LIFE INSURANCE

INDUSTRY IN INDIA
PRESENTED BY,
F.MOHAMMED
SHARFUDEEN,
V.PONMANI,
A.RAJALAKSHMI,
K.SATHISH ADITHYA,
U.SUDALAI MUTHU,
G.VENKARESAN.
 INSURANCE INDUSTRY
• Insurance sector in India is one of the booming
sectors of the economy and is growing at the
rate of 15-20 per cent annum.
• It contributes to about 7 per cent to the country's
GDP.
• The origin of life insurance in India can be traced
back to 1818 with the establishment of the
Oriental Life Insurance Company in Calcutta.
• In those days a higher premium was charged for
Indian lives than the non-Indian lives as Indian
lives were considered riskier for coverage.
•
 CONTD...............
•The Bombay Mutual Life Insurance Society that
started its business in 1870 was the first company to
charge same premium for both Indian and non-
Indian lives.
INSURANCE:
vLife insurance is a contract between the policy
owner and the insurer.
vwhere the insurer agrees to pay a designated
beneficiary a sum of money upon the occurrence of
the insured individual's or death.
vIn return, the policy owner agrees to pay a stipulated
amount (at regular intervals or in lump sums)
 WHY TAKE INSURANCE ?
ØSecurity for the family : Risk of life

ØSystematic Saving : Savings for the inevitable

milestones in life like child education , marriage of children ,
life after retirement etc…

ØInvestment : Benefit from good corporate performance ,

Be a Part of Indian growth story . Sensex has more than
doubled in 2 yr. 20 times since inception.

ØTax benefit : Exemption under section 80c and 10(10) d.

LIFE INSURANCE COMPANIES IN INDIA
CONTD…….
 PRESENT SCENARIO OF
INSURANCE INDUSTRY
• Direct selling
• Corporate agents
• Group selling
• Brokers and cooperative societies
• Bank assurance
•
 BODIES THAT REGULATE
THE SECTOR:

• IRA: Insurance Regulatory Authority.

• IRDA: Insurance Regulatory and
Development Authority.
• TAC: Tariff Advisory Committee.
 IRA: INSURANCE
REGULATORY AUTHORITY
• IRA, under the chairmanship of
Rangachary, was set-up in January
1996.
• IRA, which will be responsible for
awarding of, licenses i.e. little or no
government or political interference in
licensing process.
• The exhaustive guidelines have been
issued for the appointment of
intermediaries (brokers, agents,
surveyors and actuaries).
 IRDA: INSURANCE REGULATORY
AND DEVELOPMENT AUTHORITY
• IRDA Act 1999, provided to protect the
interest policyholders, to regulate, promote
and ensure orderly growth of the life insurance
industry.
• Specifying requisite qualifications, code of
conduct and practical training for
intermediary or insurance intermediaries
and agents.
• Grant of licenses to new companies, and
cancellation, suspension and withdrawal of
licenses given to insurance companies
•
 TARIFF ADVISORY
COMMITTEE
• The tariff advisory committee established
under the Act is empowered to control
and regulate the rates, terms, and etc.
• It is provided that in fixing, amending or
modifying such rates etc.
 Government regulations
• Private Companies with a minimum paid up capital of
Rs.1bn should be allowed to enter the industry.
• Foreign companies may be allowed to enter the industry
in collaboration with the domestic companies.
• Mandatory Investments of LIC Life Fund in government
securities to be reduced from 75% to 50%.
• Investment of asset should be:
v25 % in government securities,
vAt least 25% of the said sum in government
securities or other approved securities and
vThe balance in any approved investment rated as
“very strong” or more by reputed rating
agencies.
•
 Ombudsman
• The institution of Insurance Ombudsman was created by
a Government of India Notification dated 11th
November, 1998 with the purpose of quick disposal of
the grievances of the insured customers.
• The institution has helped to generate and sustain the
faith and confidence amongst the consumers and
insurers.
• Appointment of insurance Ombudsman on the
recommendations of the committee comprising of
Chairman, IRDA, Chairman, LIC, Chairman, GIC and
a representative of the Central Government.
• The offices of the twelve insurance Ombudsmans are
located at (1) Bhopal, (2) Bhubaneswar, (3) Cochin,
(4) Guwahati, (5) Chandigarh, (6) New Delhi, (7)
Chennai, (8) Kolkata, (9) Ahmedabad, (10) Lucknow,
(11) Mumbai, (12) Hyderabad.
Market structure
 PORTERS FIVE-FORCE OF
LIFE INSURANCE INDUSTRY
Competitive rivalry:
•

• There is cut thought competitions among rivals

in life insurance industry.
• There are mainly 13 private organizations and 1
public organization in life insurance
competition.
• Insurance companies deal in identical policies as
service levels offered are similar
• Ministry of finance controls all the insurance
companies that are in the industry at present
hence there are less chance of exit.
•
• Power of suppliers:
• Policy designer tend to have less leverage to Bargain
over premium.
• Insurance is tax exempted so that suppliers bargaining
power increases.
• Solvency of private players is not certain.
•

• Threat of Substitutes:
• Customers deposits in their amount in to bank & post
deposits & purchase gold & silver.
• Investment in government securities.
• Money market investment
• Capital market investment.
•
• Power of buyer :
• Market is highly segmented.
• Insurance industry very return oriented and switches
easily.
• High switching cost creates buyers lock in and makes a
buyers bargaining power.
• Exercise bargaining leverage over premium.
• Threat of new entrants:
• Life insurance industry entry barriers is moderate.
• The Indian market is highly brand oriented .so it is
difficult to introduce new brand.
• The acceptability of new brand is also very low.
• Economies of scale is difficult to find in the initial stage of
entry in to market.
• Special permission is required from the government to
enter in the insurance sector.
•
 GROWTH
• The life insurance industry witnessed a steady growth in
2009-10 financial year, with an 18% increase in total
premium received during the year to Rs 2,61,025
crore over the previous fiscal.
• Life insurance companies have also sold more than 2.8
crore policies in rural areas in FY'08 and FY'09.
• Up to the 2009-10 fiscal, life insurance firms opened
more than 11,927 branches, 70% of which are in
semi-urban or rural areas.
• The total assets held by life Insurance industry stood at
about Rs 12,90,000 crores as on March 31, 2010.
• life insurance industry has become one of the main
contributors towards the country's long-term
infrastructure growth.
 Contd…
• After opening up of the sector the life insurance industry has
grown leaps and bounds. The industry has earned $ 540
billion total premium income during the F.Y 2009-10.
•

• The life insurance companies are the largest institutional

investors in India.
•

• The life insurance companies have brought in huge capital for

investment and expansion. They have generated good
employment opportunities, both direct and in-direct.
•

• The latest technology is being introduced by all the companies

thereby improving the servicing standards.
•
Growth of insurance industry
 ENVIRONMENTAL ANALYSIS
• POLITICAL AND LEGAL FACTORS
• ECONOMICAL FACTORS
• SOCIO-CULTURAL FACTORS
v Population
v Life style
v Educational level
v Level of earning
v Societal benefits.
•

•
 INTERNATIONAL SCENARIO
Countries Insurance Penetration Insurance Density (Per
(premium as a% of GDP) Capita Premiums in
USD)

United Kingdom 12.71 3028.5

Japan 8.70 3165.1
United States 4.48 1611.4
South Africa 14.04 392.9
Australia 6.04 1193.5
South Korea 9.89 935.6
India 1.77 7.6
China 1.12 9.5
Malaysia 2.13 86.4
Indonesia 0.54 4.0
Brazil 0.36 12.9
 BCG MATRIX
Company Market share Relative market share Relative company
(%) sales growth rate
(%)

Bajaj Allianz 26.49 1 215.17

ICICI Prudential 25.72 .97 156

Reliance 1.89 .07 105

SBI 8.08 .30 91

HDFC 10.04 .38 120

Shriram .10 .003 18

Sahara .21 .007 23

 BCG MATRIX (Only Private players)

RELATIVE MARKET SHARE

High 1.00 Medium 0.5 Low 0.00

INDUSTRY SALES GROWTH RATE

HIGH
+437.5%

MEDIUM
0
(40.61%)

LOW
-437.5%

SOURCE:IRDA March 2009

COST BREAK UP
MARKET SHARE
 KEY SUCCESS FACTOR
• Marginal Different Product
• Designing New Strategies
• Move towards Rural Market
• Motivation of sales force
• Use of Internet
Company analysis
Life insurance corporation

• In the year 1818 the Oriental Life Insurance Company

was started at Kolkata.
• In 1912 the Indian Life Assurance Companies Act was
enacted as the first statute to regulate the Life
Insurance Business.
• In 1938 the earlier legislation was consolidated and
amended to become the Insurance Act with the
objective of protecting the interests of the insuring
public.
• In 1956, the LIC of India was formed under the LIC
Act,1956 with a capital contribution of Rs. 5 crores i.e
$ 1.2 million at current rates from the Government of
India.
•
 Mission and Vision
• Mission:
• "Explore and enhance the quality of life of
people through financial security by providing
products and services of aspired attributes with
competitive returns, and by rendering resources
for economic development."
• Vision:
"A trans-nationally competitive financial
conglomerate of significance to societies and
Pride of India."
•
 Objectives of LIC
• Spread Life Insurance widely and in particular to the rural
areas and to the socially and economically backward
classes.
• Maximize mobilization of people's savings by making
insurance-linked savings adequately attractive.
• Conduct business with utmost economy and with the full
realization that the moneys belong to the
policyholders.
• Promote amongst all agents and employees of the
Corporation a sense of participation, pride and job
satisfaction through discharge of their duties with
dedication towards achievement of Corporate
Objective.
•
Operation of LIC
 Awards of LIC

CNBC Consumer
awards 2010 Asia pacific NASCOM IT
HRM congress USER Award 2008

Golden Peacock NDTV Profit Business Leadership

Award Award 2008
 Kinds of plan
•

• Bima account • Endowment

• plans
• Assurance Plan
• •

• Endowment • Plans for High

• Plus • Worth Individuals
• •

• Children • Money Back

• Plans • Plans
• •

• Plans for • Special Money

• Handicapped • Back for Women
• Whole Life • Golden Jubilee
• Plans • Plan
• •

• Term • Special Plan

• Assurance Plan •

• •

• Joint Life Plan • Health Plan

• •

• Pension Plans • Micro

• Insurance
• Plan
•
•
• Unit Plans
•
• Group Scheme
 LIC Highlights
•Assets as on 31.03.2010 : $ 494.78
billion
•No. of policies : 650 million
•No. of employees : 1,15,966
•No. of agents : 1.4 million
•
 Contd…

• Innovative and market driven products are being offered by

life insurance corporation.
•

• LIC is building the distribution channels with strong tied

agency network.
•

• India has a total of 2.8 million agents of which 50% are with
LIC alone.
•

• There is a sharp increase in the remuneration of life insurance

professionals in LIC.
•
Expenses of LIC
 BCG Matrix of LIC:
Stars: Question Mark:

•Jeevan Anand
HIGH •Money plus ploicy •New Bima Nivesh.
•Pension plus •New Jeevan Shree.
Business growth Rate

Cows: Dogs:

•Group scheme •

•Health plan •

•Amulya Jeevan
•

LOW

HIGH Relative Market share LOW

 Challenges faced by LIC
• Micro Insurance and financial inclusion will be major
challenges for all the companies.
•

• Professionals and experts are in short supply. Man power

requirement has increased manifold.
•

• Misconceptions: When we think of life insurance, we think of

a death benefit being paid to a beneficiary upon the death of
a policyholder.
•

• Maintaining Funds in Hard Economic Times: In the case of

flood, earthquake and other natural calamities.
•
 Contd…
•

• There is a shift from traditional endowment policies to unit

linked policies.
•
• Customers are expecting higher returns and thereby a strong
emphasis on unit linked plans.
•
• Surrender of plans.
•
• Duplicate agents
•
 SWOT Analysis
• Strengths :
1) Brand Image
2) Government Guarantee( sovereign guarantee)
3) Claims settlement
4) Pan India presence
5) Large product portfolio
•

• Weakness :
1) Lethargic Staff
2) Large scale Corruption in Main Office
3) Ultra-Slow decision making process
4) Internal problems between Top Management and
lower cadre Employees
• Opportunities :
1) Pension Market
2) Health Insurance
3) Large Real Estate investment portfolio
•
• Threats
1) Internal discord
2) New players
3) Red-tapism
LIC Market share
 Strategies of LIC
• First Mover Advantage
• Product Differentiation
• Market Segmentation
•

q MARKETING STRATEGIES USED BY LIC:

v LIC has taken help of advertising agencies to promote
the brand LIC.
v They used creative slogans which affects the customer’s
mindset and able to attract their attention.
v These slogans helped LIC to make the customer
emotionally attached to services provided by them.
v They spend huge amount of money in advertising and
sales promotion to build their brand equity and
identity.
 Proposed strategies
• LIC may create awareness campaign
about the benefit of life insurance
policies.
• They may introduce some innovative
policies to avoid the loss of existing
market share.
• They can expand their market.
Competitor analysis
Bajaj Allianz Life Insurance
• Bajaj Allianz Life Insurance Company Limited is one of the
largest private insurance companies in India.
• It is a joint venture between Allianz se Limited and Bajaj auto.
Bajaj auto ltd. is India’s leading automobile company. Bajaj
Auto Ltd. is the largest exporter of two and three wheelers.
• On 2001, the Bajaj Allianz Life Insurance was given the IRDA
(Insurance Regulatory and Development Authority)
certification of Registration for conducting the Life
Insurance business (which also included the Health
Insurance business) in the country.
• Bajaj Allianz India is headquartered in Pune. The company
has its offices in 200 towns all over India.
•
 Contd….
• Allianz SE is a leading insurance conglomerate globally and
one of the largest asset managers in the world, managing
assets worth over a Trillion (Over INR. 55, 00,000 Crores).
• Allianz SE has over 115 years of financial experience and is
present in over 70 countries around the world.
•

• HIGHLIGHTS
•

•Profit as on 31.03.2010 : $ 4,274 million

•No. of policies : 53 million
•No. of customers : 3,00,000
•No. of agents : 3,69,000
•
 Contd….
• Bajaj Allianz has a Pan India network covering over 100
towns from Jammu to Thiruvananthapuram and aims
to spread its operations in many other cities.
• It has achieved AAA rating, by ICRA Limited and has the
highest claims- paying ability and a stable position in
the market.
• In a 2006 survey, Business World has rated it among the
Most Respected Companies, putting it at No.2 position
in Insurance sector.
•
 Bajaj group
 Bajaj Auto Ltd.
 Bajaj Holdings & Investment Ltd.
 Bajaj Finserv Ltd.
 Bajaj Allianz General Insurance & Life Insurance Co. Ltd
 Bajaj Financial Solutions Ltd.
 Bajaj Auto Finance Ltd.
 Bajaj Allianz Financial Distributors Ltd.
 Bajaj Auto Holdings Ltd.
 Bajaj Auto International Holdings BV
 Bajaj Electricals Ltd.
 Bajaj Ventures Ltd.
 Hospet Steels Ltd.
•
 General insurance of Bajaj
Allianz
The Company provides the following
•

products under general insurance:

•

• Travel Insurance
• Asset Insurance
• Health Insurance
• Corporate Insurance
•
 Investments of Bajaj Allianz
• T- Bills
• G-sec
• Corporate Bonds
• Equities
• ADR and GDR
•
 Mission and vision
• Mission:
• As a responsible, customer focused market leader, we will
strive to understand the insurance needs of the consumers and
translate it into affordable products that deliver value for
money.
• Vision:
• To be the first choice insurer for customers.
• To be the preferred employer for staff in the insurance
industry.
• To be the number one insurer for creating shareholder value
•
 Bajaj Allianz Life Insurance
Company

Agency channel Bank assurance Group and Alternate Channel

Branches
Standard chartered bank Group Employee
Benefit

Syndicate Bank Corporate Agency

Satellite Satellite Centurion Bank Franchisee

Cosmos Bank Brokers

Satellite

Jankalyan Sahakari
Bank

Jijamata Sahakari Coop

Bank
 Life insurance products of BA:
Individual life insurance
• Unit linked plan • Pension plans:
v Swarna vishranthi
• Endowment:
v Pension guarantee
v Invest gain
•
v Save care economy
v Life time care super saver • Term plan:
• v Protector
• Money back v Term care new risk care
•
v Cash rich insurance plan
v Super cash gain insurance • Women insurance
plan plans:
v Cash gain child gain v Women life insurance
v Products for house wife
 Group life insurance
• Members: • Employees:
v Group Credit Protection v Group Term Life
Plus (Employer Employee)
v Credit Shield v Group Save Plus
v Group Term Life(Non- v Group Leave
Employer Employee) Encashment Scheme
v Group Suraksha v Group Annuity
v Sarve Shakti Suraksha •

v Group Loan Protector

v Group Income protection
•
 Renewal of premium in BA:
• Cash
• DD
• Cheque
• Credit card
• Direct debit facility
• Electronic clearance system
 Financial performance YEAR 2009-2010
Particulars 2009-10 2008-09 2007-08 2006-07
Rs. Million Rs. Million Rs. Million Rs. Million
Gross Written Premium 18,560.7 8,798 5,998 3,420
Net Written Premium 8,792.9 4,864 3,808 1241
Net Earned Premium 7,709.2 6,306 5,541 198
Net Incurred Claims (4,263.3) (2,542) (2,072) (227)
Net Commissions 1119.4 564 355 228
Management Expenses (5,455.9) (1184) (889) (670)
Underwriting Results 609.4 32 (54) (371)
Income from Investments 988.8 485 407 143
Others 38.6 44 (8) (5)
Profit Before Tax 1269.6 1018 771 (733)
Provision for Tax (198.7) (501) (95) 77
Profit After Tax (998.7) 717 346 (216)
Claim's Ratio 71% 87% 70% 130%
Commission Ratio -13% -11% -10% -130%
Management Expenses Ratio 60% 42% 43% 376%
Combined Ratio 120% 118% 102% 376%
Return on Equity 64% 40% 24% -16%
Shareholder's Equity 5,824.1 4,380 3,095 1097
Assets Under Management 8835.5 6,486 6,709 3,688
Number of Employees 1324 780 506 241
 BCG matrix of BA:
Stars: Question Mark:

•Life time care

HIGH •Pension guarantee •Products for house wife.
•Smart insurance plan
Business growth Rate

Cows: Dogs:

•Group suraksha •I gain

•Group save plus •

LOW

HIGH Relative Market share LOW

 SWOT Analysis
• Strength:
v Multi-channel distribution
v Well diversified plans
v 3.9 Million Policies sold till 31st march 2010
v Superior investment and risk management framework
•

• Weakness:
v Company have not penetrated in the rural market.
v There is no plan for the low income group.
v Fees for the advisor is high than the other company.
v Lack of portfolio life insurance plans.
•
 Contd….
• Opportunity:
• Good potential market (77%)
• Company can penetrate in rural markets.
• Bajaj Allianz plans to focus on group insurance for its next
phase of aggressive growth.
•
• Threats:
• ‘OLD HABITS DIE HARD’: Its still difficult task to win the
confidence of public towards private company.
• Competitors offering similar kind of insurance
• Emergence of substitute products
•
 Strategies:
• Hub & spoke model BALIC has a
large
• network in the
market with
over 213,000
•
Licensed
agents
•

• Bank assurance:
• Tie-up with 2 major scheduled banks around 170 Co-operative
banks and Regional Rural banks.
• Alternate Channels:
• The company has tie-ups with more than 300 Corporate
Agents,150 brokers & 3,100 Franchisees
•
Key Strategic Drivers
 Challenges faced by BA:
• People do not believe private insurance
companies to invest their money, even if
they invest, they expect more return.
• Stiff competition among private life
insurance companies, direct competitor
of BA is ICICI prudential life insurance.
• Shortage of qualified agents.
• Lack of awareness among the public
about private life insurance companies.
•