AWARENESS OF INSURANCE IN INDIA
1. THE INSURANCE INDUSTRY IN INDIA
AN OVERVIEW
With the largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India. It’s a business growing at the rate of 15-
20 per cent annually and presently is of the order of s 15!0."1 billion #for the
financial year 200! $ 200%&. 'ogether with ban(ing ser)ices, it adds about %* to
the country’s +ross ,omestic -roduct #+,-&. 'he gross premium collection is
nearly 2* of +,- and funds a)ailable with .I/ for in)estments are 0* of the
+,-.
1)en so nearly !5* of the Indian population is without life insurance co)er while
health insurance and non-life insurance continues to be below international
standards. 2 large part of our population is also sub3ect to wea( social security and
pension systems with hardly any old age income security
2 well-de)eloped and e)ol)ed insurance sector is needed for economic
de)elopment as it pro)ides long term funds for infrastructure de)elopment and
strengthens the ris( ta(ing ability of indi)iduals. It is estimated that o)er the ne4t
ten years India would re5uire in)estments of the order of one trillion 67 dollars.
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AWARENESS OF INSURANCE IN INDIA
2. HISTORICAL PERSPECTIVE
'he history of life insurance in India dates bac( to 1010 when it was concei)ed as
a means to pro)ide for 1nglish Widows. Interestingly in those days a higher
premium was charged for Indian li)es than the non - Indian li)es, as Indian li)es
were considered more ris(y to co)er. 'he 8ombay 9utual .ife Insurance 7ociety
started its business in 10%0. It was the first company to charge the same premium
for both Indian and non-Indian li)es.
'he :riental 2ssurance /ompany was established in 1000. 'he +eneral insurance
business in India, on the other hand, can trace its roots to 'riton Insurance
/ompany .imited, the first general insurance company established in the year
1050 in /alcutta by the 8ritish. 'ill the end of the nineteenth century insurance
business was almost entirely in the hands of o)erseas companies.
Insurance regulation formally began in India with the passing of the .ife Insurance
/ompanies 2ct of 1;12 and the -ro)ident <und 2ct of 1;12. 7e)eral frauds during
the 1;20=s and 1;>0=s sullied insurance business in India. 8y 1;>0 there were 1%!
insurance companies.
'he first comprehensi)e legislation was introduced with the Insurance 2ct of 1;>0
that pro)ided strict 7tate /ontrol o)er the insurance business. 'he insurance
business grew at a faster pace after independence. Indian companies strengthened
their hold on this business but despite the growth that was witnessed, insurance
remained an urban phenomenon.
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AWARENESS OF INSURANCE IN INDIA
'he +o)ernment of India in 1;5!, brought together o)er 2"0 pri)ate life insurers
and pro)ident societies under one nationali?ed monopoly corporation and .ife
Insurance /orporation #.I/& was born. @ationali?ation was 3ustified on the
grounds that it would create the much needed funds for rapid industriali?ation. 'his
was in conformity with the +o)ernment=s chosen path of 7tate led planning and
de)elopment.
'he non-life insurance business continued to thri)e with the pri)ate sector till
1;%2. 'heir operations were restricted to organi?ed trade and industry in large
cities. 'he general insurance industry was nationali?ed in 1;%2. With this, nearly
10% insurers were amalgamated and grouped into four companies- @ational
Insurance /ompany, @ew India 2ssurance /ompany, :riental Insurance /ompany
and 6nited India Insurance /ompany. 'hese were subsidiaries of the +eneral
Insurance /ompany #+I/&.
3. KEY MILESTONES
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AWARENESS OF INSURANCE IN INDIA
1912: 'he Indian .ife 2ssurance /ompanies 2ct enacted as the first statute to
regulate the life insurance business.
1928: 'he Indian Insurance /ompanies 2ct enacted to enable the go)ernment to
collect statistical information about both life and non-life insurance businesses.
1938: 1arlier legislation consolidated and amended by the Insurance 2ct with the
ob3ecti)e of protecting the interests of the insuring public.
1956: 2"5 Indian and foreign insurers along with pro)ident societies were ta(en
o)er by the central go)ernment and nationali?ed. .I/ was formed by an 2ct of
-arliament- .I/ 2ct 1;5!- with a capital contribution of s. 5 crore from the
+o)ernment of India
4. INDUSTRY REFORMS
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AWARENESS OF INSURANCE IN INDIA
eforms in the Insurance sector were initiated with the passage of the I,2 8ill in
-arliament in ,ecember 1;;;. 'he I,2 since its incorporation as a statutory
body in 2pril 2000 has fastidiously stuc( to its schedule of framing regulations and
registering the pri)ate sector insurance companies. 7ince being set up as an
independent statutory body the I,2 has put in a framewor( of globally
compatible regulations.
'he other decision ta(en simultaneously to pro)ide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of
the I,2 online ser)ice for issue and renewal of licenses to agents. 'he appro)al
of institutions for imparting training to agents has also ensured that the insurance
companies would ha)e a trained wor(force of insurance agents in place to sell their
products.
5. PRESENT SCENARIO - LIFE INSURANCE
INDUSTRY IN INDIA
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AWARENESS OF INSURANCE IN INDIA
'he life insurance industry in India grew by an impressi)e "%.>0*, with premium
income at s. 15!0."1 billion during the fiscal year 200!-200%. 'hough the total
)olume of .I/=s business increased in the last fiscal year #200!-200%& compared to
the pre)ious one, its mar(et share came down from 05.%5* to 01.;1*.
'he 1% pri)ate insurers increased their mar(et share from about 15* to about 1;*
in a year=s time. 'he figures for the first two months of the fiscal year 200%-00 also
spea( of the growing share of the pri)ate insurers. 'he share of .I/ for this period
has further come down to %5 percent, while the pri)ate players ha)e grabbed o)er
2" percent.
With the opening up of the insurance industry in India many foreign players ha)e
entered the mar(et. 'he restriction on these companies is that they are not allowed
to ha)e more than a 2!* sta(e in a company’s ownership.
7ince the opening up of the insurance sector in 1;;;, foreign in)estments of s.
0.% billion ha)e poured into the Indian mar(et and 1; pri)ate life insurance
companies ha)e been granted licenses.
Inno)ati)e products, smart mar(eting, and aggressi)e distribution ha)e enabled
fledgling pri)ate insurance companies to sign up Indian customers faster than
anyone e4pected. Indians, who had always seen life insurance as a ta4 sa)ing
de)ice, are now suddenly turning to the pri)ate sector and snapping up the new
inno)ati)e products on offer. 7ome of these products include in)estment plans with
insurance and good returns #unit lin(ed plans&, multi $ purpose insurance plans,
pension plans, child plans and money bac( plans. #www.wi(ipedia.com&
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AWARENESS OF INSURANCE IN INDIA
6. INSURANCE INDUSTRY CLASSIFICATION
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INSURANCE
AWARENESS OF INSURANCE IN INDIA
F!" I#$%!&#'" M&!#" I#$%!&#'" M"(')&* M+,+! V"-')"
L." #$%!&#'"
L." #$%!&#'" is a contract between the policy owner and the insurer, where the
insurer agrees to pay a designated beneficiary a sum of money upon the occurrence
of the insured indi)idual=s or indi)iduals= death or other e)ent, such as terminal
illness or critical illness. In return, the policy owner agrees to pay a stipulated
amount #at regular inter)als or in lump sums&. 'here may be designs in some
countries where bills and death e4penses plus catering for after funeral e4penses
should be included in -olicy -remium. In the 6nited 7tates, the predominant form
simply specifies a lump sum to be paid on the insured=s demise.
'he )alue for the policyholder is deri)ed, not from an actual claim e)ent, rather it
is the )alue deri)ed from the =peace of mind= e4perienced by the policyholder, due
to the negating of ad)erse financial conse5uences caused by the death of the .ife
2ssured.
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LIFE INSURANCE GENERAL INSURANCE
AWARENESS OF INSURANCE IN INDIA
.ife policies are legal contracts and the terms of the contract describe the
limitations of the insured e)ents. 7pecific e4clusions are often written into the
contract to limit the liability of the insurerA for e4ample claims relating to suicide,
fraud, war, riot and ci)il commotion.
F!" I#$%!&#'"
<ire Insurance is one of the oldest forms of insurance and goes as far bac( as
9arine insurance. Its origins are in the the age-old fear of fire and human failing to
control fire. In the early de)elopment of industrial society fire was the main source
of energy. @o industrial acti)ity or commerce was possible without fire and the
need to insure the ris( of uncontrolled fire became the integral part of society.
<ire insurance is designed to pro)ide for financial loss to property due to fire and
few other related ha?ards. <ire insurance is go)erned by 'ariff under the 'ariff
2d)isory /ommittee #'2/&.
M&!#" I#$%!&#'"
9arine insurance has been defined as a contract between insurers and insured
whereby the insurer underta(es to indemnify the insured in a manner and to the
interest thereby agreed, against marine losses incident to marine ad)enture. 7ection
2#1>& 2 of Insurance 2ct 1;>0 defines it as followsB
9arine insurance businessC means the business of effecting contracts of insurance
upon )essels of any description, including cargoes freights and other interests
which may be legally insured in or in relation to such )essels, cargoes, freights,
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AWARENESS OF INSURANCE IN INDIA
goods, wares, merchandise and property of whate)er description insured for any
transit by land or water or both, and whether or not including warehouses ris(s or
similar ris(s in addition or as incidental to such transit and includes any other ris(s
customarily included among the ris(s insured in marine policies
H"&),- I#$%!&#'"
Dealth Insurance mainly co)ers two types of benefitsB one is related to the
reimbursement of medical e4penses related to specific diseases and the other is
related to the hospitali?ation. +lobally, the health co)ers operate in two ways $
cashless and cash reimbursable ones.
'he health insurance has changed the way medicine is dispensed and sold in the
most parts of the world. In India, its impact has yet to be felt. Dowe)er, the
introduction of the now famous E9ediclaim’ policy made a huge difference to an
ordinary citi?en’s usage of insurance for medical co)er purpose.
M+,+! I#$%!&#'"
9otor Insurance is one of the largest non-life insurance business in the world.
'his is because it is statutorily mandated in most parts of world. 2ll motor
)ehicles are re5uired to be registered with road transport authorities and insured
for third party liability. 'he basic premise is that motor )ehicles could either cause
in3ury or be a sub3ect to damage and in3ury and thus re5uire insurance.
'he 9otor Fehicle 2ct of 1;>; introduces compulsory insurance to ta(e care of
those who may get in3ured in an accident. 'he insurance of damage to )ehicle is
not mandatory
I#$%!&#'" /!+0("$:
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AWARENESS OF INSURANCE IN INDIA
• -rotection to in)estor.
• 2ccumulation of sa)ings.
• /hanneling these sa)ings into sectors needing huge long term in)estment.
F%#',+#$ +. #$%!&#'":
• P!+0(" /!+,"',+#: 'he primary function of insurance is to pro)ide
protection against future ris(, accidents and uncertainty. Insurance cannot
chec( the happening of the ris(, but can certainly pro)ide for the losses of
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AWARENESS OF INSURANCE IN INDIA
ris(. Insurance is actually a protection against economic loss, by sharing the
ris( with others.
• C+))"',0" 1"&!#2 +. !$3: Insurance is an instrument to share the
financial loss of few among many others. Insurance is a mean by which few
losses are shared among larger number of people. 2ll the insured contribute
the premiums towards a fund and out of which the persons e4posed to a
particular ris( is paid.
• A$$"$$*"#, +. !$3: Insurance determines the probable )olume of ris(
by e)aluating )arious factors that gi)e rise to ris(. is( is the basis for
determining the premium rate also.
• P!+0(" '"!,&#,4: Insurance is a de)ice, which helps to change from
uncertainty to certainty. Insurance is de)ice whereby the uncertain ris(s may
be made more certain.
• S*&)) '&/,&) ,+ '+0"! )&!2"! !$3: Insurance relie)es the businessmen
from security in)estments, by paying small amount of premium against
larger ris(s and uncertainty.
• C+#,!1%,"$ ,+5&!($ ,-" ("0")+/*"#, +. #(%$,!" sB Insurance
pro)ides de)elopment opportunity to those larger industries ha)ing more
ris(s in their setting up. 1)en the financial institutions may be prepared to
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AWARENESS OF INSURANCE IN INDIA
gi)e credit to sic( industrial units which ha)e insured their assets including
plant and machinery.
• M"&#$ +. $&0#2$ &#( #0"$,*"#,: Insurance ser)es as sa)ings and
in)estment, insurance is a compulsory way of sa)ings and it restricts the
unnecessary e4penses by the insured=s <or the purpose of a)ailing income-
ta4 e4emptions also, people in)est in insurance.
• S+%!'" +. "&!##2 .+!"2# "6'-": Insurance is an international
business. 'he country can earn foreign e4change by way of issue of marine
insurance policies and )arious other ways.
• R$3 .!"" ,!&(": Insurance promotes e4ports insurance, which ma(es the
foreign trade ris( free with the help of different types of policies under
marine insurance co)er.
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AWARENESS OF INSURANCE IN INDIA
7. CONSUMER A8ARENESS
/onsumer awareness is the mainspring of demand creation which runs the wheels
of industry $ any industry for that matter. 'o this Edemand’ cur)e, suppliers and
ser)ice pro)iders respond, by ma(ing a)ailable to consumers what they want,
meeting their needs and e4pectations. 'his is the way two usages Ecustomer needs’
and Ecustomer satisfaction’ emerged. 2nd these later tra)elled to domains of
Ecustomer delight’ and Ecustomer ecstasy’. /onsumer awareness, thus, becomes the
genesis for business entities. <or life insurers to initiate, e4pand, grow and sustain
by responding to larger and larger )olumes of demand emerging with greater
awareness, and setting in place supply chain management. <or life insurers to
penetrate significantly and forge ahead in the emerging mar(et, enhancing
consumer awareness becomes the prime focus of all acti)ities. 2s also strength and
competencies to Ecompete for future’
H+5 ,-"4 2+ &1+%,
.ife insurers, both in public sector and pri)ate sector, should appreciate this
Emoment of truth’ so to say and gal)ani?e their energies and resources intelligently
to bring about greater consumer awareness as a basic facilitator and an important
constituent of business strategy. 'his will create synergy all across the
organi?ation. It should be appreciated that /onsumer awareness pro)ides a new
frame of reference for )alue creation as also an opportunity for inno)ation. It is
time to thin( out of EIn bo4’ and adopt no)el strategies and measures to foster
awareness. 'o mention a fewB
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AWARENESS OF INSURANCE IN INDIA
• launch awareness mo)ement through )arious con)enient people-oriented
programs through media, corporate publicity, rural camps and popular
communication channels including adio, 'F, -ublicity FansA
• awareness of products and ser)ices though )isuals that trigger curiosity and
manifest in terms of desire and later sale-purchase transactionsA
• beyond these stages, to ta(e up awareness of other aspects such as product,
price, 5uality, ser)ice , con)enience, status, pride, 3oy and easeA
• campaigns to educate rural and semi urban masses on the need for security
that protects their li)elihood, security for produce and belongings and create
feel-good feelingsA
• 1ngage @+:s with pro)en credentials and rural intermediaries.
In summary, as life insurers #and similarly non-life insurers& get into such massi)e
efforts to reach out to all and sundry, a new phenomenon will emerge to their
delight )i?., opening up promising a)enues for Ecreation of new mar(ets’ $ the
basic fundamental and prere5uisite for sustainable growth. 9ar(et dynamics will
rule and unfold a stage through a process of e)olution Enew )alue creation’ $ the
sum total of all inno)ations. 'hereby a new phenomenon of Eco-creating uni5ue
)alue with customers’ will emerge as so brilliantly in his later path-brea(ing 'itle
G'he <uture of /ompetitionB /o-creating 6ni5ue Falue with /ustomersC. /reating
/onsumer 2wareness in .ife Insurance .et conclude by putting across two well-
(nown propositions that underline E consumer awareness’B Gcustomer is business,
business is people, people are customersC G satisfying a customer is e)erybody’s
businessC 'his phenomenon $ creating /onsumer awareness
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AWARENESS OF INSURANCE IN INDIA
8. INSURANCE AWARENESS
INSURANCE A8ARENESS
(Issued in Public Interest)
Why do you need to put your hard earned money inH
6@I' .I@I1, I@762@/1 -.2@7 li(e
.I/ 1@,:W91@' plus, 9oney plus, -rofit plus, <ortune plus, 8a3a3 6nit gain,
78I 6nit plus etcH
'erm Insurance is the /heap J 8est form of Insurance recommended by /ertified
<inancial -lanners all o)er the worldK
.et 1)eryone Inow about G'erm InsuranceC
2nd Delp them to a)oid losing their hard earned money in 6.I-sK
T-" 9"$, T"!* I#$%!&#'" P)&#$ # I#(&
INSURANCE COMPANY POLICY NAME
IDBI Fortis Termsurance
TATA AIG Raksha
Reliance Life Term Plan
HDFC Life Term Assurance
Bajaj Allianz Ne Risk Care II
LIC Anmol !ee"an # $
In%ia First Life Plan
Bharti A&A 'ecure Confi%ent
'ahara Life 'ahara (a"ach
“INSURANCE IS NOT AN INVESTMENT “
SEBI – Securities Exc!n"e # B$!rd $% Indi! (&IS')
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AWARENESS OF INSURANCE IN INDIA
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AWARENESS OF INSURANCE IN INDIA
9. INSURANCE AND ECONOMY
• Indian economy is growing in reference to global mar(et. 8usiness of
insurance with its uni5ue features has a special place in Indian economy.
• It is a highly speciali?ed technical business and customer is the most concern
people in this business, therefore this business is able to spur the growth of
infrastructure and act as a catalyst in the o)erall de)elopment of Indian
economy.
• 'he high )olumes in the insurance business help spread ris( wider, allowing
a lowering of the rates of the premium to be charged and in turn, raising
profits. When there is a bigger base, the probabilities become more
predictable, and with system wide ris(s balanced out, profits impro)e. 'his
e4plains the current scenario of mergers, ac5uisitions, and globali?ation of
insurance.
• Insurance is a type of sa)ings. Insurance is not only important for ta4
benefits, but also for sa)ings and for pro)iding security. It can be ser)ing as
an essential ser)ice which a welfare state must ma(e a)ailable to its people.
• Insurance play a crucial role in the commercial li)es of nations and act as the
lubricants of economic acti)ities. Insurance firms help to spread the
potentially financial conse5uences of ris( among the large number of
entities, to mobili?e and distribute sa)ings for producti)e use, facilitate
in)estment, support and encourage e4ternal trade, and protect economic
entities against e4ternal ris(.
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AWARENESS OF INSURANCE IN INDIA
Insurance and economic growth mutually influences each other. 2s the economy
grows, the li)ing standards of people increase. 2s a conse5uence, the demand for
life insurance increases. 2s the assets of people and of business enterprises
increase in the growth process, the demand for general insurance also increases. In
fact, as the economy widens the demand for new types of insurance products
emerges. Insurance is no longer confined to product mar(etsA they also co)er
ser)ice industries. It is e5ually true that growth itself is facilitated by insurance. 2
well-de)eloped insurance sector promotes economic growth by encouraging ris(-
ta(ing. is( is inherent in all economic acti)ities. Without some (ind of co)er
against ris(, some of these acti)ities will not be carried out at all. 2lso insurance
and more particularly life insurance is a mobili?e of long term sa)ings and life
insurance companies are thus able to support infrastructure pro3ects which re5uire
long term funds. 'here is thus a mutually beneficial interaction between insurance
and economic growth. 'he low income le)els of the )ast ma3ority of population
ha)e been one of the factors inhibiting a faster growth of insurance in India. 'o
some e4tent this is also compounded by certain attitudes to life. 'he economy has
mo)ed on to a higher growth path. 'he a)erage rate of growth of the economy in
the last three years was 0.1 per cent. 'his strong growth will bring about
significant changes in the insurance industry.
2t this point, it is important to note that not all acti)ities can be insured. If
that were possible, it would completely negate entrepreneurship. -rofessor <ran(
Inight in his celebrated boo( Gis( 6ncertainty and -rofitC emphasi?ed that profit
is a conse5uence of uncertainty. De made a distinction between 5uantifiable ris(
and non-5uantifiable ris(.
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AWARENESS OF INSURANCE IN INDIA
2ccording to him, it is non-5uantifiable ris( that leads to profit. De wrote GIt is a
world of change in which we li)e, and a world of uncertainty. We li)e only by
(nowing something about the futureA while the problems of life or of conduct at
least, arise from the fact that we (now so little. 'his is as true of business as of
other spheres of acti)ityC. 'he real management challenges are uninsurable ris(s.
In the case of insurable ris(s, ris( is a)oided at a cost.
1O. DISTRI9UTION OF INSURANCE
PRODUCTS
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AWARENESS OF INSURANCE IN INDIA
Insurance has to be sold the world o)er. 'he 'ouch point with the ultimate
customer is the distributor or the producer and the role played by them in insurance
mar(ets is critical. It is the distributor who ma(es the difference in terms of the
5uality of ad)ice for choice of product, ser)icing of policy post sale and settlement
of claims. In the Indian mar(et, with their distinct cultural and social ethics, these
conditions will play a ma3or role in shaping the distribution channels and their
effecti)eness. In today=s scenario, insurance companies must mo)e from selling
insurance to mar(eting an essential financial product. 'he distributors ha)e to
become trusted financial ad)isors for the clients and trusted business associates for
the insurance /ompanies.
D.."!"#, ($,!1%,+# '-&##")$ # I#(&
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AWARENESS OF INSURANCE IN INDIA
2 multi-channel strategy is better suited for the Indian mar(et. Indian insurance
mar(et is a combination of multiple mar(ets. 1ach of the mar(ets re5uires a
different approach. 2part from geographical spread the socio-cultural and
economic segmentation of the mar(et is )ery wide, e4hibiting different traits and
needs. ,ifferent multi-distribution channels in India are as follows
? InternetB 1-commerce sales through internet portals
? Wor(siteB 9ar(eting arrangements with entities to sell insurance to their
employees
? ,irectB 7ales through call centre’s andLor direct mailing
? 8ro(ersB epresentati)es for buyers who deal with either agent or companies
in arranging for co)erage
? /orporate agentsB @on-ban( institutions in)ol)ed in the sale of insurance
products
? 8anc assuranceB Insurance products offered through ban(s
? 'ied agentsB Insurance companies aligned agency force
In today’s scenario, insurance companies must mo)e from selling insurance to
mar(eting an essential financial product. 'he distributors ha)e to become trusted
financial ad)isors for the clients and trusted business associates for the insurance
companies.
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AWARENESS OF INSURANCE IN INDIA
'he most prominent channel of insurance distribution areB
• A2"#,$: 2gents are the primary channel for distribution of insurance. 'he
public and pri)ate sector insurance companies ha)e their branches in almost
all parts of the country and ha)e attracted local people to become their
agents. 'oday=s insurance agent has to (now which product will appeal to the
customer, and also (now his competitor=s products to be an effecti)e
salesman who can sell his company, the product, and himself to the
customer. 'o the a)erage customer, e)ery new company is the same.
-erceptions about the public sector companies are also cemented in his
mind. 7o an insurance agent can play an important role to create a good
image of company.
• 9$: 8an(s in India are all per)asi)e, especially the public sector ban(s.
9any insurance companies are selling their products through ban(s.
/ompanies which are ban( owned, they are selling their products through
their parent ban(. 'he public sector ban(s, with their )ast branch networ(s,
are helpful to insurance companies. 'his channel of selling insurance is
(nown as 9&#' &$$%!&#'".
INSURANCE COMPANY ASSOCIATE 9ANKS
ICICI /!%("#,&) ICICI 1: 1 +. I#(&:
C,1: A))&-&1&( 1: F"("!&)
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AWARENESS OF INSURANCE IN INDIA
1: $+%,- I#(&# 1: P%#;&1
&#( M&-&!&$-,!& '++/"!&,0"
1
S9I )." S,&," 1 +. I#(&
9!)& $%# )." D"%,$'-" 1: C,1: 1 +.
R&;&$,-&#: A#(-!& 1
IN< V4$4& 1 V4$4& 1
A00& )." #$%!&#'" A9N &*!+ 1: '&#&!& 1
HDFC $,&#(&!( )." U#+# 1: I#(&# 1
M", )." K&!#&,&3& 1: ;=3 1
Source: - Hindu Business Line, January 08, 2007
• 9!+3"!$: @ow a day’s different financial institution are selling insurance.
'hese financial institutions are (nown as bro(ers. 'hey are ta(ing some
underwriting charges from the insurance companies to sell their insurance
products.
• C+!/+!&," &2"#,$: /orporate agency is a cross selling type of channel.
Insurance companies’ tie-up with business houses in other industries to sell
insurance either to their employees or their customers. Insurance industry,
during the past 2 years has witnessed a number of such strategic tie-ups and
alliances. /orporate agents ha)e become a ma3or force to rec(on with in
distributing insurance products. 7uch as- 8a3a3 2llian? tied up with 9aruti
6dyog and <ord for auto insurance and 'ata 2I+ life has tied up with 'ata
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AWARENESS OF INSURANCE IN INDIA
tea, (haitan’s Williamson ma3or and bridge foundation for selling rural
policies.
• I#,"!#",: In this technological world internet is also a channel of selling
insurance. 'his can be as direct mar(eting.
O,-"! D$,!1%,+# M",-+($
2lternate distribution channels are needed for the following reasonsB
• 'o increase insurance penetration in the country
• 'o differentiate on the basis of customer ser)iceA to retain and attract new
customers to e4pand business
• 'o increase insurance awareness and (nowledge among people
• 'o satisfy the needs of more demanding customers
• 'o impro)e cost efficiency in insurance distribution
-ri)ate players are e4ploring se)eral alternati)es to reduce the cost of replicating
the distribution networ( of public sector insurance companies. While third-party
25
AWARENESS OF INSURANCE IN INDIA
distribution in fast-mo)ing consumer goods is a possibility, the comple4ity of
insurance products, especially gi)en the low awareness le)els, would necessitate
direct selling.
:ne potential channel is mar(eting through corporate employers, i.e., employers
purchase products on behalf of the employees or at least support the mar(eting
effort. 'he concept of Gwor(site mar(eting,C i.e., the sale of )oluntary insurance
products to employees at the wor(site through payroll deduction has become
common. Wor(site mar(eting, which was once the realm of a few small
companies, selling 3ust a few products, has now stretched to large companies,
offering a )ariety of wor(site products.
11. CHAN<IN< FACE OF INDIAN INSURANCE
INDUSTRY
2fter the Insurance egulatory and ,e)elopment 2uthority 2ct ha)e been
passed there has been establishment of many pri)ate insurance companies in India.
-re)iously there was a monopoly business for .ife Insurance /orporation of India
#..I./.& who was the only life-insurance company for the people till 2000. ..I./.
still holds %1."* of the mar(et share in 200!. 8ut after the introduction of pri)ate
life insurance companies there is a great competition in Indian mar(et now.
1)eryone is trying to capture the fresh mar(et here and penetrate it with aggressi)e
mar(eting strategies. 'oday life-insurance is not only limited up to 3ust life ris(
26
AWARENESS OF INSURANCE IN INDIA
co)er and maturity period bonuses but changed to greater return from the
in)estments. With the introduction of the unit lin(ed insurance policies these
companies are in)esting the money in different in)estment instruments li(e shares,
bonds, debentures, go)ernment and other securities. -eople are demanding for
higher returns with the life ris( co)er and pri)ate companies are gi)ing >0-"0*
a)erage growth per annum. 'hese life-insurance companies ha)e e)ery (ind of
policies suiting e)ery need right from financial needs of, marriage, gi)ing birth and
rearing up a child, his education, meeting daily financial needs of life, pension
solutions after retirement. 'hese companies ha)e e)ery aspects and needs of our
life co)ered along with the death-benefit.
In India only 25* of the population has life
insurance. 7o Indian life-insurance mar(et is the target mar(et of all the companies
who either want to e4tend or di)ersify their business. 'o tap the Indian mar(et
there has been tie-ups between the ma3or Indian companies with other International
insurance companies to start up their business. 'he go)ernment of India has set up
rules that no foreign insurance company can set up their business indi)idually here
and they ha)e to tie up with an Indian company and this foreign insurance
company can ha)e an in)estment of only 2"* of the total start-up in)estment.
Indian insurance industry can be featured byB
• .ow mar(et penetration.
• 1)er growing middle class component in population.
• +rowth of customer’s interest with an increasing demand for better
insurance products.
27
AWARENESS OF INSURANCE IN INDIA
• 2pplication of information technology for business.
• ebate from go)ernment in the form of ta4 incenti)es to be insured.
'oday, the Indian life insurance industry has a do?en pri)ate players,
each of which are ma(ing strides in raising awareness le)els, introducing
inno)ati)e products and increasing the penetration of life insurance in the )astly
underinsured country. 7e)eral of pri)ate insurers ha)e introduced attracti)e
products to meet the needs of their target customers and in line with their business
ob3ecti)es. 'he success of their effort is that they ha)e captured o)er 20* of
premium income in fi)e years.
'he biggest beneficiary of the competition among life insurers has
been the customer. 2 wide range of products, customer focused ser)ice and
professional ad)ice has become the mainstay of the industry, and the Indian
customer’s forms the pi)ot of each company’s strategy. -enetration of life
insurance is beginning to cut across socio-economic classes and attract people who
ha)e ne)er purchased insurance before.
.ife insurance is also now being regarded as a )ersatile financial
planning tool. 2part from the traditional term and sa)ing insurance policies,
industry has seen the entry and growth of unit lin(ed products. 'his pro)ides
mar(et lin(ed returns and is among the most fle4ible policies a)ailable today for
in)estment. @ow products are priced, fle4ible, and realistic and sustain so people
in better position to understand the ris( and benefits of the product and they are
accepting these inno)ati)e products.
7o it is clear that the face of life insurance in India is changing, but
with the changes come a host of challenges and it is only the credible players with
28
AWARENESS OF INSURANCE IN INDIA
a long term )ision and a robust business strategy that will sur)i)e. Whate)er the
de)elopments, the future and the opportunities in this industry will surely be
e4citing.
'here are 12 pri)ate players in Indian life insurance mar(et.
6 1 +5#"( #$%!"!$: - D,</ standard life, I/I/I prudential, I@+ Fysya,
9et.ife, :9 Iota(, 78I life.
6 #("/"#("#, #$%!"!$: - 2)i)a, 2@- sanmar, 8irla sun life, 8a3a3 2llian?, 9a4
@ew Mor( life, 'ata 2I+.
9a3or international insurers are- -rudential and 7tandard
life from 6I, 7un life of /anada, 2I+, 9et.ife and @ew Mor( life of the 67.
I#'!"&$#2 2!+5,- $#'" )1"!&)>&,+#:
M12 .I/ #in bn rs.& -IF2'1 -.2M1
<M0> 110 10
<M0" 120 20
<M05 1>0 "0
<M0! 1"0 !0
<M0% 2"0 1!0
P+$$1),"$ .+! #$%!&#'" '+*/&#"$ # I#(&:
• <urther deregulation of the mar(et.
• +reater concern for the customers.
• @ewer products and ser)ices.
29
AWARENESS OF INSURANCE IN INDIA
• /ompetition and 5uality consciousness.
• /ost effecti)e operations.
• estructuring of the public sector.
• /onsolidation of domestic insurance mar(ets.
• 'echnology dri)en shift in product design.
• 2ctual operations and distribution.
• /on)ergence of financial ser)ices.
I#$%!&#'" M&!3",- P!"$"#,
'he insurance sector was opened up for pri)ate participation four years ago. <or
years now, the pri)ate players are acti)e in the liberali?ed en)ironment. 'he
insurance mar(et ha)e witnessed dynamic changes which includes presence of a
large number of insurers both life and non-life segment. 9ost of the pri)ate
insurance companies ha)e formed 3oint )enture collaborating well-recogni?ed
foreign players across the globe.
'here are now 2; insurance companies operating in the Indian mar(et $ 1" pri)ate
life insurers, nine pri)ate non-life insurers and si4 public sector companies. With
many more 3oint )entures in the offing, the insurance industry in India today stands
at a crossroads as competition intensifies and companies prepare sur)i)al strategies
in a detariffed scenario.
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AWARENESS OF INSURANCE IN INDIA
'here is pressure from both within the country and outside on the +o)ernment to
increase the <oreign ,irect In)estment #<,I& limit from the current 2!* to ";*,
which would help NF partners to bring in funds for e4pansion.
'here are opportunities in the pensions sector where regulations are being framed.
.ess than 10 * of Indians abo)e the age of !0 recei)e pensions. 'he I,2 has
issued the first license for a standalone health company in the country as many
more players wait to enter. 'he health insurance sector has tremendous growth
potential, and as it matures and new players enter, product inno)ation and
enhancement will increase. 'he deepening of the health database o)er time will
also allow players to de)elop and price products for larger segments of society.
12. CHAN<IN< PERCEPTION OF INDIAN
CUSTOMERS
Indian Insurance consumers are li(e Indian Foters, they are soft but when time is
right and ripe, they demand and see( necessary changes. ,e-tariff of many
Insurance -roducts are the reflection of changing aspirations and growing demand
of Indian consumers.
<or historical years, Indian consumers were at recei)ing end. Insurance -roduct
was underwritten and was practically forced onto consumers on a G'a(e-it-2s-it-
basisC. 2ll that got changed with passage of I,2 act in 1;;;. @ew insurance
companies ha)e come into e4istence leading to open competition and hence better
products for customers.
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AWARENESS OF INSURANCE IN INDIA
Indian customers ha)e become )ery sensiti)e to /o)erage L -remium as well as the
-roducts #read is( 7olution&, that is gi)en to them. 'here are not ready to accept
any product, no matter e)en if that is coming from the mar(et leader, should that
product is not ser)ing the purpose. 2 case in point is 6.I- -roduct L +roup .ife
and /redit .ife in .ife Insurance segment and 'ra)el L <amily <loater Dealth and
.iability Insurance in the @on-life segment are new age 2)atar. 'he new products
are constantly being demanded by Indian consumers, which is putting huge
pressures on Insurance companies #ead is( 6nder-writers& and 8ro(ers to
respond.
/ustomers are loo(ing at Insurance for co)ering -ure is( now which I ha)e
co)ered in my ne4t section. 2nother good reason why we are seeing 5uic( changes
in the buying beha)ior of Insurance from mere In)estment to ris( mitigation is the
cost of eplacement of +oods #:+& or /ost of 7er)ices #/:7&.
@ow Indian customers are aware of insurance industry and insurance products
pro)ided by companies. 'hey ha)e become more sensiti)e. 'hey would not accept
any type of insurance product unless it fulfills their re5uirements and needs. In
historic day’s customers loo(ing at insurance products as a life co)er which can
pro)ide security against any unacceptable e)ents, but now customers loo( at
insurance products as an in)estment as well as life co)er. 7o today’s customers
wants good return from the insurance companies. 'he Indian customer’s forms the
pi)ot of each company’s strategy.
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AWARENESS OF INSURANCE IN INDIA
13. KEY SUCCESS FACTORS
In order to succeed in any of the business it is )ery necessary to ma(e and follow
the strategies. 7trategies are )ery important for any of the business. <ollowing are
the general strategies, which are recommending to the insurance sector. :ne
approach is to focus upon product 5uality, which will instill confidence in minds of
the customers that they would be offered best product from out of the se)eral
a)ailable products. 'he other approach, is to focus on the customers need, would
in)ol)e a hea)y in)estment in de)eloping relationships with policyholders. 6nder
this approach, one can e4pect a range of products and ser)ices designed to gi)e the
customer what he specially desires.
'he third approach is of greater mar(et segmentation under which the population
should be di)ided into se)eral homogeneous groups and product, and ser)ices
would be targeted towards such selected mar(ets. 'he effort would be to GtieC
clients to their company- by customi?ed combination of co)erage, easy payment
plan, ris( management ad)ice, and con)enient 5uic( claim handling.
33
AWARENESS OF INSURANCE IN INDIA
P+!,"! <"#"!' S,!&,"2"$:
:ne of the e4pert 9ichel porters has identified three internally consistent generic
strategies, which can be used singly or in combinationB o)erall cost leadership is
clearly under stable. In a differentiation strategy, a company see(s to be uni5ue in
its industry along some dimensions that are widely )aluable by the customer. 9ay
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 see(s a cost ad)antage in its target
segment, while in differentiation focusA a company see(s a differentiation target.
M&!2#&) D.."!"#, P!+(%',:
2nother strategy would be for the companies to design products that will ma(e
comparison-shopping difficult. 'hey could offer a wide )ariety of co)ers with
marginal differences and )arying prices, whose terms and conditions are difficult
to compare for consumers who may not ha)e sufficient e4perience in purchasing
insurance and who would find it difficult to ma(e a clear choice. If the consumer is
offered a uni5ue policy, he will ha)e no alternati)e co)erage with which can be
compared. +i)en the combination policy, which can offer protection against a
number of losses, the consumer will find comparison e)en more difficult.
D"$2##2 N"5 S,!&,"2"$:
'he e4isting insurance companies cannot be satisfied with concentrating on the
consolidation of their e4isting mar(ets, but ha)e to achie)e further growth and
penetration. 'hey must, therefore, concentrating on strengthening e4isting points of
ser)ice, designing new channel of distribution, direct contact with their ultimate
customers, and front line employee empowerment. 'hey also need to refresh their
mar(eting set up. 'he new comers, on the other hand gi)e priority to tapping the
34
AWARENESS OF INSURANCE IN INDIA
mar(et, left une4ploited by the public sector companies.
M+0" ,+5&!($ R%!&) M&!3",:
It is one of the most important suggestionsA data says that rural mar(et is still
unco)ered by this sector. We belie)e that the sector should mo)e towards tie rural
mar(et. Insurance penetration can be achie)ed by tapping the neglected ural
9ar(ets. 'here is )ast potential for insurance growth in the rural sector. 2 recent
sur)ey by foundation for research, training and 1ducation in insurance #<:'1&
suggests that insurance can be sold profitably to rural communities in India. 'he
sur)ey re)eals that
• 'here is distinct hierarchy of needs in rural areas.
• ural people find security in groups the sa)ing habit is )ery strong in rural
areas.
• 2)erage sa)ing across the most important socio-economic strata comes to
>0->5* of annual income or s.1>, 500 annually, which is significant.
• 'here is high le)el of awareness about life insurance and fairly high-le)el
about >!* already own life insurance.
• 51* of these who own life insurance would li(e to buy more.
• 2mongst the sa)ers, a significant percentage does not sa)e through formal
financial modes or institutions.
• ural buyers of insurance prefer a half yearly mode of premium payment to
coincide with the time of the har)est. 'hus there are )ery much chances for
any of the companies to wor( o)er this scenario. 7o we belie)e and suggest
all the players to mo)e towards the rural areas.
M+,0&,+# +. $&)"$ .+!'":
35
AWARENESS OF INSURANCE IN INDIA
2 life insurance company should constantly be in)ol)ed in the process of
moti)ating the sales force in the turbulent times. 'he following strategies are
recommendingA
? 8uilding relationship is real per(. :ne should be sure to build in networ(ing
times for agents during the program-in addition to entertainment and
education.
? Web should be fre5uently used for creating gift ideas.
? Dold sales contests in the forth 5uarter. It is the best times to moti)ates
agents who wants to 5ualify for a trip.
? /onsider a contrast within the contest Efor- top-tier producersA additional
rewards for additional milestones that are met, such as air and guest room
upgrades.
U$" +. I#,"!#",:
'he present scenario is such that the products sold with the help of Internet. 'he
technological ad)ancement is such that force the companies to ta(e such steps. 7till
the full-fledged use of Internet is not done in our country. 2s suggestion earlier the
Internet based life insurance will help the companies to reduce the transaction cost
and time. 2t the time it can impro)e the 5uality of ser)ice to its customers, which
is the mission of the company.
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AWARENESS OF INSURANCE IN INDIA
M&!3",#2 T/$ +. A(0"!,$" +. I#$%!&#'" A2"#'4
5-'- *+$, '+*/&#"$ .+))+5 &#( 14 5-'- '%$,+*"!
&!" &5&!" &1+%, ,-"! &2"#'4
• 9)+'3 )#" &(0"!,$#2 # #(%$,!4 /%1)'&,+#$ +! ,!&("
;+%!#&)$: 9any companies li(e to ad)ertise in the same areas.
• 9%$#"$$ +//+!,%#,4 &(0"!,$#2: 'hin( of local newspapers such as
the ,aily @ews 2nalysis #,@2&, 'imes of India, and 'he DI@,6 etc. 'his
is a )ery effecti)e way to ad)ertise and mar(et agency, since the company
needs to build brand name recognition.
• T")"0$+# A($: 'he most ob)ious and e4pensi)e forms of ad)ertising is
the tele)ision.
• L+'&) M+0" T-"&,!"$: 2 local audience and a family type atmosphere
is a great way for mar(eting insurance business. 9any types of insurance
37
AWARENESS OF INSURANCE IN INDIA
come into play here when an indi)idual or the family are out watching the
mo)ie. 2ll these things come into play when parents are out with their (ids.
• D!"', M&) A(0"!,$#2: 'here are companies out there that will do
direct mail by which people are aware.
• A(0"!,$#2 +%,(++!$: 'ransit systems, bus benches, neon and
electronic signs are becoming a great way for the agent to ad)ertise. 'his is
affordable, unli(e tele)ision ads. 2nd this targets the e4act audience as most
insurers pro)ide insurance ser)ices to their local area.
• S,&,+#&!4 &(0"!,$#2: 2 )ery great way of ad)ertising is right through
business stationary and supplies. 2 nice way of showing good faith is gi)ing
customers a pen of insurance office name and contact information
• 8"1$," A(0"!,$#2: 2 website tells customer about insurance agency
and it a 5uic( and easy reference for customers loo(ing for 5uotes of any
type of insurance such as, homeowners insurance, auto insurance, life
insurance and many others
• O#)#" &(0"!,$#2: 9any insurance companies do online ad)ertisement.
2s today in 21
st
centaury it is )ery important.
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AWARENESS OF INSURANCE IN INDIA
RSS FEED COMMENTS
o ECONOMY
o MARKETS
Monday, April 21, 2008
I#(&?$ #$%!&#'" $"',+! /+$"( .+! 2@@A 2!+5,- 14
2@1@
8y Jo Black
Indian insurance sector is li(ely to register unprecedented growth of 200* and
attain a si?e of s. 2000 billion #O51.2 billion& by 200;-10, in which a pri)ate
39
AWARENESS OF INSURANCE IN INDIA
sector insurance business will achie)e a growth rate of 1"0* as a result of
aggressi)e mar(eting techni5ue being adopted by them against >5-"0* growth rate
of state owned insurance companies.
'he aforesaid findings are made by 'he 2ssociated /hambers of /ommerce and
Industry of India #277:/D29& on PInsurance in @e4t 2 Mears’, saying that in the
last couple of years, the insurance sector has grown by /2+ of around 1%5* and
the trend will emerge still better because of potential factor. /urrently, the
insurance sector si?e is estimated at s.500 billion #O12.0 billion&.
eleasing the 277:/D29 findings, its -resident, 9r. Fenugopal @. ,hoot said
that on account of intense mar(eting strategies adopted by pri)ate insurance
players, the mar(et share of state owned insurance companies li(e +I/, .I/ and
others ha)e come down to %0* in last "-5 years from o)er ;%*.
'he pri)ate insurance players despite the sector is still regulated has been offering
rate of return #o& to its policy holders which is estimated at about >5* as
against 20* of domestic insurance companies. 'his factor is mainly responsible
for hi(e in pri)ate insurance mar(et share which will grow further which is why
the 277:/D29 estimates that its growth rate could e)en e4ceed 1"0*.
7econdly, the state owned insurance companies such as .I/ and +I/ ha)e limited
number of policies to offer to their subscribers while in case of pri)ate insurance
companies, their policy numbers are many more and the premium amount as well
as the maturity period is much competiti)e as against those of go)ernment
insurance companies. Interestingly, said 9r. ,hoot that the pri)ate sector insurance
players ha)e started e4ploring the rural mar(ets in which until recently, the state
owned companies had the monopoly.
'he /hamber has pro3ected that in rural mar(ets, the share of pri)ate insurance
players would increase substantially as these ha)e been able to generate a faith
among their rural consumers.
40
AWARENESS OF INSURANCE IN INDIA
1stimating the potential of the Indian insurance mar(et from the perspecti)e of
macro-economic )ariables such as the ratio of premium to +,-, 277:/D29
re)eals that India’s life insurance premium, as a percentage of +,- is 1.0* against
5.2* in the 67, !.5* in the 6I or 0* in 7outh Iorea.
277:/D29 findings further re)eal that in the coming years, the corporate
segment, as a whole will not be a big growth area for insurance companies. 'his is
because penetration is already good and companies recei)e good ser)ices. In both
)olumes and profitability therefore, the scope for e4pansion is modest. 'he
/hamber has suggested that insurer’s strategy should be to stimulate demand in
areas that are currently not ser)ed at all. Insurance companies mostly focus on
manufacturing sectorA howe)er, the ser)ices sector is ta(ing a large and growing
share of India’s +,-. 'his offers immense opportunities for e4pansion
opportunities.
'o understand the prospects for insurance companies in rural India, it is )ery
important to understand the re5uirements of India’s )illagers, their daily li)es, their
peculiar needs and their occupational structures. 'here are farmers, craftsmen,
mil(men, wea)ers, casual laborers, construction wor(ers and shop(eepers and so
on. 9ore often than not, they are into more than one profession.
'he rural mar(et offers tremendous growth opportunities for insurance companies
and insurers should de)elop )iable and cost-effecti)e distribution channelsA build
consumer awareness and confidence. 'he 277:/D29 found that there are a total
12" million rural households. @early 20* of all farmers in rural India own a
Iissan /redit cards. 'he 25 million credit cards used till date offer a huge data
base and opportunity for insurance companies. 2n e4tensi)e rural agent networ(
for sale of insurance products could be established. 'he agent can play a ma3or role
in creating awareness, moti)ating purchase and rendering insurance ser)ices.
41
AWARENESS OF INSURANCE IN INDIA
'here should be nothing to stop insurance companies from trying to pursue their
own uni5ue policies and target whate)er needs that they want to target in rural
India. 277:/D29 suggests that insurance needs to be pac(aged in such a form
that it appears as an acceptable in)estment to the rural people
N&,+#&) S%**,
I#(&# I#$%!&#'": T-" 8&4 F+!5&!(
29 B&#%&!4: 2@@9 H+,") L"-M"!("#: N"5 D")-
egister :nline
7ummit ,etails
'he Insurance industry in India has been progressing at a rapid pace since opening
up of the industry in 2000. Indian domestic insurance mar(et would touch around
67O !0.5 8illion by the year 2010 from e4isting si?e of about 67O 10.2 billion.
2ccording to the Insurance egulatory and ,e)elopment 2uthority #I,2&, new
business premium income from 2pril 200! to <ebruary 200% amounted to I@
5%;.>0 billion #67O1>.10 billion&, registering an impressi)e 120* growth o)er the
same period last year.
'he Insurance industry graph is definitely ascending. ,istribution accounts for the
largest element in insurers cost and affects profitability. 'he si?e of the country
42
AWARENESS OF INSURANCE IN INDIA
combined with problems of connecti)ity in the rural areas, ma(es insurance selling
in India a difficult proposition. 'he distribution capabilities strongly influence
product design in insurance. 'he distribution channels ha)e a direct impact on the
insurer’s mar(et image. 1mergence of alternati)e channels such as 8ancassurance
and Internet is reshaping the insurance industry. India with a population of more
than a billion people offers unlimited growth potential.
With a )iew to spreading the awareness of Insurance co)er and discussing )arious
regulatory issues, ASSOCHAM $ +!2&#>#2 & N&,+#&) S%**, +# CI#(&#
I#$%!&#'" D T-" 8&4 F+!5&!(E &, 1@.@@ &.*. +# 29,- B&#%&!4: 2@@9 &, H+,")
L"-M"!("#: N"5 D")-.
S-! P K 9&#$&): H+#F1)" M#$,"! +. S,&," .+! F#&#'" = P&!)&*"#,&!4
A..&!$ -&$ 0"!4 3#()4 &2!""( ,+ #&%2%!&," ,-" S%**,. 8" -&0" &)$+ #0,"(
S-! B H&! N&!&4&#: C-&!*&#: IRDA &#( S-! T&%# 9&;&;: B+#, S"'!",&!4
G9=IH M#$,!4 +. F#&#'": <+0, +. I#(& ,+ &((!"$$ ,-" /&!,'/&#,$ # ,-"
I#&%2%!&) S"$$+#.
'he 7ummit would pro)ide an ideal forum for e4pert discussion, information
sharing and an e4cellent platform for business de)elopment. We e4pect a large
participation by all sta(eholders - institutional in)estors, fund managers,
consultants, bro(ers, regulators, custodians, lawyers, ban(s, financial planners and
retail in)estors.
43
AWARENESS OF INSURANCE IN INDIA
I#$%!&#'"
L&$, U/(&,"
D"'"*1"! 2@1@
'he 67O "1-billion Indian life insurance industry is considered the fifth largest life
insurance mar(et, and growing at a rapid pace of >2->" per cent annually,
according to the .ife Insurance /ouncil.
.ife insurance companies ha)e witnessed a %0 per cent 3ump in new premium
collection during the first fi)e months of the financial year. 2ccording to data
released by the Insurance egulatory and ,e)elopment 2uthority #I,2&,
insurance companies garnered 67O 11.%> billion in new business premium during
2pril-2ugust 2010, against 67O !.;0 billion in the corresponding period last year.
7tate-owned .I/ gained the most, with an increase of 00 per cent in new business
premium income. 2t the same time, pri)ate sector insurance recorded a >" per cent
increase in income from sales of new policies. @ew business income collected by
I/I/I -rudential stood at 67O 5%!.!0 million during 2pril-2ugust. 78I .ife
remained in the third position after registering a "0 per cent increase in new sales
44
AWARENESS OF INSURANCE IN INDIA
to 67O 5>1.0% million from 67O >%;.20 million in 2pril-2ugust 200;. D,</
7tandard .ife saw a robust 5" per cent increase in new business.
<"#"!&) I#$%!&#'"
2ccording to data released by I,2, the general insurance industry recorded 22.%!
per cent year-on-year #y-o-y& growth in gross premium underwritten during 2pril$
:ctober 2010.
'he industry collected gross premium of 67O 5.2; billion during 2pril$:ctober
2010 compared with 67O ".>1 billion in the same period last year.
'he public sector players posted 21.0; per cent y-o-y growth in gross premium
during 2pril$:ctober 2010 o)er the corresponding period last year. 2t the same
time, pri)ate players recorded a 25.1; per cent y-o-y increase in gross premium.
'he state-run insurers fared better than their pri)ate counterparts, with @ew India
Insurance collecting the ma4imum premium of 67O ;1!.%% million during 2pril-
:ctober 2010, compared to 67O %%0.25 million in the same period last year,
growing by 1;.0" per cent.
2ccording to the I,2=s 7ummary eports of 9otor ,ata of -ublic and -ri)ate
7ector Insurers - 200;-10, nearly 20." million policies were issued and a total
premium of 67O 2.>1 billion was collected.
H"&),- I#$%!&#'"
'he Indian health insurance mar(et has emerged as a new and lucrati)e growth
a)enue for both the e4isting players as well as the new entrants. 2ccording to a
45
AWARENESS OF INSURANCE IN INDIA
latest research report Q8ooming Dealth Insurance in IndiaQ by research firm
@/:7 released in 2pril 2010, all emerging trends including the (ey factors
dri)ing the mar(et growth. <urthermore, the report also identifies what could be
the possible growth areas for e4pansion and gi)es a detailed o)er)iew of the
competiti)e landscape. 'he Indian health insurance mar(et has continued to post
record growth in the last two fiscals #2000-0; and 200;-10&.
9oreo)er, as per the @/:7 estimates, the health insurance premium is e4pected
to grow at a compound annual growth rate #/2+& of o)er 25 per cent for the
period spanning from 200;-10 to 201>-1".
2ccording to a report published by Mes 8an( and an industry body in @o)ember
200;, the medical insurance sector would account for 67O > billion in the ne4t
three years.
Dealth insurance premium collections were 67O 1.%5 billion in 200;-10 compared
with 67O 0;>.%! million in the pre)ious year, I,2 said in its annual report for
200;-10. It should, howe)er, be noted that figures for 200;-10 include policies
ser)ed by third party administrators #'-2s& as well as those directly ser)ed by
insurers whereas figures for 2000-0; include policies ser)ed by '-2s only.
I#(& I#$%!&#'" M&!3",: A ("'&(" +)( +! (&5# +. & #"5
"!&I
46
AWARENESS OF INSURANCE IN INDIA
CONCLUSION
Insurance sector in India is one of the booming sectors of the economy and is
growing at the rate of 15-20 per cent annum. :ne of the (ey ser)ice industries in
India would be health and education. Insurance sector in India grew at a faster pace
after independence. In 1;5!, +o)ernment of India brought together 2"5 Indian and
foreign insurers and pro)ident societies under one nationali?ed monopoly
corporation and formed .ife Insurance /orporation #.I/& by an 2ct of -arliament,
)i?. .I/ 2ct, 1;5!, with a capital contribution of s.5 crore. 'he #non-life&
insurance businessLgeneral insurance remained with the pri)ate sector till 1;%2.
'here were 10% pri)ate companies in)ol)ed in the business of general operations
and their operations were restricted to organi?ed trade and industry in large cities.
'he insurance sector in India has come to a position of )ery high potential and
competiti)eness in the mar(et. Indians, ha)e always seen life insurance as a ta4
sa)ing de)ice.
47
AWARENESS OF INSURANCE IN INDIA
9I9ILO<RAPHY
8E9SITES REFFERED
www.irdaindia.org
www.licindia.in
www.wi(ipedia.org
www.answers.com
www.insuranceguru.com
REPORTSJARTICLES REFFERED
2sia 1conomy Watch
India Infoline @ews 7er)ice
8irla 7un.ife Insurance /ompany’s 2rticle
48
doc_609522240.doc
1. THE INSURANCE INDUSTRY IN INDIA
AN OVERVIEW
With the largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India. It’s a business growing at the rate of 15-
20 per cent annually and presently is of the order of s 15!0."1 billion #for the
financial year 200! $ 200%&. 'ogether with ban(ing ser)ices, it adds about %* to
the country’s +ross ,omestic -roduct #+,-&. 'he gross premium collection is
nearly 2* of +,- and funds a)ailable with .I/ for in)estments are 0* of the
+,-.
1)en so nearly !5* of the Indian population is without life insurance co)er while
health insurance and non-life insurance continues to be below international
standards. 2 large part of our population is also sub3ect to wea( social security and
pension systems with hardly any old age income security
2 well-de)eloped and e)ol)ed insurance sector is needed for economic
de)elopment as it pro)ides long term funds for infrastructure de)elopment and
strengthens the ris( ta(ing ability of indi)iduals. It is estimated that o)er the ne4t
ten years India would re5uire in)estments of the order of one trillion 67 dollars.
1
AWARENESS OF INSURANCE IN INDIA
2. HISTORICAL PERSPECTIVE
'he history of life insurance in India dates bac( to 1010 when it was concei)ed as
a means to pro)ide for 1nglish Widows. Interestingly in those days a higher
premium was charged for Indian li)es than the non - Indian li)es, as Indian li)es
were considered more ris(y to co)er. 'he 8ombay 9utual .ife Insurance 7ociety
started its business in 10%0. It was the first company to charge the same premium
for both Indian and non-Indian li)es.
'he :riental 2ssurance /ompany was established in 1000. 'he +eneral insurance
business in India, on the other hand, can trace its roots to 'riton Insurance
/ompany .imited, the first general insurance company established in the year
1050 in /alcutta by the 8ritish. 'ill the end of the nineteenth century insurance
business was almost entirely in the hands of o)erseas companies.
Insurance regulation formally began in India with the passing of the .ife Insurance
/ompanies 2ct of 1;12 and the -ro)ident <und 2ct of 1;12. 7e)eral frauds during
the 1;20=s and 1;>0=s sullied insurance business in India. 8y 1;>0 there were 1%!
insurance companies.
'he first comprehensi)e legislation was introduced with the Insurance 2ct of 1;>0
that pro)ided strict 7tate /ontrol o)er the insurance business. 'he insurance
business grew at a faster pace after independence. Indian companies strengthened
their hold on this business but despite the growth that was witnessed, insurance
remained an urban phenomenon.
2
AWARENESS OF INSURANCE IN INDIA
'he +o)ernment of India in 1;5!, brought together o)er 2"0 pri)ate life insurers
and pro)ident societies under one nationali?ed monopoly corporation and .ife
Insurance /orporation #.I/& was born. @ationali?ation was 3ustified on the
grounds that it would create the much needed funds for rapid industriali?ation. 'his
was in conformity with the +o)ernment=s chosen path of 7tate led planning and
de)elopment.
'he non-life insurance business continued to thri)e with the pri)ate sector till
1;%2. 'heir operations were restricted to organi?ed trade and industry in large
cities. 'he general insurance industry was nationali?ed in 1;%2. With this, nearly
10% insurers were amalgamated and grouped into four companies- @ational
Insurance /ompany, @ew India 2ssurance /ompany, :riental Insurance /ompany
and 6nited India Insurance /ompany. 'hese were subsidiaries of the +eneral
Insurance /ompany #+I/&.
3. KEY MILESTONES
3
AWARENESS OF INSURANCE IN INDIA
1912: 'he Indian .ife 2ssurance /ompanies 2ct enacted as the first statute to
regulate the life insurance business.
1928: 'he Indian Insurance /ompanies 2ct enacted to enable the go)ernment to
collect statistical information about both life and non-life insurance businesses.
1938: 1arlier legislation consolidated and amended by the Insurance 2ct with the
ob3ecti)e of protecting the interests of the insuring public.
1956: 2"5 Indian and foreign insurers along with pro)ident societies were ta(en
o)er by the central go)ernment and nationali?ed. .I/ was formed by an 2ct of
-arliament- .I/ 2ct 1;5!- with a capital contribution of s. 5 crore from the
+o)ernment of India
4. INDUSTRY REFORMS
4
AWARENESS OF INSURANCE IN INDIA
eforms in the Insurance sector were initiated with the passage of the I,2 8ill in
-arliament in ,ecember 1;;;. 'he I,2 since its incorporation as a statutory
body in 2pril 2000 has fastidiously stuc( to its schedule of framing regulations and
registering the pri)ate sector insurance companies. 7ince being set up as an
independent statutory body the I,2 has put in a framewor( of globally
compatible regulations.
'he other decision ta(en simultaneously to pro)ide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of
the I,2 online ser)ice for issue and renewal of licenses to agents. 'he appro)al
of institutions for imparting training to agents has also ensured that the insurance
companies would ha)e a trained wor(force of insurance agents in place to sell their
products.
5. PRESENT SCENARIO - LIFE INSURANCE
INDUSTRY IN INDIA
5
AWARENESS OF INSURANCE IN INDIA
'he life insurance industry in India grew by an impressi)e "%.>0*, with premium
income at s. 15!0."1 billion during the fiscal year 200!-200%. 'hough the total
)olume of .I/=s business increased in the last fiscal year #200!-200%& compared to
the pre)ious one, its mar(et share came down from 05.%5* to 01.;1*.
'he 1% pri)ate insurers increased their mar(et share from about 15* to about 1;*
in a year=s time. 'he figures for the first two months of the fiscal year 200%-00 also
spea( of the growing share of the pri)ate insurers. 'he share of .I/ for this period
has further come down to %5 percent, while the pri)ate players ha)e grabbed o)er
2" percent.
With the opening up of the insurance industry in India many foreign players ha)e
entered the mar(et. 'he restriction on these companies is that they are not allowed
to ha)e more than a 2!* sta(e in a company’s ownership.
7ince the opening up of the insurance sector in 1;;;, foreign in)estments of s.
0.% billion ha)e poured into the Indian mar(et and 1; pri)ate life insurance
companies ha)e been granted licenses.
Inno)ati)e products, smart mar(eting, and aggressi)e distribution ha)e enabled
fledgling pri)ate insurance companies to sign up Indian customers faster than
anyone e4pected. Indians, who had always seen life insurance as a ta4 sa)ing
de)ice, are now suddenly turning to the pri)ate sector and snapping up the new
inno)ati)e products on offer. 7ome of these products include in)estment plans with
insurance and good returns #unit lin(ed plans&, multi $ purpose insurance plans,
pension plans, child plans and money bac( plans. #www.wi(ipedia.com&
6
AWARENESS OF INSURANCE IN INDIA
6. INSURANCE INDUSTRY CLASSIFICATION
7
INSURANCE
AWARENESS OF INSURANCE IN INDIA
F!" I#$%!&#'" M&!#" I#$%!&#'" M"(')&* M+,+! V"-')"
L." #$%!&#'"
L." #$%!&#'" is a contract between the policy owner and the insurer, where the
insurer agrees to pay a designated beneficiary a sum of money upon the occurrence
of the insured indi)idual=s or indi)iduals= death or other e)ent, such as terminal
illness or critical illness. In return, the policy owner agrees to pay a stipulated
amount #at regular inter)als or in lump sums&. 'here may be designs in some
countries where bills and death e4penses plus catering for after funeral e4penses
should be included in -olicy -remium. In the 6nited 7tates, the predominant form
simply specifies a lump sum to be paid on the insured=s demise.
'he )alue for the policyholder is deri)ed, not from an actual claim e)ent, rather it
is the )alue deri)ed from the =peace of mind= e4perienced by the policyholder, due
to the negating of ad)erse financial conse5uences caused by the death of the .ife
2ssured.
8
LIFE INSURANCE GENERAL INSURANCE
AWARENESS OF INSURANCE IN INDIA
.ife policies are legal contracts and the terms of the contract describe the
limitations of the insured e)ents. 7pecific e4clusions are often written into the
contract to limit the liability of the insurerA for e4ample claims relating to suicide,
fraud, war, riot and ci)il commotion.
F!" I#$%!&#'"
<ire Insurance is one of the oldest forms of insurance and goes as far bac( as
9arine insurance. Its origins are in the the age-old fear of fire and human failing to
control fire. In the early de)elopment of industrial society fire was the main source
of energy. @o industrial acti)ity or commerce was possible without fire and the
need to insure the ris( of uncontrolled fire became the integral part of society.
<ire insurance is designed to pro)ide for financial loss to property due to fire and
few other related ha?ards. <ire insurance is go)erned by 'ariff under the 'ariff
2d)isory /ommittee #'2/&.
M&!#" I#$%!&#'"
9arine insurance has been defined as a contract between insurers and insured
whereby the insurer underta(es to indemnify the insured in a manner and to the
interest thereby agreed, against marine losses incident to marine ad)enture. 7ection
2#1>& 2 of Insurance 2ct 1;>0 defines it as followsB
9arine insurance businessC means the business of effecting contracts of insurance
upon )essels of any description, including cargoes freights and other interests
which may be legally insured in or in relation to such )essels, cargoes, freights,
9
AWARENESS OF INSURANCE IN INDIA
goods, wares, merchandise and property of whate)er description insured for any
transit by land or water or both, and whether or not including warehouses ris(s or
similar ris(s in addition or as incidental to such transit and includes any other ris(s
customarily included among the ris(s insured in marine policies
H"&),- I#$%!&#'"
Dealth Insurance mainly co)ers two types of benefitsB one is related to the
reimbursement of medical e4penses related to specific diseases and the other is
related to the hospitali?ation. +lobally, the health co)ers operate in two ways $
cashless and cash reimbursable ones.
'he health insurance has changed the way medicine is dispensed and sold in the
most parts of the world. In India, its impact has yet to be felt. Dowe)er, the
introduction of the now famous E9ediclaim’ policy made a huge difference to an
ordinary citi?en’s usage of insurance for medical co)er purpose.
M+,+! I#$%!&#'"
9otor Insurance is one of the largest non-life insurance business in the world.
'his is because it is statutorily mandated in most parts of world. 2ll motor
)ehicles are re5uired to be registered with road transport authorities and insured
for third party liability. 'he basic premise is that motor )ehicles could either cause
in3ury or be a sub3ect to damage and in3ury and thus re5uire insurance.
'he 9otor Fehicle 2ct of 1;>; introduces compulsory insurance to ta(e care of
those who may get in3ured in an accident. 'he insurance of damage to )ehicle is
not mandatory
I#$%!&#'" /!+0("$:
10
AWARENESS OF INSURANCE IN INDIA
• -rotection to in)estor.
• 2ccumulation of sa)ings.
• /hanneling these sa)ings into sectors needing huge long term in)estment.
F%#',+#$ +. #$%!&#'":
• P!+0(" /!+,"',+#: 'he primary function of insurance is to pro)ide
protection against future ris(, accidents and uncertainty. Insurance cannot
chec( the happening of the ris(, but can certainly pro)ide for the losses of
11
AWARENESS OF INSURANCE IN INDIA
ris(. Insurance is actually a protection against economic loss, by sharing the
ris( with others.
• C+))"',0" 1"&!#2 +. !$3: Insurance is an instrument to share the
financial loss of few among many others. Insurance is a mean by which few
losses are shared among larger number of people. 2ll the insured contribute
the premiums towards a fund and out of which the persons e4posed to a
particular ris( is paid.
• A$$"$$*"#, +. !$3: Insurance determines the probable )olume of ris(
by e)aluating )arious factors that gi)e rise to ris(. is( is the basis for
determining the premium rate also.
• P!+0(" '"!,&#,4: Insurance is a de)ice, which helps to change from
uncertainty to certainty. Insurance is de)ice whereby the uncertain ris(s may
be made more certain.
• S*&)) '&/,&) ,+ '+0"! )&!2"! !$3: Insurance relie)es the businessmen
from security in)estments, by paying small amount of premium against
larger ris(s and uncertainty.
• C+#,!1%,"$ ,+5&!($ ,-" ("0")+/*"#, +. #(%$,!" sB Insurance
pro)ides de)elopment opportunity to those larger industries ha)ing more
ris(s in their setting up. 1)en the financial institutions may be prepared to
12
AWARENESS OF INSURANCE IN INDIA
gi)e credit to sic( industrial units which ha)e insured their assets including
plant and machinery.
• M"&#$ +. $&0#2$ &#( #0"$,*"#,: Insurance ser)es as sa)ings and
in)estment, insurance is a compulsory way of sa)ings and it restricts the
unnecessary e4penses by the insured=s <or the purpose of a)ailing income-
ta4 e4emptions also, people in)est in insurance.
• S+%!'" +. "&!##2 .+!"2# "6'-": Insurance is an international
business. 'he country can earn foreign e4change by way of issue of marine
insurance policies and )arious other ways.
• R$3 .!"" ,!&(": Insurance promotes e4ports insurance, which ma(es the
foreign trade ris( free with the help of different types of policies under
marine insurance co)er.
13
AWARENESS OF INSURANCE IN INDIA
7. CONSUMER A8ARENESS
/onsumer awareness is the mainspring of demand creation which runs the wheels
of industry $ any industry for that matter. 'o this Edemand’ cur)e, suppliers and
ser)ice pro)iders respond, by ma(ing a)ailable to consumers what they want,
meeting their needs and e4pectations. 'his is the way two usages Ecustomer needs’
and Ecustomer satisfaction’ emerged. 2nd these later tra)elled to domains of
Ecustomer delight’ and Ecustomer ecstasy’. /onsumer awareness, thus, becomes the
genesis for business entities. <or life insurers to initiate, e4pand, grow and sustain
by responding to larger and larger )olumes of demand emerging with greater
awareness, and setting in place supply chain management. <or life insurers to
penetrate significantly and forge ahead in the emerging mar(et, enhancing
consumer awareness becomes the prime focus of all acti)ities. 2s also strength and
competencies to Ecompete for future’
H+5 ,-"4 2+ &1+%,
.ife insurers, both in public sector and pri)ate sector, should appreciate this
Emoment of truth’ so to say and gal)ani?e their energies and resources intelligently
to bring about greater consumer awareness as a basic facilitator and an important
constituent of business strategy. 'his will create synergy all across the
organi?ation. It should be appreciated that /onsumer awareness pro)ides a new
frame of reference for )alue creation as also an opportunity for inno)ation. It is
time to thin( out of EIn bo4’ and adopt no)el strategies and measures to foster
awareness. 'o mention a fewB
14
AWARENESS OF INSURANCE IN INDIA
• launch awareness mo)ement through )arious con)enient people-oriented
programs through media, corporate publicity, rural camps and popular
communication channels including adio, 'F, -ublicity FansA
• awareness of products and ser)ices though )isuals that trigger curiosity and
manifest in terms of desire and later sale-purchase transactionsA
• beyond these stages, to ta(e up awareness of other aspects such as product,
price, 5uality, ser)ice , con)enience, status, pride, 3oy and easeA
• campaigns to educate rural and semi urban masses on the need for security
that protects their li)elihood, security for produce and belongings and create
feel-good feelingsA
• 1ngage @+:s with pro)en credentials and rural intermediaries.
In summary, as life insurers #and similarly non-life insurers& get into such massi)e
efforts to reach out to all and sundry, a new phenomenon will emerge to their
delight )i?., opening up promising a)enues for Ecreation of new mar(ets’ $ the
basic fundamental and prere5uisite for sustainable growth. 9ar(et dynamics will
rule and unfold a stage through a process of e)olution Enew )alue creation’ $ the
sum total of all inno)ations. 'hereby a new phenomenon of Eco-creating uni5ue
)alue with customers’ will emerge as so brilliantly in his later path-brea(ing 'itle
G'he <uture of /ompetitionB /o-creating 6ni5ue Falue with /ustomersC. /reating
/onsumer 2wareness in .ife Insurance .et conclude by putting across two well-
(nown propositions that underline E consumer awareness’B Gcustomer is business,
business is people, people are customersC G satisfying a customer is e)erybody’s
businessC 'his phenomenon $ creating /onsumer awareness
15
AWARENESS OF INSURANCE IN INDIA
8. INSURANCE AWARENESS
INSURANCE A8ARENESS
(Issued in Public Interest)
Why do you need to put your hard earned money inH
6@I' .I@I1, I@762@/1 -.2@7 li(e
.I/ 1@,:W91@' plus, 9oney plus, -rofit plus, <ortune plus, 8a3a3 6nit gain,
78I 6nit plus etcH
'erm Insurance is the /heap J 8est form of Insurance recommended by /ertified
<inancial -lanners all o)er the worldK
.et 1)eryone Inow about G'erm InsuranceC
2nd Delp them to a)oid losing their hard earned money in 6.I-sK
T-" 9"$, T"!* I#$%!&#'" P)&#$ # I#(&
INSURANCE COMPANY POLICY NAME
IDBI Fortis Termsurance
TATA AIG Raksha
Reliance Life Term Plan
HDFC Life Term Assurance
Bajaj Allianz Ne Risk Care II
LIC Anmol !ee"an # $
In%ia First Life Plan
Bharti A&A 'ecure Confi%ent
'ahara Life 'ahara (a"ach
“INSURANCE IS NOT AN INVESTMENT “
SEBI – Securities Exc!n"e # B$!rd $% Indi! (&IS')
16
AWARENESS OF INSURANCE IN INDIA
17
AWARENESS OF INSURANCE IN INDIA
9. INSURANCE AND ECONOMY
• Indian economy is growing in reference to global mar(et. 8usiness of
insurance with its uni5ue features has a special place in Indian economy.
• It is a highly speciali?ed technical business and customer is the most concern
people in this business, therefore this business is able to spur the growth of
infrastructure and act as a catalyst in the o)erall de)elopment of Indian
economy.
• 'he high )olumes in the insurance business help spread ris( wider, allowing
a lowering of the rates of the premium to be charged and in turn, raising
profits. When there is a bigger base, the probabilities become more
predictable, and with system wide ris(s balanced out, profits impro)e. 'his
e4plains the current scenario of mergers, ac5uisitions, and globali?ation of
insurance.
• Insurance is a type of sa)ings. Insurance is not only important for ta4
benefits, but also for sa)ings and for pro)iding security. It can be ser)ing as
an essential ser)ice which a welfare state must ma(e a)ailable to its people.
• Insurance play a crucial role in the commercial li)es of nations and act as the
lubricants of economic acti)ities. Insurance firms help to spread the
potentially financial conse5uences of ris( among the large number of
entities, to mobili?e and distribute sa)ings for producti)e use, facilitate
in)estment, support and encourage e4ternal trade, and protect economic
entities against e4ternal ris(.
18
AWARENESS OF INSURANCE IN INDIA
Insurance and economic growth mutually influences each other. 2s the economy
grows, the li)ing standards of people increase. 2s a conse5uence, the demand for
life insurance increases. 2s the assets of people and of business enterprises
increase in the growth process, the demand for general insurance also increases. In
fact, as the economy widens the demand for new types of insurance products
emerges. Insurance is no longer confined to product mar(etsA they also co)er
ser)ice industries. It is e5ually true that growth itself is facilitated by insurance. 2
well-de)eloped insurance sector promotes economic growth by encouraging ris(-
ta(ing. is( is inherent in all economic acti)ities. Without some (ind of co)er
against ris(, some of these acti)ities will not be carried out at all. 2lso insurance
and more particularly life insurance is a mobili?e of long term sa)ings and life
insurance companies are thus able to support infrastructure pro3ects which re5uire
long term funds. 'here is thus a mutually beneficial interaction between insurance
and economic growth. 'he low income le)els of the )ast ma3ority of population
ha)e been one of the factors inhibiting a faster growth of insurance in India. 'o
some e4tent this is also compounded by certain attitudes to life. 'he economy has
mo)ed on to a higher growth path. 'he a)erage rate of growth of the economy in
the last three years was 0.1 per cent. 'his strong growth will bring about
significant changes in the insurance industry.
2t this point, it is important to note that not all acti)ities can be insured. If
that were possible, it would completely negate entrepreneurship. -rofessor <ran(
Inight in his celebrated boo( Gis( 6ncertainty and -rofitC emphasi?ed that profit
is a conse5uence of uncertainty. De made a distinction between 5uantifiable ris(
and non-5uantifiable ris(.
19
AWARENESS OF INSURANCE IN INDIA
2ccording to him, it is non-5uantifiable ris( that leads to profit. De wrote GIt is a
world of change in which we li)e, and a world of uncertainty. We li)e only by
(nowing something about the futureA while the problems of life or of conduct at
least, arise from the fact that we (now so little. 'his is as true of business as of
other spheres of acti)ityC. 'he real management challenges are uninsurable ris(s.
In the case of insurable ris(s, ris( is a)oided at a cost.
1O. DISTRI9UTION OF INSURANCE
PRODUCTS
20
AWARENESS OF INSURANCE IN INDIA
Insurance has to be sold the world o)er. 'he 'ouch point with the ultimate
customer is the distributor or the producer and the role played by them in insurance
mar(ets is critical. It is the distributor who ma(es the difference in terms of the
5uality of ad)ice for choice of product, ser)icing of policy post sale and settlement
of claims. In the Indian mar(et, with their distinct cultural and social ethics, these
conditions will play a ma3or role in shaping the distribution channels and their
effecti)eness. In today=s scenario, insurance companies must mo)e from selling
insurance to mar(eting an essential financial product. 'he distributors ha)e to
become trusted financial ad)isors for the clients and trusted business associates for
the insurance /ompanies.
D.."!"#, ($,!1%,+# '-&##")$ # I#(&
21
AWARENESS OF INSURANCE IN INDIA
2 multi-channel strategy is better suited for the Indian mar(et. Indian insurance
mar(et is a combination of multiple mar(ets. 1ach of the mar(ets re5uires a
different approach. 2part from geographical spread the socio-cultural and
economic segmentation of the mar(et is )ery wide, e4hibiting different traits and
needs. ,ifferent multi-distribution channels in India are as follows
? InternetB 1-commerce sales through internet portals
? Wor(siteB 9ar(eting arrangements with entities to sell insurance to their
employees
? ,irectB 7ales through call centre’s andLor direct mailing
? 8ro(ersB epresentati)es for buyers who deal with either agent or companies
in arranging for co)erage
? /orporate agentsB @on-ban( institutions in)ol)ed in the sale of insurance
products
? 8anc assuranceB Insurance products offered through ban(s
? 'ied agentsB Insurance companies aligned agency force
In today’s scenario, insurance companies must mo)e from selling insurance to
mar(eting an essential financial product. 'he distributors ha)e to become trusted
financial ad)isors for the clients and trusted business associates for the insurance
companies.
22
AWARENESS OF INSURANCE IN INDIA
'he most prominent channel of insurance distribution areB
• A2"#,$: 2gents are the primary channel for distribution of insurance. 'he
public and pri)ate sector insurance companies ha)e their branches in almost
all parts of the country and ha)e attracted local people to become their
agents. 'oday=s insurance agent has to (now which product will appeal to the
customer, and also (now his competitor=s products to be an effecti)e
salesman who can sell his company, the product, and himself to the
customer. 'o the a)erage customer, e)ery new company is the same.
-erceptions about the public sector companies are also cemented in his
mind. 7o an insurance agent can play an important role to create a good
image of company.
• 9$: 8an(s in India are all per)asi)e, especially the public sector ban(s.
9any insurance companies are selling their products through ban(s.
/ompanies which are ban( owned, they are selling their products through
their parent ban(. 'he public sector ban(s, with their )ast branch networ(s,
are helpful to insurance companies. 'his channel of selling insurance is
(nown as 9&#' &$$%!&#'".
INSURANCE COMPANY ASSOCIATE 9ANKS
ICICI /!%("#,&) ICICI 1: 1 +. I#(&:
C,1: A))&-&1&( 1: F"("!&)
23
AWARENESS OF INSURANCE IN INDIA
1: $+%,- I#(&# 1: P%#;&1
&#( M&-&!&$-,!& '++/"!&,0"
1
S9I )." S,&," 1 +. I#(&
9!)& $%# )." D"%,$'-" 1: C,1: 1 +.
R&;&$,-&#: A#(-!& 1
IN< V4$4& 1 V4$4& 1
A00& )." #$%!&#'" A9N &*!+ 1: '&#&!& 1
HDFC $,&#(&!( )." U#+# 1: I#(&# 1
M", )." K&!#&,&3& 1: ;=3 1
Source: - Hindu Business Line, January 08, 2007
• 9!+3"!$: @ow a day’s different financial institution are selling insurance.
'hese financial institutions are (nown as bro(ers. 'hey are ta(ing some
underwriting charges from the insurance companies to sell their insurance
products.
• C+!/+!&," &2"#,$: /orporate agency is a cross selling type of channel.
Insurance companies’ tie-up with business houses in other industries to sell
insurance either to their employees or their customers. Insurance industry,
during the past 2 years has witnessed a number of such strategic tie-ups and
alliances. /orporate agents ha)e become a ma3or force to rec(on with in
distributing insurance products. 7uch as- 8a3a3 2llian? tied up with 9aruti
6dyog and <ord for auto insurance and 'ata 2I+ life has tied up with 'ata
24
AWARENESS OF INSURANCE IN INDIA
tea, (haitan’s Williamson ma3or and bridge foundation for selling rural
policies.
• I#,"!#",: In this technological world internet is also a channel of selling
insurance. 'his can be as direct mar(eting.
O,-"! D$,!1%,+# M",-+($
2lternate distribution channels are needed for the following reasonsB
• 'o increase insurance penetration in the country
• 'o differentiate on the basis of customer ser)iceA to retain and attract new
customers to e4pand business
• 'o increase insurance awareness and (nowledge among people
• 'o satisfy the needs of more demanding customers
• 'o impro)e cost efficiency in insurance distribution
-ri)ate players are e4ploring se)eral alternati)es to reduce the cost of replicating
the distribution networ( of public sector insurance companies. While third-party
25
AWARENESS OF INSURANCE IN INDIA
distribution in fast-mo)ing consumer goods is a possibility, the comple4ity of
insurance products, especially gi)en the low awareness le)els, would necessitate
direct selling.
:ne potential channel is mar(eting through corporate employers, i.e., employers
purchase products on behalf of the employees or at least support the mar(eting
effort. 'he concept of Gwor(site mar(eting,C i.e., the sale of )oluntary insurance
products to employees at the wor(site through payroll deduction has become
common. Wor(site mar(eting, which was once the realm of a few small
companies, selling 3ust a few products, has now stretched to large companies,
offering a )ariety of wor(site products.
11. CHAN<IN< FACE OF INDIAN INSURANCE
INDUSTRY
2fter the Insurance egulatory and ,e)elopment 2uthority 2ct ha)e been
passed there has been establishment of many pri)ate insurance companies in India.
-re)iously there was a monopoly business for .ife Insurance /orporation of India
#..I./.& who was the only life-insurance company for the people till 2000. ..I./.
still holds %1."* of the mar(et share in 200!. 8ut after the introduction of pri)ate
life insurance companies there is a great competition in Indian mar(et now.
1)eryone is trying to capture the fresh mar(et here and penetrate it with aggressi)e
mar(eting strategies. 'oday life-insurance is not only limited up to 3ust life ris(
26
AWARENESS OF INSURANCE IN INDIA
co)er and maturity period bonuses but changed to greater return from the
in)estments. With the introduction of the unit lin(ed insurance policies these
companies are in)esting the money in different in)estment instruments li(e shares,
bonds, debentures, go)ernment and other securities. -eople are demanding for
higher returns with the life ris( co)er and pri)ate companies are gi)ing >0-"0*
a)erage growth per annum. 'hese life-insurance companies ha)e e)ery (ind of
policies suiting e)ery need right from financial needs of, marriage, gi)ing birth and
rearing up a child, his education, meeting daily financial needs of life, pension
solutions after retirement. 'hese companies ha)e e)ery aspects and needs of our
life co)ered along with the death-benefit.
In India only 25* of the population has life
insurance. 7o Indian life-insurance mar(et is the target mar(et of all the companies
who either want to e4tend or di)ersify their business. 'o tap the Indian mar(et
there has been tie-ups between the ma3or Indian companies with other International
insurance companies to start up their business. 'he go)ernment of India has set up
rules that no foreign insurance company can set up their business indi)idually here
and they ha)e to tie up with an Indian company and this foreign insurance
company can ha)e an in)estment of only 2"* of the total start-up in)estment.
Indian insurance industry can be featured byB
• .ow mar(et penetration.
• 1)er growing middle class component in population.
• +rowth of customer’s interest with an increasing demand for better
insurance products.
27
AWARENESS OF INSURANCE IN INDIA
• 2pplication of information technology for business.
• ebate from go)ernment in the form of ta4 incenti)es to be insured.
'oday, the Indian life insurance industry has a do?en pri)ate players,
each of which are ma(ing strides in raising awareness le)els, introducing
inno)ati)e products and increasing the penetration of life insurance in the )astly
underinsured country. 7e)eral of pri)ate insurers ha)e introduced attracti)e
products to meet the needs of their target customers and in line with their business
ob3ecti)es. 'he success of their effort is that they ha)e captured o)er 20* of
premium income in fi)e years.
'he biggest beneficiary of the competition among life insurers has
been the customer. 2 wide range of products, customer focused ser)ice and
professional ad)ice has become the mainstay of the industry, and the Indian
customer’s forms the pi)ot of each company’s strategy. -enetration of life
insurance is beginning to cut across socio-economic classes and attract people who
ha)e ne)er purchased insurance before.
.ife insurance is also now being regarded as a )ersatile financial
planning tool. 2part from the traditional term and sa)ing insurance policies,
industry has seen the entry and growth of unit lin(ed products. 'his pro)ides
mar(et lin(ed returns and is among the most fle4ible policies a)ailable today for
in)estment. @ow products are priced, fle4ible, and realistic and sustain so people
in better position to understand the ris( and benefits of the product and they are
accepting these inno)ati)e products.
7o it is clear that the face of life insurance in India is changing, but
with the changes come a host of challenges and it is only the credible players with
28
AWARENESS OF INSURANCE IN INDIA
a long term )ision and a robust business strategy that will sur)i)e. Whate)er the
de)elopments, the future and the opportunities in this industry will surely be
e4citing.
'here are 12 pri)ate players in Indian life insurance mar(et.
6 1 +5#"( #$%!"!$: - D,</ standard life, I/I/I prudential, I@+ Fysya,
9et.ife, :9 Iota(, 78I life.
6 #("/"#("#, #$%!"!$: - 2)i)a, 2@- sanmar, 8irla sun life, 8a3a3 2llian?, 9a4
@ew Mor( life, 'ata 2I+.
9a3or international insurers are- -rudential and 7tandard
life from 6I, 7un life of /anada, 2I+, 9et.ife and @ew Mor( life of the 67.
I#'!"&$#2 2!+5,- $#'" )1"!&)>&,+#:
M12 .I/ #in bn rs.& -IF2'1 -.2M1
<M0> 110 10
<M0" 120 20
<M05 1>0 "0
<M0! 1"0 !0
<M0% 2"0 1!0
P+$$1),"$ .+! #$%!&#'" '+*/&#"$ # I#(&:
• <urther deregulation of the mar(et.
• +reater concern for the customers.
• @ewer products and ser)ices.
29
AWARENESS OF INSURANCE IN INDIA
• /ompetition and 5uality consciousness.
• /ost effecti)e operations.
• estructuring of the public sector.
• /onsolidation of domestic insurance mar(ets.
• 'echnology dri)en shift in product design.
• 2ctual operations and distribution.
• /on)ergence of financial ser)ices.
I#$%!&#'" M&!3",- P!"$"#,
'he insurance sector was opened up for pri)ate participation four years ago. <or
years now, the pri)ate players are acti)e in the liberali?ed en)ironment. 'he
insurance mar(et ha)e witnessed dynamic changes which includes presence of a
large number of insurers both life and non-life segment. 9ost of the pri)ate
insurance companies ha)e formed 3oint )enture collaborating well-recogni?ed
foreign players across the globe.
'here are now 2; insurance companies operating in the Indian mar(et $ 1" pri)ate
life insurers, nine pri)ate non-life insurers and si4 public sector companies. With
many more 3oint )entures in the offing, the insurance industry in India today stands
at a crossroads as competition intensifies and companies prepare sur)i)al strategies
in a detariffed scenario.
30
AWARENESS OF INSURANCE IN INDIA
'here is pressure from both within the country and outside on the +o)ernment to
increase the <oreign ,irect In)estment #<,I& limit from the current 2!* to ";*,
which would help NF partners to bring in funds for e4pansion.
'here are opportunities in the pensions sector where regulations are being framed.
.ess than 10 * of Indians abo)e the age of !0 recei)e pensions. 'he I,2 has
issued the first license for a standalone health company in the country as many
more players wait to enter. 'he health insurance sector has tremendous growth
potential, and as it matures and new players enter, product inno)ation and
enhancement will increase. 'he deepening of the health database o)er time will
also allow players to de)elop and price products for larger segments of society.
12. CHAN<IN< PERCEPTION OF INDIAN
CUSTOMERS
Indian Insurance consumers are li(e Indian Foters, they are soft but when time is
right and ripe, they demand and see( necessary changes. ,e-tariff of many
Insurance -roducts are the reflection of changing aspirations and growing demand
of Indian consumers.
<or historical years, Indian consumers were at recei)ing end. Insurance -roduct
was underwritten and was practically forced onto consumers on a G'a(e-it-2s-it-
basisC. 2ll that got changed with passage of I,2 act in 1;;;. @ew insurance
companies ha)e come into e4istence leading to open competition and hence better
products for customers.
31
AWARENESS OF INSURANCE IN INDIA
Indian customers ha)e become )ery sensiti)e to /o)erage L -remium as well as the
-roducts #read is( 7olution&, that is gi)en to them. 'here are not ready to accept
any product, no matter e)en if that is coming from the mar(et leader, should that
product is not ser)ing the purpose. 2 case in point is 6.I- -roduct L +roup .ife
and /redit .ife in .ife Insurance segment and 'ra)el L <amily <loater Dealth and
.iability Insurance in the @on-life segment are new age 2)atar. 'he new products
are constantly being demanded by Indian consumers, which is putting huge
pressures on Insurance companies #ead is( 6nder-writers& and 8ro(ers to
respond.
/ustomers are loo(ing at Insurance for co)ering -ure is( now which I ha)e
co)ered in my ne4t section. 2nother good reason why we are seeing 5uic( changes
in the buying beha)ior of Insurance from mere In)estment to ris( mitigation is the
cost of eplacement of +oods #:+& or /ost of 7er)ices #/:7&.
@ow Indian customers are aware of insurance industry and insurance products
pro)ided by companies. 'hey ha)e become more sensiti)e. 'hey would not accept
any type of insurance product unless it fulfills their re5uirements and needs. In
historic day’s customers loo(ing at insurance products as a life co)er which can
pro)ide security against any unacceptable e)ents, but now customers loo( at
insurance products as an in)estment as well as life co)er. 7o today’s customers
wants good return from the insurance companies. 'he Indian customer’s forms the
pi)ot of each company’s strategy.
32
AWARENESS OF INSURANCE IN INDIA
13. KEY SUCCESS FACTORS
In order to succeed in any of the business it is )ery necessary to ma(e and follow
the strategies. 7trategies are )ery important for any of the business. <ollowing are
the general strategies, which are recommending to the insurance sector. :ne
approach is to focus upon product 5uality, which will instill confidence in minds of
the customers that they would be offered best product from out of the se)eral
a)ailable products. 'he other approach, is to focus on the customers need, would
in)ol)e a hea)y in)estment in de)eloping relationships with policyholders. 6nder
this approach, one can e4pect a range of products and ser)ices designed to gi)e the
customer what he specially desires.
'he third approach is of greater mar(et segmentation under which the population
should be di)ided into se)eral homogeneous groups and product, and ser)ices
would be targeted towards such selected mar(ets. 'he effort would be to GtieC
clients to their company- by customi?ed combination of co)erage, easy payment
plan, ris( management ad)ice, and con)enient 5uic( claim handling.
33
AWARENESS OF INSURANCE IN INDIA
P+!,"! <"#"!' S,!&,"2"$:
:ne of the e4pert 9ichel porters has identified three internally consistent generic
strategies, which can be used singly or in combinationB o)erall cost leadership is
clearly under stable. In a differentiation strategy, a company see(s to be uni5ue in
its industry along some dimensions that are widely )aluable by the customer. 9ay
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 see(s a cost ad)antage in its target
segment, while in differentiation focusA a company see(s a differentiation target.
M&!2#&) D.."!"#, P!+(%',:
2nother strategy would be for the companies to design products that will ma(e
comparison-shopping difficult. 'hey could offer a wide )ariety of co)ers with
marginal differences and )arying prices, whose terms and conditions are difficult
to compare for consumers who may not ha)e sufficient e4perience in purchasing
insurance and who would find it difficult to ma(e a clear choice. If the consumer is
offered a uni5ue policy, he will ha)e no alternati)e co)erage with which can be
compared. +i)en the combination policy, which can offer protection against a
number of losses, the consumer will find comparison e)en more difficult.
D"$2##2 N"5 S,!&,"2"$:
'he e4isting insurance companies cannot be satisfied with concentrating on the
consolidation of their e4isting mar(ets, but ha)e to achie)e further growth and
penetration. 'hey must, therefore, concentrating on strengthening e4isting points of
ser)ice, designing new channel of distribution, direct contact with their ultimate
customers, and front line employee empowerment. 'hey also need to refresh their
mar(eting set up. 'he new comers, on the other hand gi)e priority to tapping the
34
AWARENESS OF INSURANCE IN INDIA
mar(et, left une4ploited by the public sector companies.
M+0" ,+5&!($ R%!&) M&!3",:
It is one of the most important suggestionsA data says that rural mar(et is still
unco)ered by this sector. We belie)e that the sector should mo)e towards tie rural
mar(et. Insurance penetration can be achie)ed by tapping the neglected ural
9ar(ets. 'here is )ast potential for insurance growth in the rural sector. 2 recent
sur)ey by foundation for research, training and 1ducation in insurance #<:'1&
suggests that insurance can be sold profitably to rural communities in India. 'he
sur)ey re)eals that
• 'here is distinct hierarchy of needs in rural areas.
• ural people find security in groups the sa)ing habit is )ery strong in rural
areas.
• 2)erage sa)ing across the most important socio-economic strata comes to
>0->5* of annual income or s.1>, 500 annually, which is significant.
• 'here is high le)el of awareness about life insurance and fairly high-le)el
about >!* already own life insurance.
• 51* of these who own life insurance would li(e to buy more.
• 2mongst the sa)ers, a significant percentage does not sa)e through formal
financial modes or institutions.
• ural buyers of insurance prefer a half yearly mode of premium payment to
coincide with the time of the har)est. 'hus there are )ery much chances for
any of the companies to wor( o)er this scenario. 7o we belie)e and suggest
all the players to mo)e towards the rural areas.
M+,0&,+# +. $&)"$ .+!'":
35
AWARENESS OF INSURANCE IN INDIA
2 life insurance company should constantly be in)ol)ed in the process of
moti)ating the sales force in the turbulent times. 'he following strategies are
recommendingA
? 8uilding relationship is real per(. :ne should be sure to build in networ(ing
times for agents during the program-in addition to entertainment and
education.
? Web should be fre5uently used for creating gift ideas.
? Dold sales contests in the forth 5uarter. It is the best times to moti)ates
agents who wants to 5ualify for a trip.
? /onsider a contrast within the contest Efor- top-tier producersA additional
rewards for additional milestones that are met, such as air and guest room
upgrades.
U$" +. I#,"!#",:
'he present scenario is such that the products sold with the help of Internet. 'he
technological ad)ancement is such that force the companies to ta(e such steps. 7till
the full-fledged use of Internet is not done in our country. 2s suggestion earlier the
Internet based life insurance will help the companies to reduce the transaction cost
and time. 2t the time it can impro)e the 5uality of ser)ice to its customers, which
is the mission of the company.
36
AWARENESS OF INSURANCE IN INDIA
M&!3",#2 T/$ +. A(0"!,$" +. I#$%!&#'" A2"#'4
5-'- *+$, '+*/&#"$ .+))+5 &#( 14 5-'- '%$,+*"!
&!" &5&!" &1+%, ,-"! &2"#'4
• 9)+'3 )#" &(0"!,$#2 # #(%$,!4 /%1)'&,+#$ +! ,!&("
;+%!#&)$: 9any companies li(e to ad)ertise in the same areas.
• 9%$#"$$ +//+!,%#,4 &(0"!,$#2: 'hin( of local newspapers such as
the ,aily @ews 2nalysis #,@2&, 'imes of India, and 'he DI@,6 etc. 'his
is a )ery effecti)e way to ad)ertise and mar(et agency, since the company
needs to build brand name recognition.
• T")"0$+# A($: 'he most ob)ious and e4pensi)e forms of ad)ertising is
the tele)ision.
• L+'&) M+0" T-"&,!"$: 2 local audience and a family type atmosphere
is a great way for mar(eting insurance business. 9any types of insurance
37
AWARENESS OF INSURANCE IN INDIA
come into play here when an indi)idual or the family are out watching the
mo)ie. 2ll these things come into play when parents are out with their (ids.
• D!"', M&) A(0"!,$#2: 'here are companies out there that will do
direct mail by which people are aware.
• A(0"!,$#2 +%,(++!$: 'ransit systems, bus benches, neon and
electronic signs are becoming a great way for the agent to ad)ertise. 'his is
affordable, unli(e tele)ision ads. 2nd this targets the e4act audience as most
insurers pro)ide insurance ser)ices to their local area.
• S,&,+#&!4 &(0"!,$#2: 2 )ery great way of ad)ertising is right through
business stationary and supplies. 2 nice way of showing good faith is gi)ing
customers a pen of insurance office name and contact information
• 8"1$," A(0"!,$#2: 2 website tells customer about insurance agency
and it a 5uic( and easy reference for customers loo(ing for 5uotes of any
type of insurance such as, homeowners insurance, auto insurance, life
insurance and many others
• O#)#" &(0"!,$#2: 9any insurance companies do online ad)ertisement.
2s today in 21
st
centaury it is )ery important.
38
AWARENESS OF INSURANCE IN INDIA
RSS FEED COMMENTS
o ECONOMY
o MARKETS
Monday, April 21, 2008
I#(&?$ #$%!&#'" $"',+! /+$"( .+! 2@@A 2!+5,- 14
2@1@
8y Jo Black
Indian insurance sector is li(ely to register unprecedented growth of 200* and
attain a si?e of s. 2000 billion #O51.2 billion& by 200;-10, in which a pri)ate
39
AWARENESS OF INSURANCE IN INDIA
sector insurance business will achie)e a growth rate of 1"0* as a result of
aggressi)e mar(eting techni5ue being adopted by them against >5-"0* growth rate
of state owned insurance companies.
'he aforesaid findings are made by 'he 2ssociated /hambers of /ommerce and
Industry of India #277:/D29& on PInsurance in @e4t 2 Mears’, saying that in the
last couple of years, the insurance sector has grown by /2+ of around 1%5* and
the trend will emerge still better because of potential factor. /urrently, the
insurance sector si?e is estimated at s.500 billion #O12.0 billion&.
eleasing the 277:/D29 findings, its -resident, 9r. Fenugopal @. ,hoot said
that on account of intense mar(eting strategies adopted by pri)ate insurance
players, the mar(et share of state owned insurance companies li(e +I/, .I/ and
others ha)e come down to %0* in last "-5 years from o)er ;%*.
'he pri)ate insurance players despite the sector is still regulated has been offering
rate of return #o& to its policy holders which is estimated at about >5* as
against 20* of domestic insurance companies. 'his factor is mainly responsible
for hi(e in pri)ate insurance mar(et share which will grow further which is why
the 277:/D29 estimates that its growth rate could e)en e4ceed 1"0*.
7econdly, the state owned insurance companies such as .I/ and +I/ ha)e limited
number of policies to offer to their subscribers while in case of pri)ate insurance
companies, their policy numbers are many more and the premium amount as well
as the maturity period is much competiti)e as against those of go)ernment
insurance companies. Interestingly, said 9r. ,hoot that the pri)ate sector insurance
players ha)e started e4ploring the rural mar(ets in which until recently, the state
owned companies had the monopoly.
'he /hamber has pro3ected that in rural mar(ets, the share of pri)ate insurance
players would increase substantially as these ha)e been able to generate a faith
among their rural consumers.
40
AWARENESS OF INSURANCE IN INDIA
1stimating the potential of the Indian insurance mar(et from the perspecti)e of
macro-economic )ariables such as the ratio of premium to +,-, 277:/D29
re)eals that India’s life insurance premium, as a percentage of +,- is 1.0* against
5.2* in the 67, !.5* in the 6I or 0* in 7outh Iorea.
277:/D29 findings further re)eal that in the coming years, the corporate
segment, as a whole will not be a big growth area for insurance companies. 'his is
because penetration is already good and companies recei)e good ser)ices. In both
)olumes and profitability therefore, the scope for e4pansion is modest. 'he
/hamber has suggested that insurer’s strategy should be to stimulate demand in
areas that are currently not ser)ed at all. Insurance companies mostly focus on
manufacturing sectorA howe)er, the ser)ices sector is ta(ing a large and growing
share of India’s +,-. 'his offers immense opportunities for e4pansion
opportunities.
'o understand the prospects for insurance companies in rural India, it is )ery
important to understand the re5uirements of India’s )illagers, their daily li)es, their
peculiar needs and their occupational structures. 'here are farmers, craftsmen,
mil(men, wea)ers, casual laborers, construction wor(ers and shop(eepers and so
on. 9ore often than not, they are into more than one profession.
'he rural mar(et offers tremendous growth opportunities for insurance companies
and insurers should de)elop )iable and cost-effecti)e distribution channelsA build
consumer awareness and confidence. 'he 277:/D29 found that there are a total
12" million rural households. @early 20* of all farmers in rural India own a
Iissan /redit cards. 'he 25 million credit cards used till date offer a huge data
base and opportunity for insurance companies. 2n e4tensi)e rural agent networ(
for sale of insurance products could be established. 'he agent can play a ma3or role
in creating awareness, moti)ating purchase and rendering insurance ser)ices.
41
AWARENESS OF INSURANCE IN INDIA
'here should be nothing to stop insurance companies from trying to pursue their
own uni5ue policies and target whate)er needs that they want to target in rural
India. 277:/D29 suggests that insurance needs to be pac(aged in such a form
that it appears as an acceptable in)estment to the rural people
N&,+#&) S%**,
I#(&# I#$%!&#'": T-" 8&4 F+!5&!(
29 B&#%&!4: 2@@9 H+,") L"-M"!("#: N"5 D")-
egister :nline
7ummit ,etails
'he Insurance industry in India has been progressing at a rapid pace since opening
up of the industry in 2000. Indian domestic insurance mar(et would touch around
67O !0.5 8illion by the year 2010 from e4isting si?e of about 67O 10.2 billion.
2ccording to the Insurance egulatory and ,e)elopment 2uthority #I,2&, new
business premium income from 2pril 200! to <ebruary 200% amounted to I@
5%;.>0 billion #67O1>.10 billion&, registering an impressi)e 120* growth o)er the
same period last year.
'he Insurance industry graph is definitely ascending. ,istribution accounts for the
largest element in insurers cost and affects profitability. 'he si?e of the country
42
AWARENESS OF INSURANCE IN INDIA
combined with problems of connecti)ity in the rural areas, ma(es insurance selling
in India a difficult proposition. 'he distribution capabilities strongly influence
product design in insurance. 'he distribution channels ha)e a direct impact on the
insurer’s mar(et image. 1mergence of alternati)e channels such as 8ancassurance
and Internet is reshaping the insurance industry. India with a population of more
than a billion people offers unlimited growth potential.
With a )iew to spreading the awareness of Insurance co)er and discussing )arious
regulatory issues, ASSOCHAM $ +!2&#>#2 & N&,+#&) S%**, +# CI#(&#
I#$%!&#'" D T-" 8&4 F+!5&!(E &, 1@.@@ &.*. +# 29,- B&#%&!4: 2@@9 &, H+,")
L"-M"!("#: N"5 D")-.
S-! P K 9&#$&): H+#F1)" M#$,"! +. S,&," .+! F#&#'" = P&!)&*"#,&!4
A..&!$ -&$ 0"!4 3#()4 &2!""( ,+ #&%2%!&," ,-" S%**,. 8" -&0" &)$+ #0,"(
S-! B H&! N&!&4&#: C-&!*&#: IRDA &#( S-! T&%# 9&;&;: B+#, S"'!",&!4
G9=IH M#$,!4 +. F#&#'": <+0, +. I#(& ,+ &((!"$$ ,-" /&!,'/&#,$ # ,-"
I#&%2%!&) S"$$+#.
'he 7ummit would pro)ide an ideal forum for e4pert discussion, information
sharing and an e4cellent platform for business de)elopment. We e4pect a large
participation by all sta(eholders - institutional in)estors, fund managers,
consultants, bro(ers, regulators, custodians, lawyers, ban(s, financial planners and
retail in)estors.
43
AWARENESS OF INSURANCE IN INDIA
I#$%!&#'"
L&$, U/(&,"
D"'"*1"! 2@1@'he 67O "1-billion Indian life insurance industry is considered the fifth largest life
insurance mar(et, and growing at a rapid pace of >2->" per cent annually,
according to the .ife Insurance /ouncil.
.ife insurance companies ha)e witnessed a %0 per cent 3ump in new premium
collection during the first fi)e months of the financial year. 2ccording to data
released by the Insurance egulatory and ,e)elopment 2uthority #I,2&,
insurance companies garnered 67O 11.%> billion in new business premium during
2pril-2ugust 2010, against 67O !.;0 billion in the corresponding period last year.
7tate-owned .I/ gained the most, with an increase of 00 per cent in new business
premium income. 2t the same time, pri)ate sector insurance recorded a >" per cent
increase in income from sales of new policies. @ew business income collected by
I/I/I -rudential stood at 67O 5%!.!0 million during 2pril-2ugust. 78I .ife
remained in the third position after registering a "0 per cent increase in new sales
44
AWARENESS OF INSURANCE IN INDIA
to 67O 5>1.0% million from 67O >%;.20 million in 2pril-2ugust 200;. D,</
7tandard .ife saw a robust 5" per cent increase in new business.
<"#"!&) I#$%!&#'"
2ccording to data released by I,2, the general insurance industry recorded 22.%!
per cent year-on-year #y-o-y& growth in gross premium underwritten during 2pril$
:ctober 2010.
'he industry collected gross premium of 67O 5.2; billion during 2pril$:ctober
2010 compared with 67O ".>1 billion in the same period last year.
'he public sector players posted 21.0; per cent y-o-y growth in gross premium
during 2pril$:ctober 2010 o)er the corresponding period last year. 2t the same
time, pri)ate players recorded a 25.1; per cent y-o-y increase in gross premium.
'he state-run insurers fared better than their pri)ate counterparts, with @ew India
Insurance collecting the ma4imum premium of 67O ;1!.%% million during 2pril-
:ctober 2010, compared to 67O %%0.25 million in the same period last year,
growing by 1;.0" per cent.
2ccording to the I,2=s 7ummary eports of 9otor ,ata of -ublic and -ri)ate
7ector Insurers - 200;-10, nearly 20." million policies were issued and a total
premium of 67O 2.>1 billion was collected.
H"&),- I#$%!&#'"
'he Indian health insurance mar(et has emerged as a new and lucrati)e growth
a)enue for both the e4isting players as well as the new entrants. 2ccording to a
45
AWARENESS OF INSURANCE IN INDIA
latest research report Q8ooming Dealth Insurance in IndiaQ by research firm
@/:7 released in 2pril 2010, all emerging trends including the (ey factors
dri)ing the mar(et growth. <urthermore, the report also identifies what could be
the possible growth areas for e4pansion and gi)es a detailed o)er)iew of the
competiti)e landscape. 'he Indian health insurance mar(et has continued to post
record growth in the last two fiscals #2000-0; and 200;-10&.
9oreo)er, as per the @/:7 estimates, the health insurance premium is e4pected
to grow at a compound annual growth rate #/2+& of o)er 25 per cent for the
period spanning from 200;-10 to 201>-1".
2ccording to a report published by Mes 8an( and an industry body in @o)ember
200;, the medical insurance sector would account for 67O > billion in the ne4t
three years.
Dealth insurance premium collections were 67O 1.%5 billion in 200;-10 compared
with 67O 0;>.%! million in the pre)ious year, I,2 said in its annual report for
200;-10. It should, howe)er, be noted that figures for 200;-10 include policies
ser)ed by third party administrators #'-2s& as well as those directly ser)ed by
insurers whereas figures for 2000-0; include policies ser)ed by '-2s only.
I#(& I#$%!&#'" M&!3",: A ("'&(" +)( +! (&5# +. & #"5
"!&I
46
AWARENESS OF INSURANCE IN INDIA
CONCLUSION
Insurance sector in India is one of the booming sectors of the economy and is
growing at the rate of 15-20 per cent annum. :ne of the (ey ser)ice industries in
India would be health and education. Insurance sector in India grew at a faster pace
after independence. In 1;5!, +o)ernment of India brought together 2"5 Indian and
foreign insurers and pro)ident societies under one nationali?ed monopoly
corporation and formed .ife Insurance /orporation #.I/& by an 2ct of -arliament,
)i?. .I/ 2ct, 1;5!, with a capital contribution of s.5 crore. 'he #non-life&
insurance businessLgeneral insurance remained with the pri)ate sector till 1;%2.
'here were 10% pri)ate companies in)ol)ed in the business of general operations
and their operations were restricted to organi?ed trade and industry in large cities.
'he insurance sector in India has come to a position of )ery high potential and
competiti)eness in the mar(et. Indians, ha)e always seen life insurance as a ta4
sa)ing de)ice.
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AWARENESS OF INSURANCE IN INDIA
9I9ILO<RAPHY
8E9SITES REFFERED
www.irdaindia.org
www.licindia.in
www.wi(ipedia.org
www.answers.com
www.insuranceguru.com
REPORTSJARTICLES REFFERED
2sia 1conomy Watch
India Infoline @ews 7er)ice
8irla 7un.ife Insurance /ompany’s 2rticle
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doc_609522240.doc