What is INSURANCE?

Insurance, in law and economics, is a form of risk management

primarily used to hedge against the risk of a contingent loss.

Insurance is defined as the equitable transfer of the risk of a potential

loss, from one entity to another, in exchange for a premium.

Insurance rate is a factor used to determine the amount, called the

premium, to be charged for a certain amount of insurance coverage

Risk management, the practice of appraising and controlling risk, has

evolved as a discrete field of study and practice
 Evolution India
1818 - Oriental Life Insurance Company – 1st Insurance Company.

1870 - Bombay Mutual Life Assurance Society – 1st Life Insurance

Company.

1912 - The Indian Life Assurance Companies Act enacted the 1st Law to
Regulate the Life Insurance Business.

1928 - The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life & non-life
insurance businesses.
Contd…..

1938: Earlier legislation consolidated & amended the Insurance Act with the
objective of protecting the interests of the insuring public.

1956: 245 Indian & foreign insurers & provident societies are taken over
by the central government & nationalized.

LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital
contribution of Rs. 5 crore from the Government of India.

The first General Insurance Company established in the year 1850 in

Calcutta by the British.
 Types of Insurance

Life insurance
Non - Life Insurance
(general insurance)

Property (eg.Builders risk insurance)

Aviation(eg.Private aircraft insurance)
Marine (eg. Marine hull insurance)
Miscellaneous (eg.Purchase insurance)
LIFE INSURANCE
A protection against the loss of income that would
result if the insured passed away. The named
beneficiary receives the proceeds and is thereby
safeguarded from the financial impact of the death of
the insured.
 It can also be a form of savings in the long run if you purchase a plan,
which offers the option of contributing regularly. Additionally, a little
known function of life insurance is that it can be tied in with a person's
pension plan. A person can make contributions to a pension that is funded
by a life insurance company. These are considered private pension
arrangements
WHAT LIFE INSURANCE DOES?
 Provides
 - Continuity of income
 - Mortgage protection

 - Protection against disabilities

 - Children’s education

 - Marriage expenditure

 - Retirement fund

 - Tax relief

 and most importantly

 Provides
 - PEACE OF MIND
What is Premium
What are the Products
• Premium is the Price the Policy holder pays for the Benefit
that the Life Insurance product offers
There are two parts of the premium
Risk part
Savings part

The insurance products also have two basic parts

 Policy with Pure term cover, the Sum Assured is payable only
on death

- Policy with cash accumulation, it provides saving and security

& the Sum Assured is payable either on death and on maturity
LIFE INSURANCE PUBLIC & PRIVATE

 PUBLIC: life insurance corporation (LIC)

 PRIVATE:
1. Allianz Bajaj Life Insurance Company Limited
2. Birla Sun-Life Insurance Company Limited
3. Max New York Life Insurance Co. Limited
4. TATA AIG Life Insurance Company Limited
5. MetLife Insurance Company Limited
6. ICICI Prudential Life Insurance Co. Limited
GENERAL INSURANCE PUBLIC &PRIVATE
 PUBLIC
1.National Insurance Company Limited
2. New India Assurance Company Limited
3. Oriental Insurance Company Limited
4. United India Insurance Company Limited
 PRIVATE
1. Bajaj Allianz General Insurance Co. Limited
2. HDFC Chubb General Insurance Co. Ltd.
3. ICICI Lombard General Insurance Co. Ltd
4. TATA AIG General Insurance Co. Limited
5. Reliance General Insurance Co. Limited
REINSURER
General Insurance Corporation of
India
 Regulatory Body:

• The insurance act should be changed.

• An insurance regulatory body should be set up.

• Controller of insurance-a part of the Finance Ministry – should be made

independent.

 Investments :

• Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%.

• GIC and its subsidiaries are not to hold more than 5% in any company.

 Customer Service:

• LIC should pay interest on delay on payment beyond 30 days.

• Insurance companies must be encouraged to set up unit link pension plans.

THE GLOBAL PLAYERS
in Life insurance

AVIVA

American International Group,

Inc. (AIG)

Prudential PLC
 Aviva Life Insurance
•Aviva is the fifth-largest insurance group of the world & the biggest in the
UK.

• They are among the leading providers of life & pensions products in
Europe.

•Aviva has a 35 million-customer base worldwide and more than £332 billion
of assets under management.

•The mission of Aviva is: “to provide prosperity and peace of mind for our
customers”.
 AVIVA INDIA
•Aviva was the first foreign insurance company in India to set up its
representative office in 1995.

•In India Aviva has a joint venture with Dabur.

•Aviva has 112 Branches in India.

•Aviva products are available in 392 towns & cities across India.

•Annual sales turnover is over Rs.12 billion.

Reasons for Growth
Provides value for money
 Flexibility
Transparency.
It has been among the 1st to
introduce the more modern Unit
Linked Products in the market.
[eg.whole life insurance(life long)]
Good products to offer.
 American International Group, Inc.
(AIG)
• AIG is the world's leading international insurance & financial services
org, with operations in more than 130 countries & jurisdictions.

• In the United States, AIG companies are the largest underwriters of

commercial & industrial insurance.

• AIG companies are the largest underwriters.AIG also has one of the largest
U.S. retirement savings.

• AIG American General is a top-ranked life insurer.

• A major focus of AIG's insurance business model is the concept of an

underwriting profit.
 TATA AIG

•Tata AIG General Insurance company is a joint venture between the Tata
Group & American International Group, Inc

• The Tata AIG General Insurance company’s offers a complete range of

insurance solutions

•The Tata AIG ‘s product innovation

• The rural difference

• The enhancement of distribution channels

Reasons for Growth

•Innovative Offers,
• Customer-Centric Products,
• Increasing Awareness Levels of
Consumers
• Enhanced Service Standards,
• Reaching out to the customer
through a number of distribution and
communications channels
• Providing advice to the customer
• Prudential PLC is an international financial services company.

• It has a product range of personal banking, insurance, pensions and retail

investments, to institutional fund management and property investments .

• In the UK Prudential is a leading life & pensions provider with around 7

million customers.

• It is Asia’s leading European life insurer with life and fund management
operations in 12 countries serving some seven million customers.
(Source: www.PrudentialPLC.com)
 ICICI PRUDENTIAL

• ICICI Prudential Life Insurance Company is a joint venture between ICICI

Bank & Prudential PLC.

• ICICI Prudential was amongst the first private sector insurance companies to
begin operations in December 2000.

• The company has a network of about 56,000 advisors; as well as 7 banc

assurance and 150 corporate agent tie-ups.

• For the past four years, ICICI Prudential has retained its position as the No. 1
private life insurer in the country.
 Reasons for Growth

Lucrative offers
High standard service
Customer-centric products
Good communication
techniques
Use of customer feedback
in improvement of offers.
 LIFE INSURANCE CORPORATION
FORMATION:
Insurance corporation LIC was formed in September 1956 by an act of
parliament
LIC was formed with the capital contribution of 5 crores from the govt. of
India and has the sole mandate of conducting life insurance business in India.
Before the formation of LIC there where 245 Indian and foreign insurers in
India.

OBJECTIVES:
To maximize mobilization of peoples savings by making insurance linked
saving adequately attractive.
To spread life insurance much more widely and in particularly in rural area,
providing them with insurance at reasonable price and adequate finance
cover.
 GROWTH:

LIC has come a long way since its nationalization in 1956 over 40 years
later in 1997

LIC had grown from Rs. 3.78 billion of new business in 1957 to Rs 555.5
billion

The rural India accounting for around 40% of the business.

 In 1997, LIC had spread to the farthest corners of the country with an
extensive network of over 8 lakh agents, 2048 branches(1370cities), 100
Divisional office, 7 Zonal offices and 1 Central office.

LIC has branch offices in U.K., Mauritius, & Fiji. In U.K.

 Reasons for Growth

LIC’s Game Plan:

“LIC IS TO BE IDENTIFIED AS AN EPITOME OF CUSTOMER
CARE AND CONCERN IN THE ENTIRE SERVICE INDUSTRY”
-Chairman G N BAJPAI

The IT initiative
The company, has invested over Rs. 400 crore in technology up gradation.

LIC now plans to increase the MAN to 33 more Cities by the end of the year
so that they have 4 I cities on the WAN. That will make it the biggest
network in the whole country, including that of the railways
 THE CUSTOMER FOCUS INITIATIVE

Premium payment facility through internet, smart card, credit card

Tie up with banks for payment of premium through ATM’S

Market focus initiative

Launching schemes for the rural areas designed to meet their requirement.
Derive 60% of its new business from rural areas

The corporation will soon go in for restructuring and is talking with

leading management institutes such as the IIM of Lucknow for brushing
up its marketing skills, IIM Ahmedabad for fine-tuning its investment
skills & IIM Bangalore for polishing its IT skills.
 THE GLOBAL GROWTH
 Global insurance premiums grew by 9.7% reached $3.3 trillion by 2006.

 The profits of property and casualty insurance industry actually rose by $3.2
billion, or 5.5 %, to $30.6 billion during the first half of 2007.

 North America was the most important region with premium income of
$1,217 billion in 2006.

 Followed by the EU (at $1,198 billion) & Japan (at $492 billion.)

 The United States & Japan alone accounted for a half of world insurance
premiums. (source: report by By Dr. Robe P. Hartwig, CPCU President.Insurance
Information Institute)
Contd……..

 The volume of UK insurance business totaled $295 billion or 9.1% of

global premiums by 2006.

 Emerging markets accounted for over 85% of the world’s population but
generated only 10% of premium.

The ISO results indicate a growth rate in net written premiums of just 0.1 %
during the first half of 2007, down substantially from the 2.7 % increase
during calendar year 2006.

The 0.1 % increase in premium growth, if maintained through 2007, would

represent the lowest growth rates for the during the past 40 years.

(source: report by By Dr. Robert P. Hartwig, CPCU

President Insurance Information Institute)
 The Sub-Prime Crisis Effect
The property/casualty and life insurance industry will not be materially
affected by credit market developments.

Because both by law and by the nature of their business, insurers generally
limit themselves to the low-risk end of the investing universe.

A small number of P/C insurers provide insurance on the credit-worthiness

on mortgage-backed securities.

The loss ratios for the credit insurance products of these companies are
likely to rise due to increased delinquencies and defaults.
Contd…..

At least half of these companies are parts of larger financial services
groups, so that the experience of this line of business is, for them, a small
part of their overall operations.

As such, it is much too early to estimate the dimensions of the claims
experience that may emerge from the recent credit market developments.

Of course some companies will be affected more than others, and the depth
and length of the credit market “challenges” might be more adverse than
many experts currently foresee .

But for now, these developments do not appear poised to adversely affect
the insurance industry’s ability to pay its claims and continue to have
financially successful operations.
(source: report by By Dr. Robert P. Hartwig, CPCU
President Insurance Information Institute)
 Life insurance industry grows 49% New Delhi June 14, 2007

 life insurance industry - 49 % growth in new businesses,

 general insurance players - 16 % increase in April,

 Life Insurance Corporation, ICICI Prudential and SBI Life & 16 other players

 Rs 2,982 crore in April’07 ------- with Rs 1,996 crore in April’06

 Country’s largest life insurer – LIC saw new premiums grow 57 % to Rs 2,134
crore in April by selling 15,89,684 policies against Rs 1,355 crore last year. It had
a market share of 71.56 % in April.

 life insurers - Bajaj Allianz, ING Vysya Life & Reliance Life saw a decline in
premium collections.
The 15 private players together saw their business grow 32 % to Rs 848 crore
with a market share of 28.44 %.
 Insurers Premium[Rs.Cr.]

 ICICI Prudential 271.00  Birla Sunlife 28.00

 Bajaj Allianz 124.00

 Kotak Mahindra Old
 SBI Life 90.00 Mutual 26.00

 HDFC Standard 70.00  ING Vysya 22.00

 Max New York Life 69.00

 Met Life 19.00
 Tata AIG 48.00
 Shriram Life 4.50
 Aviva 39.00
 Sahara Life 1.70
 Reliance Life 33.00
 Bharti Axa Life 0.72
 ICICI Prudential - premium income rising 84.5 % to Rs 271 crore - 9.08% market
share.

 Bajaj Allianz - 15 % in business - collected Rs 124 crore - 4.16 % market share.

 general insurance industry grew 16 % in April,

 New India - With 8 % growth in premium collection at Rs 651 crore, retained its
number one slot by cornering 20.72 % of market share.

 ICICI Lombard - new premium 36 % to Rs 448 crore - a market share of 14.28 %

 ICICI Lombard - the second-largest non-life insurance player.

 Oriental Insurance premium collection at Rs 413 crore & a market of 13.16 %.  

 United India - 3 % growth in business at Rs 407 crore & 12.97 % of the market.
 “Indian Insurance Industry: New Avenues for Growth 2012”,

 The potential of the Indian insurance industry is huge. HOW???

 ….. It has an annual growth rate of 15-20% &
 …..the largest number of life insurance policies in force.

 Total value of the Indian insurance market (2004-05) is at Rs. 450 billion
(US$10 billion).

 Insurance & Banking Services’ contribution to the country's gross domestic

product (GDP) is 7%

 The funds available with the state-owned Life Insurance Corporation (LIC) for
investments are 8% of GDP.
 The year 1999 saw a revolution in the Indian insurance sector------the ending of
government monopoly -----the passage of the Insurance Regulatory and
Development Authority (IRDA) Bill

 “A foreign partner can hold 26% equity in an insurance company, but there was a
proposal to increase this limit to 49%.

 Foreign investments of Rs. 8.7 billion have poured into the Indian market & 21
private companies have been granted licenses.
 LIC PRIVATE PLAYERS
Growth – 21.87% Growth – 129%
Earned – Rs.197.86 billion[04-05] Earned – Rs.55.57 billion[04-05]
Against Rs.24.29 billion [03-04]
Sold – 2.4 billion policies
Market share – Market share –
87.04% 78.07% 75% 13% 22% 24%

Source: www.rncos.com
 India's insurance sector to see 500 per cent growth by 2010: Study

 India's insurance sector - 500 % growth over the next three years -
60 billion-dollar industry by 2010

 India's more than one billion people are uninsured, the study by the
Associated Chambers of Commerce and Industry (Assocham) said.

 'A large part of rural India is still untapped due to poor distribution, large
distances & high costs relative to returns,‘ said Assocham president Anil K
Agarwal

 He said the study had revealed that rural & semi-urban India would
contribute 35 billion dollars to the Indian insurance industry by 2010.

 The study added that the urban sector insurance was estimated to reach 25
billion dollars by 2010, life insurance 15 billion and non- life insurance 10
billion dollars.

Source: Business News

 REINSURANCE
The practice of insurers transferring portions of risk
portfolios to other parties by some form of agreement in
order to reduce the likelihood of having to pay a large
obligation resulting from an insurance claim. The intent of
reinsurance is for an insurance company to reduce the
risks associated with underwritten policies by spreading
risks across alternative institutions
 Re-Insurance Business

retain only a part of the risk less than 10%.

balance risk is re-insured.
re-insurance is insurer's insurance.
the backbone of the insurance business.
provides a better spread of risk in the international market, allows primary
insurers to accept risks beyond their capacity, settle accumulated losses
arising from catastrophic events & maintain their financial stability.
GIC - the major re-insurer.
all insurance companies have to give 20 per cent of their reinsurance
business to GIC.
GIC reinsures the amount further with international companies such as
Swissre (Switzerland), Munichre (Germany), and Royale (UK).
 Careers
Jobs in insurance involve helping individuals and business
manage risk to protect themselves from catastrophic losses
and to anticipate potential risk problems.

Insurance brokers and agents

Claims handlers [are responsible for investigating incidents and

paying claims. They decide the extent and validity of the claim]

Underwriters [assess risks and decide whether to accept applications

for insurance cover - and on what terms]
 Conclusion

Insurance can be summed up as

“Praying for the best …
…being PREPARED for the WROST”.
Anukriti Bisht 03
Leven D’souza 10
Mohsin Khan 17
Siddharth Shah 50
Hinal Vira 57