Introduction to Financial Markets and

Institutions
Assignment - 2
Insurance sector in India

Submitted By:
Anjali Wadaskar - 17020448006
Udaykant Tiwari - 17020448102
 Content

1. Introduction to Insurance Sector in India

2. Insurance Industry in India – Market Analysis
3. Products & Schemes
4. Challenges/ Issues in Insurance Sector
5. Opportunities in Insurance Sector
6. FDI Norms
7. Executive Summary
1. Introduction to Insurance Sector in India
What is Insurance?
• Insurance is the risk-transfer mechanism that ensures full or partial financial compensation for
the loss or damage caused by event/s beyond the control of the insured party.
• Under an insurance contract, a party (the insurer) indemnifies the other party (the insured)
against a specified amount of loss, occurring from specified eventualities within a specified
period, provided a fee called premium is paid.
• In general insurance, compensation is normally proportionate to the loss incurred, whereas in life
insurance usually a fixed sum is paid.
• Some types of insurance such as product liability insurance are an essential component of risk
management, and are mandatory in several countries.
• Insurance, however, provides protection only against tangible losses. It cannot ensure continuity
of business, market share, or customer confidence, and cannot provide knowledge, skills, or
resources to resume the operations after a disaster.
Importance of Insurance
• Provides protection against occurrence of
• uncertain events.
• Device for eliminating risks and sharing losses.
• Co-operative method of spreading risks.
• Facilitates international trade.
• Serves as an agency of capital formation.
• Financial support.
• Medical support.
• Source of employment.
How Insurance Works?
• When we buy a policy we make regular payments, known as premiums, to the insurer.
• If we make a claim our insurer will pay out for the loss that is covered under the policy.
• If we don’t make a claim, we won’t get our money back; instead it is pooled with the premiums of
other policyholders who have taken out insurance with the same insurance company.
• If we make a claim the money comes from the pool of policyholders’ premiums.
Insurance is divided into two major categories:
 Property and Casualty insurance
 Life and Health insurance.
• Property and casualty insurance provides protection to businesses and individuals for losses
related to their belongings or assets, both physical and financial.
• Life and health insurance protects people from financial loss due to premature death, sickness
or disease.
Insurance Industry in India – Market Analysis
Insurance Industry in India – Market Analysis
• The total insurance market expanded from US$ 23
billion in FY05 to US$ 84.74 billion in FY17.
• Over FY05–FY17, total premiums increased at a CAGR
of 11.48 per cent .
• Life insurance companies in India earned US$ 25.12
billion as first year premiums in FY17 and Rs 1.51
trillion (US$ 23.32 billion) in FY18*.

• As of February 2018, life insurance sector had 23

private players in comparison to only 4 in FY02.
• With 70.31 per cent share market share in FY18*, LIC
continues to be the market leader, followed by HDFC
Standard Life at 5.65 per cent.
Consider before buying….
 Types of Insurance in India & Available Products

Types of Insurance

Available Products
 Term Insurance
• Term insurance is a type of life insurance product that provides
a large sum assured to the policy buyer at a relatively
affordable premium.
• Term insurance plans can usually be purchased for a policy
tenure ranging anywhere between 5 years and 40 years.
• The catch to this kind of life insurance is that usually it does not
carry any survival or maturity benefits, unlike whole life policies
or endowment/money-back policies.

SUITABILITY
Suited for investors with short term life insurance needs (10yrs or
less) like
• Who cannot afford high premium
• Students who want to take education loan and bank require
coverage
• Housing Loan
• Suitable for investors who want to demarcate between risk
coverage and investment options
Term Insurance
Benefits:
• High amount of coverage at low premium
• DEATH BENEFIT – Payable to the beneficiary when the annuitant
passes away.
• TAX BENEFIT - any payment made by a tax payer on account of
Term Insurance Policy will be allowed deduction as per section
80C of the Income-tax Act, 1961 with enhanced tax deduction up
to Rs 1,50,000.
• RENEWABILTY – Once the policy is expired , it can be renewed
with same premium and rates

Disadvantages:
• LIMITED TO CONVERSION PERIOD - The conversion options for
a number of term life polices expire prior to the term period’s
midpoint.
• PURE INSURANCE ,NO INVESTMENT- In term insurance policy
if policy holder survive to the maturity date no amount is payable(
premium paid is not returned back)
• NO SURRENDER VALUE
 Endowment Insurance
• In an endowment policy, periodic premiums are received by the insured person (in 10, 15 or 20
years) and a lump sum is received either on the death of the insured or once the policy period
expires.
• Endowment insurance plan is a type of investment oriented plan.
• Gives the policy holder triple benefits of savings, wealth creation, and insurance coverage.
• Types:-
• Joint Life Endowment Plan
• Marriage Endowment Plan
• Educational Endowment Plan

SUITABILITY
• It is apt for people of all ages & social groups who wish to protect their family from Financial
setback & Looking for Benefits. E.G SAVINGS,WEALTH CREATION.ETC.
• It is for people who want 100% return on the Insurance Premium they paid so they are willing to
accept a low insurance cover and obtain lump sum amount at maturity.
Endowment Insurance
Benefits:
• DEATH BENEFIT - Payable to the beneficiary when the
annuitant passes away.( Sum Assured + Accrued Bonus)
• MATURITY BENEFIT - Payable to the beneficiary at the
maturity of the policy. ( Sum Assured + Accrued Bonus)
• TAX BENEFIT - any payment made by a tax payer on
account of Term Insurance Policy will be allowed
deduction as per section 80C of the Income-tax Act, 1961.
• SURRENDER VALUE – 1. WITHIN 3YRS OF BUYING
THE POLICY – Receive no surrender value 2. MORE
THAN 3YRS – Receive surrender value

Disadvantages:
• Low Returns.
• Premium paid is higher as compared to term policy.
• Only few companies provide advantage of Renewability
• It provides protection only for specified period.
 Money Back Insurance
• It provides Insurance Cover & also periodic return at regular intervals
• In the event of the death of insured during the policy term, the beneficiary will get full money i.e.
sum assured without any deduction of any survival benefits (i.e. amounts which have already been
paid as money back components)
• It yields low & fixed returns as they are not market linked.
• SURRENDER VALUE

SUITABILITY
• Individuals who require money at certain intervals in their lifetime to meet Fixed Long & Short term
financial needs along with life insurance cover e.g.
1. BUSINESSMAN
2. PROFESSIONALS
 Money Back Insurance
Benefits:
• FAMILY SECURITY – It gives way for a person to plan the
course of his life with a sum that is expected in regular
intervals
• ASSURED BONUS - Every policy will have a set of
assured bonus that may be shared in regular intervals or
got at the end of the policy.

Disadvantages:
• LOW RETURNS
• LOW COVERS - Relative to term policy for same premium
 Unit Linked Insurance Policy
• It provides financial protection along with investment opportunities
• Premium paid in ULIP after deductions ( e.g. service tax deductions) is invested in equity or debt
market.
• Its performance is linked to market growth.

SUITABILITY
• It is suitable for the investors who are considering long term investments as it provides insurance
cover , investments & tax benefits.
 Unit Linked Insurance Policy
Benefits:
• DEATH BENEFIT - In case of death of insured, the Sum
Assured and fund value is released to the beneficiary.
• TAX BENEFIT- ULIP also offers tax benefits under Section 80C
and 10(10D) of the Income Tax Act, 1961. The premium paid is
deductible from taxable income for maximum amount of Rs
1,00,000.
• TRANSPARENT – Daily track of Net Asset Value (NAV) of the
fund.
• FLEXIBLE – Systematically managing the funds.

Disadvantages:
• Returns is not guaranteed
• LOCK IN PERIOD FOR 5 YEARS - It does not allow any
liquidity option at least for 5 years
• LOW SUM ASSURED - Greater focus is on investment
value.
 Whole of Life Insurance
• It provides financial protection along with investment opportunities
• Premium paid in ULIP after deductions ( e.g. service tax deductions) is invested in equity or debt
market.
• Its performance is linked to market growth.

SUITABILITY
• People who invested for post retirement needs & intend to invest in other avenues.
• It is suitable and profitable if this policy is taken at younger age as premium charged will remain
same.
• People who want to diversify their savings
• It helps to top up retirement savings of people.
 Whole of Life Insurance
Benefits:
• DEATH BENEFIT - In case of death of the Life Insured, the
nominee would get the Sum Assured + accrued Bonus.
• MATURITY BENEFIT - There is an option to withdraw the Sum
Assured + accrued bonuses declared under the policy anytime
after 40 years from the date of commencement of the policy
provided the life insured has attained a minimum age of 80
years.
• INCOME TAX BENEFIT-any payment made by a tax payer on
account of Term Insurance Policy will be allowed deduction as
per section 80C of the Income-tax Act, 1961.
• SURRENDER VALUE

Disadvantages:
• EXPENSIVE
• LOW INTEREST RATES- Interest earned is low compared to
other policies.
• INFLEXIBLE & COMPLICATED – Only expert can tell whether
this policy is a good deal.
 Non Life/ General Insurance
• Also known as General Insurance, is a form of insurance mainly concerned with protecting the
policyholder from loss or damage caused by specific risks.
• Categorized depending on the need level
– Property/ Casualty Insurance
– Health and Disability Insurance
– Business and Commercial Insurance
Types of Non Life/ General Insurance
• Agricultural
– Farmers use crop insurance to reduce or manage various risks associated with growing crops
(e.g. crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease).
• Aviation
– Insures against hull (main body of the plane), spares, deductibles, hull wear and liability risks
(e.g. Air Crash, Failure of the engines, Natural Calamity etc.).
• Car insurance
– Primarily to provide protection to car owners against losses incurred as a result of traffic
accidents and against liability that could be incurred in an accident.
• Engineering
– Insurance is on an 'all-risks' basis and in particular includes fire, lightning, explosion, aircraft
damage, Riot, strike, malicious acts, faults in erection, human errors, negligence.
• Fire
– Provides protection against damage to property caused by accidents due to fire, lightening or
explosion. Also includes damage caused due to other causes like flood, burst pipes, earthquake etc.
Types of Non Life/ General Insurance
• Health insurance
– Protect holders from costly medical bills in case of any emergency like – critical incidents and
hospital expenses.
– Critical Illness Insurance
• Home insurance
– Is a type of property insurance that covers private homes.
– A policy that includes losses occurring to home, its contents, loss of its use, or loss of other
personal possessions of the homeowner. Also covers accidents that may happen at the home.
• Marine
– Covers the loss or damage of ships, cargo, terminals, and any transport or property
– By which cargo is transferred, acquired, or held between the points of origin and final
destination
• Motor
– For cars, trucks, and other vehicles. It is for protection against losses incurred as a result of
traffic accidents.
Types of Non Life/ General Insurance
• Shop/office insurance
– Provides cover for damage to shop and it’s contents.
– Financial loss due to fraud and dishonesty of a specified employee.
– Loss of money at office premises or while transporting it due to accidents, robbery, break – ins
etc.
• Travel insurance
– It is purchased for Persons traveling or residing outside of their home country. It covers baggage
loss, medical expenses and personal liability.
Challenges in Insurance Industry in India
1. Rising Competition: Liberalization is creating acute competition in the insurance market
because more and more players are joining the race for the greater Indian insurance.
2. Customer Relationship Management: Customer behavior is influenced by
environmental factors as well as intrinsic personal aspirations. The environmental factors
are socio economic and demographic factors, inputs of insurance advisors, the company’s
efforts to manage customer satisfaction and experience.
3. Products Distribution: Segmentation of markets, selling segment oriented products,
focusing on fuller satisfaction of customer’s aspiration misstates multiple distribution net
works. While the traditional channel of tied up agents or advisors would be the most
important distribution channel, insurers should innovate and find new methods of
delivering products to customers.
4. Risk Management: With the environment changes in the economic scenario of the
country the risk landscape has undergone significant changes. With the opening up of
economy and the entry of MNC in almost all sectors, there has been a surge in the income
levels, especially in the middle class.
Challenges in Insurance Industry in India
5. Relationship Management: The relationship management of insurance companies is
mainly trapped by individuals as well as corporate agent. The relationship of the clients
should be ever maintained, but the mistakes of the agent are the major causes in the
relationship management.
6. Managing the Regulatory Authority: As the competition acute, the customer becomes
more vulnerable to the vagaries on market environment. The regulators have a duel
responsibility. They has to ensure that the insure adhere to sound insurance principles and
practices as well as maintain adequate financial resources to meet their liabilities.
7. Difficulty in designing Marketing Mix: Marketing mix refers the combination of all P‟s
to make the market attractive. Innovation in product which invited many unit linked
policies was the center of attraction for all. Low premium due to large no of players
sometimes were uncomfortable for all. This has compelled insurance
players to practice innovative communication strategy including advertisement. So is not
only product, but a balanced marketing mix is required for the industry with modern
trend.
Challenges in Insurance Industry in India
5. Relationship Management: The relationship management of insurance companies is
mainly trapped by individuals as well as corporate agent. The relationship of the clients
should be ever maintained, but the mistakes of the agent are the major causes in the
relationship management.
6. Managing the Regulatory Authority: As the competition acute, the customer becomes
more vulnerable to the vagaries on market environment. The regulators have a duel
responsibility. They has to ensure that the insure adhere to sound insurance principles and
practices as well as maintain adequate financial resources to meet their liabilities.
7. Difficulty in designing Marketing Mix: Marketing mix refers the combination of all P‟s
to make the market attractive. Innovation in product which invited many unit linked
policies was the center of attraction for all. Low premium due to large no of players
sometimes were uncomfortable for all. This has compelled insurance
players to practice innovative communication strategy including advertisement. So is not
only product, but a balanced marketing mix is required for the industry with modern
trend.
Opportunities in Insurance Industry in India
1. Multiple Channels of Distribution: Distribution being a key determinant of success for
insurance companies. Because at more number of distribution channels the insures have a
large database of their disposal. Linking insurance with allied finance products like
housing loan, mutual fund investment in companies, banks credit cards etc are the new
channels for insurance. It is definite that the new channels will help the insurance
companies to reach out farther, wider and deeper.
2. Promote Awareness: It is necessary to promote more awareness among public about
insurance. Because the level of insurance penetration is very low.
3. Professionalism in Insurance Marketing: There are quality insurance advisors in this
field due to the passing of IRDA bill. To obtain an agency license training and written test
are necessary. Many educated youth, retired officials are taking insurance agency as a
career. They guide the customers so that they can select products according to their need,
rather than to force selling
Opportunities in Insurance Industry in India
4. Huge Untapped Market: There is a lot of untapped market in the country. This gives space for all
players to grow and expand the insurance industry. Middle class people are having more awareness
than the lower class and high class people. They want to provide money for the education and
marriage of their children and also to meet their old age needs. So there is market expansion for
pension plans and child career plans.

5. Increasing Life and Health Risks: Increasing life risks in the present era due to natural
calamities and terrorism. The environmental pollution affects the health of mankind. In cities people
got employment in industries like IT, ITES etc. Due to heavy work and occupational stress they get
diseases. Hence there is a growing need for these people to go for different kinds of insurance.

6. Regulations of IRDA: IRDA regulations enacted for the protection of policy holders interest has
also set out the bench marks for servicing, settlement of claims, grievance redressal and so on. It
also contains matters relating to disclosures in proposal for insurance, statutory content of a
insurance document, duties and responsibilities of the agent etc. The IRDA watch the insurance
companies always. So the companies cannot provide deficient customer service
FDI Norms for Insurance Industry in India
Foreign Direct Investment in the insurance sector has been permitted up to 49% pursuant to the
Insurance Laws (Amendment) Act, 2015.
With the amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2016 and
the FDI Policy in March, 2016, investments up to 49% in the insurance sector are now permitted
through the automatic route i.e. prior approval of the Foreign Investment Promotion Board is not
required for increase in foreign investment up to 49%. Prior approval of the IRDAI will be required
however.
Below are some of the key points for foreign investment in an Indian insurance company, from an
insurance regulatory perspective:
1. All investments, including foreign investments, in an Indian insurance company exceeding 1% of
the paid up share capital of the company require prior approval of the IRDAI. While granting the
approval, it is customary for the IRDAI to impose a lock-in period on the shares acquired.
2. All foreign investments must comply with applicable IRDAI regulations which prescribe the
manner of computation of foreign shareholding in insurance companies.
3. There are no separate caps on holding of a single foreign investor in an Indian insurance
company – the 49% limit will apply to all foreign investment.
FDI Norms for Insurance Industry in India
4. All Indian insurance companies must be "Indian owned and controlled", in the manner prescribed in
the IRDAI's Guidelines on Indian Owned and Controlled ("Control Guidelines"). The rights of non-
resident investors often need to be negotiated in light of the Control Guidelines, and the IRDAI's
norms on corporate governance of insurance companies. From a regulatory perspective, it is
imperative that investments are structured keeping in mind the foregoing mandates.
5. A foreign investor that has exited from an Indian insurance company cannot invest in a new
insurance joint venture, till the completion of two financial years from the exit date.

BENEFITS OF INCREASE IN FOREIGN DIRECT INVESTMENT IN INSURANCE SECTOR OF

INDIA
• Increase in wide and innovative insurance products and services in India.
• Better competitive market.
• Better exposure of technology and other services from foreign partner.
• Increase in insurance penetration and density.
• Increase in employment opportunities.
FDI Norms for Insurance Industry in India
DRAWBACK OF INCREASE IN FOREIGN DIRECT INVESTMENT IN INSURANCE SECTOR OF
INDIA
• Possibility of rise in unethical practices due to less control of government of India over Insurance
sector.
• Higher mobilization of Indian Saving amount to foreign countries.
• Threat to public sector companies’ market share due to increasing number of private life insurance
players.
• Products and services offered may not fulfill Indian customer’s expectations.

CONCLUSION
Increase in foreign direct investment (F.D.I.) is optimistic move for the future of Indian Life Insurance
Sector, since this sector need huge amount of capital investment which can be done effectively only
through increase in F.D.I. and it enhance overall performance of insurance sector. As of now,
Insurance companies are in hesitation about to take positive steps towards F.D.I. There are good
chances that increase in F.D.I. will improve the Insurance penetration and density. Along with that
innovative insurance product and services, better use of technology, increase in employment and
competition etc. are by-product of increase in F.D.I. in insurance Sector. Government of India through
Insurance Regulatory and Development Authority of India (I.R.D.A.I) and Reserve Bank of India
(R.B.I.) need to keep regular check on the outflow of India currency.
 Executive Summary
• The overall insurance industry is expected to reach US$ 280B by 2020.
• The domestic life insurance industry registered 16.83% year on year growth for new business premium in
2017-18, generating revenue of Rs 1.51 Trillion (US$ 23.32 B) Premium income of the life insurance
Rapidly growing segment had increased 14.04% in FY17 to Rs 4.18 Trillion (US$ 64.92B)
insurance • Gross direct premiums for general and health insurance segment reached Rs 1.28 Trillion (US$ 19.88B)
segments in 2016-17. Gross premiums for non-life insurance industry increased by 18.87% year on year in FY18

• The market share of private sector companies in the non-life insurance market rose from 13.12% in FY03
Increasing to 48.01% in FY18
private sector
contribution

• Pradhan Mantri Fasal Bima Yojana (PMFBY) covered 50.9 Million farmers in India in 2016-17
Crop, health and • Strong growth in the automotive industry over the next decade to be a key driver of motor insurance.
motor insurance
to drive growth
 Recommendation
Life Insurance:

1. ICICI Prudential iProtect Smart Online Term Insurance Plan

ICICI Prudential has one of the best Claim Settlement data consistently, with 96.20% of the claims
received were paid/settled. ICICI Prudential’s online term plan is known as ‘iProtect Smart.’ The
premium amounts of this term insurance plan are very reasonable and are competitively priced. This
term insurance plan also provides Waiver of Premium due to disability at no extra premium. Optional
riders like Accidental death benefit rider and Additional cover for 34 Critical Illnesses are available.

2. LIC’s e-Term Plan Online Term Insurance Plan

LIC of India had launched its online Term insurance plan on 17th May, 2014. LIC was a late entrant
with respect to the launch of online term plans. But, one good point about e-term plan is that it is
relatively cheaper than Anmol Jeevan/Amulya Jeevan (LIC’s offline term plans). However, when you
compare the premiums of LIC’s e-term plan with private insurance players’ online products, you may
find it very costly.
But, LIC has the highest claim settlement ratio (98.33%) among the life insurers. You can surely
consider buying LIC e-Term plan. The minimum Sum Assured offered under LIC e-Term online
insurance plan is Rs 25 Lakh.
 Recommendation
Non Life Insurance: Health Insurance

1.Apollo Munich Easy Health

Among various offerings of Apollo Munich Health Insurance, Apollo Munich Easy Health has come
out as the best one among others. A person should consider this to secure his/her health. There are
multiple benefits that Apollo Munich Easy Health offers such as:
• This plan offers in-patient treatment which is helpful to get the cover against hospitalization expenses
for time period of more than 24 hrs.
• Provides pre-hospitalization cover through which you can get cover against the medical expenses
that take place in 60 days before the hospitalization.
2. ICICI Lombard Complete Health Insurance- iHealth
ICICI Lombard Complete Health Plan is referred to be the best plans among other health insurance
plans which are offered by this insurance company.
• This plan comes out with several beneficial features such as -cashless hospitalization, free health
check-up, tax benefit, free look period of 15 days, emergency ambulance cover and much more. It
offers the lifelong renewal ability option. In addition to treatment expenses and hospitalization
expenses, this policy also covers expenses incurred due to daycare procedures.
One can enjoy a cashless facility at all cashless network hospitals under this plan.
 Recommendation
Non Life Insurance: Car Insurance

1. ICICI Lombard Car Insurance

ICICI Lombard offers one of the best car insurance for its customers. It has more than 3100 plus
garages under its tie up which is easy to access. If you wish for additional coverage you can opt for
add on covers that is available with this policy. The claim ratio of 87.38% is a positive number which
gives a clear idea as to how well they are involved in claim settlement.
2. Bharti Axa Car Insurance
Now Bharti Axa is a prominent name in the insurance sector. Its insurance claim ratio is 83.79% which
is a good number. It’s third party coverage and the personal accident coverage is good to go for. They
also allow up to 50% no claim bonus on the renewal of your policy. This is provision is not available
with all policies. ICICI Lombard is not giving this in their policy.
Thank You