigate the negative financial
consequences of these adverse events is underdeveloped. The same
is true for both pension and health insurance, where insurers can play
a critical role in bridging demand and supply gaps. Major changes in
both national economic policies and insurance regulations will
highlight the prospects of these segments going forward.
GENERAL DEFINITION:
The general definitions are given by the social scientists & they
consider insurance as a device to protection against risks, or a
provision against inevitable contingencies or a co-operative device of
spreading risks. Some of such definitions are given below:
insurance.
small known loss (the insurance premium) for a large unknown loss,
which may or may not occur.
10
11
SECONDARY DATA
The secondary source of information has been collected from
internet, books.
CHAPTER LAYOUT
CHAPTER 1 Introduction of the title Indian insurance industry
CHAPTER 2 Theoretical view of Indian insurance industry.
CHAPTER 3 Survey.
CHAPTER 4 Summarizes the results of the study.
12
CHAPTER 2
THEORETICAL VIEW
13
1818 saw the advent of life insurance business in India with the
establishment of the Oriental Life Insurance Company in Calcutta.
This Company however failed in 1834. In 1829, the Madras Equitable
had begun transacting life insurance business in the Madras
Presidency. 1870 saw the enactment of the British Insurance Act and
in the last three decades of the nineteenth century, the Bombay
Mutual (1871), Oriental (1874) and Empire of India (1897) were
started in the Bombay Residency. This era, however, was dominated
by foreign insurance offices which did good business in India, namely
Albert Life Assurance, Royal Insurance, Liverpool and London Globe
Insurance and the Indian offices were up for hard competition from
the foreign companies.
14
15
16
The IRDA opened up the market in August 2000 with the invitation
for application for registrations. Foreign companies were allowed
ownership of up to 26%. The Authority has the power to frame
regulations under Section 114A of the Insurance Act, 1938 and has
17
18
Characteristics of Insurance:
Sharing of Risks
Co-operative Device
Evaluation of Risk
19
Amount of payment
Spreading of risk
Insurance is a plan, which spread the risks & losses of few people
among a large number of people. John Magee writes, Insurance is a
plan by which large number of people associates themselves &
transfer to the shoulders of all, risks attached to individuals.
Transfer of risk
Ascertaining of losses
By taking a life insurance policy, one can ascertain his future losses
in terms of money. This is done by the insurer to determining the rate
of premium, which is calculated on the basis of maximum risks.
A contract
21
22
23
Insurance Regulatory body should be set up. Controller of Insurancea part of the Finance Ministry- should be made independent
iv)
payments
beyond
30
days.
Insurance
companies
must
be
24
25
MALHOTRA COMMITTEE :
In 1993, the first step towards insurance sector reforms was initiated
with the formation of Malhotra Committee, headed by former Finance
Secretary and RBI Governor R.N. Malhotra. The committee was
formed to evaluate the Indian insurance industry and recommend its
future direction with the objective of complementing the reforms
initiated in the financial sector.
26
Competition
Private Companies with a minimum paid up capital of Rs.1billion
should be allowed to enter the industry.
No Company should deal in both Life and General Insurance
through a single Entity.
Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies.
Postal Life Insurance should be allowed to operate in the rural
market.
Only one State Level Life Insurance Company should be allowed to
operate in each state.
Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance should be made independent.
27
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.
Customer Service
LIC should pay interest on delays in payments beyond 30 days
Insurance companies must be encouraged to set up unit linked
pension plans.
Computerisation of operations and updating of technology to be
carried out in the insurance industry.
Malhotra Committee also proposed setting up an independent
regulatory body - The Insurance Regulatory and Development
Authority (IRDA) to provide greater autonomy to insurance
companies in order to improve their performance and enable them to
act as independent companies with economic motives.
28
a)
29
Objectives of LIC:
30
b)
c)
people,
and
service-oriented
business
31
of
life
d)
With
e)
32
committed
to
helping
you
realize
those
happy
f)
g)
SBI is the
Cardiff is a
wholly owned
the largest
subsidiary of
European Bank.
33
BNP Paribas,
CHAPTER 3
SURVEY, DATA ANALYSIS
34
No. Of
Respondents
Yes
50
No
No. of Respondents
LIC
50
Birla Sunlife
SBI
10
Kotak Mahindra
Post Office
15
HDFC
35
No. of Respondents
No. of
Respondents
60
50
40
30
20
10
0
LIC
SBI
Kotak
HDFC
As from the above chart it is very clear the all of the respondents
have an insurance of the LIC while some of them have an insurance
of the other companies like post Office, ICICI Prudential Life
insurance Co., HDFC Co. Etc.
The reason behind this is that the LIC competitor since more than
four decades and the Indian Govt. allowed the Introduction of private
player in Insurance in the year 2000.
36
No. of Respondents
11
10,000 to 20,000
18
20,000 to 30,000
30,000 to 40,000
Above 40,000
10
The analysis of the above available data is merely to find out the
percentage of income that one is willing to invest in insurance.
37
Total
Death Benefit
29
10
50
Childrens
13
21
44
20
43
Tax Planning
18
48
Financial
11
25
46
Future
Retirement
Planning
Planning
From the table and chart it can be say that most of the people rank
death benefit first for the decision to make investment in Insurance.
Their second priority is tax planning because the premium, which is
paid by the people towards Insurance, is deductible up to certain limit
from the income and also the maturity amount is also tax free. The
third and fourth priorities are childrens future and retirement
planning.
38
No. of Respondents
Yes
32
No
18
No. of Respondents
Yes
25
No
39
Total
Mutual Fund
25
12
50
Insurance
12
14
45
Gold
13
13
48
Equities
17
34
Post Office
22
12
12
50
Debenture
10
14
33
Bank Deposit
12
19
42
Other
10
20
40
Q.8 According to you what are the factors that would affect
your decision while purchasing an insurance policy?
Criteria/Rank
50
Premium
12
15
15
50
Return
21
17
50
Safety
20
14
15
50
Liquidity
18
21
50
Market
16
21
40
Condition
41
No. of Respondents
Yes
13
No
37
No. of Respondents
Yes
10
No
30
42
No. of Respondents
High Premium
Low Return
Poor Services
Others
43
SWOT ANALYSIS
Strengths
1.
Flexible Products
2.
3.
4.
5.
Professional management
6.
Weakness
1.
2.
3.
44
Opportunities
1.
Untapped market
2.
Threats
1.
2.
3.
45
CHAPTER 4
CONCLUSION
46
47
BIBLOGRAPHY
WEBLIOGRAPHY
http://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?pa
ge=PageNo4&mid=2
http://en.wikipedia.org/wiki/Insurance#History_of_insurance
http://en.wikipedia.org/wiki/Insurance_in_India
BOOKS
48
ANNEXURE
49
Alliance Bajaj
Cholamandalam
OM Kotak Mahindra
AVIVA Life
AMP Sanmar
Childrens Education
Retirements Benefit
Tax Planning
Financial Planning
50
Insurance Policies
Debentures
Gold
Equities
If other (specify)___________
According to you what are the factors that would affect you decision
while
purchasing an insurance policy?
(Please Rank Your Choice)
Premium
Return
Safety
Liquidity
Market Condition
51
Poor Services
Other Reasons__________