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INTRODUCTION
The word “Fear” has only four letters like love, but both have a very different meaning e. Whatever man (Malo female) allows for the love of their families always starts with the background of fear. General so often that we have been asking ourselves to what will happen if we were not there, but we continue to pray rather than to do something for it. Time is precious, it never ceases to anyone and we live in a world of uncertainty; uncertainty about the job, uncertainty about money, contingent assets and so the story goes constantly throughout life.
A thriving insurance sector is vital to any modern economy. First, because it encourages the habit of saving, second, because it provides a safety net for rural and urban enterprises and productive individuals. And perhaps most importantly it generates long-term invisible money for infrastructure building. The nature of the insurance business is such that cash insurance is constant while the payout is deferred and contingency related.
The characteristic feature of their business makes the biggest insurance companies invest in long-gestation infrastructure development projects in all developed and emerging nations. This is the most compelling reason for the private sector (and foreign) companies, which will distribute insurance in social habits and consumer interest is urgently needed in this important sector. Opening up the insurance to the private sector, including foreign participation has resulted in a variety of opportunities and challenges in India.
Life MARKET
The Life Insurance market in India is underdeveloped market was only tapped by the state-owned lic until the entry of private insurers. Penetration of life insurance products was 19 percent of the total 400 million insurable population. The state-owned LIC sold insurance as a tax instrument, not as a product the protection. Most customers were under-insured without flexibility or transparency in products. With the entry of private insurers rules of the game have changed.
12 private insurers in the life insurance market has already grabbed nearly 9 percent of the market in terms of premium income. The new business premium of 12 private players has tripled over Rs 1,000 crore in 2002- 03 last year. At the same time, with regard to state-owned new topping Lic’s business has declined.
innovations, smart marketing and aggressive distribution. It is a triple screen combination that has made fledgling private insurance companies to sign up Indian customers faster than anyone ever expected. Indians, who have always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up innovative new products on offer.
The growing popularity of private insurers is evidenced in another way. They are coining money in new niches that they have introduced. The state-owned company remains the dominant part as endowments and money back policy. But annuity or pension products business, private insurers have already wrested over 33 percent of the market. And the popular unit linked insurance scheme, they have a virtual monopoly, with over 90 percent of customers.
Private insurers also seem to score big in other ways- they are to convince people to take out a larger strategy. For example, the average size of a life insurance policy for privatization was around Rs 50,000. Which has risen to about Rs 80,000. But private insurers are ahead in this game and the average size of their strategy is about Rs 1.1 lakh to Rs 1.2 lakh- way bigger than the industry average.
enormous faster than expected their success, almost all private insurers are quick on the second phase of expansion plans. No doubt an aggressive stance private insurers is already paying rich dividends. But rejuvenated LIC is also trying to fight back to ask new customers.
INSURANCE TODAY
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor RN Malhotra, was formed to evaluate the Indian insurance industry and recommend future policy. The Malhotra committee was set up with the aim of improving the reforms underway in the financial sector.
The installation of the Insurance Regulatory Development Authority (IRDA) reform began in the insurance sector. It became necessary as if we compare insurance penetration and my personal contribution we are much behind them the rest of the world. The above table gives the statistics for 2000.
With the expected increase in per capita income of 6% for the next 10 years and by improving the awareness levels of demand for insurance is expected to grow.
As an independent consulting firm, Monitor Group has estimated that the growth form Rs. 218 billion to Rs. 1,003 billion in 2008. Estimates appears achieve the successful 13 insurance players in India for the year 2002-2003 (up to October, based on the first year premium) is Rs. 66683000 LIC being the largest contributor with Rs. 59,187 million. As of now LIC has 2,050 branches in 7 regions with a strong team 5,60,000 agents.
Globalisation
Although nationalized insurance companies have done a commendable job in extending the volume of business, opening up the insurance sector to private players was necessary in the context of globalization of the financial system. If traditional infrastructural and semi public goods industries such as banks, airlines, telecommunications, power, etc., have a significant private sector presence, continued state monopoly in the provision of insurance was indefensible and the globalization of insurance has been made as previously discussed. its impact has to be seen in the form of creating various opportunities and challenges.
The introduction of private players in the industry has added colors to dull industry. The initiative taken by the private players are very competitive and have given tremendous competition on time monopoly in the market Lic. Since the advent of private players in the market industry has seen new and innovative steps taken by the players in the industry. The new players have improved service quality insurance. Therefore LIC down the years have seen a decline in his career. Market share was distributed among private players. While LIC still holds 75% in insurance upcoming nature of these private players are enough to give more competition to Lic in the near future. LIC market share has fallen from 95% (2002-03) to 81% (2004-05). The following company holds the rest of the market share of the insurance industry.
TABLE – 1
Globalisation
NAME PLAYER market share (%)
LIC 82.3
ICICI PRUDENTIAL 5.63
BIRLA SUN LIFE 2.56
BAJA ALLIANZ 2.03
1.80 SBI LIFE
HDFC STANDARD 1.36
TATA AIG 1.29
MAX NEW YORK 0.90
Aviva 0.79
OM KOTAK Mahindra 12:51
iNG Vyasa 0:37
AMP Sanmar 0.26
MetLife 0:21
this scenario of globalization
in a tough struggle to increase market private sector insurance industry consists of 14 life insurance of 26% have lost 3% of the market share of state-owned Life Insurance Corporation (LIC) in the domestic insurance industry in 2006-07. According to figures from the Insurance Regulatory & Development Authority, the total contribution of these 14 companies have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore.
LIC with a total premium mobilize Rs 55,934 crore has managed to maintain market share 74.26% in the period. Total life insurance industry in the first year the premium has grown by 110% to Rs 75, 406 crore during 2006-07. The 2006-07 performance has thrown a few surprises in the ranking among private life insurance. New entrants such as Reliance Life and SBI Life had shown a huge increase of 381% and 210% respectively over the year. Reliance Life has become one of the top five companies ended the year with a premium of Rs 930 crore during the year.
While ICICI Prudential Life Insurance on as the No. 1 private life insurance company in the year. Bajaj Allianz ICICI Prudential managed in terms of monthly market share in March, the first time in history. Bajaj is the market share among private players in the non-single premium for March was 29.1% against ICICI Prudential’s 23.8%. Bajaj was 4.6 per cent market share among private sector players for FY07.
Among other private players, SBI Life and Reliance Life continues to do well, each gained 4% market share in FY07. SBI Life Growth was driven by increasing contributions from ULIP premiums. Another notable development in 2006-07 success has been the expansion of the retail market of life insurance comapnies. Bajaj Alliannz Life has added 20 lakh policies while ICICI Prudential has expanded over 19 lakh policies during the year.
With most life insurance policies in force in the world, insurance happens to be mega opportunity in India. It is a company growing at the rate of 15-20 percent a year and now of the order of Rs 450 billion. Along with banking, adding that about 7 percent of the country’s GDP. Gross premium collection is almost 2 percent of GDP and the funds available for investment by Lic 8 percent of GDP.
Yet nearly 80 percent of the Indian population is without life insurance coverage while health insurance and life insurance continued to be below international standards. And this part of the population is also subject to weak social security and pension systems almost all old age income security. This itself is an indicator that the growth potential for the insurance sector is immense.
Well-developed and evolved insurance sector is needed for economic development as it provides long-term funds for infrastructure development and at the same time strengthens the risk-taking ability. It is estimated that in the next ten years India would require investments of the order of one trillion US dollar. Insurance, to some extent, can make investments in infrastructure to sustain economic growth in the country.
Insurance is a federal subject in India. There are two legislation governing sector- The Insurance Act- 1938 IrDA Act- 1999. The insurance sector in India has become a circle from being an open competitive market to nationalization and re-open market again. Tracking trends in the Indian insurance sector reveals 360 degree turn witnessed a period almost two centuries.
important dates in the life insurance business in India
1912: The Indian life insurance Songs set as the first law to regulate life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect statistics on both life and non-life insurance company.
1938: Earlier legislation consolidated and amended by the Insurance Act with the aim to protect the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the state and nationalized. LIC formed by an Act of Parliament- LIC Act 1956- a capital contribution of Rs. 5 crore from Government of India.
In a tough struggle to increase market private sector insurance industry comprising life insurance 14 26% have lost 3% of the market share of state-owned Life Insurance Corporation (LIC) in the domestic life insurance industry in 2006-07. According to figures from the Insurance Regulatory & Development Authority the total premium that 14 companies have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore.
LIC with a total premium mobilize Rs 55,934 crore has managed to maintain market share 74.26% in the period. Total life insurance industry in the first year the premium has grown by 110% to Rs 75, 406 crore during 2006-07. The 2006-07 performance has thrown a few surprises in the ranking among private life insurance. New entrants such as Reliance Life and SBI Life had shown a huge increase of 381% and 210% respectively over the year. Reliance Life has become one of the top five companies ended the year with a premium of Rs 930 crore during the year.
While ICICI Prudential Life Insurance on as the No. 1 private life insurance company in Bajaj Allianz ICICI Prudential managed in terms of monthly market share in March, the first time in history. Bajaj is the market share among private players in the non-single premium for March was 29.1% against ICICI Prudential’s 23.8%. Bajaj was 4.6 per cent market share among private sector players for FY07.
Among other private players, SBI Life and Reliance Life continues to do well, each gained 4% market share in FY07. SBI Life Growth was driven by increasing contributions from ULIP premiums. Another notable development 2006-07 performance has been the expansion of the retail market of life insurance. Bajaj Alliannz Life has added 20 lakh policies while ICICI Prudential has expanded over 19 lakh policies during the year.
opportunities
– A state monopoly has little incentive to new or offers a wide range of products. It shows a lack of certain products owned lic and the lack of a comprehensive risk classification in several Gic products, such as health insurance. More competition in this business will stimulate companies to offer several new products and more sophisticated and comprehensive risk classification.
– It would also lead to better customer service and help add variety and pricing of insurance products.
– The entry of new players would accelerate the spread of both life and general insurance. Distribution of insurance will be measured in terms of insurance penetration and a measure of density.
– With the entry of private players, it is expected that the insurance company about 400 billion rupees a year now, more than 20 percent per year, even leaving aside the relatively under-developed areas of health insurance, pen More importantly, it will also ensure high mobalisation funds can be utilized for the purpose of infrastructure development was a factor considered globalization insurance.
– More importantly, it will also ensure great moblisation funds can be utilized for the purpose of infrastructure development that was a factor considered globalization insurance.
– By allowing the holding of shares of a foreign company itself or through its subsidiaries or appointed not more than 26% of the paid up capital of the Indian partners will operate as ways to increase domestic savings and increase economic progress nation. Contracts for various projects have been carried out to discuss later in this article.
– It has been estimated that the growth of the insurance sector more than three times the growth rate of the economy in India. So the companies or domestic companies will try to invest in the insurance sector. Moreover, the growth of the insurance business in India is 13 times the growth of insurance in developed countries. So it is natural that foreign companies would be nurtured very strong desire to invest something in Indian insurance.
– important not least the tremendous job opportunities will be created in the insurance sector is a burning problem present day issues.
Challenges before INDUSTRY
New Age companies have started their business as previously discussed. Some of these companies have been able to float 3 or 4 products and only some have targeted to reach a level of 8 or 10 products. Now these companies are not in a position to pose any challenge suits and all the other four companies operating in the general insurance sector, but if we see the quality and standards of products which they issued, they can be challenged in the future. Since the challenge in the whole environment of globalization and liberalization industry faces the following challenges.
– The existing company, LIC and GIC, have created a large group of dissatisfied customers due to poor service. Therefore, a change in the number of clients from the public and GIC to private insurers.
– LIC may face the problem of delivery of a number of policies, the new insurers will ask them for special new products at lower prices.
– The corporate customers under the program group and salary pension schemes can be divided their loyalty from lic to private insurers.
– It’s likely departure of young dynamic management of Lic to a private company, as they will get more packages of commission.
– LIC has overstaffing and with the introduction of full computerization, the number of employees will be leaving. But they can not be retrenched. Therefore, operating expenses lic will not decrease. This will be a disadvantage in a competitive market, as new insurers will operate with a lean office and advanced technology to reduce operating costs.
– GIC and four subsidiary companies are going to face more challenges, the management of their charges are very high because the staff surplus. They can not reduce the number of rules of service.
– Management requirements will put a strain on resources, GIC and its subsidiaries as it is not up to mark.
– LIC has more than 60 products and GLC has more than 180 products in their kitty, which are obsolete in this context as they are not suitable to the changing needs of customers. Not only that they are not competent enough to complete the new products offered by foreign companies in the market.
– Achieve consumer expectations on par with foreign companies, such as improved yield and much better quality services especially in the field of claims, issuance of new policy, transport policy and the revival policy on the open market is very difficult to LIC and GIC.
– Stiff competition from new insurers in winning consumers with multi-channel distribution, which will include agents, brokers, corporate intermediaries, bank branches, affinity groups and direct marketing through telesales and interest.
– The market very soon be flooded with a number of products with quite a number of insurers operating in the Indian market. Even with a limited range of products offered by public and GIC, consumers are confused in the market. their confusion will increase even further in the face of a number of products on the market. Current consumer awareness for insurance products is very low. It is so because only 62% of the Indian population is literate and less than 10% educated. Even educated consumers are unaware of the various products in insurance.
– The insurers will have to face acute problems of redressal of consumer grievances for lack of goods and services.
– Increased awareness will bring the number of legal cases filled by consumers against insurers is likely to increase substantially in the future.
– the main challenges in canalizing the growth of the insurance sector has product development, distribution, investment management, customer service and education.
ESSENTIALS meet the challenges
– Indian insurance industry needs the following to global challenges
– Understanding the customer better will make insurance companies to design appropriate products, determine the prices of properly and increase profitability.
– Selection of the correct type of distribution channel mix along with a sensible and efficient FOS [Fleet On Street] management.
– An efficient CRM system, which would ultimately create sustainable competitive advantages and build a lasting relationship
– Insurers must follow the best investment practices and will have a strong asset management company to maximize returns.
– Insurers should increase its customer base in semi urban and rural areas, which offer great potential.
– Promoting health insurance and use e-broking to increase business.
Resolution
Thus in the past on the basis of the above discussion, we can conclude that the need for private transfer is justified on the basis of increasing the efficiency of operation, achieving higher density and insurance coverage in the country and for greater mobilization of long-term savings for long-gestation infrastructure projects. Following such competition is necessary for the government monopoly (LIC and GIC) they quickly grade technology, to reorganize itself on efficient lines and operate the widest run enterprise. New players should not be treated as rivalries to government companies, but they can complement to attain the growth of the insurance business in India.
* Assistant Professor, Department of Commerce, Bharathiar University, Coimbatore-46
| Email – Buarticlecommerce@yahoo.com
** Ph.D Scholar, Department of Commerce, Bharathiar University, Coimbatore. | Email – Parentbala@sify.com
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Source by Bala Murugan