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A

PROJECT REPORT ON
“ROLE OF INSURANCE INDUSTRY IN ECONOMIC
GROWTH OF INDIA”

SUBMITTED IN PARTIAL FULFILMENT OF THE


REQUIREMENTS
T.Y.B.COM (BANKING & INSURANCE)
SEMESTER-VI
[2018-2019]

BY
Mr. OMKAR MILIND PAWAR
ROLL NO: 38

UNDER THE GUIDANCE OF


PROF. [Mrs.] SHUBHA SHAH

SUBMITTED TO
DYNAN GANGA EDUCATION TRUST
DEFREE COLLEGE OF
ARTS, SCIENCE AND COMMERCE (2018-2019)

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Dnyan Ganga Education Trust’s
Degree College of Arts, Science &
Commerce
Kasarvadavli Naka, G.B. Road, Thane (W)

CERTIFICATE
This is to certify that Mr. /Miss………………………………………………….. of B&I Semester 6 has

undertaken the project work titled …………………………………….………..……………….………...during the

academic year……………….…………….…………………………..……..Under the guidance of Mr./Mrs.

………………………………………….………………...…. submitted on……………………...…….. to this college in

fulfilment of Bachelor of Banking and Insurance (B&I), University of Mumbai.

This is a bonafide project work & information presented is true & original to the best of knowledge

and belief.

Project Guide Course Coordinator External Examiner Principal

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DECLARATION
I OMKAR MILIND PAWAR studying in T.Y.BCOM (Banking and Insurance)
hereby declares that I have done a project on ROLE OF INSURANCE
INDUSTRY IN ECONOMIC GROWTH OF INDIA. As required by the
university rules, I state that the work presented in this is original in nature and
to the best my knowledge, has not been submitted so far to any other University.

Whenever reference have been made to the work of others, it is clearly indicated
in the sources of information in references.

PLACE : THANE STUDENT

DATE :

(OMKAR MILIND PAWAR)

ROLL NO. 38

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ACKNOWLEDGEMENT
It gives me great pleasure to declare that my project on ROLE OF INSURANCE
INDUSTRY IN ECONOMIC GROWTH OF INDIA has been prepared purely form the
point of views of students requirements.

This project covers all the information pertaining to overall study of LIC. I had tried
my best to write project in simple and lucid manner. I have tried to avoid unnecessary
discussion and details. At the same time it provides all the necessary information. I feel
that it would be of immense help to the students as well as all others referring in
updating their knowledge.

I am indebted to our principal PROF.(Mrs.) VANDANA SHARMA for giving us such


an awesome opportunity. I am also tankful to our librarian and my colleagues for their
valuable support, co-operation and encouragement in completing my project.

Special thanks to PROF.(Mrs.) SHUBHA SHAH my internal guide for this project for
giving me expert guidance, full support and encouragement in completing my project
successfully.

I take this opportunity to thanks my parents for giving guidance and for their patience
and understanding me while I am busy with my project work.

Lastly I am thankful to God for giving me strength, spirit and also his blessing for
completing my project successfully

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EXECUTIVE SUMMARY
Objectives of the study

The main objective of the present research is t study, know and analyze
human resource management policies, practices and procedures in the
select software company on the basis of the respondent’s perception,
opinions and experiences. This main objective can be delineated into the
following sub-objectives.

To know and analyze the recruitment and selection process, procedures


and practices in the selected software company.

To study and evaluate the employee training and development related


programs and practices in the selected software company.

To analyze the employee perceptions on performance appraisal system in


vogue in the selected software company.

To study the analyze employee perceptions on the reward management in


the selected software company.

To study the promotion policy and practices in the selected software


company.

To offer suggestions if any for impriving human resource management


practices in the company.

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INDEX

SR.NO. PARTICULARS PAGE NO.

1 INTRODUCTION PAGE 1 TO 63

2 REVIEW OF LITERATURE PAGE 64 TO 66

3 SCOPE, OBJECTIVES AND LIMITATION PAGE 67 TO 69

4 RESEARCH METHODOLOGY PAGE 70 TO 71

5 ANALYSIS AND FINDINGS PAGE 72 TO 86

6 SUGGESTION AND PAGE 87


RECOMMENDATIONS
7 CONCLUSION PAGE 88

BIBLIOGRAPHY / REFERENCE PAGE 89 TO 90

ANNEXURE PAGE 91 TO 92

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INTRODUCTION

For economic development investments are necessary. Investments are made out of savings.
Life Insurance Company is a major instrument for the mobilization of savings of people,
particularly from the middle and lower group. All good life insurance companies have huge
funds accumulated through the payments of small amounts of premium of individuals. These
funds are invested in ways that contribute substantially for the economic development of the
countries in which they do business The system of insurance provides numerous direct and
indirect benefits to the individuals and his family as well as to industry and commerce and to
the community and the nation as a whole. Present day organization of industry, commerce
and trade depend entirely on insurance for their operation, banks, and financial institutions
lend money to industrial and commercial undertakings only on the basis of the collateral
security of insurance.
The economic reform of 1991 played a pivotal role in the economic development of India.
Reaping its benefit the growth of the country reached around 7.5% in the late
2000s.Insurance is a risk transfer mechanism whereby the individuals or the business

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enterprise can shift some of the uncertainties of life on the shoulder of other. In peace the
insurance provides of trade industry which ultimately contribution towards human progress.
Thus, insurance is the most lending force contribution towards economic, social and
technological progress of man. The Indian insurance market is the 19th largest globally and
ranks 5th in Asia, after Japan, South Korea china and twain. In 2003, total gross premiums
collected amount to USD 17.3billion representing just under 0.6%of world premiums. Similar
to the pattern observed in other regional market and reflecting the country’s high savings rate,
life insurance business accounted for 78.5% of total gross premiums collected in the year,
against 21.5 for non-life insurance business.

Insurance is one of the demanding financial products in India. Its basic motto is to protect the
family of any uncertainty in life. So it is long term investment and need knowledge about
that. Indian life insurance is too old. It is there from British Period and after nationalization; it
has come fully under Government. The Indian insurance market is a huge business
opportunity. India currently accounts for less than 1.5 per cent of the world’s total insurance
premiums and about 2 per cent of the world’s life insurance premiums despite being the
second most populous nation. The country is the fifteenth largest insurance market in the
world in terms of premium volume, and has the potential to grow exponentially in the coming
years. India’s life insurance sector is the biggest in the world with about 360 million policies
which are expected to increase at a Compound Annual Growth Rate of 12-15 per cent over
the next five years. The insurance industry plans to hike penetration levels to five per cent by
2020.
Financial sectors of a country are considered as a vital part of its economic growth. An
effective and well developed financial system helps to increase productivity and subsequently
the economic growth. Insurance is an important part in the financial sector that contributes
significantly to the economy of a country. Insurance market contributes to the economic
growth as an financial intermediary and also helps in managing risk more effectively (Ward
and Zurbruegg ,2000).
Moreover, insurance contributes to the promotion of financial stability, facilitation of trade
and commerce, management of risk in an effective manner, mobilization of savings,
allocation of capital in an effective way and also it acts as a complement of Government
security programs (Skipper,2001)
Insurance can be broadly categorized as life insurance, non-life insurance and reinsurance.
Life insurance represents the long- term funds whereas the non-life insurance represents short
–term funds. Reinsurance can be defined as security of other insurance company against loss.
However, existing literatures show that insurance development significantly affect the
economic growth (Outreville 1990,1996, Browne and Kim 1993, Beck and Hebb 2003)
Many research highlighted a controversial relation between financial development and
economic growth. Some studies remarked financial development leads to economic growth
where as some other found it reversely. ( Levine 1993)
In almost every developing and developed country the importance of the insurance is rising
due to the increasing share of the insurance sector in the entire financial sector.
Insurance companies, together with mutual and pension funds, are one of the biggest
institutional investors into stock, bond and real estate markets. Their impact on the economic
development has
been growing due to ageing societies, widening income disparity and globalization. The
growing links between the insurance and other financial sectors also emphasize the possible
role of insurance companies in economic growth (Rule, 2001).
For last few years, it is observed that there has been a significant growth in the insurance
sector across the globe. At the same time the contribution of insurance to the financial sector
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is remarkable. Mobilization of domestic savings, more efficient management of different
risks, mitigation of losses, more efficient allocation of domestic capital and promotion of
financial stability has been researched by many researchers. These studies also shows a
positive influence of insurance on economic growth. Some of the recent research deals with
the contribution of insurance on economic growth and analyzing the impact of insurance on
economic growth mostly in global context.
The insurance industry in India is witnessing a growth rate of 12-13% in the financial year
2015.
Due to the changing life style, work culture and high income structure, change in
consumption types and rate lots of change is currently happening in the insurance sector . (
Daily News &Analysis ) reports reveal that some of the key drivers of for the growth in
insurance market are 'make In India ' initiatives, investment in infrastructure, smart cities
initiative and increased consumption. The implementation of seventh pay commission ,
which will increase the pay-scale and it ultimately leads to more investments which will
contribute to economic growth. Insurance being a capital intensive business an increase in
FDI lead to more investment to grow the business. Insurance company in India helps in
mobilization of savings. Insurance companies accumulate huge funds which is generated
from the premiums they collect from the policies offered to the customers. These funds are
invested in different ways and that substantially contribute to the economic growth.
The main objective of this research is to examine the relationship between insurance and
economic growth of India using panel data. For this research the data is collected for twenty-
five states of India and covers the time period for 2000 to 2015 from various secondary
sources like IRDA website, CMIE, RBI bulletin, State economic survey report etc. For this
purpose endogenous growth model with a modified Cobb-Douglass production function is
used. To study the relationship between insurance and economic growth Pooled ordinary
least square generalized moment method is used. premium, human capital, physical capital
are found to be significant variables. The results also reveals that premium, physical capital
has positive impact where as human capital has negative impact on economic growth.
This research paper contributes extensively to the existing literature. Available research have
studied the relationship between insurance and economic growth in global context and
compared with other countries. Such research using state level data is a research gap. The
main objective of this research is to examine the relationship between insurance and
economic growth of India using panel data.
The rest of the research work is documented as follows: Section 2 deals with literature extant.
In section 3 methodology is discussed, Section 4 highlights the empirical results . Section 5
discussed the conclusions where as section 6 deals with implications of the research.

The Gross Domestic Product (GDP) in India expanded 0.60 percent in the third quarter of
2012 over the previous quarter. GDP Growth Rate in India is reported by the Organization for
Economic Cooperation and Development (OECD). Historically, from 1996 until 2012, India
GDP Growth Rate averaged 1.6 Percent reaching an all time high of 6.1 Percent in March of
2010 and a record low of -1.5 Percent in March of 2004. In India, the growth rate in GDP
measures the change in the seasonally adjusted value of the goods and services produced by
the Indian economy during the quarter India is the world‘s tenth largest economy and the
second most populous. The most important and the fastest growing sector of Indian economy
are services. Trade, hotels, transport and communication; financing, insurance, real estate and
business services and community, social and personal services account for more than 60
percent of GDP. Agriculture, forestry and fishing constitute around 12 percent of the output,
but employs more than 50 percent of the labor force. Manufacturing accounts for 15 percent

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of GDP, construction for another 8 percent and mining, quarrying, electricity, gas and water
supply for the remaining 5 percent.
India's GDP Growth Slows to 5.3 Percent in Q3 Ministry of Statistics and Programme
Implementation 12/11/2012
India’s economy has expanded by just 0.6 over the previous quarter and 5.3 percent
over the previous year in the third quarter. The economic activities which registered
significant growth in the fourth quarter year-over-year are construction at 6.7 per cent, trade,
hotels, transport and communication at 5.5 per cent, financing, insurance, real estate and
business services at 9.4 per cent, and community, social and personal services at 7.5 per cent.
The growth rates in agriculture, forestry & fishing is estimated at 1.2 per cent, mining and
quarrying at 1.9 per cent, manufacturing at 0.8 per cent, electricity, gas and water supply at
3.4 per cent in this period. According to the latest estimates available on the Index of
Industrial Production (IIP), the index of mining, manufacturing and electricity, registered
growth rates of 1.8 per cent, 0.2 per cent and 2.8 per cent, respectively in Q3 2012, as
compared to the growth rates of (-) 4.1 per cent, 3.4 per cent and 10.5 per cent in these
industries in Q3 2011. The key indicators of construction sector, namely, cement and
consumption of finished steel registered growth rates of 5.1 per cent and 2.3 per cent,
respectively. Exports have slowed down as a result of Europe‘s sovereign debt crisis that has
slowed exports. Investment has declined as the central bank has maintained high interest rates
to curb inflationary pressures. Amid fears of a credit downgrade, the government's poor fiscal
position has not allowed for expansive fiscal policy to stimulate the economy towards the
target growth rate.

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REVIEW OF LITERATURE

The literature on studying the relationship between insurance and economic growth are
moderately documented. However, In India very few conceptual and empirical studies are
available. In most of the studies the relationship is studied on different countries. Beenstock ,
dickson and Khajuria (1988) studied the relationship between insurance and economic
growth on twelve countries. They applied pooled time series and cross sectional analysis and
found that premiums are correlated to interest rate and GNP.
Kugler and Ofoghi(2005) studied long run relationship between insurance market size and
economic growth in united Kingdom for the period from 1966 to 2003. The results reveal
there exists a bidirectional causal relationship in the long run between economic growth and
insurance market size.
Haiss and Sumeji( 2008) studied the impact of premiums and insurance investments on GDP
growth in Europe. He conducted a cross-country panel data analysis from 1992 to 2005 and
found a positive impact of life insurance on GDP growth in fifteen UE countries.
Krishna(2008) checked the economic growth effects of insurance reforms. He remarked that
the reforms exerted no strong relationship but the rate of growth of reforms had a positive
influence on economic development.
IIhan EGE, Taha Bahadir(2011) studied the role of insurance in changing economic growth
using data of twenty-nine countries from 1999 to 2008. They found positive relationship
between insurance and economic growth.
PAN Guochen, Su Chi Wei(2012) studied the patterns of interaction between insurance
development and economic growth . Their study revealed that demand following pattern is
significant only for provinces of high income in both life and non-life insurance sectors while
supply leading pattern prevails through most provinces at different developing stage except
for provinces of low income level in life sector.
Taiwo Akinlo, Olumuyiwa Tolulope Apanisile( 2014) studied the relationship insurance and
economic growth in sub-Saharan Africa over the period 1986-2011. Pooled regression is
used. The results show that insurance has positive and significant impact on economic growth
in Sub-Saharan Africa .

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CONTRIBUTION IN ECONOMIC GROWTH OF INDIA

Positive contribution towards economic growth.

Strong complementary between insurance and banking.

The concept of MICROINSURANCE Household insurance, Crop insurance, Health


insurance, SME insurance

The relation of per capita income and insurance

Promote financial stability

By identifying those who suffer or harm, insurance helps stabilize the financial situations of
individuals, families and organizations.

It encourages individuals and firms to invest and create wealth.

Substitutes for and complements government security programs

Private insurance can relieve pressure on social insurance system, preserving government
resources for essential social security.

Pension fund and life insurance

Natural disaster indemnity plan.

Many products and services are produced and sold only if adequate liability insurance is
available to cover any claims for negligence.

Innovation.

Credit enhancement.

Helps mobilize savings.

Insurance and financial intermediation.

Insurance enhance financial system efficiency in three ways.

1] Reduce transaction costs associated with bringing together savers and borrowers.

2] create liquidity.

3] facilitates economies of scale in investments.

Financial intermediaries VS. financial markets.

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The more developed a country’s financial systems, the greater the reliance on markets and the
less the reliance on intermediaries.

Insurers VS. other financial intermediaries

Commercial banks – short-term deposits.

Contractual saving institutions – long- term view.

Risk pricing – greater the expected loss, higher the price.

Risk transformation – risk exposures can be transferred to an insurer for a price.

Risk pooling and reduction

Insurers make reasonably accurate estimates as to the pool’s overall losses.

Insurers diversify their portfolios.

Encourages loss mitigation-if pricing is tied to loss experience, insures have economic
incentives to control losses.

Insurers will monitor the companies to reduce risk increasing behavior and act in the best
interests of their various stakeholders.

A watch dog role.

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Development in Indian Insurance Market

The insurance industry of India consists of 57 insurance companies of which 24 are in life
insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is sole national re-
insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in
Indian Insurance market include agents (individual and corporate), brokers, surveyors and
third party administrators servicing health insurance claims.

Market Size
Government's policy of insuring the uninsured has gradually pushed insurance penetration in
the country and proliferation of insurance schemes.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with
Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion)
from non-life insurance. Overall insurance penetration (premiums as % of GDP) in India
reached 3.69 per cent in 2017 from 2.71 per cent in 2001.
In FY19 (up to October 2018), premium from new life insurance business increased 3.66 per
cent year-on-year to Rs 1.09 trillion (US$ 15.46 billion). In FY19 (up to October 2018), gross
direct premiums of non-life insurers reached Rs 962.05 billion (US$ 13.71 billion), showing a
year-on-year growth rate of 12.40 per cent.
Investments and Recent Developments
The following are some of the major investments and developments in the Indian insurance
sector.

 As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo Munich


Health Insurance at a valuation of around Rs 2,600 crore (US$ 370.05 million).
 In October 2018, Indian e-commerce major Flipkart entered the insurance space in
partnership with Bajaj Allianz to offer mobile insurance.
 In August 2018, a consortium of WestBridge Capital, billionaire investor Mr Rakesh
Jhunjunwala announced that it would acquire India’s largest health insurer Star Health
and Allied Insurance in a deal estimated at around US$ 1 billion.

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 In September 2018, HDFC Ergo launched ‘E@Secure’ a cyber insurance policy for
individuals.
 Insurance sector companies in India raised around Rs 434.3 billion (US$ 6.7 billion)
through public issues in 2017.
 In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals worth
US$ 903 million.
 India's leading bourse Bombay Stock Exchange (BSE) will set up a joint venture with
Ebix Inc to build a robust insurance distribution network in the country through a new
distribution exchange platform.

Government Initiatives
The Government of India has taken a number of initiatives to boost the insurance industry.
Some of them are as follows:

 In September 2018, National Health Protection Scheme was launched under


Ayushman Bharat to provide coverage of up to Rs 500,000 (US$ 7,723) to more than
100 million vulnerable families. The scheme is expected to increase penetration of
health insurance in India from 34 per cent to 50 per cent.
 Over 47.9 million famers were benefitted under Pradhan Mantri Fasal Bima Yojana
(PMFBY) in 2017-18.
 The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue
redesigned initial public offering (IPO) guidelines for insurance companies in India,
which are to looking to divest equity through the IPO route.
 IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1)
bonds that are issued by banks to augment their tier 1 capital, in order to expand the
pool of eligible investors for the banks.

Road Ahead
The future looks promising for the life insurance industry with several changes in regulatory
framework which will lead to further change in the way the industry conducts its business
and engages with its customers.
The overall insurance industry is expected to reach US$ 280 billion by 2020. Life insurance
industry in the country is expected grow by 12-15 per cent annually for the next three to five
years.
Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of
Indian life insurance.
Exchange Rate Used: INR 1 = US$ 0.0149 as on June 29, 2018

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Post-liberalisation, the insurance industry in India has recorded significant growth. The
Indian insurance industry is expected to grow to US$ 280 billion by FY2020, owing to the
solid economic growth and higher personal disposable incomes in the country. Overall
insurance penetration in India reached 3.69 per cent in 2017 from 2.71 per cent in 2001.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with
Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion)
from non-life insurance.
Over FY12–18, premium from new business of life insurance companies in India have
increased at a 14.44 per cent CAGR to reach Rs 1.94 trillion (US$ 30.1 billion) and non-life
insurance premiums (in Rs) increased at a CAGR of 16.65 per cent. In FY19 (up to Dec
2018), premium from new life insurance business increased 2.41 per cent year-on-year to Rs
1.42 trillion (US$ 19.62 billion). Life insurance industry in the country is expected grow 12-
15 per cent annually for the next three to five years.
In FY19 (up to December 2018), gross direct premiums of non-life insurers reached Rs 1.23
trillion (US$ 17.05 billion), showing a year-on-year growth rate of 13.14 per cent.
There are 24 life insurance and 33 non-life insurance companies in the Indian market who
compete on price and services to attract customers. There are two reinsurance companies.
The industry has been spurred by product innovation, vibrant distribution channels, coupled
with targeted publicity and promotional campaigns by the insurers. The market share of
private sector companies in the non-life insurance market rose from 13.12 per cent in FY03 to
50.7 per cent in FY19 (up to Nov 2018). In life insurance segment, private players had a
market share of 35.51 per cent in new business in FY19 (up to Dec 2018).
Government has approved the ordinance to increase Foreign Direct Investment (FDI) limit in
Insurance sector from 26 per cent to 49 per cent which would further help attract investments
in the sector.
In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals worth US$
903 million. Enrolments under the Pradhan Mantri Suraksha Bima Yojana (PMSBY) reached
130.41 million in 2017-18. National Health Protection Scheme was announced under Budget
2018-19 as a part of Ayushman Bharat. The scheme will provide insurance cover of up to Rs
500,000 (US$ 7,723) to more than 100 million vulnerable families in India.
Going forward, increasing life expectancy, favourable savings and greater employment in the
private sector is expected to fuel demand for pension plans. Likewise, strong growth in the
automotive industry over the next decade would be a key driver for the motor insurance
market.

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Indian insurance sector: Stepping into the next decade of
growth
A well developed and evolved insurance sector is a boon for economic development of a
country. It provides long-term funds for infrastructure development and concurrently
strengthens the risk-taking ability of the country. India’s rapid rate of economic growth over
the past decade has been one of the most significant developments in the global economy.
The Indian insurance industry: At the crossroads of development
The industry is on its way to development and a number of factors govern that growth. Some
of them are:
 Significantly untapped latent potential: India’s insurance industry has witnessed
rapid growth during the last decade. Consequently, many foreign companies have
expressed their interest in investing in domestic insurance companies, despite the
Government of India’s regulation, which mandates that the foreign shareholding limit
is fixed at 26% for the life as well as non-life insurance sectors. How can this
potential be tapped efficiently? This report analyzes the issues of the industry and
suggests methods to overcome them.
 Recent regulatory developments that govern the current market state: The
development of the insurance industry in India is likely to be critically dependent on
the nature and quality of regulation. Overall, the regulatory environment is favorable
and takes care that players maintain prudent underwriting standards, and reserve
valuation and investment practices. The primary objective for the current regulations
is to promote stability and fair play in the market place. Our report details some major
regulations by the IRDA as well as those concerning ULIPS, IPOs, among others.
What will drive market development in the Indian insurance industry?
There are certain factors that need to be considered by the Indian insurance industry to ensure
a seamless growth in business. Our report analyzes these factors in detail. Some of these
include:
 Distribution channels: The effectiveness and cost of diverse distribution strategies of
different players is crucial in ensuring the success of players in the insurance business,
particularly in the retail lines of business.
 Focus on financial inclusion: The approach to insurance must be in sync with the
evolving times. The mission of the insurance sector in India should be to extend the
insurance coverage over a larger section of the population and a wider segment of
activities.
 Consumer needs and preferences: The growth in insurance industry has been
spurred by product innovation, vibrant distribution channels, coupled with targeted
publicity and promotional campaigns by the insurers. Innovation has come not only in
the form of benefits attached to the products, but also in the delivery mechanism
through various marketing tie-ups. All these efforts have brought insurance closer to
the customer as well as made it more relevant.

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Growth of insurance business in India 

The awareness for insurance among the Indian population is steadily growing. While earlier
people used to shy away from insurance, today, individuals are choosing to insure their life,
health and other belongings through different life and non-life insurance plans. While motor
insurance is compulsory, term insurance, ULIPs and health insurance products are also finding
favour among many. That’s why the Indian insurance market has seen a positive growth over
the last years. Even within the last year itself, insurance companies have posted impressive
growth in the total amount of premium collected by them. Here are some figures collected and
furnished by the Insurance Regulatory and Development Authority which shows the premiums
collected by both life and non-life insurers in a year as on 31st January, 2018 vis-à-vis the
premium collected by them until 31st January, 2017.

Despite LIC having the largest market-share, HDFC Life has posted the highest premium
increase in the last one year.

Growth posted by general insurers

Here is what the premium figures for general insurance companies say –

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Here Bajaj Allianz has posted highest increase in the last 1 year.

So, both life and general insurers reported a good rate of growth in premium collections in the
last year. Thus, the future of insurance is good and with the coming years we can see a higher
penetration of insurance in India.

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The Role and Importance of Insurance – Explained
The following point shows the role and importance of insurance:
Insurance has evolved as a process of safeguarding the interest of people from loss and
uncertainty. It may be described as a social device to reduce or eliminate risk of loss to life
and property.
ADVERTISEMENTS:
Insurance contributes a lot to the general economic growth of the society by provides stability
to the functioning of process. The insurance industries develop financial institutions and
reduce uncertainties by improving financial resources.
1. Provide safety and security:
Insurance provide financial support and reduce uncertainties in business and human life. It
provides safety and security against particular event. There is always a fear of sudden loss.
Insurance provides a cover against any sudden loss. For example, in case of life insurance
financial assistance is provided to the family of the insured on his death. In case of other
insurance security is provided against the loss due to fire, marine, accidents etc.
2. Generates financial resources:
Insurance generate funds by collecting premium. These funds are invested in government
securities and stock. These funds are gainfully employed in industrial development of a
country for generating more funds and utilised for the economic development of the country.
Employment opportunities are increased by big investments leading to capital formation.
3. Life insurance encourages savings:
Insurance does not only protect against risks and uncertainties, but also provides an
investment channel too. Life insurance enables systematic savings due to payment of regular
premium. Life insurance provides a mode of investment. It develops a habit of saving money
by paying premium. The insured get the lump sum amount at the maturity of the contract.
Thus life insurance encourages savings.
4. Promotes economic growth:
Insurance generates significant impact on the economy by mobilizing domestic savings.
Insurance turn accumulated capital into productive investments. Insurance enables to mitigate
loss, financial stability and promotes trade and commerce activities those results into
economic growth and development. Thus, insurance plays a crucial role in sustainable growth
of an economy.
5. Medical support:
A medical insurance considered essential in managing risk in health. Anyone can be a victim
of critical illness unexpectedly. And rising medical expense is of great concern. Medical
Insurance is one of the insurance policies that cater for different type of health risks. The
insured gets a medical support in case of medical insurance policy.

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6. Spreading of risk:
Insurance facilitates spreading of risk from the insured to the insurer. The basic principle of
insurance is to spread risk among a large number of people. A large number of persons get
insurance policies and pay premium to the insurer. Whenever a loss occurs, it is compensated
out of funds of the insurer.
7. Source of collecting funds:
Large funds are collected by the way of premium. These funds are utilised in the industrial
development of a country, which accelerates the economic growth. Employment
opportunities are increased by such big investments. Thus, insurance has become an
important source of capital formation.

The process of insurance has been evolved to safeguard the interests of people from
uncertainty by providing certainty of payment at a given contingency. The insurance
principle comes to be more and more used and useful in modern affairs.

Not only does it serve the ends of individuals, or of special groups of individuals, it tends to
pervade and to transform our modern social order, too. The role and importance of insurance,
here, has been discussed in three phases: (i) uses to individual, (ii) uses to a special group of
individuals, viz., to business or industry, and (iii) uses to the society.

Uses to an individual :
1. Insurance provides Security and Safety:

The insurance provides safety and security against the loss on a particular event. In case of
life insurance payment is made when death occurs or the term of insurance is expired. The
loss to the family at a premature death and payment in old age are adequately provided by
insurance. In other words, security against premature death and old age sufferings are
provided by life insurance.

Similarly, the property of insured is secured against loss on a fire in fire insurance. In other
insurance, too, this security is provided against the loss at a given contingency.

The insurance provides safety and security against the loss of earning at death or in golden
age, against the loss at fire, against the loss at damage, destruction or disappearance of
property, goods, furniture and machines, etc.

2. Insurance affords Peace of Mind:

The security wish is the prime motivating factor. This is the wish which tends to stimulate to
more work, if this wish is unsatisfied, it will create a tension which manifests itself to the
individual in the form of an unpleasant reaction causing reduction in work.

The security banishes fear and uncertainty, fire, windstorm, auto-mobile accident, damage
and death are almost beyond the control human agency and in occurrence of any of these
events may frustrate or weaken the human mind. By means of insurance, however, much of
the uncertainty that centers about the wish for security and its attainment may be eliminated.

3. Insurance protects Mortgaged Property:

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At the death of the owner of the mortgaged property, the property is taken over by the lender
of money and the family will be deprived of the uses of the property. On the other hand, the
mortgagee wishes to get the property insured because at the damage or destruction of the
property he will lose his right to get the loan replayed.

The insurance will provide adequate amount to the dependents at the early death of the
property-owner to pay off the unpaid loans. Similarly, the mortgagee gets adequate amount at
the destruction of the property.

4. Insurance eliminates dependency:

At the death of the husband or father, the destruction of family needs no elaboration.
Similarly, at destruction of, property and goods, the family would suffer a lot. It brings
reduced standards of living and the suffering may go to any extent of begging from the
relatives, neighbors or friends.

The economic independence of the family is reduced or, sometimes, lost totally. What can be
more pitiable condition than this that the wife and children are looking others more
benevolent than the husband and father, in absence of protection against such dependency?
The insurance is here to assist them and provides adequate amount at the time of sufferings.

5. Life Insurance encourages saving:

The elements of protection and investment are present only in case of life insurance. In
property insurance, only protection element exists. In most of the life policies elements of
saving predominates. These policies combine the programs of insurance and savings.

The saving with insurance has certain extra advantages

(i) Systematic saving am possible because regular premiums are required to be compulsorily
paid. The saving with a bank is voluntary and one can easily omit a month or two and then
abandon the program entirely.

(ii) In insurance the deposited premium cannot be withdrawn easily before the expiry of the
term of the policy. As contrast to this, the saving which can be withdrawn at any moment will
finish within no time.

(iii) The insurance will pay the policy money irrespective of the premium deposited while in
case of bank-deposit; only the deposited amount along with the interest is paid. The
insurance, thus, provides the wished amount of insurance and the bank provides only the
deposited amount,

(iv) The compulsion or force to premium in insurance is so high that if the policy-holder fails
to pay premiums within the days of grace, he subjects his policy to causation and may get
back only a very nominal portion of the total premiums paid on the policy.

For the preservation of the policy, he has to try his level best to pay the premium. After a
certain period, it would be a part of necessary expenditure of the insured. In absence of such
forceful compulsion elsewhere life insurance is the best media of saving.

6. Life Insurance provides profitable Investment:

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Individuals unwilling or unable to handle their own funds have been pleased to find an outlet
for their investment in life insurance policies. Endowment policies, multipurpose policies,
deferred annuities are certain better form of investment.

The elements of investment i.e., regular saving, capital formation, and return of the capital
along with certain additional return are perfectly observed, in life insurance.

In India the insurance policies carry a special exemption from income-tax, wealth tax, and
gift tax and estate duty. An individual from his own capacity cannot invest regularly with
enough of security and profitability. The life insurance fulfils all these requirements with a
lower cost. The beneficiary of the policy-holder can get a regular income from the life-
insurer; if the insured amount is left with him.

7. Life Insurance fulfils the needs of a person:

The needs of a person are divided into (A) Family needs, (B) Old-age needs, (C) Re-
adjustment needs, (D) Special needs, (E) The clean-up needs.

(A) Family Needs:

Death is certain, but the time is uncertain. So, there is uncertainty of the time when the
sufferings and financial stringencies may be fall on the family. Moreover, every person is
responsible to provide for the family.

It would be a more pathetic sight in the world to see the wife and children of a man looking
for someone more considerate arid benevolent than the husband or the father, who left them
unprovoked.

Therefore, the provision for children up to their reaching earning period and for widow up to
long life should he made. Any other provision except life insurance will not adequately meet
this financial requirement of the family. Whole life policies are the better means of meeting
such requirements.

(B) Old-age heeds:

The provision for old-age is required where the person is surviving more than his earning
period. The reduction of income in old-age is serious to the person and his family.

If no other family member starts earning, they will be left with nothing and if there is no
property, it would be more piteous state. The life insurance provides old age funds along with
the protection of the family by issuing various policies.

(C) Re-adjustment Needs:

At the time of reduction in income whether by loss of unemployment, disability, or death,


adjustment in the standard of living of family is required. The family members will have to
be satisfied with meager income and they have to settle down to lower income and social
obligations.

Before coming down to the lower standard and to be satisfied with that, they require certain
adjustment income so that the primary obstacles may be reduced to minimum. The life
insurance helps to accumulate adequate funds. Endowment policy anticipated endowment

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policy and guaranteed triple benefit policies are seemed to be a good substitute for old age
needs.

(D) Special Needs:

There is certain special requirement of the family which is fulfilled by the earning member of
the family. If the member becomes disable to earn the income due to old age or death, those
needs may remain unfulfilled and the family will suffer.

(i) Need for Education. There are certain insurance policies, and annuities which are useful
for education of the children irrespective of the death or survival of the father or guardian.

(ii) Marriage. The daughter may remain unmarried in case of father's death or in case of
inadequate provision for meeting the expenses of marriage. The insurance can provide funds
for the marriage if policy is taken for the purpose.

(iii) Insurance needs for settlement of children. After education, settlement of children takes
time and in absence of adequate funds, the children cannot be well placed and all the
education go to waste.

(E) Clean-up funds:

After death, ritual ceremonies, payment of wealth taxes and income taxes are certain
requirements which decrease the amount of funds of the family member. Insurance comes to
help for meeting these requirements. Multipurpose policy, education and marriage policies,
capital redemption policies are the better policies for the special needs.

Uses to business :

The insurance has been useful to the business society also. Some of the uses are discussed
below:

1. Uncertainty of business losses is reduced:

In world of business, commerce and industry a huge number of properties are employed.
With a slight slackness or negligence, the property may be turned into ashes. The accident
may be fatal not only to the individual or property but to the third party also. New
construction and new establishment are possible only with the help of insurance.

In absence of it, uncertainty will be to the maximum level and nobody would like to invest a
huge amount in the business or industry. A person may not be sure of his life and health and
cannot continue the business up to longer period to support his dependents. By purchasing
policy, he can be sure of his earning because the insurer will pay a fed amount at the time of
death.

Again, the owner of a business might foresee contingencies that would bring great loss. To
meet such situations they might decide to set aside annually a reserve, but it could not be
accumulated due to death. However, by making an annual payment, to secure immediately,
insure policy can be taken.

2. Business-efficiency is increased with insurance:

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When the owner of a business is free from the botheration of losses, he will certainly devote
much time to the business. The care free owner can work better for the maximisation of the
profit. The new as well as old businessmen are guaranteed payment of certain amount with
the insurance policies at the death of the person; at the damage, destruction or disappearance
of the property or goods.

The uncertainty of loss may affect the mind of the businessmen adversely. The insurance,
removing the uncertainty, stimulates the businessmen to work hard.

3. Key Man Indemnification:

Key man is that particular man whose capital, expertise, experience, energy, ability to
control, goodwill and dutifulness make him the most valuable asset in the business and whose
absence will reduce the income of the employer tremendously and up to that time when such
employee is not substituted.

The death or disability of such valuable lives will, in many instances, prove a more serious
loss than that by fire or any hazard. The potential loss to be suffered and the compensation to
the dependents of such employee require an adequate provision which is met by purchasing
adequate life-policies.

The amount of loss may be up to the amount of reduced profit, expenses involved in
appointing and training, of such persons and payment to the dependents of the key man. The
Term Insurance Policy or Convertible Term Insurance Policy is more suitable in this case.

4. Enhancement of Credit:

The business can obtain loan by pledging the policy as collateral for the loan. The insured
persons are getting more loans due to certainty of payment at their deaths. The amount of
loan that can be obtained with such pledging of policy, with interest thereon will not exceed
the cash value of the policy. In case of death, this value can be utilised for setting of the loan
along with the interest.

If the borrower is unwilling to repay the loan and interest, the lender can surrender the policy
and get the amount of loan and interest thereon repaid. The redeemable debentures can be
issued on the collateral of capital redemption policies. The' insurance properties are the best
collateral and adequate loans are granted by the lenders.

5. Business Continuation:

In any business particularly partnership business may discontinue at the death of any partner
although the surviving partners can restart the business, but in both the cases the business and
the partners will suffer economically.

The insurance policies provide adequate funds at the time of death. Each partner may be
insured for the amount of his interest in the partnership and his dependents may get that
amount at the death of the partner.

With the help of property insurance, the property of the business is protected against disasters
and the chance of disclosure of the business due to the tremendous waste or loss.

6. Welfare of Employees:

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The welfare of employees is the responsibility of the employer. The former are working for
the latter. Therefore, the latter has to look after the welfare of the former which can be
provision for early death, provision for disability and provision for old age.

These requirements are easily met by the life insurance, accident and sickness benefit, and
pensions which are generally provided by group insurance. The premium for group insurance
is generally paid by the employer. This plan is the cheapest form of insurance for employers
to fulfill their responsibilities.

The employees will devote their maximum capacities to complete their jobs when they are
assured of the above benefits. The struggle and strife between employees and employer can
be minimised easily with the help of such schemes.

Uses of society :

Some of the uses of insurance to society are discussed in the following sections.

1. Wealth of the society is protected :

The loss of a particular wealth can be protected with the insurance. Life insurance provides
loss of human wealth. The human material, if it is strong, educated and care-free, will
generate more income.

Similarly, the loss of damage of property at fire, accident, etc., can be well indemnified by
the property insurance; cattle, crop, profit and machines are also protected against their
accidental and economic losses.

With the advancement of the society, the wealth or the property of the society attracts more
hazardous and, so new types of insurance are also invented to protect them against the
possible losses.

Each and every member will have financial security against old age, death, damage,
destruction and disappearance of his wealth including the life wealth. Through prevention of
economic losses, instance protects the society against degradation.

Through stabilization and expansion of business and industry, the economic security is
maximised. The present, future and potential human and property resources are well-
protected. The children are getting expertise education, working classes are free from
botherations and older people are guiding at ease. The happiness and prosperity are observed
everywhere with the help of insurance.

2. Economic Growth of the Country:

For the economic growth of the country, insurance provides strong hand and mind, protection
against loss of property and adequate capital to produce more wealth. The agriculture will
experience protection against losses of cattle, machines, tools and crop.

This sort of protection stimulates more production hi agriculture, in industry, the factory
premises, machines, boilers and profit insurances provide more confidence to start and
operate the industry welfare of employees create a conducive atmosphere to work: Adequate
capital from insurers accelerate the production cycle.

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Similarly in business, too, the property and human material are protected against certain
losses; capital and credit are expanded with the help of insurance. Thus, the insurance meets
all the requirements of the economic growth of a country.

3. Reduction in Inflation:

The insurance reduces the inflationary resource in two ways. First, by extracting money in
supply to the amount of premium collected and secondly, by providing sufficient funds for
production narrow down the inflationary gap.

With reference to Indian context it has been observed that about 5.0 per cent of the money in
supply was collected in form of premium.

The share of premium contributed to the total investment of the country was about 10.0 per
cent. The two main causes of inflation, namely, increased money in supply and decreased
production are properly controlled by insurance business, Insurance Need and Selling.

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Advantages & Disadvantages of Life Insurance
Life insurance offers several advantages not available from any other financial instrument;
yet it also has disadvantages.

Advantages of Life Insurance

Life insurance provides an infusion of cash for dealing with the adverse financial
consequences of the insured’s death.

Life insurance enjoys favorable tax treatment unlike any other financial instrument.

Death benefits are generally income-tax-free to the beneficiary.

Death benefits may be estate-tax free if the policy is owned properly.

Cash values grow tax deferred during the insured’s lifetime.

Cash value withdrawals are treated on a first-in-first-out (FIFO) basis, therefore cash value
withdrawals up to the total premiums paid are generally income-tax free.

Policy loans are income tax free.

A life insurance policy may be exchanged for another life insurance policy (or for an annuity)
without incurring current taxation.

Covers Business Property


Most businesses have business property and inventory. If there is a fire, robbery or another
type of accident leading to damage or property loss of business assets, a general liability
policy covers the business to the policy limits. It also protects the building the business leases
for operations. If a storefront window is broken by a vandal, the glass could be covered by
the policy. Business owners should do a thorough inventory of assets including computers,
furniture, supplies and inventory to have adequate coverage.

Protects Against Liabilities


Businesses are sued for a lot of different things. Business insurance protects against many
types of lawsuits. Workers' compensation covers employees from injury or illness at work.
Business liability insurance protects the business if a consumer trips and falls in the office or
otherwise is hurt. Professional liability insurance such as medical malpractice insurance
protects professionals from mistakes that may result in harm to a client. Many insurance
policies pay not just the settlement to the injured party but also cover legal fees incurred by
the company when battling a lawsuit.

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Replaces Income
There are times when business operations must halt because of a break-in, fire, flood or
another disaster. Some business policies cover revenues based on historical information. So if
you average $10,000 a month in revenues, your policy would pay that to you up to the policy
limits during the time your business is closed.

Many life insurance policies are exceptionally flexible in terms of adjusting to the
policyholder’s needs. The death benefit may be decreased at any time and the premiums may
be easily reduced, skipped or increased.

A cash value life insurance policy may be thought of as a tax-favored repository of easily
accessible funds if the need arises; yet, the assets backing these funds are generally held in
longer-term investments, thereby earning a higher return.

Disadvantages of Life Insurance


Policyholders forego some current expenditure to pay policy premiums. Moreover, life
insurance is typically purchased for the benefit of others and usually only indirectly for the
insured person.

Cash surrender values are usually less than the premiums paid in the first several policy years
and sometimes a policyowner may not recover the premiums paid if the policy is surrendered.

The life insurance purchase decision and the positioning of the life insurance can be complex
especially if the insurance is for estate planning, business situations or complex family
situations.

The life insurance acquisition process can be annoying and perplexing (e.g. Is the life
insurance agent trustworthy? Is this the right product and carrier? How can medical
underwriting be streamlined?).

Denies Claims or Pays Slowly


Because business insurance is confusing with many types of policies, a claim may arise that
the company's policy doesn't cover. Additionally, many claims take time to process because
insurance companies need to assess the damage and determine an accurate accounting of loss.
The time and energy required can be frustrating and end unfavorably for the business
claimant.

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Adds Expense
Business owners are constantly examining budgets and looking for ways to save money.
Insurance can be expensive, especially in certain industries where workers' compensation
injuries are common. Construction business policies are more expensive than policies for
accounting offices. As a business grows, it should review its policies to make sure they cover
the existing needs. Otherwise, the policy may not cover a loss completely, leaving the
business underinsured.

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Indian Insurance Industry Analysis

Post-liberalisation, the insurance industry in India has recorded significant growth. The
Indian insurance industry is expected to grow to US$ 280 billion by FY2020, owing to the
solid economic growth and higher personal disposable incomes in the country. Overall
insurance penetration in India reached 3.69 per cent in 2017 from 2.71 per cent in 2001.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with
Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion)
from non-life insurance.
Over FY12–18, premium from new business of life insurance companies in India have
increased at a 14.44 per cent CAGR to reach Rs 1.94 trillion (US$ 30.1 billion) and non-life
insurance premiums (in Rs) increased at a CAGR of 16.65 per cent. In FY19 (up to Dec
2018), premium from new life insurance business increased 2.41 per cent year-on-year to Rs
1.42 trillion (US$ 19.62 billion). Life insurance industry in the country is expected grow 12-
15 per cent annually for the next three to five years.
In FY19 (up to December 2018), gross direct premiums of non-life insurers reached Rs 1.23
trillion (US$ 17.05 billion), showing a year-on-year growth rate of 13.14 per cent.
There are 24 life insurance and 33 non-life insurance companies in the Indian market who
compete on price and services to attract customers. There are two reinsurance companies.
The industry has been spurred by product innovation, vibrant distribution channels, coupled
with targeted publicity and promotional campaigns by the insurers. The market share of
private sector companies in the non-life insurance market rose from 13.12 per cent in FY03 to
50.7 per cent in FY19 (up to Nov 2018). In life insurance segment, private players had a
market share of 35.51 per cent in new business in FY19 (up to Dec 2018).
Government has approved the ordinance to increase Foreign Direct Investment (FDI) limit in
Insurance sector from 26 per cent to 49 per cent which would further help attract investments
in the sector.
In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals worth US$
903 million. Enrolments under the Pradhan Mantri Suraksha Bima Yojana (PMSBY) reached
130.41 million in 2017-18. National Health Protection Scheme was announced under Budget
2018-19 as a part of Ayushman Bharat. The scheme will provide insurance cover of up to Rs
500,000 (US$ 7,723) to more than 100 million vulnerable families in India.
Going forward, increasing life expectancy, favourable savings and greater employment in the
private sector is expected to fuel demand for pension plans. Likewise, strong growth in the
automotive industry over the next decade would be a key driver for the motor insurance
market.

The insurance industry can be broadly divided into two: life insurance and general
insurance. While life insurance relates to risk cover for life or disability/accidents of an
individual or a group of individuals, general insurance or non-life insurance covers risk to
other insurable assets such as property, vehicles, health etc.

Penetration (premium as a percentage of GDP) of life insurance stood at 2.7% as


compared to the global average of 3.5%. On the other hand, the general insurance
penetration stood at a mere 0.8% as compared to the global average of 2.8%. This shows
the huge untapped potential in the Indian insurance market.

The insurance sector is regulated by the Insurance Regulatory and Development Authority
of India (IRDAI). The IRDAI opened up the insurance sector for private participation in
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2000. Until 2000, there were only one life insurer and four general insurers in the country,
all from the public sector. Presently there are 24 life insurance companies and 30 general
insurance companies operating in the country.

General insurance can be broadly divided across fire, marine, motor, health, and crop
product segments. Motor, health, and crop were the three biggest segments with shares of
39.5%, 27% and 16% of the general insurance pie in FY17. Life insurance products can
be classified as non-linked and linked. Non-linked products are traditional products with a
protection and savings element built in or only pure-protection products. Non-linked
savings products can be further divided into participating products and non-participating
products. Participating products have variable returns, as it is linked to the performance of
the insurance company. Linked products' returns, on the other hand, are tied to the
performance of debt and equity markets. Linked products started gaining traction from
FY07. As of fiscal 2017, non-linked products was the biggest segment accounting for
87% of the total premium collected. However, the share was much lower for private
players, constituting 56% of the total premium.

Reinsurance refers to the arrangement whereby insurers transfer part of the risks and
liabilities to one or more insurers or reinsurers by entering reinsurance contracts and
paying premiums. Reinsurance allows direct insurers to manage capacity, ease surplus
strain, minimise fluctuations in claim payments and lapse exposure and also manage their
portfolios.

The fortunes of the reinsurance industry are tied to the growth of underlying life and non-
life insurance businesses. The size of the Indian reinsurance market was estimated to be
around Rs 388 billion in FY17. Reinsurance of non-life insurance business accounted for
a lion's share of 95% of the total premium during the year. The dominance of non-life in
the reinsurance pie can be attributed to the better geographical spread of life policies
compared to non-life and because the insured amounts are typically smaller in
comparison, reinsurance need is correspondingly lower. In addition, life insurance is
viewed as a protection-cum-savings product in India. Therefore, the uptake of pure life
protection policies (term insurance) that can be reinsured is on the lower side.

1 Introduction:  The Insurance Industry of India consists of 53 insurance companies of which 24 are
in life insurance business and 29 are non-life insurers.  Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company.  Among the non-life insurers there are six
public sector insurers.  In addition to these, there is sole national re-insurer, namely, General
Insurance Corporation of India.  Out of 29 non-life insurance companies, 5 private sector insurers
are registered to underwrite policies exclusively in health, personal accident and travel insurance
segments.
2. 1. Star Health and Allied Insurance Company Ltd. 2. Apollo Munich Health Insurance Company Ltd.
3. Max Bupa Health Insurance Company Ltd. 4. Religare Health Insurance Company Ltd. 5. Cigna TTK
Health Insurance Company Ltd.  There are two more specialized insurers belonging to public sector.
1. Export Credit Guarantee Corporation of India for Credit Insurance. 2. Agriculture Insurance
Company Ltd for crop insurance.  The Insurance Regulatory and Development Authority (IRDA)
recently allowed life insurance companies that have completed 10
5. years of operations to raise capital through Initial Public Offerings (IPOs).  Insurance products are
also covered under the Exempt Exempt Exempt (EEE) method of taxation, which translates to an
effective tax benefit of approximately 30 per cent on select investments.  In 2015, Government
33 | P a g e
introduced Pradhan Mantri Suraksha Bima Yojna (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima
Yojana (PMJBY) to bring more people under the insurance cover.  Going forward, increasing life
expectancy, favorable savings and greater employment in the private sector is expected to fuel
demand for pension plans.  The Indian market for insurance is characterized by the geographical
spread fragmented in terms of characteristics, language barriers, 248 million urban, 300
6. million middle class, five metros, 30 cities, 700 towns, and a large number of villages  Likewise,
strong growth in the automotive industry over the next decade would be a key driver for the motor
insurance market. Policy Support:  Tax incentives  Insurance Bill Provides IRDA with the flexibility
to formulate regulations  Clarify on rules for insurance IPOs would infuse Liquidity  Attempts to
make sector lucrative for foreign participants
7. Market Size:  India’s life insurance sector is the biggest in the world with about 360 million
policies which are expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per
cent over the next five years. The insurance industry plans to hike penetration levels to five per cent
by 2020.  The country’s insurance market is expected to quadruple in size over the next 10 years
from its current size of US$ 60 billion. During this period, the life insurance market is slated to cross
US$ 160 billion.  During April 2015 to March 2016 period, the life insurance industry recorded a
new premium income of Rs 1.38 trillion, indicating a growth rate of 22.5 %.
8.  The general insurance industry recorded a 12 per cent growth in Gross Direct Premium
underwritten in April 2016 at Rs 105.25 billion.  The general insurance business in India is currently
at Rs 78,000 cr (US$ 11.44 billion) premium per annum industry and is growing at a healthy rate of
17 per cent.  India currently accounts for less than 1.5 per cent of the world’s total insurance
premiums and about 2 per cent of the world’s life insurance premiums despite being the second
most populous nation.  The country is the fifteenth largest insurance market in the world in terms
of premium volume, and has the potential to grow exponentially in the coming years.
9. Shares in non-life insurance market: • Motor insurance accounted for 39.41 per cent of the gross
direct premiums earned in FY16* (up from 41 per cent in FY06), at US$ 1.01 billion till September
2015. • At US$ 0.71 billion (till September 2015), the health segment seized 27.75 per cent share in
gross direct premiums. • Private players contribute around 50.2 per cent in the total revenue
generated in non-life insurance sector while public companies contributes around 49.8 per cent
share by September 2015.  In 2015, Crop Insurance market covered around 32 million farmers; that
is 19% of total farmers in India.  Strong Growth in the automotive sector to drive motor insurance
market.
10. Entry and Exit Barriers in Indian Insurance Industry: 1. Foreign Direct Investment: IRDA allows
49% FDI in India in Insurance Sector. This means if any investor outside India wants to enter into
Indian Insurance market then it would have to form collaboration with some Indian Companies.
Moreover the foreign investor can hold only 49% of the equity shares in the joint venture and the
remaining 51% would be held by the Indian company. Also foreign reinsurers are not given right of
first refusal privileges while domestic reinsurers are given. This forms a kind of entry barrier for the
foreign investors in Indian Insurance sector. 2. Capital Requirements: Insurance sector is a capital
intensive sector that requires huge initial investment and also the capital
11. gets locked for a longer period before the actual gains can be obtained. For private sector, IRDA
has setup a minimum paid up equity capital for life insurance or general insurance business as 100cr
and for reinsurance as 200 cr. This huge investment is often difficult for a company to arrange and so
it prevents many companies from entering the sector. 3. Exit Barriers: In India exiting insurance
sector proves to be quite costly for the existing players. The regulatory transaction cost involved for
closing the business is quite high. Since it becomes almost impossible for an insurance firm to exit, it
proves to be a barrier for many new players. 4. Composite Insurance not allowed: A single company
can carry out only one out the three types of insurance business viz life insurance, general insurance
and reinsurance. This puts restrictions on companies that want to

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12. expand their insurance business by entering different fields. 5. License Requirement: For any
private company to enter into the insurance sector they have to acquire license from the
government. IRDA has set up rules which need to be fulfilled in order to be eligible to acquire the
license. It becomes difficult for many companies to fulfill all the requirements and so it acts as a
barrier for them to enter into the market. 6. Brand Loyalty: State owned Life Insurance Corporation
of India (LIC) was the first to enter into Life insurance business and so it enjoys a monopoly in the life
insurance business.
13. 7.Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of
entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of
substitutable goods and service for consumers- though none of the alternative channels as such are
in position to replace the personal selling through the agents, the players have been vying with each
other through a combination of innovative channels in their Endeavour to reduce the cost of
distribution and satisfying customers. Alternative channels will grow over a period of time. The
distribution network is locking the growth of other players and giving the market a non-level playing
field.
14. Competition:  Market structure and size of markets- Out of this percentage more than 70% is
dominated by LIC which shows the dominant position of LIC and the non level playing field existent
in the market denying healthy competition in market. A rise of almost 47% has been witnessed by
LIC in its average premium per policy 10.  Opening of the market and insurance sector for the
private and foreign players has definitely brought in noticeable changes in the insurance industries in
India.  It has challenged the Monopoly of LIC in life insurance and the GIC and its subsidiaries in the
Non-life insurance sector. Market share of these two Government behemoths have also Dropped
but not as expected.
15.  The global financial crisis has reverted the trend and the market share of these companies
almost remains unchallenged, even today.  Private players are doing their bit in terms of bringing in
professionalism, technology, range of products and the operational efficiency yet it has not reached
anywhere near the global standard.  Unlike the developed and other emerging economies, there is
dominance of life than non-life Insurance in India which needs to be reversed to make it on par with
other Asian peers.  Moreover, the professionalism and customer centric approach of the private
players is yet to bring is substantial revenue and break the hegemony of LIC and GIC.
16.  People still trust the Government companies over private players in India. This is due to the
after sale service and too much of profit oriented approach of the existing private players. 
Therefore, they must also focus on their role and commitment towards the society to have their own
space and make the co- existence a reality.  They must win back the confidence of the public and
their business has to be for the public welfare and not other way round. They must also bring in
attitudinal change and manner in which they operate their business.  The future growth of life
insurance depends upon the products that provide pure protection, have variety to choose from,
easy to understand and customer centric
17. with focus on the continuous improvement in its services.  Since the flow of amount to
insurance is linked to the household savings, innovative distribution channels are a must for the
increased penetration into rural areas and deeper markets. Products:  Insurance is a push product.
Insurance cover is procured where it is mandated. Motor insurance that is statutory and fire
insurance, which is mandated by lenders, are cases in point. A few others like marine hull, marine
transit, and liability policies like public liability also fall into this category.  Increasing awareness and
penetration of certain product categories such as liability
18. insurance, health insurance, and overseas travel insurance.  Innovative product offerings in the
market such as weather insurance offering practical solutions to insurance needs.  Insurance
products can easily be copied thereby limiting differentiation at the product level.  In such a
scenario, competitive advantage will be gained through constant product innovation, cost effective
distribution, and quality of service delivery. This will allow the insurer to differentiate the overall

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value proposition offered to the customer and to adopt a pricing model based on the perceived
value as against discounting.  In addition, most customers who have taken insurance of some sort
are usually under-
19. insured in terms of the potential risks they are exposed to. This applies to individuals as well as
corporates and insurers must constantly educate their customers on the need for adequate
coverage.  There are also a large number of underserved segments such as senior citizens, rural
markets, and NRIs whose needs are still unmet. The appropriate product solution delivered through
the right channels will be the key to penetrate these markets  There are two main types of
insurance, namely life insurance and general insurance which covers different aspects in your life.
1.Life Insurance:  Whole Life  Endowment
20.  Term  Investment linked  Life annuity plan  Medical and health Risks Covered under Life
Insurance are Premature Death, Income during Retirement and Illness. 2.General Insurance:  Motor
Insurance  Fire/Houseowners /Householders Insurance  Personal accident insurance  Medical and
health insurance  Travel Insurance Risks Covered under by General Insurance includes Property loss
(Stolen car or Burnt House),liability
21. arising from damage caused by yourself to third party and Accidental death or injury.
22. Competitive Challenges: 1. Multi-channel distribution footprint: Understanding the science of
multi- distribution channel management and developing a robust field footprint will remain the most
distinctive competitive challenges for the new age insurers. Managing the expectations of channel
partners, viz., banks, corporate agents, brokers, and advisory force, and keeping the acquisition costs
at manageable proportions at the same time will help the new players reach break-even relatively
sooner. 2. Technological advancement: A key driver of growth in a long-term business like life
insurance, technological advancement will be critical to functions like data management,
underwriting, fund management, actuarial efficiency, and the end- to-end service delivery process.
Technology will provide the cutting edge in terms of improved disclosure to the policy holder as well
as the regulator in due course of time.
23. 3. Quality of manpower: Insurance is an intensively people-oriented business and human
resources will be the undoubted differentiator like in any other retail industry. The quality of
manpower attracted and retained by insurers and how their abilities and ambitions are harnessed
would be the litmus test for the industry. 4. Investment strategy and fund management: Expertise in
fund management is the value proposition that any insurance company offers and the quality of
asset-liability management (ALM) in a falling or stable interest rate regime will thus be a key
challenge. The regulator is progressively in favor of insurance companies setting up their own
investment research and dealing cells and against knowledge sharing with group asset management
companies. Bonus performance on traditional plans and the net asset value (NAV) performance on
ULIPs will determine the
24. demand patterns and investment strategy will remain at the core of successful insurance
business. 5. Acquisition costs: Acquisition costs which is a sum total of technological, operational,
and distribution costs, will be the key differentiating factor in the initial years. While the initial hits
on the technology and process costs have already been absorbed by a majority of the new insurers,
intermediary costs of distribution is a critical variable.. SBI Life can boast of the lowest acquisition
cost levels in the industry due to the lower infrastructure and set-up costs thanks to our existing
bank network. Further, the intermediary costs to distribution channel partners are also lower due to
the bargaining power that the strong brand possesses in life insurance.
25. Dominance in market: LIC  All this time, we find a dominant position being enjoyed by state
owned LIC in life insurance market. In India, LIC is the only state owned enterprise working in life
insurance sector. There are several private players in this market but only one state owned
enterprise. To say that private players have some catching up to do with LIC would be an
understatement of sorts  After all, given the massive head start the latter has over the private
insurers, coupled with its army of agents that gives it enormous distribution leverage, its strength is

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staggering, to say the least.  Moreover, as the private players have been around for only for few
years, it would not be possible for them to make a substantial dent in LIC‘s market-share either.
Prior to the opening up of private participation in August 2000, the insurance sector was a
government
26. monopoly consisting of LIC and GIC with its four subsidiaries. Now there are several new Life
insurance companies and General life insurance companies.  LIC has huge investment and financial
strength. Owing its bigger size it has the best advantage of pricing as well as getting better
investment returns which can subsidise its original insurance product.  LIC is said to have a
dominant position in insurance market and the factors leading to distortion in level playing field are
as follows :-
27. 1. Sovereign Guarantee: LIC has sovereign guarantee from central government. By sovereign
guarantee, government gives the policy holders of LIC a commitment that it will fulfill all the
promises made by the company. Private players and insurance regulator IRDA have been asking the
government to remove sovereign guarantee given to bail out in case of any mishap. This denies the
life insurance market from a level playing field to the competitors. The private players have been in
the market for 10 years now but could not bring a big change in market share of life insurance.
People‘s trust is build up with LIC due to such sovereign guarantee to LIC to create a level playing
field. LIC enjoys this dominance because it is obvious that investors want a guarantee of their money
irrespective of cycles of market. They know that
28. it would be a safe play to invest in LIC as the government guarantee. LIC has not used this
benefit of sovereign guarantee but this definitely helps them grow their market size because of the
faith people lay in them being a state owned enterprise. 2. Distribution network: The distribution
network is most important in insurance industry. Insurance is not a high cost industry like telecom
sector. Therefore it is building its maket on goodwill and access on distribution network. We cannot
deny that insurance are not bought, it is sold. The industry covers approx. 3% of the population of
our country. The market has a great scope to grow. This can be better done by more innovative
channels like a super market, a bank, a post office, an ATM, departmental store etc. these could be
used to increase channels of insurance. agents seem to be the most
29. important distribution channel in this industry. Agents connect with people and influence them
to buy any insurance policy. The LIC has vast distribution network in the rural and semi rural urban
areas. Distribution channel is an important stimulant of competition in market. LIC has more than 10
lakh agents which are supposedly to grow more in future which in comparison to private players is
mammoth. The new players have comparatively few agents. The policy of IRDA hinders distribution
network. It leads to an exclusionary behaviour of distribution network. Such behaviour gives LIC a
dominant position in the market. the market factors influencing decision to purchase insurance
There are several factors which influence customers to choose any life insurance like agents,
advertisement, coworkers, friends and family. It is important to mention here that agents cover 55%
market factor influencing purchase of insurance.With more market share, it is obvious that LIC has
30. better capacity to invest more on advertisement which leads them to dominate the market
much more than other players. There is an exclusively distribution network which is helping to build
LICs core strength which needs to be made accessible to give a level playing field to all market
players. One potential way to duplicate it could be increasing other distribution network like
bancassurance 3. Other factors: It has been reported several times through several journals that
every time the stock market falls sharply; government asks LIC to step in as a buyer to curtail the fall
in the market. Its investment decision is influenced by the government last year. LIC has to follow
the guidelines of IRDA and there is a proper system to take investment decisions. There has been
incidence where it seems that LIC gets offers
31. from big companies as well to pump in money in market when they are in need of cash. This
gives LIC a dominant position as it acts as a savior during crisis due to its surplus liquid cash reserve.
Nevertheless, it cannot be denied that LIC is a government agency and is therefore trusted by a lot of

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companies and has a lot of share in these companies. Therefore it has a major role to play in
influencing the decisions of such companies and big market players.
32. Conclusion:  The intense competition brought about by deregulation has encouraged the
industry to innovate in all areas; from underwriting, marketing, policy holder servicing to record-
keeping. The existence of stringent licensing requirements ensures that only adequately capitalized
and professionally managed companies are eligible to carry out insurance and reinsurance.  The
Insurance Regulatory Development Authority of India’s (IRDA) emphasis on quarterly
reporting/monitoring of insurer solvency has enhance capital adequacy and transparency.
Aggressive marketing strategies by private sector insurers will buoy consumer awareness of risk and
expand the markets for products.  Competition in a deregulated environment will allow market
forces to set premiums that are appropriate for exposure and push insurers to
33. differentiate their products and services. Innovations in distribution and improvements in
market penetration will follow as public and private insurers compete to market their products. 
Allowing insurers to issue their own policy wordings and set their own rates will enable underwriters
to tailor products to meet client needs. Range of available products will increase because foreign
companies bring with them a wide range of products and product development expertise.  Licensed
brokers are very much part of the intermediary structure and only those with adequate capital,
professional experience and expertise will be licensed by IRDA  . Capital structure of entire
insurance industry will improve as foreign companies bring fresh capital with them. Market
efficiency will improve due to information dissemination, global operating knowledge and increased
competition.
34.  Management efficiency will increase because foreign companies bring with them global
experience and management innovation. Customers’ service will improve competition which will
finally benefit the consumers. Globalization will also improve Regulatory and Governance system. It
will also improve market conduct and Ethical Business Standard.

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THE CHANGING FACE OF INDIAN INSURANCE

Mr. Ajay Kumar is a successful lawyer who lives with his wife and two children (12 and 14)
in a swanky bungalow in Hazratgunj, Lucknow. It is a nice Saturday morning and Ajay
jumps into his car to go for a quick game of squash with his friend, since his family is
travelling. His car welcomes him as he gets in and adjusts the settings to his preferences. He
glances at the dashboard indicator, which informs him that his car insurance has shifted from
home insurer, which handles insurance of his car while it is parked at home, to his driving
insurer. As he accelerates onto the main road, the dashboard warns him that his risk rating
could worsen if he continues accelerating heavily and braking suddenly. Ajay makes a note to
himself to be less heavy footed on the accelerator. Ajay takes pride in proactive management
of his financials, including insurance. He reminds himself to do a full review of all his
insurance policies on his return. It is 9 a.m. when Ajay gets back from his game. As he starts
having breakfast, he is reminded of the drive and he opens the insurance manager mobile app
that shows all different insurance policies purchased by him. As he looks at the application
dashboard, he realizes how different his insurance experience is today compared to the year
2015 when he took his first steps in finance and insurance planning for his family. There is a
prompt offering him a brilliant pension plan. He clicks on the link and is connected for a
video chat with his bank RM. He likes the pension plan demonstrated by the RM. He is
amazed to see how the pension plan was customized for his own saving pattern and how
similar other customers of the bank had chosen a similar plan. The car insurance dashboard
shows a ‘thumbs up’. He has earned 5,000 points over the past quarter, which he could
redeem at the garage. He earned them because he had practiced the right technique to apply
acceleration and brakes as suggested by the app (unlike this morning, thank God for sensors)
– something he wonders why he did not do before. However, he is disappointed that he could
not earn the fourth star in the health-buddy program linked to his health insurance. The
virtual chat assistant tells him that missing the gym and squash sessions and scheduled health
check-ups had cost him the extra star. Before closing the app, he quickly checks the
appointment with a home maintenance agency, a partner service of his home insurance
policy. Does this sound like science fiction? Not really. This story is likely to be a reality by
the year 2020, and in India. Just to highlight a few key elements that are highlighted by the
example:

• Insurance will be dynamic and will cover end-to-end customer journeys

• Insurance will be highly customized and relevant to each customer individually

• Interactions will be “phygital” – a mix of physical and digital, though increasingly


becoming more and more digital

• Insurers will partner with multiple different service providers to offer end-end services
meeting customer needs and not just products Technology advances are transforming
different industries at an ever-increasing pace. Insurance industry will not be isolated. These
advances will be a lot more potent as they will have widespread applications across different

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aspects of the insurance business including sales, underwriting, claims and customer service.
And if this were not enough, the rapidly evolving macro-economic landscape – lower interest
rates, evolving customer behavior, impact of digital adoption, changing competitive
landscape and the dynamic regulatory situation will keep the C-suite busy in developing and
adapting strategies to leverage the opportunities and stave off the challenges. Basis the above
context, we have identified 12 strategic priorities for insurers that could help in preparing for
the insurance of the future (Refer Exhibit 1).

1. Distribution of the future – ‘Phygital’ interactions across channels: So far, insurers had
predominantly focused EXHIBIT 1 : 12 Strategic Priorities for the Indian Insurers Customer
facing priorities Priorities severely driven by digital Functional Priorities Distribution of the
future: 'Phygital' interactions across channels Serving the underserved and uninsured:
addressing white spaces Ecosystems and partnerships a reality— leveraging broader
ecosystems People 2.0.2.0 – Creating a winning organization model while addressing
millennials' needs Creating the technology and data architecture required to deliver the
'digital insurer' Ride the wave of regulatory shifts—be agile and ahead of the game Value
creation in a changing shareholder world—IPOs, M&A 1 2 3 Process digitization 2.0—
customer journeys will be digitized end to end Customer engagement 1.0—digital will enable
customer centricity Products and Pricing 2.0—new, tailored and integrated end-toend Data
and analytics will be king—will separate winners from also-rans InsurTechs will accelerate
industry transformation— learn from & collaborate

• Bionic agency: At present, the solicitation process is heavy on physical face-to-face


interactions. Going beyond just sales, some of the potential elements of a bionic agency are
enablement of agency force through mobile apps, agent interactions with the customers
through digitally video tools, streaming demos and real time sales support from insurers.

• Open architecture banca partners: After many years of inactivity, open architecture
bancassurance will become a reality. While insurers have established strong physical
distribution channels through bancassurance or other corporate partners, multi-channel
integration across digital platforms including websites, apps is yet to achieve full maturity.
The challenge is acute especially with brickand-mortar heavy partners such as PSU banks. In
open architecture bancassurance, insurers that will effectively integrate with digital channels
of the partners and leverage partners’ customer data for customized offers will stand to gain a
greater share of the pie.

• Direct digital interaction with customers: In the last few years, online insurance
aggregators, email and social marketing, search engine marketing and website + tele-assist
based direct sales have established themselves as key digital marketing and distribution
channels. Growth witnessed in these channels leaves no doubt about their potential. By
leveraging analytics and advances in technology and digital infrastructure, direct digital
interactions and marketing to the customers will become highly personalized, more engaging
and automated using natural language processing.

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2. Serving the underserved and uninsured: addressing white spaces: There are many customer
segments that are under served, for example, the HNWI and mass market from a life
insurance perspective, and the SME and mass market segments from a non-life insurance
perspective. Let’s talk about the mass market customers in detail. Insurers have traditionally
found it difficult to target low-income customer segments or semi-urban, rural customer
segments viably. Regulatory requirements as well as government schemes such as PMJBY or
PMFBY have surely nudged insurers to target such segments but they have barely scratched
the surface. The headroom for growth has always been there but lack of awareness among
customers and low viability of distribution infrastructure did not translate the headroom into
an addressable opportunity. The stars are now aligning and a number of drivers are set to
change this picture. Ecosystems and partnerships will enable insurers to embed insurance
offering in customer journeys. Aadhaar linked biometric authentication will ease the burden
of fulfilling KYC requirements. Digital distribution, integration with ecosystems and partners
will make insurance bite-sized and affordable. Demonetization and PMJDY have bolstered
financial savings and a good part of it will find its way to insurance products. Banca partners,
which are aggressively targeting fee-income, will increase branch activation and use data and
analytics to find the right targets. By any estimation, the ‘opportunity’ is large and it will play
out only gradually. This will allow insurers to find their sweet spots, fine tune their business
models and target significant growth for years to come.

3. Ecosystems and partnerships a reality—leveraging the broader ecosystems: To create


‘sustainable’ differentiation, insurers will need to think of new business models that are hard
to replicate and that engulf the customer across broad needs fulfilled by a suite of services.
For example, creation of health ecosystem vs. health insurance, mobility ecosystem vs. motor
insurance, retirement ecosystem vs. pension plan, child care and development ecosystem vs.
health insurance and so on. Ecosystems are a set of businesses, which address customer needs
in a comprehensive and integrated manner. For example, a health ecosystem will entail
wellness providers, health food providers, fitness centers, primary clinics, diagnostic centers,
secondary or tertiary hospitals, payers such as insurers / corporate / government, pharmacies,
disease management services linked together by an ecosystem aggregator. Ecosystems will
help not only in gaining share of wallet but also in achieving customer ‘lock-in’ with more
hooks and hence high exit barriers. Insurers will have to either take the lead and create such
ecosystems or participate in existing ones. Since ecosystems business model is radically
different from traditional insurance business model, it will require insurers to take large
strategic bets, heavily invest in product design, operations and technology and source
customers through multiple touch-points across the ecosystem.

4. Process digitization 2.0—customer journeys will be digitized end-to-end: The global trend
of digitizing the core insurance processes of sales, claims settlement as well as back-office
operations is also gaining roots in India. A number of insurers have launched processes and
apps for distribution partners and customers. Apart from productivity gains, digitization also
helps improve process quality through standardization, process risk controls and lower
manual involvement. For process digitization 2.0, insurers will leverage the rapidly

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developing digital infrastructure in the country as well as the latest technological advances.
The next advance in process digitization will be driven by the following five key elements:

• Aadhaar based biometric authentication: Recent entrants in banking and Telecom have
already leveraged Aadhaar based authentication to roll out fully paperless customer on-
boarding process with high quality KYC compliance. Insurers have also started using the
same. The time has come to commit to this unconditionally.

• Digital document storage: Whether it is de-materialized policy documents or claim


documents, insurers have the opportunity to eliminate paper from most, if not all processes.
However, to take full advantage, it will be imperative to have data architecture that allows
capture of semi-structured and unstructured data. Third party digital lockers are now a reality
where users can allow insurers to access paper records issued by other third parties such as
government or medical records.

• Digital consent: Insurers in future will increasingly use third party data for tailored
offerings, underwriting and customer service. Digitally signed consent through a modern
private data-sharing framework will allow insurers to securely access specific data allowed
by users. It will also enable separation of data and consent flow reducing the chance of
frauds.

• Digital payments: Accelerating transition to cashless economy and adoption of UPI


interface will significantly enable process digitization and eliminate manual elements of
payment collections.

• New technological advances: Internet of Things (IoT) including wearables and telematics
devices, Artificial Intelligence (AI) including chat-bots and machine learning, and Robotics
will significantly increase automation leading to greater productivity.

5. Customer engagement 1.0—Digital will enable customer centricity: Insurance as a product


category faces a key challenge of limited customer touch-points and low customer
engagement despite the consultative nature of the product and significant financial
implications for the customers. BCG experience shows that insurers have on an average of
0.3-0.4 customer contacts per year. Add to that, the Indian situa- tion where so far, insurers
have focused more on intermediaries than the customers, has resulted in even less data on end
customers. Customer contactability is abysmally low. Digital is a key enabler of
disintermediation and allows insurers to meaningfully engage and influence customer
experience directly. Insurance companies will have to start treating end customers as
customers. They could potentially leverage the opportunity to integrate other high frequency
transactions such as financial dashboards, health apps, social media content or other customer
journeys (e.g. driving, travel, child education) and create ‘moments of truth’. The next
imperative will be to excel at customer experience in those interactions. Insurers that will
crack the code will surely have a better chance of increasing customers as well as share of
customer wallet and retain customers for longer.

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6. Products and pricing 2.0—new, tailored and integrated end-to-end: In the rapidly evolving
world, we believe that products will evolve on three key dimensions.

• New products—Evolving needs and growing niches will drive new product development
and product feature enhancements. E.g. cyber risk, fine arts, extended warranty products will
become more prominent.

• Tailored offers—based on data insights will make products uniquely relevant to the
segment of one and pique customer interest. Better understanding of the customer profile and
life stage, other financial transactions, social behavior will allow insurers to provide the ‘right
product at the right time’.

• Products integrated with partner offerings: Insurance is already sold through partnerships as
an attachment product primarily in the context of loans or large asset purchases such as
housing and vehicles. Even further, insurers will have the opportunity to introduce products
with features that are highly customized or integral to the partner’s product offering. Product
evolution will go hand in hand with evolving pricing approaches. Pricing will be a key driver
of profitable growth. New data sources such as partnerships, IoT – wearables, big data
analytics, will put insurers in a great position to bridge the ‘data divide’ and price products
appropriately.

7. Data and analytics will be king and will differentiate winners from also-rans: Like other
businesses, insurers are also keen to leverage big data analytics. However, they suffer from
lack of quality data. In India, the challenge is even starker, insurers struggle from lack of
data, leave aside high quality data. It is driven partly by the nature of the business where
customer transactions are limited (BCG analysis shows just about 0.3-0.4 contact points per
year) and partly by the focus of insurers on intermediaries who call the shots and at times
mask the data and do not share the full customer data with the insurers. In general insurance,
for example, since KYC is not mandatory, insurers often do not have basic profile
information of the customers. Importance of data is beyond debate and insurers can overcome
the challenge by first looking internally for the right processes to capture the appropriate data
as well as look at forging data partnerships. Different data partnerships become relevant in
the context of sourcing and actuarial modeling. In case of sourcing, insurers need to dig
deeper into sourcing data from intermediaries apart from third party partnerships which
provide rich information on customer profile, life stage, social behavior and transaction
context. In case of actuarial modeling, varied sources of data can be leveraged in specific
contexts. For example, weather data can not only be used for crop insurance but also for
analyzing chances of health epidemics, public health issues (e.g. pollution), natural disasters
impacting life and property In future, and this is the immediate future, we believe that data
and analytics will truly be king, and the insurers that commit to this element and get it right
will clearly differentiate themselves and emerge as winners.

8. InsurTechs will accelerate industry transformation – insurers will learn from and
collaborate with them: InsurTechs have been late in coming to the start-up party, but come
they have with vengeance. While Insurtechs started later than FinTechs, over the past few

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years, ~2,100 InsurTechs have received investments in excess of $38 Bn. Nearly 600
InsurTechs have come up in last 5 years. Technology driven start-ups are driving a range of
innovations across the value chain. From new pricing models (pay as you go - Metromile), to
peer-to-peer insurance (friendsurance, Kroodle), to connected devices/drones for real time
information collection for underwriting, claims settlement (dropin, domotz), the list is long
and each of these players is disrupting the insurance space. InsurTechs will challenge insurers
by completely transforming and disrupting business models. At the same time, many of them
will provide an opportunity for insurers to collaborate and differentiate on underwriting,
claims and customer service. Traditional operating models and organization structures of
insurance companies do not allow for an entrepreneurial approach required for disruptive
innovations in products and processes. Insurance companies will need to explore the
opportunity to groom the InsurTechs through separate incubators and innovation labs that
isolate the innovation effort from the traditional way of working. Incubators allow insurers to
engage with start-ups meaningfully in win-win situations where the parent business brings the
seed capital, business experience and customer base strength, whereas the start-ups bring
fresh ideas that businesses can nurture for their own advantage.

9. People 2.0.2.0.—Creating a winning organization model while addressing millennials’


needs: Millennials will be a sizeable part of the workforce by year 2020. Insurers (as will all
businesses) will need to adapt to the new way of working to deliver the ‘Future of Work’.
Over the generations, one can observe the mindset shifts, ‘from one job per lifetime to one
career per lifetime to the millennials’ comfort with a few careers and multiple jobs’. A large
shift is visible in the workforce values and culture. As loyalty takes a new meaning,
organizations will need to focus on talent management on steroids to manage talent gaps,
focus on individualization and entrepreneurship and address the changing employee needs.
Complexity is also compounded by the impact of technology on the people dimension.

10. Creating the technology and data architecture required to deliver the ‘digital insurer’:
Infomation Technology has been the backbone of many transformations within the Insurance
industry over the past two decades. However, the past two decades will not be a patch on the
next few. The multiple state-of-the-art technology advances from big data and analytics, to
machine learning and artificial intelligence, to the Internet of Things including wearables and
telematics, to robotics, to chatbots, to voice recognition and beyond, will completely
transform the requirements from IT architecture. Agile, a very small five alphabet word, will
drive the technology teams crazy. Let’s take just two of these advances as examples, AI and
Big Data. Until recently, AI was similar to nuclear fusion, an unfulfilled promise. It had been
around for a long time but had not reached the spectacular heights foreseen in its infancy.
Now, however, AI is realizing its potential in achieving human-like capabilities, so it is the
time to ask: “How can business leaders harness AI to take advantage of the specific strengths
of man and machine?”

There are three implications for the insurers.

• AI sounds ‘cool’ but insurers will need to define clear business use cases. Fundamentally,
AI will need to address customer needs in an efficient manner
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• Breaking down processes and offerings into relatively routinized and isolated elements that
can be automated taking advantage of technological advances and data sources. Then,
reassembling them to better meet the customers’ needs

• Incorporating technological advances – The stack of AI services has become reasonably


standardized and is increasingly accessible through intuitive tools. Even non-experts can use
large data sets. Right platforms and tools need to be setup for flexible architecture and for
integration with diverse process elements. As insurers prepare themselves to leverage Big
Data either by harnessing data that is available internally or through partnerships, they need
to assess the preparedness to manage such data. Traditionally, insurers have been used to
managing structured data that comes as part of various business processes. Harnessing new
sources of data will require the ability to store and process semi-structured and unstructured
data such as customer interactions, images, medical records. Multiple trade-offs including
costs, speed, functionality, scalability, data diversity are involved while choosing the right
data architecture in line with business objectives. Given the selection and implementation
lead times, this becomes not only important but also urgent for parallel design and execution
of business strategy.

11. Ride the wave of regulatory shifts – be agile and ahead of the game: In case of the
insurance industry across the globe, regulatory changes have always had large implications
for insurers. As one looks ahead, the regulatory environment will continue to be dynamic
because of the business environment changes, such as new business models like the
ecosystems mentioned above, new products driven by partnerships and customer data insight,
heightened risks such as cyber security and data privacy. Insurers will need to keep pace with
the evolving regulations. Take for example, the GST rollout, which is likely to happen this
year. This will have a huge implication for insurers on multiple fronts, including
attractiveness of product categories, and the operational efforts for insurers. The applicability
of different GST slabs can significantly influence affordability and therefore alter the growth
trajectory of different product segments. Insurers will need to work with the regulatory body
to ensure that regulations, while aligned with the principles, are also practical in terms of the
implementability, the impact on customers and the business economics.

12. Value creation in changing shareholder world: A number of the insurers will have to deal
with new shareholders over the next few years. In fact, likely all of them. Two big trends
driving this – the listing of insurers, including the PSUs and the accelerating wave of M&A.
Retail investors (driven by listing), new strategic investors (basis M&A) and potential PE
investors are all going to completely transform shareholder expectations. The scrutiny on the
insurers as well as the many metrics will change drastically. Typically, not only value
creation, but also consistency of the same (beta) is key for investors. Insurers will have to
manage these new shareholder expectations. In closing, each of the insurers will need to
define their own agenda and priorities basis the 12 strategic priorities outlined above. The
journey to deliver a sustainable business in the face of all the change will not be easy.
Insurers will need to place their bets on the most relevant priorities for them in the context of
their business model and pursue them with conviction.

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Future Of Insurance Sector In India

Introduction
The insurance industry of India consists of 57 insurance companies of which 24 are in life
insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is sole national re-
insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in
Indian Insurance market include agents (individual and corporate), brokers, surveyors and
third party administrators servicing health insurance claims.
Market Size
Government's policy of insuring the uninsured has gradually pushed insurance penetration in
the country and proliferation of insurance schemes.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with
Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion)
from non-life insurance. Overall insurance penetration (premiums as % of GDP) in India
reached 3.69 per cent in 2017 from 2.71 per cent in 2001.
In FY19 (up to October 2018), premium from new life insurance business increased 3.66 per
cent year-on-year to Rs 1.09 trillion (US$ 15.46 billion). In FY19 (up to October 2018), gross
direct premiums of non-life insurers reached Rs 962.05 billion (US$ 13.71 billion), showing a
year-on-year growth rate of 12.40 per cent.
Investments and Recent Developments
The following are some of the major investments and developments in the Indian insurance
sector.

 As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo Munich


Health Insurance at a valuation of around Rs 2,600 crore (US$ 370.05 million).
 In October 2018, Indian e-commerce major Flipkart entered the insurance space in
partnership with Bajaj Allianz to offer mobile insurance.
 In August 2018, a consortium of WestBridge Capital, billionaire investor Mr Rakesh
Jhunjunwala announced that it would acquire India’s largest health insurer Star Health
and Allied Insurance in a deal estimated at around US$ 1 billion.
 In September 2018, HDFC Ergo launched ‘E@Secure’ a cyber insurance policy for
individuals.
 Insurance sector companies in India raised around Rs 434.3 billion (US$ 6.7 billion)
through public issues in 2017.
 In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals worth
US$ 903 million.
 India's leading bourse Bombay Stock Exchange (BSE) will set up a joint venture with
Ebix Inc to build a robust insurance distribution network in the country through a new
distribution exchange platform.

Government Initiatives
The Government of India has taken a number of initiatives to boost the insurance industry.
Some of them are as follows:

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 In September 2018, National Health Protection Scheme was launched under
Ayushman Bharat to provide coverage of up to Rs 500,000 (US$ 7,723) to more than
100 million vulnerable families. The scheme is expected to increase penetration of
health insurance in India from 34 per cent to 50 per cent.
 Over 47.9 million famers were benefitted under Pradhan Mantri Fasal Bima Yojana
(PMFBY) in 2017-18.
 The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue
redesigned initial public offering (IPO) guidelines for insurance companies in India,
which are to looking to divest equity through the IPO route.
 IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1)
bonds that are issued by banks to augment their tier 1 capital, in order to expand the
pool of eligible investors for the banks.

Road Ahead
The future looks promising for the life insurance industry with several changes in regulatory
framework which will lead to further change in the way the industry conducts its business
and engages with its customers.
The overall insurance industry is expected to reach US$ 280 billion by 2020. Life insurance
industry in the country is expected grow by 12-15 per cent annually for the next three to five
years.
Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of
Indian life insurance.

Insurance sector in India

The insurance sector in India – Every asset is a value and is related to the security of the
economic value of the business assets of general insurance. The property owner’s efforts,
which could be in the form of building vehicles, machinery, and other tangible properties.
Since the tangible property is physical size and stability, it is subject to many fires, associated
threats, risks for theft and robbery.

Insurance sector in India

The concept of insurance has been extended beyond the coverage of tangible property. Now
the risk of loss due to the sudden change in currency exchange rates, political unrest,
negligence and loss due to damage can also be included.

But if a person wisely invested in insurance before making any unpredictable accidental for
his property then he will be suitable for his loss as soon as the extent of damage is explored.

Insurance - What is the future of insurance sector in India?

Insurance is a form of risk management that is primarily used to prevent the risk of a team
loss. Insurance is defined as the risk of a loss equal to the transfer, from one institution to
another, in a foreign currency for a premium, and a guarantee is small and to prevent loss of a
large, potentially devastating loss Can be thought of as.

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An insurance company is a company that sells insurance, or the insurance policyholder is a
person or institution insurance purchase. Insurance rates are an aspect that is used to
determine the amount which is being charged for a certain amount of insurance coverage and
called premium.

Insurance sector in India

Insurance has been a federal subject in India. The insurance sector has gone through many
stages and changes. Since 1999, when the government started with the insurance sector to
allow private insurance companies to plead and also allowed foreign direct investment to
26%, the insurance sector was celebrated for a fast-growing market. Has gone. However, the
most significant life insurance company in India is still owned by a large number of
government-owned enterprises.

History of Insurance sector in India

In 1818, Anita Bhavshar started the Oriental Life Insurance Company in Kolkata to meet the
requirements of the European Community. In East India, the era of the high premium is being
accused of Indians being discriminated between the lives of foreigners (English) and among
Indians. In 1870, the Bombay Mutual Life Assurance Society was the first Indian insurance
company to become the cover of Indian life at normal rates.What is the future of insurance
sector in India?

In the dawn of the 20th century, a large number of insurance companies were established. In
the Life Insurance Companies Act and the Provident Fund Act – 1912, two acts have been
passed to regulate insurance business. As per the life insurance companies act, the periodic
valuation of the 1912 premium rate as well as the cable companies was certified by a clerk.
However, discrimination still exists between Indian and foreign companies.

National Insurance Company Limited is the oldest existing insurance company in India,
which was established in 1906. It is still in business. Life Insurance Companies, Life
Insurance Corporation of India, LIC and General Insurance Companies [General Insurance
Corporation of India], GIC: Before that, the industry was involved only by 2 state insurance
companies. GIC is a four subsidiary company that is affiliated with the parent company and
was established in December 2000 as independent insurance companies. These are United
India Insurance Company Limited, Oriental Insurance Company Limited, National
Insurance Company and New India Assurance Company Limited.

Insurance and tax – Insurance sector in India

Insurance and tax – Insurance sector in India

1. U / 10 (10A) Income Tax Act (iii), the payment received through the commutations
of a pension is exempt from tax.
2. U / S 10 (10D), under any life insurance policy (not being a key man policy),
received any amount has also been exempted from taxation. But it is wise to
remember that the pension received from the annuity plans are not exempt from
income tax.

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3. U / 10 (13), the following are exempt from tax. Payment received from an approved
Annuation Fund.
Death of a beneficiary.
4. Instead of an annuity on his retirement or an employee after a fixed age.
5. As a return of contribution on the death of a beneficiary, etc.
6. Section 80 CCC deducts up to Rs 10 / – 000 – Any person assessee for any amount
paid or paid for LIC’s Annuity plan for receiving any pension while keeping in
force.
1. Principles of Insurance sector in India

Principles of Insurance sector in India

Insurance – Definition

The contract of insurance is a promise of compensation for a periodic payment [known as


premium] for some potential future loss in foreign exchange. Insurance is to protect a person
or a company or in case of unexpected losses, the financial well being of any other institution.
An insurance policy creates an agreement between the insurance and the insurance company
on an agreement for the case. In the foreign currency for the premium paid by the insured, the
policyholder agrees to pay a certain amount of money in the event of a specific incident or on
maturity. In most cases, the policyholder gives a share of loss (called deducted), while the
insurance company pays the rest. Examples include health insurance, car insurance, life
insurance, disability insurance and insurance business.

 Principles of Insurance:
 Utmost good faith
 Indemnification
 Subrogation
 Contribution
 Insured
 Proximate cause
 Ultimate Harmony (Uberrimae Fides)
It is the disclosure of the facts related to the risk being covered by all the materials for the
customer’s duty. A material fact is a fact that for a fixed insurer’s mind-affecting or not, and
for accepting risk on the terms and conditions whatsoever. It is to disclose the fee at the time
of installation at the time of renewal as well as any point in the mid-term.

Indemnification What is the future of insurance sector in India?

When the event is insured against that, the insured person will be kept in the same monetary
position that he/she will be captured immediately before the occurrence of the incident.

In the event of a claim, there is a need to ensure:

Prove that the incident took place


Prove that an economic loss has also happened
The transfer has any right that he/she can recover the insurance company from any other
source if he/she is fully indemnified.

Subrogation
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About insurance, substitution is a feature of the principle of indemnity, and therefore applies
to contracts of indemnity and therefore does not apply to life insurance or personal accident
policies. It is an indemnity to stop insurance that it receives under its insurance (where it
represents the full amount of its loss) and recovery of more than the insurance company able
to recover or reduce the loss To do.

Contribution – Insurance sector in India

Similar to the correcting of an insurance company, but not necessarily the other insurance
companies to call the same insured on a tourism policy, i.e., the loss of indemnity repayment
with a material policy of domestic policy. The overlapping cover can be. The principle of
contribution is a claim against an insurer for the permit of the insured. The insurer has the
right to share claim settlement in the order of phone to the insurance companies responsible
for any other loss

Insured What is the future of insurance sector in India?

If an insurance court wants to enforce an insurance contract before it, it should have an
insurable interest in the subject matter of insurance, which means that it suffers from its
protection and its loss. In the case of non-marine insurance, it is insurable interest required
for insurance when the policy is taken out, and the loss is also on the date of giving birth to a
claim under the policy.

Proximate cause

An insurer is liable to pay a claim under an insurance contract only if the loss that was born
to the claim was proximately due to an insured exposure. This means that the loss should be
done directly without breaking anyone in the chain of causation. An insured risk deposit.

2. Life Insurance sector in India

Life Insurance sector in India

The life insurance sector in India – Along with life insurance, India started its 100 years
ago. Our main features are not as widely understood in our country as they should be. Is there
such an attempt to introduce readers to some of the concepts of life insurance with special
reference to life insurance? It should, however, be understood that the following statement
means a detailed explanation of the terms and conditions of a life insurance policy or its
benefit or privilege. With the help of any life insurance agent, you will be happy to choose
life insurance plan to meet your needs and provide policy servicing.

In the field of life insurance, the fastest growing sector in India since 2000, when the
government has allowed private players and foreign direct investment (FDI) to 26%. Life
Insurance was nationalized in India by incorporating Life Insurance Corporation (LIC) in
1956. At that time all the private life insurance companies were taken by the LIC.

The Insurance Regulatory and Development Authority Act 2000 was passed, in 2000,
amendments to the Insurance Act of 1938 and legislating where newly appointed insurance
regulator – Insurance Regulatory and Development Authority [IRDA]issued licenses for
private life insurance companies.
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What is life Insurance sector in India?

What is life Insurance sector in India?

Life insurance is a contract for the payment of the amount of money to the person (or he/she
deserves to receive the same for failing), on the happening of the insurance incident against
the person. The contract provides for payment of an amount on the date of maturity or
periodic intervals or on unfortunate deaths if it is earlier. Apart from other things, the contract
also provides to the corporation from time to time by the assured for payment of premium.
Life insurance is a universal institution that is acknowledged for the ‘exposure’ termination,
certainty replacement for uncertainty and the unfortunate incident of the death of the family
comes to the aid of the family at the time. There is a partial solution to the problems caused
by the death of life insurance civilization, and by big. In essence, life insurance is concerned
with two dangers that stand in the way of every person’s life: Before leaving a dependent
family for a while to live for themselves and without seeing the means of support.

Why is it better from other forms of savings?

Protection: Guaranteed insurance against the risk of death of lifesaver Savings through full
protection In life insurance, the entire sum insured (where applicable with bonus), while in
other savings schemes only the amount saved (with interest) is payable.

Support for saving: Life insurance encourages ‘saving.’ Long-term savings can be made in a
relatively painless manner due to the convenience built in easy installment scheme (the
method of premium payment is either monthly, quarter, half-yearly or annual). For example,
our salary savings plan is popularly known as SSS. The premium of this plan provides a
convenient way to pay each month’s deduction from one’s salary. The premium deducted is
sent by the employer to the LIC. Salary plans can be presented under an organization or
establishment subject to specified terms and conditions.

Liquidity: Debt can be raised on the sole security of a policy that has acquired the loan
value. Apart from this, a life insurance policy is also generally accepted as a security for a
commercial loan.

Tax relief: Income tax and property tax is available for payment of amount through premium
for life insurance subject to the rate of income tax in the tax relief force. The assessee can
avail themselves of the provisions in the law for tax relief. In such cases, the effect paid in
respect to the less premium for his insurance than he otherwise would have to pay.

Money when you need it: A suitable insurance plan or combination of different schemes can
be taken out of a specific category like education of children, initially – for life or marriage
provision or even periodic need to be born in the future Chances are, the cash on a block of
full time Alternatively, the amount of policy money can be arranged to be made available at
the time of the service being used for any specific purpose as a retirement, for a home
purchase or other investment. Subject to certain conditions, loans to the policyholder are
provided for the construction of houses or the purchase of flats.

Who can buy a life insurance policy?

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Any person who has obtained the majority and is eligible for admission to a valid contract for
himself and who can take a life insurance policy on them in the insurable interest. Policies
can also be taken out, subject to certain conditions on the life of a spouse or children. While
underwriting proposals can be assured, such factors as the health status of life, the proposer’s
income and other relevant factors are considered by the corporation.

Insurance on women

The first (1956) nationalization is used to offer insurance for one of many private insurance
companies, with some extra premium or for the life of a woman on restrictive terms. After the
nationalization of life insurance, there is a rule under which life insurance is provided for the
life of a woman, periodically reviewed. At present, with the earned income, women are
dealing with the life of a man at par. In other cases, a restrictive block is imposed and that too
only if the woman is 30 years old and if she is not an income tax drawer.

Medical and non-medical plans Insurance sector in India

Medical plans Insurance sector in India

Life insurance is offered after a medical examination of life can be assured. However, to
facilitate the greater spread of insurance and also as a measure of relaxation, LIC has been
done without any medical examination extension of insurance cover, subject to certain
conditions.

Without profit and profit plans

Benefits can be with ‘an insurance policy’ or ‘without.’ In the past, the disclosure of bonuses,
if any, are allocated for the periodic valuation policy and the amount signed with the due.
Without the ‘contracted’ benefit plan the amount is paid without any extra payment. With the
‘Premium Benefit Policy,’ the rate of duty for one is, therefore, higher than the one for
‘without profit policy.’

Keyman Insurance

Keyman Insurance Key (s) is a firm against employee finance loss which can be caused by
the time of the premature demise of Keeman is taken by a professional firm on the life of the
project.

3. Non-life Insurance sector in India

Every asset is a value and is related to the security of the economic value of the business
assets of general insurance. The property owner’s efforts, which could be in the form of
building vehicles, machinery, and other tangible properties. Since the tangible property is
physical size and stability, it is subject to many fires, associated threats, risks for theft and
robbery.

The concept of insurance has been extended beyond the coverage of tangible property. Now
the risk of loss due to the sudden change in currency exchange rates, political unrest,
negligence and loss due to damage can also be included.

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But if a person wisely invested in insurance before making any unpredictable accidental for
his property then he will be suitable for his loss as soon as the extent of damage is explored.

Some of the policies of General Insurance sector in India

General insurance sector in India

What is the future of insurance sector in India?

Property Insurance: The home has the most important authority. The policy is designed to
cover various risks under the same policy. It protects property and insurance and family
interest.

Health Insurance: This cover is available, which takes care of medical expenses after taking
a sudden illness or accident after hospitalization.

Personal Accident Insurance: This insurance policy provides compensation for the loss of
life or injury (partially or permanently) due to an accident. The cost of this treatment includes
the use of facilities in the hospital for reimbursement and treatment.

Travel insurance policy covers insurance under various circumstances while traveling abroad.
Insurance cover against personal accident, medical expenses, and repatriation, loss of luggage
check, passport, etc.

Liability Insurance: This policy compensates other professionals against losses arising out
of claims made against them by the cause of the act or any wrongdoing in their official
capacity.

Motor insurance: In the Motor Vehicles Act, it has been said that for every motor vehicle
that runs on the road, at least the obligation is to be ensured only with the policy. Two types
of policy are covering the liability work, while other cover insurance companies all liability
and damage are due to one vehicle.

Since one policy cannot meet all the insurance objectives, one needs all the portfolio of
policies covered.

4. General Insurance sector in India

Important milestones:

 1907: Indian Mercantile Insurance Limited set up was the first company to run all
classes of general insurance business.
 1957: The General Insurance Council follows a Code of Conduct to ensure fair
conduct and sound business practices.
 1968: The Insurance Act and also a set was amended to regulate minimum
investment capacity as well as the margin tariff advisory committee formed to
invest.
 1972: General Insurance business was nationalized in India through 1 January
1973, effective from the General Insurance Business (Nationalization) Act, 1972.
5. List of some General Companies Insurance sector in India

HDFC ERGO General Insurance Company Limited


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1. 5 – Available plans
2. Travel Insurance – 3 Plans
3. Personal Accident Insurance – 2 Schemes
4. Auto Insurance – Plan 1
5. Health insurance scheme 1
6. Household Insurance – Plan 1
Tata AIG General Insurance Company Limited

8 – Available plans

1. Personal Accident Insurance Plan 1


2. Critical Illness Insurance – Plan 1
3. Hospital Care – Plan 1
4. Household Insurance – 4 Plans
5. Safe future plans – Plan 1
6. Shopkeepers Insurance – Plan 1
7. Auto Insurance – Plan 1
8. Planning 1 Travel Insurance – 4 Schemes Maharaksha
9. Hospital Cash Insurance – Plan 1
+ Healthcare – Plan 1
10. Mediclaim Insurance – Plan 1
6. Health and Mediclaim Insurance sector in India

Health and Mediclaim Insurance sector in India

The Health insurance sector in India – Today, health treatments can be very expensive.
People are suffering from more stress on seeing medical bills than they have suffered due to
their actual illness. The best way to get rid of health-related concerns is by taking a health or
medical insurance policy. A health insurance policy covers not only the expenses that are
incurred during hospitalization but also during recruitment stages in the hospital as well as
before. This includes the cost of operating various medical tests and the purchase of
medicines. The cover is usually up to the extent of sum insured.

At today’s date, health insurance companies offer many innovative plans for their clients. The
latest product in this field is recruitment in the ‘cashless’ hospital. Under this scheme, insured
persons are not paid for the hospital bill in case of hospitalization, the insurance company
takes care of this, and the bill will settle directly. However, there are some requirements to
meet the terms and conditions. For example, there is an insurance company for the hospital,
and all necessary orders should be in tie-ups with documents.

How much health insurance should one be?

Quickstart

One is to reduce the premium after buying health insurance at an early stage when you are
young, and the rate of increase in health insurance premium is directly proportional to the age
of a person. Health insurance companies feel that at a young age the probability of claiming
one is reduced to 40 years old as a person who takes health insurance against a later age and
he/she too Prone to diseases.

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In today’s world of expensive medical treatment, the importance of medical or health
insurance cannot be ignored and looking at its benefits at a younger age, a medical injury /
own life against illness / early life in the insurance itself Will happen.

How much cover is needed? What is the future of insurance sector in India?

The need for health insurance varies from person to person. It depends on factors like age,
income and expenditure, marital status, family background, etc.

Age: During the initial years of your life you may need to spend a simple health policy to
cover that if you get sick or meet with an accident. The probability of the occurrence of
serious diseases is low in the early age and therefore is not necessary for a high cover. As you
grow older, you should keep the increased amount covered/assured.

Marital status: If you are married, to make a good idea, make sure that your husband is also
covered by any emergency medicine. In a family floater plan, you and your spouse will be
covered under the same policy (a premium). Even after the birth of your child, you are also
involved in your child’s family floater plan.

Family Background: If you have a family history of some diseases like diabetes, then it
becomes necessary to take the shield of the Critical Care Plan that will cover you against all
major diseases that you may be in danger for.

Income and expenses: A high health insurance cover is necessary if you think the cost of
medical treatment of your family will be high. How much depends on your family’s current
expenditure and income.

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Conclusion

India’s insurable population is anticipated to touch 750 million in 2020, with life expectancy
reaching 74 years. Furthermore, life insurance is projected to comprise 35 per cent of total
savings by the end of this decade, as against 26 per cent in 2009-10. The Insurance sector in
India is expected to attract over Rs 12,000 crore in 2016 as many foreign companies are
expected to raise their stake in private sector insurance joint ventures. The Union Budget of
2016-17 has made the provisions for the Insurance Sector that Foreign investment will be
allowed through automatic route for up to 49 per cent subject to the guidelines on Indian
management and control, to be verified by the regulators. The Government of India has
launched two insurance schemes as announced in Union Budget 2015-16. The first is Pradhan
Mantri Suraksha Bima Yojana (PMSBY), which is a Personal Accident Insurance Scheme.
The second is Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), which is the
government’s Life Insurance Scheme. Both the schemes offer basic insurance at minimal
rates and can be easily availed of through various government agencies and private sector
outlets. The Insurance Regulatory and Development Authority of India (IRDAI) has given
initial approval to open branches in India to Switzerland-based Swiss Re, French-based Scor
SE, and two Germany-based reinsurers namely, Hannover Re and Munich Re. From all of
this it is concluded that insurance sector is booming day by day.

The growth of the Indian economy has been diminishing due to various reasons, but the
Indian growth story is still alive as Indians has a habit of moving slowly but steadily and in
the end we win the race. Currently the situations are not in our favour but as soon the above
problems settles down, we may back on track. At the same time many sectors are supporting
to the growth of the Indian economy, among that insurance sector‘s contribution is very high.
The growth performance of the insurance industry has increased tremendously since the
establishment of IRDA in India, which supervise and controlled the entire insurance industry.
The increase in number of insurer both in life and non-life, growth in insurance penetration
and density, increase in number of policies issued and increase in the speed of claims
settlement and the in many more aspects the IRDA is playing a prominent role in the Indian
insurance sector.

A healthy and growing insurance sector is of vital importance for any economy. It encourages
the savings habit, provides safety nets to rural and urban productive individuals, and
generates long term funds for infrastructure development. Life insurance sector in India in the
post liberalisation period has emerged as one of the fastest growing insurance markets in the
world. Despite this growth, India remains far behind its peers in global insurance arena.

Insurance is an important part in the financial sector that contributes significantly to the
economy of a country. Insurance market contributes to the economic growth as a financial
intermediary and also helps in managing risk more effectively. This piece of research work

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made an attempt to examine the relationship between insurance and economic growth in
India considering the state level data and contributing to the existing literature. The data is
collected for twenty-five states of India and covers the time period for 2000 to 2015.
Endogenous growth model with a modified Cobb-Douglass production function is used. This
result implies that the insurance policies which can improve the insurance penetration in
different states of India should be promoted. The relationship between physical capital and
economic growth indicates that more investments should be made on the policies of
infrastructure like health facilities, road etc. This research work could be useful for the state
Governments to improve the economic growth and also is useful for the development of the
insurance sector in India.

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