INTERNATIONAL INSTITUTE FOR

SPECIAL EDUCATION
Insurance and Risk Management

For PGDM 3 Trimester 2016

Submitted To: Submitted By:

Mr. Tarun Bose Abhishek Kr. Yadav
Assistant Professor PGDM Ist Year

Address: Kalyanpur (West), Lucknow, Uttar Pradesh 226022

Phone: 0522 275 0620

 DECLARATION

I hereby declare that the project work entitled “Study on market share of
different insurance companies in india ” submitted to the IISE is a record of an
original work done by me under the guidance of Mr. Tarun Bose, Faculty
Member, and this project work has not performed the basis for the award of any
degree or diploma/associate/fellowship and similar project if any.

Date:

Signature:
 ACKNOWLEDGEMENT

I Abhishek Kr Yadav, using this opportunity to express my gratitude and thanks

to Mr.Tarun Bose for his support and guidance during the project. Without his
valuable advices and criticism this can’t be happen.

Further I would like to express my thanks to everyone who supported me

throughout the project of this “market share of different insurance companies in
India” based project of Management Accounting. I am thankful for their aspiring
help, valuable criticism and advice during the project work.

Again I would like to express my thanks to IISE (International Institute for

Special Education) for providing me this platform.
 Insurance in India

Insurance in India refers to the market for insurance in India which covers both
the public and private sector organisations. It is listed in the Constitution of
India in the Seventh Schedule as a Union List subject, meaning it can only be
legislated by the Central government.
The insurance sector has gone through a number of phases by allowing private
companies to solicit insurance and also allowing foreign direct investment. India
allowed private companies in insurance sector in 2000, setting a limit on FDI to
26%, which was increased to 49% in 2014. However, the largest life-insurance
company in India, Life Insurance Corporation of India is still owned by the
government and carries a sovereign guarantee for all insurance policies issued by
it.

History
In India, insurance has a deep-rooted history. Insurance in various forms has been
mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra)
and Kautilya(Arthashastra). The fundamental basis of the historical reference to
insurance in these ancient Indian texts is the same i.e. pooling of resources that
could be re-distributed in times of calamities such as fire, floods, epidemics and
famine. The early references to Insurance in these texts have reference to marine
trade loans and carriers' contracts.
Insurance in its current form has its history dating back until 1818, when Oriental
Life Insurance Company was started by Anita Bhavsar in Kolkata to cater to the
needs of European community. The pre-independence era in India saw
discrimination between the lives of foreigners (English) and Indians with higher
premiums being charged for the latter. In 1870, Bombay Mutual Life Assurance
Society became the first Indian insurer.
At the dawn of the twentieth century, many insurance companies were founded. In
the year 1912, the Life Insurance Companies Act and the Provident Fund Act were
passed to regulate the insurance business. The Life Insurance Companies Act, 1912
made it necessary that the premium-rate tables and periodical valuations of
companies should be certified by an actuary. However, the disparity still existed as
discrimination between Indian and foreign companies. The oldest existing
insurance company in India is the National Insurance Company , which was
founded in 1906, and is still in business.
The Government of India issued an Ordinance on 19 January 1956 nationalising
the Life Insurance sector and Life Insurance Corporation came into existence in the
same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-
Indian insurers as also 75 provident societies—245 Indian and foreign insurers in
all. In 1972 with the General Insurance Business (Nationalisation) Act was passed
by the Indian Parliament, and consequently, General Insurance business was
nationalized with effect from 1 January 1973. 107 insurers were amalgamated and
grouped into four companies, namely National Insurance Company Ltd., the New
India Assurance Company Ltd., the Oriental Insurance Company Ltd and the
United India Insurance Company Ltd. The General Insurance Corporation of India
was incorporated as a company in 1971 and it commence business on 1 January
1973.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to
the private sector. Before that, the industry consisted of only two state insurers:
Life Insurers (Life Insurance Corporation of India, LIC) and General Insurers
(General Insurance Corporation of India, GIC). GIC had four subsidiary
companies. With effect from December 2000, these subsidiaries have been de-
linked from the parent company and were set up as independent insurance
companies: Oriental Insurance Company Limited, New India Assurance Company
Limited, National Insurance Company Limited and United India Insurance
Company Limited.
Industry structure
By 2012 Indian Insurance is a US$72 billion industry. However, only two million
people (0.2% of the total population of 1 billion) are covered under Mediclaim.
With more and more private companies in the sector, this situation is expected to
change. ECGC, ESIC and AIC provide insurance services for niche markets. So,
their scope is limited by legislation but enjoy some special powers. The majority of
Western Countries have state run medical systems so have less need for medical
insurance. In the UK, for example, the corporate cover of employees, when added
to the individual purchase of coverage gives approximately 11-12% of the
population on cover due largely to usage of the state financed National Health
Service (NHS), whereas in developed nations with a more limited state system,
like USA, about 75% of the total population are covered under some insurance
scheme.

Insurance Repository
On 16 September 2013, IRDA launched 'Insurance Repository' services in India. It
is a unique concept and first to be introduced in India. This system enables policy
holders to buy and keep insurance policies in dematerialized or electronic form.
Policy holders can hold all their insurance policies in an electronic format in a
single account called electronic insurance account (eIA). Insurance Regulatory and
Development Authority of India has issued licenses to five entities to act as
Insurance Repository:
CDSL Insurance Repository Limited ( CDSL IR ) , SHCIL Projects Limited Karvy
Insurance repository Limited NSDL Database Management Limited CAMS
Repository Services Limited
Legal structure
The insurance sector went through a full circle of phases from being unregulated to
completely regulated and then currently being partly deregulated. It is governed by
a number of acts.
The Insurance Act of 1938 was the first legislation governing all forms of
insurance to provide strict state control over insurance business. Life insurance in
India was completely nationalized on 19 January 1956, through the Life Insurance
Corporation Act. All 245 insurance companies operating then in the country were
merged into one entity, the Life Insurance Corporation of India.
The General Insurance Business Act of 1972 was enacted to nationalise about 100
general insurance companies then and subsequently merging them into four
companies. All the companies were amalgamated into National Insurance, New
India Assurance, Oriental Insurance and United India Insurance, which were
headquartered in each of the four metropolitan cities.Until 1999, there were no
private insurance companies in India. The government then introduced the
Insurance Regulatory and Development Authority Act in 1999, thereby de-
regulating the insurance sector and allowing private companies. Furthermore,
foreign investment was also allowed and capped at 26% holding in the Indian
insurance companies.
In 2006, the Actuaries Act was passed by parliament to give the profession
statutory status on par with Chartered Accountants, Notaries, Cost & Works
Accountants, Advocates, Architects and Company Secretaries.A minimum capital
of US$80 million(Rs.400 Crore) is required by legislation to set up an insurance
business.
Authorities
The primary regulator for insurance in India is the Insurance Regulatory and
Development Authority of India (IRDAI) which was established in 1999 under the
government legislation called the Insurance Regulatory and Development
Authority Act, 1999. The industry recognises examinations conducted by the IAI
(for 280 actuaries), III (for 2.2 million retail agents, 361 brokers, 175 bancassurers,
125 corporate agents and 29third-party administrators) and IIISLA (for 8,200
surveyors and loss assessors). There are 9 licensed Web aggregators. TAC is the
sole data repository for the non-life industry. IBAI gives voice to brokers while GI
Council and LI Council are platforms for insurers. AIGIEA, AIIEA, AIIEF,
AILICEF, AILIEA, FLICOA, GIEAIA, GIEU and NFIFWI cater to the employees
of the insurers. In addition, there are a dozen Ombudsman offices to address client
grievances.

Insurance education
A number of institutions provide specialist education for the insurance industry,
these include;

 National Insurance Academy, Pune, specialized in teaching, conducting

research and providing consulting services in the insurance sector. NIA offers a
two-year PGDM programme in insurance. NIA was founded as Ministry of
Finance initiative with capital support from the then public insurance
companies, both Life (LIC) and Non-Life (GIC, National, Oriental, United &
New India).
 Institute of Insurance and Risk Management, Hyderabad, was established by
the regulator IRDA. The institute offers Postgraduate diploma in Life, General
Insurance, Risk Management and Actuarial Sciences. The institute is a global
learning and research centre in insurance, risk management, actuarial sciences.
They provide consulting services for the financial industry.
 Amity School of Insurance Banking and Actuarial science (ASIBAS) of Amity
University, located in Noida and established in 2000, offers MBA programmes
in Insurance, Insurance and Banking, and M.Sc./B.Sc. actuarial sciences to a
Post Graduate Diploma in Actuarial Sciences.
 Pondicherry University offers an MBA in insurance management. Pondicherry
University is the only central university which offers insurance management in
India.
 Birla Institute of Management Technology is a graduate business school located
in Greater Noida, established in 1988, offers a PGDM-IBM programme in
insurance business management. This programme was launched in 2000 by the
Centre for Insurance and Risk Management and is accredited by the Insurance
Regulatory and Development Authority. Life Office Management Association
(LOMA), USA is BIMTECH's educational partner and BIMTECH is an
approved centre for LOMA examination. The Chartered Insurance
Institute (CII), UK has accorded recognition (by way of credits) to the
BIMTECH PGDM-IBM programme. Their two-year PGDM programme in
insurance business has been recognised as equivalent to the Associate level of
the Insurance Institute of India, Mumbai.
 National Law University, Jodhpur offers a two-year MBA and one year MS
(for engineering graduates) programme in insurance.
To become an insurance advisor in India, Insurance Act, 1938 mandates that the
individual has to be "a Major with sound mind". After the advent of IRDA as
insurance regulator, it has framed various regulations, viz. training hours,
examination and fees which are amended from time to time. Since November 2011
IRDA has introduced a syllabus (IC-33) conceived and developed by CII, London.
The syllabus mainly aims to make an Insurance Agent a financial professional.
Recent Initiatives: On 09 th May 2015 NDA Government led by Shri.Narendra
Modi initiated three social Insurance Security schemes named ATAL PENSION
YOJANA,PRADHAN MANTHRI JEEVAN JYOTHI YOJANA, PRADHAN
MANTHRI SURAKSHA YOJANA on a massive scale such as 8 crore people
joined in these schemes in just 03 weeks and still the number is growing.
 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. 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.
Out of 29 non-life insurance companies, five private sector insurers are registered
to underwrite policies exclusively in health, personal accident and travel insurance
segments. They are Star Health and Allied Insurance Company Ltd, Apollo
Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company
Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance
Company Ltd. There are two more specialised insurers belonging to public sector,
namely, Export Credit Guarantee Corporation of India for Credit Insurance and
Agriculture Insurance Company Ltd for crop insurance.
Market Size
During April 2015 to March 2016 period, the life insurance industry recorded a
new premium income of Rs 1.38 trillion (US$ 20.54 billion), indicating a growth
rate of 22.5 per cent. The general insurance industry recorded a 12 per cent growth
in Gross Direct Premium underwritten in April 2016 at Rs 105.25 billion (US$
1.55 billion).
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.
The general insurance business in India is currently at Rs 78,000 crore (US$ 11.44
billion) premium per annum industry and is growing at a healthy rate of 17 per
cent.
The Indian insurance market is a huge business opportunity waiting to be
harnessed. 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.
Investments
The following are some of the major investments and developments in the Indian
insurance sector.

 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.
 Aviva Plc, the UK-based Insurance company, has acquired an additional 23
per cent stake in Aviva Life Insurance Company India from the joint venture
(JV) partner Dabur Invest Corporation for Rs 940 crore (US$ 141.3 million),
thereby increasing their stake to 49 per cent in the company.
 The Insurance sector in India is expected to attract over Rs 12,000 crore
(US$ 1.76 billion) in 2016# as many foreign companies are expected to raise
their stake in private sector insurance joint ventures.
 QuEST Global, a pure-play engineering and Research and Development
(R&D) services provider, has raised investment of around Rs 2,396 crore
(US$ 351.54 million) from leading global investors Bain Capital, GIC and
Advent International for a minority stake in the company.
 Insurance firm AIA Group Ltd has decided to increase its stake in Tata AIA
Life Insurance Co Ltd, a joint venture owned by Tata Sons Ltd and AIA
Group from 26 per cent to 49 per cent.
 Canada-based Sun Life Financial Inc plans to increase its stake from 26 per
cent to 49 per cent in Birla Sun Life Insurance Co Ltd, a joint venture with
Aditya Birla Nuvo Ltd, through buying of shares worth Rs 1,664 crore (US$
244.14 million).
 Nippon Life Insurance, Japan’s second largest life insurance company, has
signed definitive agreements to invest Rs 2,265 crore (US$ 332.32 million)
in order to increase its stake in Reliance Life Insurance from 26 per cent to
49 per cent.

 Bennett Coleman and Co. Ltd (BCCL), the media conglomerate with
multiple publications in several languages across India, is set to buy Religare
Enterprises Ltd’s entire 44 per cent stake in life insurance joint venture
Aegon Religare Life Insurance Co. Ltd. The foreign partner Aegon is set to
increase its stake in the joint venture from 26 per cent to 49 per cent,
 following government’s reform measure allowing the increase in stake
holding by foreign companies in the insurance sector.
 GIC Re and 11 other non-life insurers have jointly formed the India Nuclear
Insurance Pool with a capacity of Rs 1,500 crore (US$ 220.08 million) and
will provide the risk transfer mechanism to the operators and suppliers under
the CLND Act.
 State Bank of India has announced that BNP Paribas Cardif is keen to
increase its stake in SBI Life Insurance from 26 per cent to 36 per cent.
Once the foreign joint venture partner increases its stake to 36 per cent,
SBI’s stake in SBI Life will get diluted to 64 per cent.

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

 The Union Budget of 2016-17 has made the following provisions for the
Insurance Sector:

 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.
 Service tax on single premium annuity policies has been reduced from 3.5
per cent to 1.4 per cent of the premium paid in certain cases.
 Government insurance companies to be listed on the exchanges
 Service tax on service of life insurance business provided by way of annuity
under the National Pension System regulated by Pension Fund Regulatory
and Development Authority (PFRDA) being exempted, with effect from
April 01, 2016.

 The Insurance Regulatory and Development Authority (IRDA) of India has

formed two committees to explore and suggest ways to promote e-commerce
in the sector in order to increase insurance penetration and bring financial
inclusion.
 IRDA has formulated a draft regulation, IRDAI (Obligations of Insures to
Rural and Social Sectors) Regulations, 2015, in pursuance of the
amendments brought about under section 32 B of the Insurance Laws
(Amendment) Act, 2015. These regulations impose obligations on insurers
towards providing insurance cover to the rural and economically weaker
sections of the population.
  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 Uttar Pradesh government has launched a first of its kind banking and
insurance services helpline for farmers where individuals can lodge their
complaints on a toll free number.
 The select committee of the Rajya Sabha gave its approval to increase stake
of foreign investors to 49 per cent equity investment in insurance companies.
 Government of India has launched an insurance pool to the tune of Rs 1,500
crore (US$ 220.08 million) which is mandatory under the Civil Liability for
Nuclear Damage Act (CLND) in a bid to offset financial burden of foreign
nuclear suppliers.
 Foreign Investment Promotion Board (FIPB) has cleared 15 Foreign Direct
Investment (FDI) proposals including large investments in the insurance
sector by Nippon Life Insurance, AIA International, Sun Life and Aviva Life
leading to a cumulative investment of Rs 7,262 crore (US$ 1.09 billion).
 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.

Road Ahead
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 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.
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$ 0.0148 as on July 11, 2016
Indian Insurance Market
The insurance industry of India consists of 47 insurance companies of which 23 are
in life insurance business and 24 are non-life insurers. Among the life insurers,
Life Insurance Corporation (LIC) is the sole public sector company.

Out of 24 non-life insurance companies, there are six public sector insurers, which
include two specialised insurers namely Agriculture Insurance Company Ltd for
Crop Insurance and Export Credit Guarantee Corporation of India for Credit
Insurance. Moreover, there are 5 private sector insurers are registered to
underwrite policies exclusively in Health, Personal Accident and Travel insurance
segments. They are Star Health and Allied Insurance Company Ltd, Apollo
Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company
Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance
Company Ltd.

In addition to 47 insurance companies, there is sole national re-insurer, namely,

General Insurance Corporation of India. Other stakeholders in Indian Insurance
market include approved insurance agents, licensed Corporate Agents, Brokers,
Common Service Centres, Web-Aggregators, Surveyors and Third Party
Administrators servicing Health Insurance claims.

Insurance Laws (Amendment) Act, 2015 provides for enhancement of the Foreign
Investment Cap in an Indian Insurance Company from 26% to an Explicitly
Composite Limit of 49% with the safeguard of Indian Ownership and Control.

Insurance penetration of India i.e. Premium collected by Indian insurers is 3.30%

of GDP in FY 2014-15. Per capita premium underwritten i.e. insurance density in
India during FY 2014-15 is US$ 55.0.

Here are some performance highlights of the Indian insurance industry.

REGISTERED INSURERS IN INDIA
(As on 31th March, 2016)

Type of Insurer Public Private Total

Life 1 23 24
General 6 18 24
Health 0 5 5
Reinsurance 1 0 1
Total 8 46 54

2015-16 2014-15
Life Insurance Business
Performance: Public Private Public Private
Sector Sector Sector Sector
Premium Underwritten (Rs in
239667.65 88433.49 236942.30 77340.90
Crores)
New Policies Issued (in Lakhs) 201.71 57.37 345.12 63.60
Number of Offices 4877 6156 4839 6193
Benefits Paid (Rs in Crores) 144125 67054 158081 58380
Individual Death Claims (Number
755901 121927 760334 125027
of Policies)
Individual Death Claims Amount
9055.18 2733.49 8475.26 2385.33
Paid (Rs in Crores)
Group Death Claims (Number of
273794 192989 267296 158682
lives)
Group Death Claims Amount
2037.27 1483.55 1882.83 1222.25
Paid (Rs in Crores)
Individual Death Claims (Figures
98.19 89.40 98.14 88.31
in per cent of policies)
Group Death Claims (Figures in
99.64 91.20 99.65 90.45
per cent of lives covered)
No. of Grievances reported
80944 198048 85284 289336
during the year
 Grievances resolved during the
80944 193119 85828 288836
year
Grievance Resolved (in percent) 100.00 97.51 100.64 99.83

2015-16 2014-15
Non-Life Insurance Business
Performance: Public Private Public Private
Sector Sector Sector Sector
Premium Underwritten (Rs in
42549.48 35090.09 38599.71 32010.30
Crores)
New Policies Issued (in Lakhs) 677.82 504.97 600.06 424.47
Number of Offices 8207 2200 7869 2003
Net Incurred Claims (Rs in
31567.75 19430.46 27817.96 17874.11
Crores)
Number of Grievances reported
15860 44828 17658 45677
during the year
Grievances Resolved During the
16105 43318 18083 45653
Year
Grievance Resolved (in percent) 101.54 96.63 102.40 99.95

Stand 2015-16
Alone
Health 2014-15
Insurance
Companies
Net earned U/W Net Gross Net U/W Net
Gross Direct premium(Rs Profit / incurred Direct earned Profit / incurred
Premium (Rs in in Crores) Loss claim Premium premium(Rs Loss claim
Crores) (Rs in ratio (Rs in in Crores) (Rs in ratio
Crores) Crores) Crores)
 1 2 3 4 5 6 7 8
Star Health Loss
and Allied 1017 N.A. 63.96% 675 147 67.21%
1469 1091
Insurance
Apollo Loss
Munich 655 N.A. 60.03% 543 85 65.59%
803
Health 692
Insurance
Max Bupa Loss
Health 372 315 N.A. 55.16% 238 158 59.07%
309
Insurance
Religare N.A. Loss
Health 275 154 61.13% N.A. 94 79.92%
152
Insurance
Cigna TTK Loss
Health 21 6 N.A. 64.33% N.A. 62.74 N.A.
.34
Insurance

Specialised 2015-16
Insurer in 2014-15
Agriculture

1 2 3 4 5 6 7 8

Agriculture Loss Profit

Insurance 2740 1598 158 108.47% 1648 32 104.65
3395
Co. Ltd. %

2015-16
Specialised
2013-14
Insurer in
export
credit
insurance

1 6 7 8
2 3 4 5
Export loss Profit
Credit 1019 291.91 114% 907 61.86 82.22%
Guarantee
1362 1304
Corporation
of India
Limited

INDUSTRY STATISTICS
“Private life insurers recorded a double digit year-on-year growth of 17.8% in
weighted new business premium collections in the period April to June 2015.
While the state-owned insurer LIC witnessed a fall of 8.9%, the industry recorded
a modest overall growth of 2% for the quarter.”
Industry new business performance
w

As per statistics released by the IRDAI, life insurance industry in India collected
weighted new business premiums of over INR99 billion in the first three months of
FY2015-16, representing a growth of 2.0% over the corresponding period in
FY2014-15.
State-owned LIC witnessed a fall of 8.9% in its weighted new business premium
collections in the first three months of FY2015-16, resulting in its market share
declining from 59.1% to 52.7% corresponding to the same period in FY2014-15.
LIC recorded a decline in individual business by 11.9% and a marginal growth of
0.9% in group business. Despite registering a decline in weighted new business
premium collections, LIC witnessed a year-on-year rise of 17.2% in its unweighted
new business premium collections on the back of a significant rise in single
premium business by 35.3%. Weighted new business premiums are calculated as
10% of single premium and 100% of regular new business premiums.
Private life insurers maintained their strong performance from the recently
concluded financial year and recorded a double digit growth of 17.8% in their
weighted new business premium collections in the first quarter of FY2015-16,
resulting in a corresponding rise in their overall market share from 40.9% to
47.3%. Private players recorded a growth in both individual and group business of
14.2% and 27.4% respectively, and an increase of 43.8% and 16.5% in single and
regular premium collections, respectively.
The relative shift in market shares of LIC and private insurers can be attributed to
the absence of unit-linked plans from LIC’s product offerings until the end of first
quarter, while private sector, reportedly, recorded a rise in unit-linked sales on the
back of upsurge in stock markets.
With an impressive growth of 40.5% in weighted new business premiums, ICICI
Prudential Life has retained its position as the market leader among private life
insurers in first quarter of FY2015-16. All private life insurers amongst the top 10
in terms of weighted new business premium collections, recorded a positive
growth in their new business volumes during the first quarter of FY2015-16 with
the exception of Reliance Life and Max Life. Reliance Lifewitnessed a steep fall
in its year-on-year weighted new business premium collections of 49.5% and
moved down from second to seventh rank. On the other hand, Star Union Dai-ichi
Lifehas made its entry into the top 10 private insurers, moving up from fourteenth
to ninth rank, riding on an eight-fold rise in its regular premium group business.
Buoyed by the strong performance in the first quarter, the life insurance industry
has expressed optimism with a number of companies making press statements
indicating double digit planned new business growth for the year.
Expenses of private life insurers
Expenses of life insurers have received increased attention recently with ongoing
deliberations among industry participants on the appropriate limit for expenses of
management. Further, increasing attention is being paid to allocation of total
company expenses by line of business, as expenses allocated to participating
business are directly shared with the policyholders. High expense ratios remain a
general concern for the industry as most players continue to experience expense
over-runs relative to long term expense loadings allowed for in pricing despite
nearly a decade and a half since privatisation. Nevertheless, the overall expense
ratio for the life insurance industry (excluding Aviva Life and Sahara Life) has
come down from 18.7% for FY2013-14 to 16.3% for FY2014-15 as concerted
efforts are being made towards expense rationalization. The chart below represents
the operating expense ratios of private life insurers for FY2014-15. The expense
ratio is expressed as a percentage of total operating expenses relating to the
insurance business over the total premiums. Besides the expense ratios, the chart
also illustrates the size of the insurer in terms of total premium income through the
relative bubble size and the primary distribution channel for individual business
adopted by the company through the horizontal axis.
Click image to enlarge

A comparison of the expense ratios for FY2014-15 with those for FY2013-14,
reported in ourIndia Market Life Insurance Update, Edition 56, shows that each of
the top five private life insurers, in terms of total premium collection, have
witnessed an improvement in their expense ratios during the year. SBI Life notably
has the lowest expense ratio among all private players with 9.5%, nearly same as
that of the state-owned insurer, LIC. DHFL Pramerica Life has managed to
substantially reduce its expense ratio by around 40% in absolute terms. Among
other notable movements since the prior year, expense ratio of Bharti AXA
Life also reduced by 9.4% while that of Shriram Life increased by 9.9% during
FY2014-15. While the above analysis pertains to overall expense ratios, the
following chart provides an indication of allocation of expenses by line of business
for private life insurers where such information is available. Notably, expense ratio
for participating business are higher than the overall company level expense ratio
for four out of six insurers covered in the analysis.
Click image to enlarge

CLASSIFICATION OF HEALTH INSURANCE BUSINESS

(in terms of gross premium)
 Strengths/Opportunities of Insurance Industry

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
ensure 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 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. 145 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. 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. 6.1.2 Weaknesses/Challenges of Insurance Industry Premiums rates will
remain under pressure due to intense competition on more profitable lines. Falling
premium income without a corresponding reduction in claims is likely to drive
down profits. Public and private sector insurers’ greater reliance on their
investment portfolios to generate sufficient income and gains for net profits would
subject them to the volatility of the financial markets. Private insurers need to raise
more capital otherwise growth could be constrained since reliance on reinsurance
for capital relief is not always viable or available. Traditional distribution channels,
especially tied agents, need to improve to match the new product offerings. 146
There is general lack of transparency as financial and operational data for insurers
are not readily available as none of India’s insurers are directly listed on stock
exchanges. Like all developing economies on a fast track, the shortage of trained
insurance professionals and technicians at all levels cannot be remedied in the
short term. Natural catastrophes will always be present; the Indian sub-continent is
vulnerable to cyclones, floods, hurricanes and earthquakes, and until there is a
national capacity (similar to the terrorism pool) to manage losses, dependence on
overseas reinsurers will continue.
 Conclusion and suggestions

The life insurance density of India was 9.1 percent in the year 2000-01 when the
private sector was opened up. It increased to 52.2 percent in 2009- 10.India’s life
insurance density is very low as compared to the developed countries and
developing countries, inspite of India being the second most populous country in
the world. This shows that there is much scope for life insurance sector to develop
in India. The life insurance penetration of India was 2.15 percent in the year 2000-
01when the private sector was opened up.. It increased to 4.90 percent in 2009-
10.Since opening up of Indian Insurance sector for private participation, India has
reported an increase in both life insurance density and penetration. But compared
to UK, France, South Korea, Japan and South Africa, India is way behind. Among
developing countries it stands second to South Africa. There is much scope for the
life insurance sector to develop in India. The prediction of new business and total
premium for both private and public sector life insurance companies in India for
the year 2015 also shows an upward trend which signifies that there is a lot of
scope for life insurance business in India. 147 For over a century, the United States
has been the largest economy in the world but major developments have taken
place in the world economy since then, leading to the shift of focus from the US
and the rich countries of Europe to the two Asian giants India and China.
Economic experts and various studies conducted across the globe envisage India
and China to rule the world in the 21st century. India, which is now the fourth
largest economy in terms of purchasing power parity, may overtake Japan and
become third major economic power within 10 years. Life insurance will grow
very rapidly over the next decades in India. The major drivers include sound
economic fundamentals, a rising middle-income class, an improving regulatory
framework and rising risk awareness.
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