PRESENTED BY:DINESH MITTAL

ORIGIN AND GROWTH OF INSURANCE SECTOR

OBJECTIVE AND PROCESS OF RISK MANAGEMENT

ORIGIN OF INSURANCE SECTOR

• 1818 First life insurance company “Oriental Life Insurance Company (in Calcutta).

• 1850 First general insurance company “Triton Insurance Company “(in Calcutta).

• Till 1956/1972 life and general insurance industry grown in terms of number of companies (life 245 and General 107 with complete private sector ownership), the volume of premium, investible resources, and so on. And both type of insurance companies were competitive.

• The insurance was regulated through the Insurance Act, 1938.

• The picture changed after the Independence.

• In 1956, 245 Indian and Foreign life insurers and provident societies were nationalized, and new single entity namely “LIC” was established by passing the LIC Act, 1956.

• Similarly, in 1972, 107 general insurers were nationalized through the passing of General Insurance Business (Nationalization) Act, 1972.

• The existing 107 insurers were amalgamated and grouped into Five companies, viz., National Insurance Company (NIC), New India Assurance Company (NIAC), Oriental Insurance Company (OIC), United India Insurance Company (UIIC), and General Insurance Corporation (GIC).

• Then insurance industry transformed into monopoly and Oligopolistic state or public sector insurance industry in India.

• After liberalization in 1991 insurance sector open for private players.

• In 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry.

• The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums.

• Today there are 24 general insurance companies and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country.

 

GROWTH OF INSURANCE SECTOR• Insurance sector is growing at a speedy rate of 15-20%, Together with banking services.• insurance services add about 7% to the country’s GDP. • As per industry estimates, insurance penetration in India stood at 5.1 per cent in 2011. While

life insurance penetration was marked at 4.4 per cent during the year, general insurance sector penetrated to an extent of 0.7 per cent in 2010.

• As of now, insurance accounts for just 3 per cent of overall healthcare expenditure in India which implies that there lies a great potential to enhance the penetration of insurance as a concept.

• The scope of growth is further enhanced by rural India's development as a major contributor to the economy as the clan residing in hinterlands is increasingly getting aware of new products and services across all the economic and social segments.

• The Rs 2.9 trillion (US$ 58.7 billion)-Indian life insurance industry has emerged as the mainstay of entire insurance space. With over 35 crore life insurance policies in force, the industry has registered remarkable growth since its privatization in 2000.

Indian Insurance Industry: Recent Statistics

• The 24 life insurance players' premiums collected in April-December 2011 stood at Rs 71, 953.54 crore (US$ 14.59 billion) while the industry sold about 27.24 million policies during the period, according to data collected by the Insurance Regulatory and Development Authority (IRDA).

• With respect to general insurance industry, there was a growth of 24 per cent in first three quarters of 2011-12 in gross written premium collected. The general insurance industry collected premium of Rs 42,023.3 crore (US$ 8.51 billion) by writing new policies during the period.

• While private insurers registered a growth of 26.73 per cent in premium collection at Rs 17,525.3 crore (US$ 3.55 billion), the four state-owned general insurance companies collected Rs 24,498.1 crore (US$ 5 billion) (22.1 per cent higher than the corresponding period a year ago).

• The health insurance business constitutes more than 25 per cent of the general insurance industry in India. Health insurance premium collection during the April-September period of 2011-12 rose 21.3 per cent to Rs 6,721.53 crore (US$ 1.36 billion) from Rs 5,540.34 crore (US$ 1.12 billion) in the year-ago period

Recent Developments

• Health insurance policies are on their way to get 'age-free'. Though the proposal is still at a nascent stage, IRDA has already taken a step towards this concept by making it mandatory for policies to have 'life long' renewal clause. This implies that once a health insurance policy is issued, an insurer would be obliged to continue renewing such a policy during the policyholder's lifetime. However, the entry age barrier would continue to be there

• Some general insurance companies have already started applying for such 'age-free' policies. For instance, Apollo Munich Insurance applied for such a policy a few months back and is awaiting regulator's approval.

• State-owned Life Insurance Corporation (LIC) would buy 5 per cent stake in Punjab & Sind Bank. The bank's proposal to issue 11.2 million fresh shares is awaiting Securities and Exchange Board of India (SEBI)'s decision regarding the rate and is eventually subject to approval from the Government of India and other regulatory entities

• HDFC Life, a private life insurance company and a JV between India's Housing Development Finance Corporation Ltd (HDFC) and UK's Standard Life plc has launched its first international operations with the opening of its representative office in Dubai. The launch comes as a result of the company's strategy to serve large non-resident Indian (NRI) base in the Gulf region.

RISK MANAGEMENT

RISK

• “Risk refers to the possibility that actual outcome of an investment will differ from its expected outcome”.

RISK MANAGEMENT

• Risk Management refer to the process of identify loss exposure faced by an organization and selecting most appropriate technique for treat such exposure.

OBJECTIVETo reduce the uncertaintyStability of earningTo meet out the legal obligationContinuous operationGrowth of firmTo reduce the anxiety

PROCESS OF RISK MANGEMENT

• Identify potential loss: Most risk managers use some systematic approach to the problem of risk identification. A few of their more important tools include insurance policy checklists, risk analysis questionnaires, flowcharts, analysis of financial statements, and inspections of the firm's operations.

• Evaluate potential loss: This means measuring the potential size of the loss and the probability that it is likely to occur.

• Selecting appropriate technique: The four basic techniques subsumed under the broad approaches of risk control and risk financing.

1. Avoidance,2. Reduction,3. Retention, and4. Transfer

• Implementation and Evaluation of program: is based on your decision, The decision is made to retain a risk. This may be accomplished with or without a reserve and

with or without a fund. If the plan is to include the accumulation of a fund, proper administrative procedures must be set up to implement the decision. If loss prevention is selected to deal with a particular risk, the proper loss-prevention program must be designed and implemented. The decision to transfer the risk through insurance must be followed by the selection of an insurer, negotiations, and placement of the insurance