INDUSTRY PROFILE & COMPANY PROFILE
The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. In addition to these, there is sole national re-insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market include agents (individual and corporate), brokers, surveyors and third party administrators servicing health insurance claims.
Out of 33 non-life insurance companies, five private sector insurers are registered to underwrite policies exclusively in health, personal accident and travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Relegate Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more specialised insurers belonging to public sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance.
Government’s policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes are expected to catapult this key ratio beyond 4 per cent mark by the end of this year, reveals the ASSOCHAM latest paper. The number of lives covered under Health Insurance policies during 2015-16 was 36 crore which is approximately 30 per cent of India’s total population. The number has seen an increase every subsequent year as 28.80 crore people had the policy in the previous fiscal. Premium income of the life insurance segment had increased 14.04 per cent in FY17 to Rs 4.18 trillion (US$ 64.92 billion). In August 2017, the Life Insurance industry reported a 24 per cent growth in overall annualised premium equivalent with the help of both private players and Life Insurance Corporation.
• Health Insurance is an insurance product that reimburses the costs you incur in the incident of hospitalization or domiciliary care. It may either reimburse payments or allow you to have a completely cashless hospitalization wherein your insurer will at once cope with the hospital– letting you focus on treatment and restoration. All individuals starting from five years to eighty years can buy this insurance policy, however, age varies from one company to another.
• Family cover – You can get the health policy for a family with the payment of one premium that is also known as master premium. This may additionally make you eligible for reductions in your premium, depending on your issuer of the family health plan.A majority of insurance companies offer health insurance policy that provide coverage to you in India and remote places, subject to certain predetermined situations. Under segment 80D you can avail tax benefits as well.
• The aim of life insurance is to provide financial safety to your family after your demise. Formerly buying a plan or policy look at your current financial status and standard of living, then choose a policy that best suits your pocket and requirements, but at the same time also choose a policy that will help keep your family stable for at least a couple of years. When applying for life insurance, you will be asked to mention a nominee or a beneficiary who will receive your proceeds. The benefit will be paid by the life insurer to your nominee. It is a best investment plan for your family’s future, and these are quite promising policies.
Market development in the Indian insurance industry
There a few things that the Indian insurance industry should consider to make sure about the seamless growth in the business. Some of such things consist of
Distribution channels: It is very important for the success to have effective and cost efficient strategies, especially in the retail lines of business.
• Focus on financial inclusion: The approach to insurance must be in sync with the evolving times. In India, the mission of the insurance industry should be to extend the insurance coverage over a larger part of the population.
• Consumer needs: The growth of the insurance industry has been spurred by different distribution channel, coupled with targeted publicity and promotional campaigns by the insurance companies. Innovation has come not only in the form of advantages attached to the products, but also in the delivery mechanism through various marketing tie-ups. All these efforts have brought insurance closer to the customer as well as made it more relevant.
Insurance Sector Reforms
• In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included:
• Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate.
• Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies.
• Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state.
iii) 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
• 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 (there current holdings to be brought down to this level over a period of time)
v) Customer Service
• LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry
• The committee emphasized that in order to improve the customer services and increase the coverage of insurance policies, industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry.
• The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent.
• The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 12 life insurance and 8 general insurance companies have been registered. A host of private Insurance companies operating in both life and non-life segments have started selling their insurance policies since 2001.
Non-Life Insurance Market
• In December 2000, the GIC subsidiaries were restructured as independent insurance companies. At the same time, GIC was converted into a national re-insurer. In July 2002, Parliament passed a bill, de-linking the four subsidiaries from GIC.
• Presently there are 12 general insurance companies with 4 public sector companies and 8 private insurers. Although the public sector companies still dominate the general insurance business, the private players are slowly gaining a foothold. According to estimates, private insurance companies have a 10 percent share of the market, up from 4 percent in 2001. In the first half of 2002, the private companies booked premiums worth Rs 6.34 billion. Most of the new entrants reported losses in the first year of their operation in 2001.
• Insurance, like project finance, is extended by a consortium. Normally one insurer takes the lead, shouldering about 40-50 per cent of the risk and receiving a proportionate percentage of the premium. The other companies share the remaining risk and premium. The policies are renewed usually on an annual basis through the invitation of bids.
• Of late, with IPP projects fizzling out, the insurance companies are turning once again to old hands such as NTPC, NHPC and BSES for business.
• The balance risk is re-insured with other insurers. In effect, therefore, re-insurance is insurer’s insurance. It forms the backbone of the insurance business. It helps to provide 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 and still maintain their financial stability.
Life Insurance Market
• The Life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population. The state owned LIC sold insurance as a tax instrument, not as a product giving protection. Most customers were under- insured with no flexibility or transparency in the products. With the entry of the private insurers the rules of the game have changed.
List of Life Insurance Companies
• While LIC has been around for a long time and is an extremely profit making venture, some of the private players have just about started making profits on a year-on-year basis. It will take some time before most of them break even. The life insurance business has a long gestation period and it may take more than a decade to break even – so all players would be ready for the same.
1. Aegon Religare Private Player
2. Aviva India Private Player
3. Bajaj Allianz Life Insurance Private Player
4. Bharti Axa Life Insurance Private Player
5. Birla Sun Life Private Player
6. Canara HSBC Private Player
7. DLF Pramerica Private Player
8. Future Generali Life Private Player
9. HDFC Standard Private Player
10. ICICI Prudential Private Player
11. IDBI Fortis Private Player
12. IndiaFirst Private Player
13. ING Vysya Private Player
14. Kotak Mahindra Old Mutual Private Player
15. LIC Government Owned
16. Max New York Private Player
17. Met Life Private Player
18. Reliance Life Insurance Private Player
19. Sahara India Private Player
20. SBI Life Private Player
21. Shriram Life Insurance Private Player
22. Star Union Dai-ichi Private Player
23. Tata AIG Life Insurance Private Player
List of Non-Life Insurance Companies
• The core business of almost all non-life insurance companies in India are loss making. It is only through investment income that these companies report profits. This is not a desirable scenario and we should see a lot of upward price revisions in the coming years – some this has already started. With an entry of every new player we see a effort to grab market share and drop premiums. This has been the status of the general insurance companies for quite a few years and as a result the premium collected are not proportionate to the risks and claims are either greater than the premium collected or very close to it. Gradually, we are witnessing some companies taking steps to correct this anomaly.
1. Agriculture Insurance Company Government Owned
2. Apollo Munich Health Insurance Private Player
3. Bajaj Allianz General Insurance Private Player
4. Bharti AXA General Insurance Private Player
5. Cholamandalam MS Private Player
6. Export Credit Guarantee Corp Government Owned
7. Future Generali Private Player
8. HDFC Ergo Private Player
9. ICICI Lombard Private Player
10. Iffco Tokio Private Player
11.. L&T General Insurance Private Player
12. Max Bupa Private Player
13. National Insurance Government Owned
14. New India Assurance Government Owned
15. Oriental Insurance Government Owned
16. Raheja QBE Private Player
17. Reliance General Insurance Private Player
18. Royal Sundaram Private Player
19. SBI General Insurance Private Player
20. Shriram General Insurance General Insurance
21. Star Health Insurance Private Player
22. Tata AIG General Insurance Private Player
23. United India Government Owned
24. Universal Sompo Private Player