CONTRIBUTION OF

LIFE INSURANCE
INDUSTRY IN INDIAN
ECONOMY
By
Mir Dastagir Ali Khan, B.Com
Process Trainer
Talk Training Academy
OBJECTIVE OF STUDY

 The objective of this study are basically 3 in

number.
 The objectives are:
 1. Structure of Indian Insurance Industry.
 2. Contribution to Indian Industry.
 3. Special features related to the title
declared.
STRUCTURE OF THE INDIAN
INDSUTRY – LIFE INSURANCE
 Indian Insurance Industry has conceived Life
Insurance Industry.
 Prior to 1956 – They were 242 companies
promoting Life Insurance & Marine Insurance.
 1956 – 2001 – Govt of India nationalized LIC
as the sole authority.
 2001 – Private Sector Insurance opened in
India.
PRESENT STRUCTURE OF INDIAN
INSURANCE AS PER IRDA
 Prior to 2000: Prior to 2000 Life Insurance
Corporation came into existence & promoted
the Life Insurance Business.
 After 2000: After 2000 “14” Private Insurance
co, promoting Life Insurance in India.
 Some of the names are: 1. BALIL, 2. BSLICL,
HDFC, ICICI Prudential etc.
CONTRIBUTION OF LIFE INSURANCE
INDUSTRY
 Hawks View to Life Insurance Industry:
 1. Life Insurance is the only sector which
garners long term savings.
 2. Spread of financial services in rural areas
& amongst socially less privileged.
 3. Long term funds for infrastructure.
 4. Strong positive correlation between the
Capital Market/Insurance Market & the
Pension Initiatives.
AGGREATION OF LONG TERM SAVINGS

1.Total Assets of Life Insurance Companies:

 2002- 2003 – 2,80,450

 2003- 2004 – 3,52,608

 2004-2005 – 4,23,000

2. Total Premium generated:

 2002-2003 – 57,708 Cr

 2003-2004 – 66,278 Cr

 2004-2005 – 79,000 Cr
AGGREATION OF LONG TERM
SAVINGS- CONTD
3. Industry is growing @ 19 % P. A
4. At this rate of the Life Insurance the projected
future premiums will be:
 2005 – 2006 – Rs. 94,000.

 2006 - 2007 – Rs. 1,12,000.

 2007- 2008 – Rs. 1,13,000.

5. Life Insurance accounts for 15 % of household

savings.
6. The Industry has the potential of raising its
funds upto 20 % .
INSURANCE FACTS – AFTER PRIVATIZATION OF
INSURANCE INDUSTRY
 IRDA has prescribed guidelines for doing
minimum business.
 Life Insurance offices are spread over 1,400
offices.
 Presence of representatives in every tehsil –
Deeper penetration in the rural areas.
 Insurance agents numbering 6.25 Lakhs in the
rural areas.
 Policies sold in the rural areas (2004 – 2005). No of
Policies were – 55 Lakhs & Sum Assured – 46,000
Crores.
 Social Security – No of lives covered 2003 – 2004
Rs. 17.4 Lakhs & 2004 – 2005 is Rs. 42.1 Lakhs.
LONG TERM FUNDS FOR
INFRASTRUCTURE
1. For a Gross Domestic Product (GDP) to grow
there is an investment of 8 to 10 % in the
infrastructure.
2. Estimated of funds would vary from
infrastructure to infrastructure.
3. An investment of Rs. 6,19,600 crore is
anticipated in the next 5 years.
4. Tenure of funding required normally ranges
from 10 to 20 years.
5. Major regulation is regulated by debt or equity
(Private Participation).
LONG TERM FUNDS FOR
INFRASTRUCTURE – CONTD
6. Major of the capital is funded by the state
Govt & the they are in the approved
securities which are used for infrastructure
purpose.
7. As the investments of Life Insurance
Companies funds are:
(a) In central govt, state govt & approved
govt project – Not less than 50 % .
(b) In Infrastructure – 15 % .
LONG TERM FUNDS FOR
INFRASTRUCTURE – CONTD
8. Investment in the Infrastructure for a Life
Insurance Company is generally for a very
long time.
9. It ranges averagely for 23 years.
10. The Investment minimum as per the
investment pattern is Rs. 40,000 Cr.
11. It is expected life insurance sector will
generate a minimum of Rs. 15,000 Cr for
infrastructure investment in 2006 – 2007
with amount increasing every year.
DEVELOPMENT OF INDIAN CAPITAL
MARKETS / ECONOMIC GROWTH

1. Industry also contributes in economic

development through investments in capital
markets.
2. Present level is Rs. 40,000 Cr & according
to reports mark to market is Rs. 80,000.
3. Annual Investment of around Rs. 9000 Cr in
capital markets.
 DEVELOPMENT OF INDIAN CAPITAL
MARKETS / ECONOMIC GROWTH – CONTD

4. Contribution to 5 years plans: 9th Plan

Rs. 2,30,900 Cr & last 2 years Rs. 1,70,900.
5. Helps indicate a sense of security by protecting
earnings of people in case of untimely death.
6. Benefits to Policy Holders: In the following years.
2002 – 2003 – 20,800 Cr.
2003 – 2004 – 24,200 Cr.
2004 – 2005 – 28,700 Cr.
EMPLOYMENT
GENERATION
• Life Insurance Industry provides increased
employment opportunities.
• Employment as on March 31st 2005 was about
2,00,000 employees.
• Many Insurance Consultants depend on
Insurance for their livelihood.
• No of Insurance Consultants as on 31st 2004
were 15.59 Lakhs.
• Brokers/Insurance Agencies & other setups
provide ample opportunities for employment.
 SPECIAL FEATURES SECTION CAPTITAL
INTENSIVE INDUSTRY

1. The respective data is for 2 years.

2. In the year 2002 – 2003 the total income was
Rs. 1,631 Cr & 2003 – 2004 Rs. 4053.
3. Capital employed in the year 2002 – 2003 was
Rs. 2,219 Cr & in the year 2003 – 2004
Rs. 3,239
SPECIAL FEATURES SECTION
CONTD

1. Tax clubbing of various savings short term

& long term into same bracket have a bias
towards short term savings.
2. Distinction between the short term & long
term is essential as it prone towards the
inflator situation.
3. Clearly, long savings are encouraged as it
provides long term IT returns.
GROWTH POTENTIAL
1. At present India’s penetration in the Insurance Industry
is quiet low.
2. According to IRDA & D&BS (London) there is still 75 %
of only the Indian population which is to be covered
under Life Insurance.
3. The above statement makes it clear that only 53 % of
the Indian Population is covered under Life Insurance.
4. After the senses which were taken in the year 2002 –
2003 Insurance penetration is 2.26% of the GDP.
5. In International scenario it is 6.77 % In Hong Kong &
6.38 % in Singapore.
FINAL NOTE

 Final note for these presentations are 3 in

No:
2. Life Insurance is in a phase of infinity after
50 years of monopoly.
3. Competition within the Insurance sector &
other financial sector within the capital
market & Indian markets.
4. Needs environmental support till it reaches
optimal level.
THANK YOU