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INTRODUCTION
Insurance may be defined as: It is a contract between two parties where by one party undertakes to
compensate the party for the loss arising due to an uncertain events for
which the another party agrees to pay a certain amount regularly.
In India, insurance has a deep-rooted history. Insurance in India has evolved
over time heavily drawing from other countries, England in particular. 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. 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.
The Insurance Act, 1938 was the first legislation governing all forms of
insurance to provide strict state control over insurance business.
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DEFINITION
General definition:
In the words of John Magee, Insurance is a plan by which large number of
people associate themselves and transfer to the shoulders of all, risks that
attach to individuals.
Fundamental definition:
In the words of D.S. Hansel, Insurance may be defined as a social
device providing financial compensation for the effects of misfortune, the
payment being made from the accumulated contributions of all parties
participating in the scheme.
Contractual definition:
In the words of justice Tindal, Insurance is a contract in which a sum of
money is paid to the assured as consideration of insurers incurring the risk
of paying a large sum upon a given contingency.
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HISTORICAL BACKGROUND
Oriental insurance co. Was the first British insurance company to start its
business in 1818.
Bombay mutual life assurance society was the first insurance company in
India (1870).
Life insurance business was nationalised in 1956.
General insurance was nationalised in 1971.
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The insurance sector is divided in two parts life and general or non-life.
Life
Non-life/General
LIFE INSURANCE
In 1870 two British life insurance companies entered in India and attempted to do life
insurance business on Indian lives.After that many Indian & foreign companies started
business in India and by the year 1955 there were 255 insurance companies operating in
India and transacting the business to the extent of Rs 200 crores. Due to the following
reasons the Government decided to nationalize the life insurance industry w.e.f 1/7/1956.
1. No full guarantee to the Policyholders (who are insured).
2. The concept of trusteeship (confidence) was lacking.
3. Many insurance companies went into liquidation (bankrupt).
4. There was malpractice in the business.
5. Non-Spreading of life insurance.
6. No insurance in rural areas.
7. No group insurance
8. No social security
To overcome the above mentioned problems the life insurance business was nationalized
and formed Life Insurance
Corporation with following features:
1. The Central Govt. guaranteed the Policyholders through the LIC.
2. Being a Corporation formed under Special Act Passed by the Parliament therefore the
public can trust.
3. The LIC cannot be liquidated without the order of the Central Govt.
4. Under the LIC Act, all day-to-day functions of the Corporation and the method of
Investment in Govt. Securities were defined. Therefore, the malpractices were
eliminated.
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The recent development in the general insurance sector is the activities by the insurance regulator. The IRDA has been very
stringent and has been keeping a close-watch on the functioning of all the insurance companies. The latest regulation from
IRDA is on health insurance portability. In the future, general insurance industry will be very much in the limelight than any
other industry facing recession now.
Online selling of insurance policies to discerning customers, who access the Internet will gain momentum. Typically motor,
travel and health policies will be sold more online. Many insurers have already realised this and are creating separate verticals
to exploit this segment. The interplay of technology & telecom solutions will be a major factor determining the growth of the
industry in the future.
Till recently, micro-insurance on the lines of micro-finance, is thought to be a magic word and insurers planned to bring retail
products to suit this segment.
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One major problem affecting the industry, like in all developing economies is the shortage of trained insurance professionals
and technicians at all levels. So companies that are able to recruit and grow talent that continue to provide innovative
insurance solutions for the underserved Indian market will be the ones that will rise and shine in the general insurance
industry. The market is large and set for rapid growth but the ones that take the required calculated risks, have the right
technical expertise, do not blindly go after market share and are customer-centric in their approach to the market will be the
ones to benefit from this growth and become one of the biggest and best run insurance companies in the world.
OBJECTIVE OF TRENDS
Government of India initiated certion changes through its new economic
policy in 1991. This policy attempted some of the following objectives of
trends
Reform in industrial policy and indusrial licencing.
Developing and partial convertibility of rupee.
Reform in trade policy.
Reduction of fiscal policy.
Simplification of bureaucratic control and procedures.
Simplification of foreign investment norms.
Reduction of inflationary pressures.
Reducing control of investment norms.
Change in enactment like FERA ( FOREIGN EXCHANGE
REGULATORY AUTHORITY) and MRTP ( MONOPOLIES AND
RESTRICTIVE TRADE PRACTICE )
Opening up of insurance to the private sector will substially help in
enhancing saving mobilization offering anew range of insurance products,
covering a large population and increasing the average per capita insurance
premium.
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POLICIES OF TRENDS
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In addition to this, they are required to furnish certificates from advocates and actuaries
that the statements made are true and accurate and are not in violation of any law and
that the policy wordings are simple and easily understandable to a policyholder.
STRATEGIES FOR BETTERMENT AFTER trends in insurance
sector
Maximising customer satisfaction.
Introducing new technologies.
Improving promotional mix.
Updating research and development.
Strategic approach to fund management.
Diversification.
Minimum government interference.
OPPORTUNITIES
Mass Marketing:
India is a highly populated country and would continue to be so in the near
future.New players may tend to favour the "creamy" layer of the urban
population. But, in doing so, they may well miss a large chunk of the
insurable population. A strong case in point is the current business
composition of the dominant market leader -the Life Insurance Corporation
of India. The lion's share of its new business comes from the rural and semirural markets. In a country of 1 billion people, mass marketing is always a
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Job Opportunities:
Job opportunities are likely to increase manifold. The liberalization of the
insurance sector promises several new job opportunities for those who are
equipped with degrees in finance. Finance professionals who had witnessed
a slump in the job market would be much relieved. There will be demand
for marketing specialists, finance experts and human resource professionals.
Reinsurance:
Huge capacity is likely to be created in the area of reinsurance. Apart from
pure reinsurance activities, which involve providing insurance protection,
there will be a revolution in service-related fields like training, seminars,
workshops, know-how transfer regarding risk assessment and rating, risk
inspections, risk management and devising new policy covers, etc.
Marketing Strategies:
Also, with more players in the market, there will be significant increase in
advertising, brand building, and this will benefit whole lot of ancillary
industries.A substantial shift is likely to take place in the distribution of
insurance in India. Many of these changes will echo international trends.
Worldwide, insurance products move along a continuum from pure service
products to pure commodity products. Initially, insurance is seen as a
complex product with a high advice and service component. Buyers prefer a
face-to-face interaction and place a high premium on brand names and
reliability.
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Bancassurance:
In other markets, notably Europe, this has resulted in bank assurance: banks
entering the insurance business. The Netherlands led with financial services
firms providing an entire range of products including bank accounts, motor,
home and life insurance, and pensions. Other European markets have
followed suit. In France, over half of all life insurance sales are made
through banks. In the UK, almost 95% of banks and building societies are
distributing insurance products today.In India too, banks hope to maximize
expensive existing networks by selling a range of products.
Information Technology
Worldwide interest in E-commerce and India's predominant position in
Information Technology and software development are also likely to be
major factors in the marketing of insurance products in the immediate
future. The number of Internet account is increasing and the trend has
already been set by some of the leading insurers and insurance brokers
worldwide.
CHALLENGES
1)Technology:
In today's highly competitive financial services environment, effective
organizations will employ technology in a strategic way so to achieve a
competitive edge. Technology will play an increasing role in aiding design
and administering of products, as well in efforts to build life-long customer
relationships. At the same time, investment in technology will only help as
long as firms find the right people: people with the right attitude, values,
and ethics, commitment to excellence, and focus on customer service.
Competition:
Thus, apart from the normal issues facing any new company, many new
Indian private insurance players will need to cope with the challenges of
working with a joint venture partner. They will be competing with large and
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Figure for
June 2015 in
INR crores
Figure for
June 2014 in
INR crores
Royal Sundaram
64.78
77.46
Tata AIG
47.14
36.50
Reliance General
Insurance
80.45
79.03
IFFCO Tokio
36.55
58.23
ICICI Lombard
348.98
423.54
Bajaj Allianz
136.20
109.84
HDFC Ergo
143.86
123.40
Cholamandalam
87.21
51.71
Future Generali
32.29
37.30
Universal Sompo
17.57
12.22
Bharti AXA
66.30
39.33
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1.99
1.45
L&T
3.94
0.10
176.90
406.13
Apollo Munich
97.31
67.73
Max Bupa
36.39
14.13
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CONCLUSION
Privatization is a widely applied economic policy. It has, incontestably,
produced substantial economic benefits by raising profitability and
efficiency in firms, by providing financial resources to strapped
governments, and by signaling to creditors, investors and donors the
seriousness and credibility of a governments shift in economic regime. In
developing countries, privatization has most successfully been applied in
commercial, industrial, manufacturing and service firms operating in
competitive markets. This form of privatization has generally proven its
worth: Consumers appreciate improvements in terms of quality and quantity
of good or services producedeven when prices increase, which is far from
the general case. In most countries, complaints about this sort of
privatization have been relatively muted and short-lived. Citizenries may
not like the job losses or the foreign ownership of breweries, banks, mines
and hotels, but the matter rarely reaches the level of street demonstrations.
The more important issue, economically and politically, is that of
infrastructure privatization.
Indias insurance sector is expected to grow even faster than the countrys overall
economic growth, opening up new business avenues across the industry. With a
large number of insurance providers already operating in the country, the Indian
insurance industry has shown early signs of entering a consolidation phase, and an
improved distribution infrastructure, the adoption of new channels and
differentiated product offerings will continue to change the competitive landscape
significantly.
Indias low life insurance penetration rate and the rising awareness of the need for
insurance will be key growth factors in the Indian insurance industry. Favorable
foreign investment policies and increased capital-raising options will also create an
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