INDUSTRY ANALYSIS OF INSURANCE SECTOR

IN INDIA

What is INSURANCE? Insurance is actually a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premium to pay the other party called as insured person happening of a certain event.

TYPES OF INSURANCE

Insurance

Generalinsurance

Health insurance

Motor insurance

Marineinsurance

Fireinsurance

Life insurance

MISSION OF INSURANCE

• To provide security • Old age pensions • Acts as an investment/ or saving

mechanism • Acts as a collateral for loans • Helps in tax benefits

FUNCTIONS OF INSURANCE • Provide protection• Provide Certainty• Collective bearing of risk Primary Functions• Small capital to cover larger risk Secondary

Functions • Means of saving & investments • Sources of earning foreign exchange Other

Functions

LEADING INSURERS IN INDIA

REGULATORY AUTHORITY

• The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory agency tasked with regulating and promoting the insurance and re-insurance industries in India.

• The functions of the IRDAI starts from Issuing, renewing, modifying, withdrawing, suspending or cancelling registrations

MARKET SHARE OF COMPANIES

ECONOMIC FACTORS AFFECTING INSURANCE INDUSTRY

• INFLATION If the inflation rate is so high, many people may feel

threatened to lose their property and may rush to acquire insurance. This will mean more business and revenues to the insurance sector.

• DEFLATION Deflation means the economy is doing well and the

value of the currency is competitive in the market. As a result of this, many people are able to spend more, which is good news to insurance companies

ECONOMIC FACTORS AFFECTING INSURANCE INDUSTRY

• ECONOMIC POLICIES In times when an economy is facing a crisis, the

government can implement economic policies to shield consumers from exploitation by insurers while also protecting insurance companies.

• COMPETITION The economy of a country can also affect the level

of competition by increasing or decreasing it.

ONLINE PRESENCE OF INSURANCE INDUSTRY IN INDIA

• In 2010-11, most of the insurers started selling online. And at present, insurers have made online mode a priority in their distribution strategy

• Online purchase of policies has increased from 2 per cent to 200 per cent in just two years.

• The research by BCG implies that the insurance industry in online is slated to enjoy a growth of 2000 per cent in the next five years.

FUTURE PROSPECTS• India’s insurable population is anticipated to touch

750 million in 2020, with life expectancy reaching 74 years. Furthermore, life insurance is projected to comprise 35 per cent of total savings by the end of this decade, as against 26 per cent in 2009-10.

• Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.

MARKET SIZE During April 2015 to March 2016 period• The life insurance industry recorded a new

premium income of Rs 1.38 trillion (US$ 20.54 billion), indicating a growth rate of 22.5 per cent.

• The general insurance industry recorded a 12 per cent growth in Gross Direct Premium underwritten in April 2016 at Rs 105.25 billion (US$ 1.55 billion).

GOVERNMENT INITIATIVES

• Foreign investment will be allowed through automatic route for up to 49 per cent subject to the guidelines on Indian management

• Government insurance companies to be listed on the exchanges

• The Insurance Regulatory and Development Authority (IRDA) of India has formed two committees to explore and suggest ways to promote e-commerce in the sector

INSURANCE GROWTH DRIVERS IN INDIA

• Growing of the financial industry as a whole• Growth of life and non-life industry• Promoting innovation and removing

inefficiency• Competition and orderly growth• Growth of specific insurance segments such

as motor insurance

SWOT ANALYSISSTRENGTHS

•New products•Business Growth•Rise in Per capita income•Emerging middle income group

WEAKNESS

•Low investments•Dominance of public sector•Old tariff structure•Limited facilities

OPPURTUNITIES

•Creation of stronger demand•Strong future growth•Rise in income and awareness•Health Insurance

THREATS

•The political environment not supportive to constructive change•The legal framework, bureaucracy and financial infrastructure worsen the insurance business environment