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Insurance Market

What is insurance?
The definition of insurance can be
made from two points: Functional
definition. Contractual definition.
Insurance is a co-operative device to
spread the loss caused by a
particular risk over a number of
persons who are exposed to it and
who agree to insure themselves
against the risk.

Contractual Definition: In the

words of justice Tindall, Insurance is
a contract in which a sum of money
is paid to the assured as
consideration of insurers incurring
the risk of paying a large sum upon a
given contingency.

LIFE INSURANCE Life insurance is a written
contract between the insured and the insurer, that
provides for the payment of the insured sum on the
date of the maturity of the contract or on the
unfortunate death of the insured, whichever occurs
GENERAL INSURANCE General insurance or nonlife insurance policies, including automobile and
homeowners policies, provide payments depending
on the loss from a particular financial event. General
insurance typically comprises any insurance that is
not determined to be life insurance .


Health insurance, Business insurance,
Automobile insurance, Fire insurance etc.
HEALTH INSURANCE: Just like one looks
to safeguard ones wealth, these policies
ensure guarding the insurer health
against any calamities that may cause
long term harm to ones life and even
hamper ones earning ability for a lifetime.
Some examples of this type of policy are
mediclaim policy, personal accident,
group accident, traffic accident, etc.

Business Insurance: Risks of loss of

profits/business, goods, plant and
machinery are most profound in case of
business. Under this head they cover the
most widely used policies that cover a
business from any loss of the above kind.
Some of these policies are burglary
insurance, shopkeepers insurance, keyman insurance, marine insurance, public
liability insurance, workmen compensation
insurance, air transit insurance, fidelity
guarantee insurance etc.

Automobile Insurance: Auto Policy is

required to be taken to cover the risks that
arise to the owner, vehicle and third party.
This includes the Compulsory Vehicle Policy
(In India, by the Motor Vehicles Act, every
car owner is required to covered against Act
risks) and the Comprehensive Vehicle Policy.
FIRE INSURANCE: This policy is required
to be taken to prevent any loss of profits /
property from incidental fire. Ex. fire
insurance and fire consequential loss policy.


Phase I- Life Insurance General Insurance 1818
to 1956 (about 138 yrs). Many (245) private
sector companies only, competitive market.
Phase II- Life Insurance General Insurance 1956
to 2000 (about 44 yrs). Nationalization, public
sector or State monopoly i.e. Life Insurance and
General Insurance.
Phase III- After 2000 Opened to the entry of
private domestic and foreign companies, mixed
sector of public and private sector units,
oligopoly of public sector companies (14 life
insurance and 12 general insurance companies)

1818 First life insurance company Oriental Life
Insurance Company (in Calcutta). - 1850 First
general insurance company Tritan Insurance
Company (in Calcutta) - Till 1956/1972 life and
general insurance industry grown in terms of
number of companies (life 245 and General 107
with complete private sector ownership), the
volume of premium, investible resources, and so
on. And both type of insurance companies were
competitive. - The insurance was regulated
through the Insurance Act, 1938. - The picture
changed after the Independence.

In 1956, 245 Indian and Foreign life insurers and

provident societies were nationalized, and new single
entity namely LIC was established by passing the
LIC Act, 1956.
Similarly, in 1972, 107 general insurers were
nationalized through the passing of General
Insurance Business (Nationalisation) Act, 1972. The
existing 107 insurers were amalgamated and
grouped into Five companies, viz., National Insurance
Company (NIC), New India Assurance Company
(NIAC), Oriental Insurance Company (OIC), United
India Insurance Company (UIIC), and General
Insurance Corporation (GIC). Then insurance industry
transformed into monopoly and Oligopolistic state or
public sector insurance industry in India.

Life Insurance Corporation of India (LIC) was

formed in September 1956 by an Act of
Parliament, LIC Act 1956 with a contribution of
Rs. 50 million. The then Finance Minister Mr. C.
D. Deshmukh while piloting the bill for
nationalization outlined the objectives of LIC
thus : To conduct the business with utmost
economy with the spirit of trusteeship; to charge
premium no higher than warranted by strict
actuarial considerations; to invest the funds for
obtaining maximum yield for the policy holders
consistent with safety of capital; to render
prompt and efficient service to policy holders
thereby making Insurance widely popular.

Presently the LIC has a network of seven zones; 100 divisions and
2,048 branches, personnel exceed seven lakhs employees and over
six lakhs agents.
Vision: A trans-nationally competitive financial conglomerate of
significance to societies and Pride of India. Mission: To explore and
enhance the quality of the life of people through financial security by
providing products and services of aspired attributes with competitive
returns and by rendering resources for economic development.
Values: Caring and Courtesy, Initiatives and Innovation, Integrity and
Transparency, Quality and Returns, Participation and Relationship, and
Trustworthiness and Reliability Culture: Agility (quickness),
Adaptability, Collaboration, Commitment, Discipline, Empowerment,
Sensitivity, and Excellence.
Objectives: Spread Life Insurance widely and in particular to the rural
areas. Maximise mobilization of peoples savings by making
insurance-linked savings adequately attractive. Deployment of funds
to the best of advantage of the investors as well as the community as
whole, keeping in view national priorities and obligations of attractive
return. Conduct of business at most economy and with the full
realisation that the money belongs to the policyholders. Act as trustee
of the insured public in their individual and collective capacities.


Security of funds, and Maximization of return of
investment, marketable securities being not less than
20% Loans to Housing Bank including above (1) being
not less than 25% State Govt. securities including
Govt. Guaranteed marketable securities, inclusive of
(2) above being not less than 50% Socially oriented
sectors including public sector, co-operative sector
house building by policyholders, own house scheme,
inclusive of (3) above not less than 75% Private
corporate sector, loans to policyholders for
construction and acquisition of immovable property

LIC Products & Plans

Jeevan Anurag Komal Jeevan CDA Endowment Vesting at 21 Marriage Endowment
Or Educational Annuity Plan CDA Endowment Vesting 18 Jeevan Kishore Jeevan
Chhaya Child Career Plan Child Future Plan Child Fortune Plus
Jeevan Aadhar Jeevan Vishwas The Endowment Assurance Policy The
Endowment Assurance Policy-Limited Payment Jeevan Mitra(Double Cover
Endowment Plan) Jeevan Mitra(Triple Cover Endowment Plan) Jeevan Anand New
Janaraksha Plan Jeevan Amrit
Jeevan Shree-I Jeevan Pramukh The Money Back Policy-20 Years The Money Back
Policy-25 Years Jeevan Surabhi-15 Years Jeevan Surabhi-20 Years Jeevan Surabhi25 Years Bima Bachat jeevan Bharati-1
The Whole Life Policy The Whole Life Policy- Limited Payment The Whole Life
Policy- Single Premium Jeevan Anand Jeevan Tarang Two Year Temporary
Assurance Policy The Convertible Term Assurance Policy Anmol Jeevan-I Amulya
Jeevan Saathi Plus Jeevan Saathi Jeevan Nidhi Jeevan Akshay-VI New Jeevan
Dhara-I New Jeevan Suraksha-I
Wealth Plus Market Plus I Profit Plus Money Plus-I Child Fortune Plus Jeevan Saathi

PRIVATE SECTOR COMPANIES Several leading private sector companies
have entered in the field of insurance sector, both in life and non-life
insurance. There are several MNCs, in Joint Venture with Indian private
sector firms, have started operations in a big way.
Private Players in the Life Insurance Business Regd.
No. Date of Regd. Name of the Company Who Owns it (in percentage)
101 23.10.00 HDFC Standard Life Standard Life, UK - 18 and HDFC 82
104 15.11.00 Max New York Life New York Life - 26 and Max India 74
105 24.11.00 ICICI Prudential Life Prudential, UK - 26 and ICICI Bank
107 10.01.01 Om Kotak Mahindra Old Maruthi, South Africa 26 and
Kotak Mahindra 74
109 31.01.01 Birla Sunlife Sun Life of Canada26 and Birla Capital 74
110 12.02.01 Tata AIG AIG, US 26 and Tatas 74
111 30.03.01 SBI Life Cardif SA, France 26 and State Bank of India
114 02.08.01 ING Vysya ING, Holland26 and GMR Group, Hyd54 and
ING Vysya Bank20

116 03.08.01 Allianz Bajaj Allianz AG, Germany

26 and Bajaj Auto 74
117 06.08.01 Metlife Metlife, US26, Shapoorji
Pallonji30 and J&K Bank25
121 03.01.02 AMP Sanmar AMP, Australia26 and
Sanmar Group, Chennai74
122 03.01.02 Aviva Aviva PLC, UK 26 and Dabur
Investments 74 *** ***
Reliance Life *** *** Bharathi AXA
127 06.02.04 Sahara India Insurance
128 07.11.05 Shriram Life Insurance

Growing at the rate of 15-20%
annually 75% population has no
insurance Adds 7% to countrys GDP
LIC market share come down to 75%
and private insurers increased over
24% Annuity or pension product have
over 33% of market Unity linked
insurance scheme have monopoly


nationalization there were 68 Indian insurers (including LIC)
and 45 non-Indian insurers did the business. In Nov. 1972,
the general insurance business was nationalized by the
General Insurance Business (Nationalized), Act 1972
(GIBNA) and vested in the hand of the GIC and its four
subsidiaries viz. 1. National Insurance Co. Ltd., 2. New India
Assurance Co. Ltd., 3. Oriental Fire and General Insurance
Co. Ltd., and 4. United India Insurance Co. Ltd. GIC was
incorporated as a holding company in 1992. General
Insurance Business is completely owned by the
government. The paid up capital of GIC was fully subscribed
by the Government and of four subsidiaries. It was
controlled by a single organization with four subsidiaries.

GICs four subsidiaries: 1. National Insurance Co.

Ltd., 2. New India Assurance Co. Ltd., 3. Oriental
Fire and General Insurance Co. Ltd., and 4. United
India Insurance Co. Ltd. The Govt of India took
over Control, supervision, and policy making is
with GIC. The premium income for GIC comes
mainly through the obligatory reinsurance
premium on a quota share basis from subsidiaries
on their direct business in India (almost 20% of
subsidiaries business come to GIC).


insurance policies are not financial claims. There is no
guarantee of renewal of policy on the same terms or on
any terms. The contract is short-term contract. The
general insurance companies do not collect savings.
Policy claims are unpredictable. Assets are held in
relatively liquid form. GIC meets the requirements of
industrial, manufacturing, commercial, services,
household, and agricultural sectors through wide rage
of 115 products, granting insurance coverage. GIC has
been promoting insurance cover in the field of
livestock, poultry, sericulture, horticulture, pump sets,
and personal accidents.


GIC Central Govt. securities being not
less than 20% State Govt. securities
and other government guaranteed
securities, including (1) above, being
not less than 30% Loans to
HUDCO/DDA/GIC-HF and to state
govts. For housing and fire fighting
equipment, not less than 15% Market
sector not more than 55%

IRDAS MISSION To protect the interests of the
policyholders, to regulate, promote and ensure
orderly growth of the insurance industry and for
matters connected therewith or incidental thereto.
Composition of Authority under IRDA Act, 1999 As
per the section 4 of IRDA Act, 1999, Insurance
Regulatory and Development Authority (IRDA, which
was constituted by an act of parliament) specify the
composition of Authority. The Authority is a ten
member team consisting of a. Chairman; b. five
whole-time members; c. four part-time members,
(all appointed by the Government of India)

Duties, Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 lays down the duties,
powers and functions of IRDA. 1. Subject to the
provisions of this Act and any other law for the
time being in force, the Authority shall have the
duty to regulate, promote and ensure orderly
growth of the insurance business and re-insurance
business. 2. Without prejudice to the generality of
the provisions contained in sub-section (1), the
powers and functions of the Authority shall include:
a. issue to the applicant a certificate of
registration, renew, modify, withdraw, suspend or
cancel such registration

Duties, Powers and Functions of

B. protection of the interests of the policy holders in
matters concerning assigning of policy, nomination
by policy holders, insurable interest, settlement of
insurance claim, surrender value of policy and other
terms and conditions of contracts of insurance;
c. specifying requisite qualifications, code of conduct
and practical training for intermediary or insurance
intermediaries and agents;
d. specifying the code of conduct for surveyors and
loss assessors;
e. promoting efficiency in the conduct of insurance

Duties, Powers and Functions of

F. specifying the form and manner in which books
of account shall be maintained and statement of
accounts shall be rendered by insurers and other
insurance intermediaries;
g. regulating investment of funds by insurance
h. regulating maintenance of margin of solvency;
I. adjudication of disputes between insurers and
intermediaries or insurance intermediaries;
j. supervising the functioning of the Tariff
Advisory Committee;

Growth of Indian economy is an
investment driven growth Opens a
wide variety of investment avenues
Companies help to gain knowledge of
products and services Achieve a
better standard for near future life