ON
INSURANCE SECTOR
SUBMITTED BY:
Lloyd’s Club House
History of World Insurance Industry
For several years, the companies' ambitions were thwarted until they
made a strategic adjustment. In time-honored fashion, they offered King
George I a bribe. The King's influence prevailed and charters were
granted under the existing 1720 Bubble Act. The legislation had been
passed in response to the "South Sea Bubble." This man-made disaster
involved the catastrophic failure of a stock company organized to
monopolize Britain's South Sea trade. When its shares became
disastrously over-inflated, the company's collapse caused financial panic
throughout the country.
Royal Exchange and London Assurance also hoped to take over most
marine insurance handled by individual underwriters. In a classic case
of unintended consequences, under the 1720 legislation, individuals
actually received competitive protection from other insurance
organizations. Ironically, the chartered companies wrote mostly fire
insurance and for years left the marine insurance market to individuals.
Individuals of Dubious Character
Lloyd's became more cohesive and professional over time. In 1800, its
underwriting room was restricted to merchants, underwriters,
insurance brokers, and bankers—all of whom needed to be
recommended by two or more members. A £15 subscription fee helped
control chaotic overcrowding and eliminates "undesirables."
Lloyd's Reorganizes
The history of insurance in India dates back to the year 1818, when the
Oriental Life Insurance Company was formed in Kolkata. The Life
Insurance Act of 1912 marked the beginning of a new era in the
insurance sector of India.
The Indian Insurance Companies Act was passed in the year 1928. This
act empowered the government of India to gather necessary information
about the life insurance and non-life insurance organizations operating
in Indian financial markets.
The Triton Insurance Company Ltd. formed in 1850 and was the first of
its kind in the general insurance sector in India. The Indian Mercantile
Insurance Limited was established in 1907, and was the company in
India to handle all classes of insurance.
The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market
again.
Tracing the developments in the Indian insurance sector reveals the 360-
degree turn witnessed over a period of almost 190 years.
1912 - The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business.
1956 - 245 Indian and foreign insurers and provident societies taken
over by the central government and nationalized. LIC formed by an Act
of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5
crore from the Government of India.
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.
Some of the important milestones in the general insurance business in
India are:
1907 - The Indian Mercantile Insurance Ltd. set up, the first company to
transact all classes of general insurance business.
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.
The Malhotra Committee, 1993
Reform in the Indian insurance sector was initiated with the formation
of the Malhotra Committee in 1993. It was named after R.N. Malhotra,
the then Finance Secretary and RBI Governor, who headed the
committee.
i)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
corporations. All the insurance companies should be given greater
freedom to operate.
ii) Competition
Private Companies with a minimum paid up capital of Rs.1bn should be
allowed to enter the sector. No Company should deal in both Life and
General Insurance through a single entity. Foreign companies may be
allowed to enter the industry in collaboration with the domestic
companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only one State Level Life Insurance Company should be allowed to
operate in each state.
iv) 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)
v) Customer Service
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked pension
plans. Computerization of operations and updating of technology to be
carried out in the insurance industry.
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.
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions
of IRDA.
1. Subject to the provisions of this Act and any other law for the time
being in force, the Authority shall have the duty to regulate, promote
and ensure orderly growth of the insurance business and re-insurance
business.
(d) specifying the code of conduct for surveyors and loss assessors;
(g) levying fees and other charges for carrying out the purposes of this
Act;
(h) calling for information from, undertaking inspection of, conducting
enquiries and investigations including audit of the insurers,
intermediaries, insurance intermediaries and other organizations
connected with the insurance business;
(i) control and regulation of the rates, advantages, terms and conditions
that may be offered by insurers in respect of general insurance business
not so controlled and regulated by the Tariff Advisory Committee under
section 64U of the Insurance Act, 1938 (4 of 1938);
(j) specifying the form and manner in which books of account shall be
maintained and statement of accounts shall be rendered by insurers and
other insurance intermediaries;
IRDA has to play a vital role for the regulation and development of
insurance business. The report recalled that following a raft of
discussion held with the IRDA, the Law Commission prepared an
exhaustive Consultation paper in June 2003, identifying thirteen
tentative grounds of revision of the Insurance Act, 1938 and the IRDA
Act, 1999 ranging from merger of relevant provisions of IRDA Act with
the Insurance Act 1938 to harmonising of the Act with rules and
regulations.
• VISON:
• MISSION:
Max New York Life Insurance Company is a joint venture between New
York Life International Inc., a Fortune 100 company and America's
largest life insurance provider and Max India Limited one of the leading
multi-business corporations in India. Max New York Life Insurance Co
Ltd is a Rs. 250 crore joint venture with a paid up capital of Rs. 807
crore. Max India has raised its economic interest in life insurance joint
venture with a foreign partner, Max New York Life (MNYL) from 50%
to 74%.
It is widely known that as per the agreement signed between the two
leading giants in 2003, the New York Life was contributing 26 percent in
the 26:74 joint venture for every equity investment made. Max was
contributing 50 percent and the remaining 24 percent was funded
through an advance paid by New York Life to it. New York Life had an
option to raise its shareholding in the JV close to 50 percent at the par
value, in case of a relaxation up to 26 percent in the FDI sectoral cap in
the insurance segment. These terms were approved by the Insurance
Regulatory and Development Authority (IRDA) and were highlighted in
the successive annual reports of Max India.
• Asset Under Management-
Max New York Life Insurance announced that it has clocked Rs. 2,100
crore in collected premiums for the period Jan - July 2008 recording a
growth of 81% over the similar period last year. Of this, first year
premiums contributed Rs. 1195crore, while earnings from renewal
premium stood at Rs.905 crore. The company has acquired around 27
lakh policies since inception and is ranked number 3 amongst private
life insurers in terms of number of policies sold (YTD June). The Assets
Under Management have also increased to over Rs.4138 crore on July
31, 2008 as compared to Rs.2271 crore on July 31, 2007. The capital
base of the company is expected to expand to Rs.3600 crore from
current equity base of Rs.1,232 crore.
New York Life is one of the largest and strongest life insurance
companies in the world with more than USD$215 billion assets under
management and has received among the highest ratings for financial
strength from the life insurance industry's principal rating agencies:
A.M. Best (AA+), Standard & Poor's (AA+), Moody's (Aa1), Fitch
(AAA). According to Moody's, "New York Life's rating reflects the
company's good quality investment portfolio, ample liquidity, and sound
capitalization, as well as the good growth potential of its international
business.”
• Strategies-
i) Recruitment Vertical
ii) Health and Retirement Plan
iii) Highly Network Individual
iv) CEIP
v) Max BUPA:-Max India and BUPA International
vi) General Insurance
• Products –
Max New York Life brings to you specially customized products and
services that are flexible and can e customized to suit your needs
It now has 30 life insurance products and 8 riders that can be
customized to over 800 combinations enabling customers to choose the
policy or plan that best fits their need. These include:
INDIVIDUAL INSURANCE
Protection Plans:
• Whole Life
• Level Term
• Five Year Term R & C
• Life Partner Plus
Savings:
o Life Gain Endowment
o Life Pay Money Back
o Life Gain Plus 20
o Life Gain Plus 25
o 20-Year Endowment
Unit Linked:
o Life Maker Premium
o Life Maker Gold
o Life Maker Platinum
o Life Maker Pension
o Life Invest
GROUP INSURANCE
o Group Term Life
o Group Gratuity
o Employee Deposit Linked Insurance
o Credit Shield
o Unit Linked Group Gratuity
o Unit Linked Group Superannuation
RURAL INSURANCE
o Max Suraksha
o Easy Term
o Max Mangal Endowment
o Max Vriksha Money Back
MAX ASSURE
o Max Assure Bonus Builder
o Max Assure Business Builder
o Max Assure Money Back
o Max Assure Future Builder
o Max Assure Secure Returns Builder
NAV
• Life Maker Investment Plan
• Life Maker Pension Plan
• Life Maker Premium
• Smart Steps
• Group Gratuity
• Group Superannuation
iii) Direct Sales Team (DST):- Max New York Life Insurance makes
a data base of potential customers; contact them on the telephone to
market different policy of the company.
Span of Organization
Max New York Life Insurance has a strong growth focus. The company
plans to significantly expand its distribution footprint by opening more
than 100 new offices every year for next 3-4 years. The number of agent
advisors is expected to touch 2, 00,000 from current 36,500. The growth
in agency distribution will be complemented by strong growth in
partnership distribution. The company currently has an equity base of
Rs.1, 032 crore. To support this growth plan, the shareholders are
committed to increase the capital base to Rs. 2,650 crores over the next
3-4 years. There are 13000 employees all over India and 55000 Agent
advisors.
Channel Head
2 Vice President
M.P (Managing Partner)
Partner
68.50%
7.8%
5.30%
G-Sec (Rating: Sovereign)
Infrastructure (Rating:AAA /AA+)
Corporate
Cash & Short Term
Max New York Life invests only in safe debt
instruments with the highest credit ratings.
Our current portfolio has almost 70% invested in GOI bonds, 25% in
corporate bonds (AAA and AA rated bonds only). The balance 5% is
invested in short-term cash instruments to meet working capital
requirements.
.IRDA has overarching rights to amalgamate companies and change the
management to protect policyholder interests.
Comments:-
Max New York Life is the first company to be awarded license by IRDA
after liberalization of the insurance industry. The Company's paid up
capital is Rs. 657 crore, which is more than the norm laid down by
IRDA.
I think that the company has positioned itself on the quality platform
and it has developed a strong corporate governance model based on the
core values of excellence, honesty, knowledge, caring, integrity and
teamwork. The main strategy is to establish itself as a trusted life
insurance specialist through a quality approach to business. Their
financial practices are prudent enough to ensure safety of policyholder's
funds. Its primary channel of distribution is individual agents. As being
the best in class agency distribution model in place, the company is
spearheading a major thrust into additional distribution channels to
further grow its business. The five-pronged strategy to pursue
alternative channels of distribution includes the franchisee model, rural
business, direct sales force involving group insurance and telemarketing
opportunities and corporate alliances. It also offers a suite of flexible
products.