INSURANCE SECTOR IN INDIA

In the words of a layman, insurance means managing risk. The insurance company works in a manner by collecting premiums from policy holders, investing the money (usually in low risk investments), and then reimbursing this same money once the person passes away or the policy matures. The greater the probability for a person to have a shorter life span than the average mark, the higher premium that person has to pay. The case is the same for all other types of insurance, including automobile, health and property. There are now 29 insurance companies operating in the Indian market 14 private life insurers, nine private non-life insurers and six public sector companies. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario. There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion.

List of Life Insurers :

Apart from Life Insurance Corporation, the public sector life insurer, there are 22 other private sector life insurers, most of them joint ventures between Indian groups and global insurance giants. Life Insurer in Public Sector : 1. Life Insurance Corporation of India Life Insurers in Private Sector : 1. SBI Life Insurance 2. Metlife India Life Insurance 3. ICICI Prudential Life Insurance 4. Bajaj Allianz Life 5. Max New York Life Insurance 6. Sahara Life Insurance 7. Tata AIG Life 8. HDFC Standard Life 9. Birla Sunlife 10. Kotak Life Insurance 11. Aviva Life Insurance 12. Reliance Life Insurance Company Limited - Formerly known as AMP Sanmar LIC 13. ING Vysya Life Insurance 14. Shriram Life Insurance 15. Bharti AXA Life Insurance Co Ltd 16. Future Generali Life Insurance Co Ltd 17. IDBI Fortis Life Insurance 18. AEGON Religare Life Insurance 19. DLF Pramerica Life Insurance 20. CANARA HSBC Oriental Bank of Commerce LIFE INSURANCE 21. India First Life insurance company limited 22. Star Union Dia-ichi Life Insurance Co. Ltd

These are few companies on the list. The total life insurance market can be judged in terms of 2 parameters- premium collected and number of new policies underwritten. It can be seen that market share of more than 70% is with LIC.

Entry barrier :
- Life insurance covers approx. 3% of the total Indian population. - India needs that more players come in life insurance sector and cover a large population with life insurance. For this, it is required to allow more Foreign Direct Investment in insurance sector so that more funds are available with foreign players come in market and the size of market grows. - There is scope of higher capital infusion, the higher the growth of market possible. Despite the progress, Indias insurance sector remains very small compared with some of the major emerging markets. Indias share of global insurance market is less than 1%. - The insurance industry lags behind other economies in the baseline measure of insurance penetration. - Industry is now open to private players under the government mandate of a minimum capital of Rs.100 crore of which a maximum of 26% stake can be held by a foreign partner as equity.

Challenges facing Insurance Industry :

Threat of New Entrants: The insurance industry has been budding with new entrants every other day. Therefore the companies should carve out niche areas such that the threat of new entrants might not be a hindrance. There is also a chance that the big players might squeeze the small new entrants.

Power of Suppliers: Those who are supplying the capital are not that big a threat. For instance, if someone as a very talented insurance underwriter is presently working for a small insurance company, there exists a chance that any big player willing to enter the insurance industry might entice that person off.

Power of Buyers: No individual is a big threat to the insurance industry and big corporate houses have a lot more negotiating capability with the insurance companies. Big corporate clients like airlines and pharmaceutical companies pay millions of dollars every year in premiums.

Availability of Substitutes: There exist a lot of substitutes in the insurance industry. Majorly, the large insurance companies provide similar kinds of services - be it auto, home, commercial, health or life insurance.

Protection of the interest of policy holders:

IRDA has the responsibility of protecting the interest of insurance policyholders. Towards achieving this objective, the Authority has taken the following steps:

IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for: policy proposal documents in easily understandable language; claims procedure in both life and nonlife; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders' servicing. The Regulation also provides for payment of interest by insurers for the delay in settlement of claim. The insurers are required to maintain solvency margins so that they are in a position to meet their obligations towards policyholders with regard to payment of claims. It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and conditions under the policy. The advertisements issued by the insurers should not mislead the insuring public. All insurers are required to set up proper grievance redress machinery in their head office and at their other offices. The Authority takes up with the insurers any complaint received from the policyholders in connection with services provided by them under the insurance contract.

SUGGESTION : The commission needs to advocate competition in market. The commission needs to enquire in detail about reasons behind such anti competitive behaviour of life insurance market. The commission needs to advocate the government to remove such sovereign guarantee to give the life insurance a free market and level playing field. The life insurance market will see a healthy competition with the opening up of developing markets to competition, there is a greater impetus to demand growth and volumes would start dictating economic sizes and pricing. There should be fair effort made by commission to enlarge the distribution network to provide a level playing field to all players and also discourage dominance of LIC due to exclusive distribution of network through agents. Also , the commission can make a report on how the market suffers from anti competitive practices due to IRDA regulation and also ask government to increase FDI cap from 26% to 49% to bring more players in market which would help more population to be covered from life insurance.