Insurance sector

By any yardstick, India, with about 200 million middle class households, presents a huge untapped potential for players in the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors.

With the per capita income in India expected to grow at over 6% for the next 10 years and with improvement in awareness levels, the demand for insurance is expected to grow at an attractive rate in India. An independent consulting company, The Monitor Group has estimated that the life insurance market will grow from Rs.218 billion in 1998 to Rs.1003 billion by 2008 (a compounded annual growth of 16.5%)3.

Insurance business has a positive correlation with economic development in an economy. As an economy develops over the years, insurance sector starts making inroads into the interiors of the system. Most of the times, insurance begins with the life insurance and gradually spreads to the field of general insurance. Every forward-looking person would invariably have his/her life insurance done. Even in a country like India, it is hard to believe that any adult person living in towns would not have life insurance done and the concept is picking up even in the rural areas. In other words, the life insurance market in India is as large as its population.

There is no doubt that the liberalized life insurance industry is booming; and liberalization of the life insurance market has so far proved to be a great success. New Life business is growing at 35 per cent, and invested funds have grown dramatically by about Rs. 90,000 crore in 2003-04 to touch about Rs. 3,50,000 crore.

India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. With such a large Indian population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the countries GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India.LIFE INSURERS

Public Sector

Life Insurance Corporation of India

Private Sector

Allianz Bajaj Life Insurance Company Limited

Birla Sun-Life Insurance Company Limited

HDFC Standard Life Insurance Co. Limited

ICICI Prudential Life Insurance Co. Limited

ING Vysya Life Insurance Company Limited

Max New York Life Insurance Co. Limited

MetLife Insurance Company Limited

Om Kotak Mahindra Life Insurance Co. Ltd.

SBI Life Insurance Company Limited

TATA AIG Life Insurance Company Limited

AMP Sanmar Assurance Company Limited

Dabur CGU Life Insurance Co. Pvt. Limited

GENERAL INSURERS

Public Sector

National Insurance Company Limited

New India Assurance Company Limited

Oriental Insurance Company Limited

United India Insurance Company Limited

Private Sector

Bajaj Allianz General Insurance Co. Limited

ICICI Lombard General Insurance Co. Ltd.

IFFCO-Tokio General Insurance Co. Ltd.

Reliance General Insurance Co. Limited

Royal Sundaram Alliance Insurance Co. Ltd.

TATA AIG General Insurance Co. Limited

Max Newyork life insurance co. ltd

Export Credit Guarantee Corporation

HDFC Chubb General Insurance Co. Ltd.

The insurance industry is quite diverse in terms of portfolio of products provided by different companies. The products can be broadly classified into two product lines:

1. Property and casualty (P&C)2. Life insurance.

Life insurance product line can be further sub-divided into life insurance, health insurance and annuity products.

Growing consolidation and change in the regulatory framework has led many insurers toAdd new products to their portfolio. This presents its own unique challenge to the insurerIn leveraging its greatest asset - data.

Brief History

The origin of insurance is very old .The time when we were not even born; man has sought some sort of protection from the unpredictable calamities of the nature. The basic urge in man to secure himself against any form of risk and uncertainty led to the origin ofInsurance.

The insurance came to India from UK; with the establishment of the Oriental Life insurance Corporation in 1818.The Indian life insurance company act 1912 was the first statutory body that started to regulate the life insurance business in India. By 1956 about 154 Indian, 16 foreign and 75 provident firms were been established in India. Then the central government took over these companies and as a result the LIC was formed. Since then LIC has worked towards spreading life insurance and building a wide network across the length and the breath of the country. After the liberalization the entrance of foreign players has added to the competition in the market.

The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. In 1957 General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. In 1972 The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. It was after this that 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

Insurance Sector ReformsIn 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction.

The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms

In 1994, the committee submitted the report and some of the key recommendationsIncluded:

1. Structure

Government stake in the insurance Companies to be brought down to 50%Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporationsAll the insurance companies should be given greater freedom to operate

2. Competition

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industryNo Company should deal in both Life and General Insurance through a singleEntityForeign companies may be allowed to enter the industry in collaboration with the domestic companiesPostal Life Insurance should be allowed to operate in the rural marketOnly one State Level Life Insurance Company should be allowed to operate inEach state3. Regulatory Body

The Insurance Act should be changedAn Insurance Regulatory body should be set upController of Insurance (Currently a part from the Finance Ministry) should bemade independent

4. Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time)

5. Customer Service

LIC should pay interest on delays in payments beyond 30 daysInsurance companies must be encouraged to set up unit linked pension plansComputerisation of operations and updating of technology to be carried out in theinsurance industry

The committee emphasised that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry.

Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.

The Insurance Regulatory and Development Authority

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies.

The other decisions taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDAs online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products, which are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. In the private sector 12 life insurance and 6 general insurance companies have been registered.

Max newyork life insurance company

COMPANY PROFILE

Max New York Life Insurance Company Ltd. is a joint venture between New York Life, a Fortune 100 company and Max India Limited, one of India's leading multi-business corporations. The company has positioned itself on the quality platform. In line with its vision to be the most admired life insurance company in India, it has developed a strong corporate governance model based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself as a trusted life insurance specialist through a quality approach to business.In line with its values of financial responsibility, Max New York Life has adopted prudent financial practices to ensure safety of policyholder's funds. The Company's paid up capital is Rs. 907.4 crore, which is more than the norm laid down by IRDA. Max New York Life has identified individual agents as its primary channel of distribution. The Company places a lot of emphasis on its selection process, which comprises four stages - screening, psychometric test, career seminar and final interview. The agent advisors are trained in-house to ensure optimal control on quality of training. Max New York Life invests significantly in its training programme and each agent is trained for 152 hours as opposed to the mandatory 100 hours stipulated by the IRDA before beginning to sell in the marketplace. Training is a continuous process for agents at Max New York Life and ensures development of skills and knowledge through a structured programme spread over 500 hours in two years. This focus on continuous quality training has resulted in the company having amongst the highest agent pass rate in IRDA examinations and the agents have the highest productivity among private life insurers. 337agent advisors have qualified for the Million Dollar Round Table (MDRT) membership in 2007. MDRT is an exclusive congregation of the worlds top selling insurance agents and is internationally recognized as the standard of excellence in the life insurance business.

Having set a best in class agency distribution model in place, the companyis spearheadinga major thrust into additional distribution channels to further grow its business. The company is using a five-pronged strategy to pursue alternative channels of distribution. These include the franchisee model, rural business, direct sales force involving group insurance and telemarketing opportunities, bancassurance and corporate alliances.Max New York Life offers a suite of flexible products. It now has43 life insurance products and8riders that can be customized to over 800 combinations enabling customers to choose the policy that best fits their need.

History Introduction The story of Max is the story of Enterprise, Perseverance, and Credibility. These have enabled our birth, energized our life, and continue to define our path forward. We have tempered Enterprise with Knowledge, Perseverance with Systems and Processes, Credibility with Values and Operating Principles, to create business acumen and culture, uniquely our own. This has led us to believe in People. To recognize human capital as our most vital resource and our greatest intrinsic worth.Enterprise and Knowledge have led us to find the 'new' through the 'unknown'. We have grown with a 'hands on' approach. With the building blocks of Enterprise, Knowledge, and People, we have created diverse businesses from the ground up. Each of these, has emerged as a distinguished organization. Our mature businesses enjoy leadership positions in their area of activity; our emerging businesses are well on their way to creating industry benchmarks.