INSURANCE STATISTICS

Insurance is a means by which the problem of risk in business or life of an individual person is covered. The two main classes of insurance are: (a) general insurance which covers all forms of insurance other than life and is usually written on an annual basis, and (b) life insurance which is generally on a long-term basis against risk of death. Insurance statistics can be grouped under the following categories:

Life Insurance Statistics Non-life (General) Insurance Statistics Reinsurance Statistics Pension and Super-annuation Statistics Health Insurance Statistics Crop Insurance Statistics Other Insurance Statistics like ESI, Postal Insurance, Army Insurance, etc.

10.4.2 As a part of the Financial Sector Reforms, a Committee on Reforms in Insurance Sector (CRIS), headed by Shri R.N. Malhotra, former Governor of RBI, was constituted in 1993. The main thrust of the Committees recommendations were: open up the insurance sector, improve the service standards of Indian insurance majors, and extend insurance coverage to a larger section of the Indian population to inject a greater degree of competition. The Insurance Regulatory Development Authority (IRDA) Bill was passed in both the Houses of Parliament in the year 1999 and IRDA came into existence as a Regulator for the Insurance business in India. The Act also provides protection to the interests of holder of insurance policy and aim to regulate, promote and ensure orderly growth of the insurance industry. It also seeks to amend the Life Insurance Act, 1956; General Insurance Business (Nationalisation) Act, 1972 and consequential provisions in the Insurance Act, 1938 with a view to open up the Indian Insurance industry to the private sector for further expansion of insurance business and to realise the untapped potential in the Indian insurance market. In order to provide better insurance coverage to citizens and also to augment the flow of long-term resources for financing infrastructure, the Insurance Regulatory and Development Authority (IRDA) was constituted with effect from 19 April, 2000. The Reserve Bank of India has also issued guidelines for the entry of NBFCs and Banks into the insurance business in May 2000 and August 2000, respectively. 10.4.3 Statistical information currently available on insurance is scattered and inadequate. With the entry of private insurance companies, the sources of information will be multiplied. It is, therefore, necessary that a single source of information, which can disseminate information to users is put in place. In this context, a Committee on Insurance Statistics was constituted by the National Statistical

Commission with Shri H. Ansari, Member, IRDA as Chairman to examine the information required for the Insurance Sector. The Committee reviewed the current status of the statistical system in Insurance Sector, identified the data gaps and weaknesses in the existing data collection mechanism and recommended measures to correct deficiencies by revamping the system. Current Status 10.4.4 The data presently collected by the Life Insurance Company (LIC) and the General Insurance Company (GIC) largely meet their own requirements to assist management decisions, design strategy, formulate business plans, examine the market sizes, and changes in market environment, etc. The annual reports of LIC and GIC provide statistical information on various aspects of insurance statistics in their organisations. The General Insurance companies also supply statistical information to the Tariff Advisory Committee (TAC) in prescribed proforma to perform its function of scientific rating and pricing for general insurance products. The insurance companies also supply statistical information on assets and liabilities, sources of funds and deployment of funds and other aspects to RBI (quarterly/annual) as a part of the survey of the Financial Sector. The statistical system prevalent in these two agencies is given below: 10.4.5 The LIC collects information on various aspects of its operation such as:

Individual insurance business information new business and sum assured, premium income, number of policies, rural and urban business, social sector schemes, etc. Group and pension fund business number of schemes, lives covered, premium income, etc. Product-related information Sales under various policies, number of lives investment, State-wise investment, etc. Investment information total investment, sectoral investment, instrument-wise investment, State-wise investment, etc.

Claims-related information total claims settled, claims ratios, etc. Cost and expenses information total cost, management expenses, etc.

International operation business procurement, investment, etc.

10.4.6

The GIC collects information on:

Balance sheet in respect of every class of business. Major claims, details of investments category-wise and assets owned, claims settlement position with settlement ratio, premium details, class: business-wise and region-wise, documents issued with documentation percentage, investments and investment income. Investments, short-term loan placement, call money transactions, sanctions and disbursements.

Rural traditional covers and rural non-traditional business, cattle, poultry, Janta Personal Accident and other covers. Data on foreign operations, Motor Accident Claims Tribunal (MACT) settlements, grievance redressal and details of commission and management expenses.

10.4.7 The IRDA on the advice of the Insurance Advisory Committee has framed fifteen regulations so far under the IRDA Act, which are to be followed by all insurers. It has also prescribed a number of returns to monitor various provisions of these regulations and the insurers in the life insurance business and general insurance business are required to statutorily submit these returns to the IRDA as per the periodicity and time frame specified. Most of the regulations, which require insurers to submit these returns to the IRDA, have been framed in the year 2000 only. The IRDA will be receiving these returns from the insurance companies as per the periodicity and time frame specified by it. Reinsurance 10.4.8 Insurers who do direct business need a mechanism of risk transfer so that they do not suffer from unduly large exposure. This is achieved by their sharing the risk, premium and claims with other insurers. This transaction is known as reinsurance. There are two types of reinsurers. One is a direct insurer who also accepts reinsurance from other insurers. The second category is a professional reinsurer who transacts only reinsurance business. The reinsurance business is international in character and is done for both life and non-life business. In the past, General Insurance Corporation was acting as principal reinsurer for its four subsidiaries and managing the statutory cessions, which they had to make as per provisions of Insurance Act, 1938. In addition, GIC managed the countrys non-life reinsurance business so as to ensure a maximum retention of premium within the country. In the emerging scenario, GIC has been notified as Indian Reinsurer both for life and non life business. The statistical data on reinsurance business have become all the more important in the emerging scenario. Health Insurance 10.4.9 In India, the total spending on health care in 1997 was a mere 5.6 per cent of GDP (4.4 per cent from private sources and 1.2 per cent from public sources). The few Indians who avail of some kind of health schemes are covered under: (a) CGHS (Central Government Health Scheme), (b) ESIS (Employees State Insurance Scheme), (c) Health schemes offered by the Railways to their employees, (d) Health schemes offered by Defence Services to their employees, (e) Health schemes offered by the State Government and allied administrative bodies, (f) Health schemes offered to employees by Multinational Companies and other employers, and (g) Health

Insurance schemes. The statistical data currently available with the industry covers only (1) number of policies issued (combined for individual and group), (2) number of persons covered, (3) premium collected and (4) claims paid. As health insurance is likely to be a major business in the emerging scenario, the companies would need to collect and analyse the large amount of health insurance-related data. Crop Insurance 10.4.10 Large-scale crop failures occur every year in one part of the country or the other due to natural calamities such as drought, flood, etc. The farmers in such areas not only lose their crop for the current year but are left with no money to invest in the future crop. In order to reduce the hardship of such farmers, the Government of India thought it fit to introduce Crop Insurance Schemes since 1973. The data on crop insurance have to be consolidated and published for analysis and policy formulation. Deficiencies 10.4.11 Even though existing insurance companies publish a large amount of information through their annual reports and other publications, certain data deficiencies still exist in the Insurance Sector. These are: (a) Life Insurance 10.4.12 Some information as published by LIC is not readily available such as:

Ownership of Life Insurance namely, individual, Hindu undivided family,

etc.

Gender-wise break up of insurance business. Occupation-wise break up of policy holders, sum assured, etc. Detailed information about operational mechanism, agency organisation, premium income, etc. is not publicly available for Postal Life Insurance, State Insurance and Army Group Insurance funds.

(b) Non-Life Insurance 10.4.13 Presently, the data on general insurance are scattered. More reliable and timely data needs to be made available for smooth implementation of crop insurance scheme by means of linkages with State Governments and other organisations in the rural sector. (c) Health Insurance

10.4.14 It is not only necessary to have a large amount of health-related data for actuarial rating and successful marketing/penetration of health insurance, but data is also needed on: (1) number of policies issued (2) number of persons covered, (3) premium collected, and (4) claims and disbursements on the basis of age, disease, gender and geographical location. Consolidated data on this should be published. (d) Reinsurance 10.4.15 Reinsurance contracts are on a long-term basis. The data gap is in relation to risk-wise catastrophic exposure, as detailed mapping of the country has yet to be done. This becomes vital as both direct insurers and reinsurers could be exposed to catastrophic risks. A detailed compilation of data in terms of properties covered location-wise under different risk factors for individual risks and data on human lives and other animate objects on geographical location-wise basis and exposures against accidents, riots, natural calamities would be required. 10.4.16 In the case of the Insurance Sector, the annual accounts of Life Insurance Corporation of India and General Insurance Corporation of India and the four companies were analysed and estimates of the Domestic Product prepared. Similar information would now be required from other insurance companies operating in the country. The commission to agents appearing on the expenditure side of the revenue accounts of the annual accounts of LIC, GIC and the four companies in the public sector is treated as unorganised activity in the Insurance Sector and is taken to be the mixed income of self employed. There is a need to provide the details of this unorganised activity and its break up for procuration of insurance business pertaining to all companies. Conclusions and Recommendations 10.4.17 As the current state of collection and dissemination of the statistical information in the Insurance sector is inadequate, a system needs to be developed under a structured format rationalising existing returns and introducing new returns to fill up data gaps. The supply of information should be made mandatory by utilising the statutory powers of the Insurance Regulatory and Development Authority (IRDA). The collection and dissemination of data should rest with IRDA. The requirements of CSO and RBI as regards income, expenditure, appropriation, assets, liabilities, investment, etc. should also be furnished through IRDA. The Commission recommends that: (i) Information pertaining to the insurance sector should be collected and disseminated by Insurance Regulatory and Development Authority (IRDA). Income, expenditure, assets, liability, sources and uses of funds, investments, term structure,

non-resident operations of insurance companies, etc. should be the major items of information. IRDA should establish a Research and Statistical Division for this purpose, rationalise existing returns and introduce new returns to collect necessary data. (ii) The data should be consolidated by different categories of insurance, e.g. life, non-life, reinsurance, pension and super-annuation, health, crop, others. (iii) In respect of Postal, Employees State Insurance, Army and other group insurance schemes, pension and super-annuation, essential information should be collected by IRDA and published. (iv) Break-up of data by State, sector (rural-urban), ownership of insurance business, gender and occupation classification of policy-holders, etc. should be published.

Insurance Present Stats

The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and non-life segment. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe. There are now 29 insurance companies operating in the Indian market 14 private life insurers, nine private non-life insurers and six public sector companies. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario. There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion. There are opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60 receive pensions. The IRDA has issued the first licence for a standalone health company in the country as many more players wait to enter. The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase.

The deepening of the health database over time will also allow players to develop and price products for larger segments of society. State Insurers Continue To Dominate There may be room for many more players in a large underinsured market like India with a population of over one billion. But the reality is that the intense competition in the last five years has made it difficult for new entrants to keep pace with the leaders and thereby failing to make any impact in the market. Also as the private sector controls over 26.18% of the life insurance market and over 26.53% of the non-life market, the public sector companies still call the shots. The countrys largest life insurer, Life Insurance Corporation of India (LIC), had a share of 74.82% in new business premium income in November 2005. Similarly, the four public-sector non-life insurers New India Assurance, National Insurance, Oriental Insurance and United India Insurance had a combined market share of 73.47% as of October 2005. ICICI Prudential Life Insurance Company continues to lead the private sector with a 7.26% market share in terms of fresh premium, whereas ICICI Lombard General Insurance Company is the leader among the private non-life players with a 8.11% market share. ICICI Lombard has focused on growing the market for general insurance products and increasing penetration within existing customers through product innovation and distribution. Reaching Out To Customers No doubt, the customer profile in the insurance industry is changing with the introduction of large number of divergent intermediaries such as brokers, corporate agents, and bancassurance. The industry now deals with customers who know what they want and when, and are more demanding in terms of better service and speedier responses. With the industry all set to move to a detariffed regime by 2007, there will be considerable improvement in customer service levels, product innovation and newer standards of underwriting. Intense Competition In a de-tariffed environment, competition will manifest itself in prices, products, underwriting criteria, innovative sales methods and creditworthiness. Insurance companies will vie with each other to capture market share through better pricing and client segmentation. The battle has so far been fought in the big urban cities, but in the next few years, increased competition will drive insurers to rural and semi-urban markets.

Global Standards While the world is eyeing India for growth and expansion, Indian companies are becoming increasingly world class. Take the case of LIC, which has set its sight on becoming a major global player following a Rs280-crore investment from the Indian government. The company now operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal and will soon start operations in Saudi Arabia. It also plans to venture into the African and Asia-Pacific regions in 2006. The year 2005 was a testing phase for the general insurance industry with a series of catastrophes hitting the Indian sub-continent. However, with robust reinsurance programmes in place, insurers have successfully managed to tide over the crisis without any adverse impact on their balance sheets. With life insurance premiums being just 2.5% of GDP and general insurance premiums being 0.65% of GDP, the opportunities in the Indian market place is immense. The next five years will be challenging but those that can build scale and market share will survive and prosper. LIFE INSURANCE CORPORATION OF INDIA (LIC)

Life Insurance Corporation of India (LIC) was formed in September, 1956 by an Act of Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution from the Government of India. The then Finance Minister, Shri C.D. Deshmukh, while piloting the bill, outlined the objectives of LIC thus: to conduct the business with the utmost economy, in a spirit of trusteeship; to charge premium no higher than warranted by strict actuarial considerations; to invest the funds for obtaining maximum yield for the policy holders consistent with safety of the capital; to render prompt and efficient service to policy holders, thereby making insurance widely popular. Since nationalisation, LIC has built up a vast network of 2,048 branches, 100 divisions and 7 zonal offices spread over the country. The Life Insurance Corporation of India also transacts business abroad and has offices inFiji, Mauritius and United Kingdom. LIC is associated with joint ventures abroad in the field of insurance, namely, Ken-India Assurance Company Limited, Nairobi; United Oriental Assurance Company Limited, Kuala Lumpur and Life Insurance Corporation (International) E.C. Bahrain. The Corporation has registered a joint venture company in 26th December,

2000 in Kathmandu, Nepal by the name of Life Insurance Corporation (Nepal) Limited in collaboration with Vishal Group Limited, a local industrial Group. An off-shore company L.I.C. (Mauritius) Off-shore Limited has also been set up in 2001 to tap the African insurance market. Some Areas of Future Growth Life Insurance The traditional life insurance business for the LIC has been a little more than a savings policy. Term life (where the insurance company pays a predetermined amount if the policyholder dies within a given time but it pays nothing if the policyholder does not die) has accounted for less than 2% of the insurance premium of the LIC (Mitra and Nayak, 2001). For the new life insurance companies, term life policies would be the main line of business. Health Insurance Health insurance expenditure in India is roughly 6% of GDP, much higher than most other countries with the same level of economic development. Of that, 4.7% is private and the rest is public. What is even more striking is that 4.5% are out of pocket expenditure (Berman, 1996). There has been an almost total failure of the public health care system in India. This creates an opportunity for the new insurance companies. Thus, private insurance companies will be able to sell health insurance to a vast number of families who would like to have health care cover but do not have it.

Pension The pension system in India is in its infancy. There are generally three forms of plans: provident funds, gratuities and pension funds. Most of the pension schemes are confined to government employees (and some large companies). The vast majority of workers are in the informal sector. As a result, most workers do not have any retirement benefits to fall back on after retirement. Total assets of all the pension plans in India amount to less than USD 40 billion. Therefore, there is a huge scope for the development of pension funds in India. The finance minister of India has repeatedly asserted that a Latin American style reform of the privatized pension system in India would be welcome (Roy, 1997). Given all the pros and cons, it is not clear whether such a wholesale privatization would really benefit India or not (Sinha, 2000).
PRESENT SCENARIO OF INSURANCE INDUSTRY

India with about 200 million middle class household shows 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. The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice.

Consumers remain the most important centre of the insurance sector. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. Computerisation of operations and updating of technology has become imperative in the current scenario. Foreign players are bringing in international best practices in service through use of latest technologies

 The insurance agents still remain the main source through which insurance products are sold. The concept is very well established in the country like India but still the increasing use of other sources is imperative. At present the distribution channels that are available in the market are listed below. Direct selling Corporate agents Group selling Brokers and cooperative societies Bancassurance

Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not just traditional moneyback policies, which is not considered very appropriate for long-term protection and savings. There is lots of saving and investment plans in the market. However, there are still some key new products yet to be introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity for insurance products. A research conducted exhibited that the rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In the insurance the awareness level for life insurance is the highest in rural India, but the consumers are also aware about motor, accidents and

cattle insurance. In a study conducted by MART the results showed that nearly one third said that they had purchased some kind of insurance with the maximum penetration skewed in favor of life insurance. The study also pointed out the private companies have huge task to play in creating awareness and credibility among the rural populace. The perceived benefits of buying a life policy range from security of income bulk return in future, daughter's marriage, children's education and good return on savings, in that order, the study adds.