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What is Insurance? Evolution Types of Insurance Insurance Sector Reforms Global Players – Indian Mergers LIC Global Growth Sub Prime Indian Scenario Interview Careers Conclusion
Insurance is a form of contract or agreement under one party agrees in return of a consideration to pay an agreed amount of money to another party to make goods for a loss, damage, injury to something of value 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
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 LifeInsurance Business.1928 - The Indian Insurance Companies Act enacted to enable the government to collectstatistical information about both life & non-life insurance businesses.1938: Earlier legislation consolidated & amended the Insurance Act with the objective ofprotecting the interests of the insuring public.1956: 245 Indian & foreign insurers & provident societies are taken over by the centralgovernment & nationalized.LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crorefrom the Government of India.The first General Insurance Company established in the year 1850 in Calcutta by the British.
In 1993, Malhotra Committee - headed by former Finance Secretary & RBI Governor R.N. Malhotra. Objective - to create more efficient & competitive financial system. Key recommendations of the reform; 1.Structure: – a. government stake 50% in insurance companies. 2.Competition: 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.
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 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 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.
• Provides value for money• Flexibility• Transparency.• It has been among the 1st to introduce themore modern Unit Linked Products in themarket. [eg.whole life insurance(life long)]•Good products to offer.
• AIG is the worlds 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 AIGs insurance business model is the concept of an underwriting profit.
• 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
• Innovative Offers,• Customer-Centric Products,• Increasing Awareness Levels of Consumers• Enhanced Service Standards,• Reaching out to the customer through a number ofdistribution 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.
• 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
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.
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.
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 BAJPAIThe 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
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.
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.
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.
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.
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.
Insurers Premium[Rs.Cr.] ICICI Prudential 271.00 Bajaj Allianz 124.00 SBI Life 90.00 HDFC Standard 70.00 Max New York Life 69.00 Tata AIG 48.00 Aviva 39.00 Reliance Life 33.00
Birla Sunlife 28.00 Kotak Mahindra Old Mutual 26.00 ING Vysya 22.00 Met Life 19.00 Shriram Life 4.50 Sahara Life 1.70 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.
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 countrys 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.
Indias insurance sector to see 500 per cent growth by 2010: Study Indias insurance sector - 500 % growth over the next three years - 60 billion-dollar industry by 2010 Indias 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.
When was LIC formed? What are the objectives of LIC? How does LIC functions? What mission and vision do you practice? How do you address to customers grievances? Any significant achievement you would like to mention?
Jobs in insurance involve helping individuals and businessmanage risk to protect themselves from catastrophic lossesand 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]
Insurance can be summed up as “Praying for the best … …being PREPARED for the WROST”.