Prepare by,

Pro. Jay patel

Content

Insurance Introduction Privatization in Insurance Types of Insurance Growing up of Insurance Sector Major driving factord Top players of Insurance sector Insurance and Salary Challenges and Opportunity Causes

Insurance- Introduction

Insurance is a co-operative device of distributing losses, falling on an individual or family over a large number of persons, each bearing a nominal expenditure & feeling secured against heavy loss.

Insurance business has emerged as one of the prominent financial services during recent times, particularly in developing countries where it could not grow before globalization. But it is very difficult to trace exactlywheninsuranceoriginated.

Insurance = Protection against Risk

Contd… Insurance has always been a politically sensitive subject in India.

Within less than 10 years of independence, the Indian government nationalized private insurance companies 

in 1956 to bring this vital sector under government control

to raise much needed development funds.

Since then, state-owned insurance companies have grown into monoliths, lumbering and often inefficient but the only alternative. They have been criticized for their huge bureaucracies, but still have millions of policy holders as there is no alternative.

Privatization in insuranceThe Narasimha Rao government (1991-96) which unleashed liberal changes in India's rigid economic structure could not handle this political hot potato. Ironically, it is the coalition government in power today which has declared its intention of opening up insurance to the private sector. Ironical because this government is at the mercy of support from the left groups which have been the most vociferous opponents of any such move.

All segments of the financial sector had been opened to private players with better product, services & social objective

International players are eyeing the vast potential of the Indian market and are

already making plans to come in.

Types of Insurance Privatization has brought in lot of surprises for insurance

sector. In India, insurance sector is at the booming stage as only 40% of the population is insured. Private organizations are striving hard and hard to develop the sector.

Government is also supporting the insurance sector to increase the Gross Domestic Product ratio from the sector which is now about 1.4% only.

accidental insurance

family-health

insurance

Dental- insurance

medical insurance

diabetes insurance

Other various types of

insurance polices

auto insurance

medi-claims

Grown up insurance sectorThe insurance industry has grown by 83 per cent since the opening up of the sector.

- C S Rao, chairman (IRDA)

• Insurance premium income has risen to Rs 82,415 crore in 2003-04, against

45,000 crore in 2000-01.

• premium income in the life insurance sector to rise further by 15-16 per cent

and non-life insurance premium by 14 per cent in 2005-06.

• The health insurance sector is expected to grow by 10-15 per cent.

• foreign direct investment is increased to 49 per cent from the current 26 per

cent, the industry can expect greater entry of players.

Cont……. Indian insurance sector is likely to register unprecedented

growth of 200% and attain a size of Rs. 2000 billion by 2009-10, in which a private sector insurance business will achieve a growth rate of 140% as a result of aggressive marketing technique being adopted by them against 35-40% growth rate

of state owned insurance companies. On account of intense marketing strategies adopted by private

insurance players, the market share of state owned insurance companies like GIC, LIC and others have come down to 70%

in last 4-5 years from over 97%.

Cont…… The private insurance players despite the sector is still

regulated has been offering rate of return (RoR) to its policy holders which is estimated at about 35% as against 20% of

domestic insurance companies. LIC and GIC have limited number of policies to offer to their

subscribers while in case of private insurance companies, their policy numbers are many more and the premium amount as well as the maturity period is much competitive as against those of government insurance companies.

The Chamber has projected that in rural markets, the share of private insurance players would increase substantially as these have been able to generate a faith among their rural

consumers.

Growth of top 10 private insurance companies of India:

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India. It experienced growth of 58%.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52%

and its market share went up to 6.98% in 2007-08 form 5.66% in

2006-07.

SBI Life Insurance Co Ltd in terms of new number of policies

sold, the company ranked 6th in 2007-08. its growth is 87% over

last year.

Cont……. Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76

crore and its market share went up to 2.96% from 1.23% a year back.

HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680

crore in FY2007-08, registering a year-on-year growth of 64%.

Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08.

Cont……..

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported growth of 80%, moving from the 11th

position to 9th. It captured a market share of 1.19% in 2007-08. Aviva Life Insurance Company India Ltd ranking dropped to 10th

in 2007-08 from 9th last year. It has presence in more than 3,000 locations across India via 221 branches and close to 40 bancassurance partnerships.

Major Driving Factor Growing Demand from Semi-Urban Population. Rising demand for retirement provision in the ageing

population. The opening of the pension sector and the establishment

of the new pension regulator. Rising per capita incomes among the strong middle class,

and spreading affluence. Public private partnerships infrastructure development. Growing consumer class and increase in spending &

saving capacity.

Top Players of Insurance Sector

Following are the top players of the insurance sector offering most competitive packages to their employees:

Life Insurance Corporation New York Life Prudential Met Life Birla Insurance Kotak Mahindra ICICI HDFC

Insurance and Salary

Due to privatization in insurance sector growth

options have been changed.

From basic salary with small incentives,

compensation systems have been grown to increased

salaries, incentives, perks, allowances,

accommodations, etc.

The average salary increase for the year 2006

was 17.1%.

Insurance due to privatization Current Scenario

process of privatization will lead to `green field' area of activity.

The banks and capital markets were integrated with insurance, which, in turn, was vital to sustain and grow the economy

Trade and finance had no geographical limits and, hence, the need to align with the international scenario in this aspect.

Risk coverage & security.

Entry of privatization Competition New product & technology Distribution work Customer services CRM policy increases sales

force Modern marketing approach

Challenges & Opportunities

Mass Marketing Job Opportunities Inflow of Funds Reinsurance Marketing Strategies Banc assurance Information technology

causes

Ineffective distribution and marketing strategies adopted by LIC

Limited advertising initiatives

References  www.irdaindia.org  Privatisation of Insurance Industry, by V. R. Krishna Iyer and K.

K. Narendran © 1994 Economic and Political Weekly. http://www.123eng.com/forum/viewtopic.php?p=111861 http://www.thehindubusinessline.com/2000/08/17/stories/

171708k9.htm http://www.business-standard.com/india/news/insurance-sector-

grew-83-after-privatisation/208147/ http://www.ieo.org/sid002.html http://payroll.naukrihub.com/compensation/indian-industry/

insurance-sector/

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