2.

1 LITERATURE REVIEW

With the initiation of the deregulation in the Indian insurance market, the monopoly of big public sector
companies in life insurance as well as general (non-life insurance) market has been broken. New private
players have entered the market and with their innovative approaches and better use of distribution
channels and technology, they are eating in to the shares of established public sector companies in
Indian Insurance Market.

McKinsey’s director in India and banking industry expert Leo Puri says the opening of insurance has been
a smooth deregulation process. “The state mammoth, the LIC has not been estabilished and the
objective of deregulation has been met. Employment has grown so as the insurance business.”

“Consumer attitudes and perception about insurance have changed; Insurance is now considered a
viable financial instrument to meet different needs.” Bajaj Allianz’s Ghosh.

In 2009-10, the life insurance sector grew by 10%. Life Insurance penetration (i.e. premium as a
percentage of GDP) in India was 2.26% as against the global penetration level of 5.23%.The marketplace
is getting competitive, but the market share of private insurance companies remains very low -- in the
10-15 percent range. The heavy hand of government still dominates the market, with price controls,
limits on ownership, and other restraints.

Indian insurance industry is anticipated to witness a 500% growth and reach to US$ 60 Billion in the
coming four years, thanks to swelling demand in semi-urban and rural areas, reported industry chamber
Assoc ham. Assocham stated that semi-urban areas would have a share of US$ 35 Billion and urban
areas would account for US$ 25 Billion in the US$ 60 Billion industry. Anil K Agarwal, President,
Assocham (Associated Chambers of Commerce and Industry of India), reported that a large segment of
rural India is still untouched because of long distances, poor distribution and high return costs. A
Research Analyst at RNCOS says that the progress in the semi-urban and rural areas would largely fuel
the growth in insurance sector. The other factors that would boost the growth in this sector are
improving economic scenario, increasing disposable incomes, and rising product demands.

As part of the Federal Balanced Budget Act of 1997, Congress in United States created the Children's
Health Insurance Program (CHIP) as a way to encourage states to provide health insurance to uninsured
children. Jacob Alex Klerman (1997) in his report Health Insurance among children of unemployed
parents addresses the problem of lack of health insurance for children in the United States. Using the
data from the 1990, 1991, and 1992 panels of the Survey of Income and Program Participation, this
report presents the interrelation between parental unemployment and children’s health insurance
coverage. As per the report nearly half of the children lose their health insurance because their parents
lose or change a job. Rosemarie, Paul J Boben, Jennifer B. Bonney (2007) evaluates the State Children’s
Health Insurance Program (SCHIP) and how it has given state the freedom in providing more children
with coverage. They found out that because of providing Health Insurance to Children it provides not
only cover against medical bill but also participate in the customer health planning. Senate Bill Report
(United States) (2005) on Regulating Life Insurance by Labor, Commerce and Financial Institutions
evaluates 100 Life Insurance Companies to survey their practices with regard to the marketing and
underwriting of juvenile insurance policies. In many cases, the average death benefit claimed, upon the
death of an insured child, far exceeded the economic losses, such as funeral expenses. Concern exists
that, while many well-meaning adults may innocently purchase inappropriate or unnecessary amounts
of life insurance on children, some may actually be purchasing the policies with criminal intent. Some
news stories indicate that some children are murdered in order to obtain insurance payments. The
report suggest that Life insurers must develop and implement underwriting standards and procedures
designed to detect and prevent the purchase of juvenile life insurance for speculative or fraudulent
purposes, and maintain records of rejected applications for 10 years. Deborah Senn (2007) Insurance
commissioner United States says that State needs stronger guidelines for Children’s Life Insurance. The
survey conducted indicates that many companies offering juvenile life insurance do not appear to have
strong standards in place to help prevent this kind of tragedy. ShaileshBhandari and Elizabeth Gifford
(2005) in their paper on Children with Health Insurance investigate patterns of children’s health
insurance coverage and explore the characteristics of uninsured children. Using the data from the
Current Population Survey (CPS), it provides national estimates of the number and percentage of
uninsured children by age, race, family type and family income. According to Tom Menezes, in his work
on “Life insurance for child”, June, 2007, Child Insurance is one of the fastest selling insurance products
of the new era. Every insurance company should focus on innovative products and train the advisors to
approach prospective customers. SmithaTripathi (2008) looks into how Higher education which used to
be remarkably cheap in India is changing with remarkable swiftness. The paper discusses that parents
should start saving for the child education even before he or she starts going to nursery school. If you
are the type who likes starting early, it might be a good idea to start looking at insurance policies that
matures when your child comes of age. Now that education is getting costlier, insurance companies are
also realizing that it’s important to offer new schemes. So, there are much more policies than ever
before. These policies mature when your child comes of age and the money can be used for higher
education or marriage expenses. The paper provides the information about the different type of child
policies and which one suits you according to your need. Mr. Ian J Watts, Managing Director, Tata AIG
Life Insurance (2006) says that Children Life insurance products not only meet the educational needs of
children but also offer insurance cover. Considering the costs involved for pursuing higher education and
also the competitive environment that a child is exposed to, the need for planning the education of a
child is an important aspect for any parent.

Alison Cuellar, Kelly J Kelleher, Jennifer A Rolls and Kathleen Pajer (2008) discuss that without the Health
Insurance benefits many youths will not receive timely health care. The delinquent youths who have
violated the law have typical poor physical and mental stress which leads to higher medical costs. David
Gambrill (2008) points out the importance of Child Insurance. It’s a changing world. Almost nothing
remains the same like that your child dreams keep on changing. It’s up to you to make sure that when
time comes, she has the means to make her dreams come true. Sue Laing (2009) brings forward an
often-overlooked issue, the financial impact that a child’s illness or injury can have on family finances in
her research paper Children’s trauma: an undersold safety net. The author shares her personal
experience that clients accept the vulnerability of their children far more readily than their own…this is
just a matter of informing them of their options. Of those with whom children’s trauma is discussed and
perhaps debated, some will accept the advice to go for child insurance. The overall amount the parent’s
will be committing to their insurance package is relatively inexpensive as compared to the child’s
trauma. Though the returns are not very high, most financial planners recommend that you buy a
children's policy. Sanjiv Bajaj, director, Bajaj Capital, says that "Children insurance policies ensure a
disciplined saving mode for the child's future”. Moreover, since the returns are tax-free, you need not
worry about what the tax structure will be like 20 years down the line."

The US$ 41-billion Indian life insurance industry is considered the fifth largest life insurance market, and
growing at a rapid pace of 32-34 per cent annually, according to the Life Insurance Council. Since the
opening up of the insurance sector in India, the industry has received FDI to the tune of US$ 525.6
million. The government is likely to reintroduce the Insurance Bill which proposes to increase the FDI
cap in private sector insurance companies from 26 per cent to 49 per cent.