Chapter : 5 Data Analysis

5.1 Life Insurance Density and Penetration in India

The potential and performance of the Insurance sector is universally assessed with reference to two parameters. 1. Insurance Density 2. Insurance Penetration The measure of Life Insurance penetration and density reflects the level of development of life insurance sector in a country.

5.1.1 Life Insurance Density

Life Insurance density is defined as the ratio of premium underwritten in a given year to the total population.

Table : V International comparison of Life insurance Density

Countries 200001 200102 200203 200304 200405 200506 200607 200708 200809 200910

Developed Countries
US UK France Germany South Korea Japan
1602.0 2567.9 1268.2 674.3 763.4 2806.4 1662.6 2679.4 1349.5 736.7 821.9 2783.9 1657.5 2617.1 1767.9 930.4 873.6 3002.9 1692.5 3190.4 2150.2 1021.3 1006.8 3044.0 1753.2 3287.1 2474.6 1042.1 1210.6 2956.3 1789.5 5139.6 2922.5 1136.1 1480.0 2829.3 1922.0 5730.5 2728.3 1234.1 1656.6 2583.9 1900.6 5582.1 2791.9 1346.5 1347.7 2869.5 1602.6 3527.6 2979.8 1359.7 1180.6 3138.7 1498.3 3025.7 3251.9 1390.5 1080.7 3865.8

Developing Countries
Brazil Russia Malaysia India China South Africa Australia
10.8 33.2 129.5 9.1 12.2 377.2 1040.3 27.2 23.1 118.7 11.7 19.2 360.5 1010.4 35.8 33.9 139.8 12.9 25.1 476.5 1129.3 45.9 24.8 167.3 15.7 27.3 545.5 1285.1 56.8 6.3 188.0 18.30 30.5 558.3 1366.7 72.5 4.0 189.2 33.2 34.1 695.6 1389.0 95.3 6.1 221.5 40.4 44.2 719.0 1674.1 115.4 5.4 225.9 41.2 71.7 707.0 2038.0 127.9 4.50 206.9 47.7 81.1 574.2 1524.8 139.4 4.30 198.2 52.2 93.6 498.2 1328.6

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Observation: Table V provides a comparison of Indian life insurance density levels of developed and developing countries from 2000-01 to 2009-10. The life insurance density of India was 9.1 percent in the year 2000-01 when the private sector was opened up. It increased to 52.2 percent in 2009-10.Indias life insurance density is very low as compared to the developed countries and developing countries, inspite of India being the second most populous country in the world. This shows that there is much scope for life insurance sector to develop in India.

5.1.2 Life Insurance Penetration

Life Insurance penetration is defined as the ratio of premium underwritten in a given year to the Gross Domestic Product (GDP).

Table : VI International Comparison of life insurance penetration

Countries 200001 200102 200203 200304 200405 200506 200607 200708 200809 200910

Developed Countries
US UK France Germany South Korea Japan 4.40 10.73 5.73 3.00 8.69 8.85 4.60 10.19 5.61 3.06 8.23 8.64 4.38 8.62 5.99 3.17 6.77 8.61 4.22 8.92 6.38 3.11 6.75 8.26 4.14 8.90 7.08 3.06 7.27 8.32 4.00 13.10 7.90 3.10 7.90 8.30 4.20 12.60 7.30 3.10 8.20 7.50 4.10 12.80 6.20 3.00 8.00 7.60 3.50 10.00 7.20 3.30 6.50 7.80 3.10 9.20 8.40 3.50 6.20 8.10

Developing Countries
Brazil Russia Malaysia India China South Africa Australia 0.36 1.55 3.38 2.15 1.34 15.19 5.70 1.05 0.96 2.94 2.59 2.03 15.92 5.02 1.28 1.12 3.29 2.26 2.30 12.96 4.42 1.36 0.61 3.52 2.53 2.21 11.43 4.17 1.33 0.12 3.60 2.53 1.78 10.84 3.51 1.30 0.10 3.20 4.10 1.70 13.00 3.80 1.40 0.10 3.10 4.00 1.80 12.50 3.80 1.40 0.00 2.80 4.00 2.20 12.50 4.40 1.60 0.00 2.90 4.60 2.30 10.00 3.40 1.62 0.00 3.10 4.90 2.60 9.10 3.10

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Observation: Table VI shows the comparison of Indian life insurance penetration of developed and developing countries from 2000-01 to 2009-10. The Indian life insurance market is drawing intense attention, fuelled in part by the fast expansion of its insurance markets and the fact that this growth potential is now available to all (subject to the regulatory restriction on foreign equity holding).India is the second most populous country of the world with more than one billion population. The economic growth record is strong (more than 6% during the past one decade). Inspite of these positive developments, the life insurance market in India is extremely under-penetrated. The life insurance penetration of India was 2.15 percent in the year 200001when the private sector was opened up. It increased to 4.90 percent in 200910.Since opening up of Indian Insurance sector for private participation, India has reported an increase life insurance penetration. But compared to UK, France, South Korea, Japan and South Africa, India is way behind. Among developing counties it stands second to South Africa. There is much scope for the life insurance sector to develop in India.

5.2 Market share based on premium and policies of public and private sector Life insurance companies
5.2.1 Market Share based on Total Premium
The most important indicator to assess life insurers is the amount of premium collected. The sum assured is fragmented into installments of premium. In other words, premium is the fragmented value of the Sum Assured of policy, payable continuously at regular intervals until the maturity of the policy. The total premium consists of first year premium, Renewal Premium and Single Premium.

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The amount of premium otherwise called premium rate, depends on: Mortality experience of insured lives Expenses incurred by the company in administrating the life fund Yield on investments of life fund Besides these three, the premium rates may also be affected by other factors namely interest rates and taxation rates.

Table : VII Market Share based on Total premium

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Public Sector (%) 99.98 99.46 97.99 95.29 90.67 85.76 81.90 74.40 70.92 70.10 Private sector (%) 0.02 0.54 2.01 4.71 9.33 14.24 18.10 25.60 29.08 29.90

Market Share based on Total Premium

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

Public Sector

Private sector
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Observation: Table VII shows the market share of public and private sector life insurance companies based on total premium. The total premium of Life Insurance Corporation of India increased continuously since 2000-01 to 2009-10.However a significant decline is noticed in market share from 99.98% in 2000-01 to 70.10% in 2009-10. While in case of private sector, the total premium income and market share of total premium have both increased. The market share of private sector life insurance companies on the basis of total premium has increased from 0.02% in 2000-01 to 29.90% in 2009-10. It reflects that the private sector has been successful in capturing the market share from Life Insurance Corporation of India. Due to stiff competition from the private players, Life Insurance Corporation of India has lost nearly 30% market share based on total premium. Life Insurance Corporation of India is still the market leader at present.

5.2.2 Market Share based on New Business

Premium collected on the new business is called first year premium. It also includes single premium. It is the first Premium collected by the insurance companies from policy holders.

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Table : VIII Market Share based on new business

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Public Sector (%) 99.93 98.65 94.30 87.66 78.78 73.52 74.32 64.02 60.89 65.08 Private sector (%) 0.07 1.35 5.70 12.34 21.22 26.48 25.68 35.98 39.11 34.92

Market Share based New Business

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Public Sector

Private sector

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Observation: Table VIII shows the market share of public and private sector life insurance companies based on New Business. The market share of Life Insurance Corporation of India on the basis of the first year premium in the year 2000-01 was 99.93% but it declined to 60.89% in 2008-09 and has slightly risen to 65.08% in 2009-10 while the market share of private sector life insurance companies was only 0.07% in 2000-01, which increased up to 39.11% in 2008-09 and slightly declined to 34.92% in 200910.The growth in first year premium of private sector was fuelled by sales of unit linked products.

5.2.3 Market Share based on Renewal Premium

Premium collected on business in force is called renewal premium. Increase in the renewal premium is a good measure of quality of the business underwritten by the insurer. It reflects increase in their persistency ratio and enables insurers to bring down overall cost of doing business.

Table : IX Market Share based on Renewal premium

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Public Sector (%) 99.99 99.98 99.60 98.55 96.18 92.82 89.02 83.42 77.43 73.64 Private sector (%) 0.01 0.02 0.40 1.45 3.82 7.18 10.98 16.58 22.57 26.36

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Market Share based on Renewal Premium

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

Public Sector
Observation:

Private sector

Table IX shows the market share of public and private sector life insurance companies based on Renewal premium.

The public sector recorded 99.99% market share based on renewal premium in the year 2000-01 but it has decreased to 73.64% in the year 2009-10. While that of the private sector recorded 0.01% in the year 2000-01 which increased to 26.36% in the year 2009-10. Private sector has managed to take away nearly 26% of the market share from LIC of India. LIC of India is still the market leader in this segment.

5.2.4 Market Share based on Total Policies

The life insurance contract provides elements of protection and investment. After getting insured, the policy-holder feels a sense of protection because he shall be paid a definite sum at death or maturity. Since a definite sum must be paid, the element of investment is also present. In other words, life insurance provides
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against pre-mature death and a fixed sum at maturity of policy. The two elements of protection and investment exist in various degrees in different types of policies.

The older the policy, the lesser the element of protection and higher the element of investment and vice-versa is also true. Having different elements in different policies, the policy-holders are free to choose the best policies according to their requirements.

It should be known that no one policy is the best policy for all the policy-holders due to variance in cost, elements of investments and protection, requirements of the policy-holders and availability of the policy. Life insurance policies are divided on the basis of duration of policy, method of premium payments and participation.

Table : X Market Share based on total policies

Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Public Sector (%) Private sector (%) 99.23 0.77 93.98 6.02 96.75 3.25 94.21 5.79 91.48 8.52 89.08 10.92 82.83 17.17 73.93 26.07 70.52 29.48 73.02 26.98

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Market Share based on Total Policies

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

Public Sector
Observation:

Private sector

Table X shows the market share of both the public and the private sector life insurance companies based on total policies. The market share of LIC of India was 99.23% in the year 2000-01.It has decreased to 73.02% in the year 2009-10. While that of the private sector was 0.77% in the year 2000-01 and increased to 26.98% in the year 2009-10. There are concerns over Life Insurance Corporation of Indias declining market share based on total policies and concurrent rise of private insurers who have just entered ten years ago. Innovative products, smart marketing and aggressive distribution channels has enabled private life insurance companies to sell policies. As of today, Life Insurance Corporation of India has retained the market share based on total policies.

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5.3 market share of private life insurance companies based on Total Premium and New Business

5.3.1 Market Share of Private Life Insurance Companies based on Total Premium Table : XI Market share of private life insurance companies based on total premium (%)

Life Insurer
HDFC standard Life Insurance Co.Ltd. Max New York Life Insurance Co.Ltd. ICICI Prudential Life Insurance Co.Ltd. Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd. TATA AIG Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. ING Vysya Life Insurance Co. Ltd. BAJAJ ALLIANZ Life Insurance Co. Ltd.

200001

200102

200203

200304

200405

200506

200607

200708

200809

200910

9.54

12.27

13.30

9.54

8.89

10.41

10.11

9.43

8.63

8.83

2.24

14.29

8.63

6.90

5.35

5.23

5.31

5.27

5.98

6.12

83.73

42.70

37.32

31.70

30.59

28.26

28.02

26.31

23.81

20.83

NA

2.78

3.60

4.83

6.03

4.12

3.44

3.28

3.63

3.61 3.61 6.94

4.49

10.38

12.86

17.23

11.85

8.33

6.25

6.32

7.09

NA

7.77

7.26

8.13

6.43

5.84

4.84

3.97

4.26

4.40

NA

5.39

6.47

7.23

7.78

8.10

10.37

10.90

11.18

12.73

NA

1.54

1.89

2.84

4.39

2.82

2.50

2.25

2.24

2.07

NA

2.61

6.18

7.08

12.96

20.78

18.93

18.87

16.47

14.39

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MET Life India Insurance Co. Ltd. Reliance Life Insurance Co. Ltd. AVIVA Life Insurance Co.Ltd. SAHARA India Life Insurance Co.Ltd. SHRIRAM Life Insurance Co.Ltd. Bharti Axa Life Insurance Co.Ltd. Future Generali India Life Insurance Co.Ltd. IDBI Fortis Life Insurance Co. Ltd. Canara HSBC Oriental Bankl of Commerce Life Insurance Co.Ltd. Argon Religare Life Insurance co.Ltd. DLF premercia Life Insurance Co.Ltd. Star Union DaiIchi Life Insurance co. Ltd. India First Life Insurance Co. Ltd. NA NA NA NA NA NA NA NA NA 0.25 NA NA NA NA NA NA NA NA 0.08 0.67 NA NA NA NA NA NA NA NA 0.005 0.05 NA NA NA NA NA NA NA NA 0.05 0.21 NA NA NA NA NA NA NA NA 0.46 1.06 NA NA NA NA NA NA NA 0.02 0.50 0.72 NA NA NA NA NA NA NA 0.005 0.24 0.68 NA NA NA NA NA NA 0.03 0.23 0.56 0.84 NA NA NA NA NA 0.07 0.65 0.68 0.68 0.77 NA NA NA NA 0.02 0.18 0.18 0.28 0.32 0.32 NA NA 1.20 2.61 3.28 3.98 4.07 3.67 3.09 2.99 NA 0.10 0.58 0.99 1.37 1.48 3.56 6.26 7.65 8.32 NA 0.17 0.71 0.92 1.06 1.37 1.74 2.25 3.10 3.20

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5.3.2 Ranks given to Private Life Insurance Companies based on Total Premium Table : XII Ranks given to private life insurance companies based on total premium
Life Insurer
HDFC standard Life Insurance Co.Ltd. MAX New York Life Insurance Co.Ltd. ICICI Prudential Life Insurance Co.Ltd. Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd. TATA AIG Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. NA 6 6 5 5 5 3 3 3 3 NA 5 5 4 6 6 7 8 8 8 3 4 3 2 3 4 5 5 6 6 NA 7 8 8 7 8 10 10 9 9 1 1 1 1 1 1 1 1 1 1 4 2 4 7 8 7 6 7 7 7 2 3 2 3 4 3 4 4 4 4 200001 200102 200203 200304 200405 200506 200607 200708 200809 200910

ING Vysya Life Insurance Co. Ltd. NA 9 9 9 9 10 11 11 12 12

BAJAJ ALLIANZ Life Insurance Co. Ltd. MET Life India Insurance Co. Ltd. Reliance Life Insurance Co. Ltd. NA 11 12 11 11 11 9 6 5 5 NA 10 11 12 12 12 12 12 10 10 NA 8 7 6 2 2 2 2 2 2

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AVIVA Life Insurance Co.Ltd. SAHARA India Life Insurance Co.Ltd. SHRIRAM Life Insurance Co.Ltd. Bharti Axa Life Insurance Co.Ltd. Future Generali India Life Insurance Co.Ltd. IDBI Fortis Life Insurance Co. Ltd. Canara HSBC Oriental Bankl of Commerce Life Insurance Co.Ltd. Argon Religare Life Insurance co.Ltd. DLF premercia Life Insurance Co.Ltd. Star Union DaiIchi Life Insurance co. Ltd. India First Life Insurance Co. Ltd. NA NA NA NA NA NA NA NA NA 20 NA NA NA NA NA NA NA NA 19 18 NA NA NA NA NA NA NA NA 21 22 NA NA NA NA NA NA NA NA 20 21 NA NA NA NA NA NA NA NA 16 13 NA NA NA NA NA NA NA 16 15 16 NA NA NA NA NA NA NA 17 18 17 NA NA NA NA NA NA 15 15 14 14 NA NA NA NA NA 14 13 13 13 15 NA NA NA NA 13 13 14 14 17 19 NA NA 10 10 10 9 8 9 11 11

Observation: Table XI and XII shows the market share based on total premium and their ranks on the basis of total premium of private life insurance companies respectively. Private Life Insurance companies have raised their market share based on total premium from 0.02% in 2000-01 to 39.90 % in 2009-10. ICICI Prudential Life Insurance Company has consistently retain its first position based on total premium from 2000-01 to 2009-10, even though the company has reduced its
116

market share from 83.73% in 2000-01 to 20.83% in 2009-10.The market share based on total premium of SBI Life Insurance Co. Ltd. has increased from 5.39% in 2001-02 to 12.73% in 2009-10.While that of Bajaj Allianz Life Insurance Co. Ltd. has increased from 2.61% in 2002-03 to 14.39%. Also Reliance Life Insurance Co. Ltd. increased its market share from 0.10 in 2002-03 to 8.32% in 2009-10. This signifies that there is lot of competition among the private life insurance companies in India. ICICI Prudential Life Insurance Company continues to be the largest private life insurance player.

5.3.3 Market Share of Private Life Insurance Companies based on New Business

Table : XIII Market share of private life insurance companies based on new business (%)
Life Insurer
HDFC standard Life Insurance Co.Ltd. MAX New York Life Insurance Co.Ltd. ICICI Prudential Life Insurance Co.Ltd. Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd. TATA AIG Life Insurance Co. Ltd. NA 7.87 6.19 7.44 5.35 4.52 3.32 2.86 3.35 3.45 4.96 10.47 13.42 18.43 11.17 6.60 4.54 5.83 8.26 7.71 NA 2.82 3.65 5.14 6.72 3.86 3.17 3.28 3.93 3.48 92.53 42.21 37.70 30.76 28.47 25.34 26.57 23.83 19.95 16.51 2.48 14.45 6.97 5.62 4.20 4.59 4.70 4.74 5.40 4.82 0.03 12.21 13.39 8.58 8.74 10.15 8.49 7.95 7.76 8.49 200001 200102 200203 200304 200405 200506 200607 200708 200809 200910

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SBI Life Insurance Co. Ltd. ING Vysya Life Insurance Co. Ltd. BAJAJ ALLIANZ Life Insurance Co. Ltd. MET Life India Insurance Co. Ltd. Reliance Life Insurance Co. Ltd. AVIVA Life Insurance Co.Ltd. SAHARA India Life Insurance Co.Ltd. SHRIRAM Life Insurance Co.Ltd. Bharti Axa Life Insurance Co.Ltd. Future Generali India Life Insurance Co.Ltd. IDBI Fortis Life Insurance Co. Ltd. Canara HSBC Oriental Bankl of Commerce Life Insurance Co.Ltd. Argon Religare Life Insurance co.Ltd. DLF premercia Life Insurance Co.Ltd. Star Union DaiIchi Life Insurance co. Ltd. India First Life Insurance Co. Ltd. NA NA NA NA NA NA NA NA NA 0.52 NA NA NA NA NA NA NA NA 0.14 1.35 NA NA NA NA NA NA NA NA 0.01 0.39 NA NA NA NA NA NA NA NA 0.09 0.10 NA NA NA NA NA NA NA NA 0.87 1.62 NA NA NA NA NA NA NA 0.04 0.93 1.04 NA NA NA NA NA NA NA 0.007 0.44 1.27 NA NA NA NA NA NA 0.04 0.34 0.86 1.14 NA NA NA NA NA 0.11 0.93 0.91 0.92 1.09 NA NA NA NA 0.03 0.26 0.22 0.36 0.39 0.33 NA NA 1.40 3.16 3.45 3.96 3.71 3.13 2.12 2.08 NA 0.10 0.65 1.12 1.64 1.88 4.80 8.16 10.29 10.22 NA 0.18 0.80 0.96 1.03 1.45 1.75 2.45 3.35 2.77 NA 2.66 6.56 7.36 15.41 26.45 22.15 19.80 13.15 11.60 NA 1.56 1.83 2.95 5.08 2.77 2.41 20.90 2.02 1.67 NA 5.47 7.44 8.48 8.71 9.10 13.20 14.22 15.77 18.35

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5.3.4 Ranks given to Private Life Insurance Companies based on New Business Table : XIV Ranks given to private life insurance companies based on New Business
Life Insurer
HDFC standard Life Insurance Co.Ltd. MAX New York Life Insurance Co.Ltd. ICICI Prudential Life Insurance Co.Ltd. Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd TATA AIG Life Insurance Co. Ltd SBI Life Insurance Co. Ltd ING Vysya Life Insurance Co. Ltd BAJAJ ALLIANZ Life Insurance Co. Ltd MET Life India Insurance Co. Ltd. Reliance Life Insurance Co. Ltd NA 11 12 11 11 11 5 5 4 4 NA 10 11 12 12 12 12 12 10 10 NA 8 6 6 2 1 2 3 3 3 NA 9 9 10 8 10 11 2 12 12 NA 6 4 4 5 4 3 4 2 1 NA 5 7 5 7 7 9 11 9 9 2 4 2 2 3 5 7 7 5 6 NA 7 8 8 6 9 10 9 8 8 1 1 1 1 1 2 1 1 1 2 3 2 5 7 9 6 6 8 7 7 4 3 3 3 4 3 4 6 6 5 200001 200102 200203 200304 200405 200506 200607 200708 200809 200910

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AVIVA Life Insurance Co.Ltd. SAHARA India Life Insurance Co.Ltd. SHRIRAM Life Insurance Co.Ltd. Bharti Axa Life Insurance Co.Ltd. Future Generali India Life Insurance Co.Ltd. IDBI Fortis Life Insurance Co. Ltd. Canara HSBC Oriental Bankl of Commerce Life Insurance Co.Ltd. Argon Religare Life Insurance co.Ltd. DLF premercia Life Insurance Co.Ltd. Star Union DaiIchi Life Insurance co. Ltd. India First Life Insurance Co. Ltd. NA NA NA NA NA NA NA NA NA 19 NA NA NA NA NA NA NA NA 19 14 NA NA NA NA NA NA NA NA 21 20 NA NA NA NA NA NA NA NA 20 22 NA NA NA NA NA NA NA NA 15 13 NA NA NA NA NA NA NA 16 13 18 NA NA NA NA NA NA NA 17 17 15 NA NA NA NA NA NA 15 15 16 16 NA NA NA NA NA 14 13 13 14 17 NA NA NA NA 13 13 14 14 18 21 NA NA 10 9 10 8 8 10 11 11

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Observation: Table XIII and XIV shows the market share based on first year premium (including single premium) and their ranks on the basis of first year premium (including single premium) of private life insurance companies in India. The success of life insurance companies to a large extent depends upon the new growth and development of new business. Private Life Insurance companies have raised their market share based on first year premium (including single premium) from 0.07% in 2000-01 to 34.92 % in 2009-10. ICICI Prudential Life Insurance Company ranked 1st on the basis of market share as per first year premium (including single premium) in eight years out of ten years. The Market share based on first year premium (including single premium) of SBI life Insurance Company consistently increased from 5.47% in 2001-02 to 18.35% in 2009-10.The market share based on first year premium (including single premium) of Reliance Life Insurance Co. Ltd. has increased from 0.10% in 2001-02 to 10.22% in 2009-10.While that of Bajaj Allianz Life Insurance Co. Ltd. has increased from 2.66% in 2002-03 to 11.60%. ICICI Prudential Life Insurance Company is the largest life insurance company in the private sector.

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5.4 Prediction of new business and total premium of life insurance sector for the year 2015 5.4.1 Prediction of New Business for Public Sector Table : XV Trend values of new business (Public sector)
Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Public Sector (Rs.) 970098 1958877 1597676 1734762 2065306 2851587 5622356 5999657 5317908 7152190 Trend values (Rs.) 23949.22 899722.34 1775495.46 2651268.58 3527041.70 4402814.82 5278587.94 6154361.06 7030134.18 7905907.30

New Business - Public Sector Trend Values (in lacs)

9000000 8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 -1000000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

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Observation: Table XV depicts the trend values of new business Life Insurance Corporation India from 2000-01 to 2009-10.

= 3527041.70

= 875773.12 Y= + (X-2005)

= 3527041.70 + 875773.12 (2015-2005) = 12284772.90 Based on the year 2004-05 the trend value for the year 2015 is calculated using linear function where, are constant. Substituting values in

the trend line equation, the expected new business in India for Life Insurance Corporation of India for the year 2015 would be Rs.12284772.90 lakh. New business in India for Life Insurance Corporation of India shows an increasing trend.

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5.4.2 Prediction of New Business for Private Sector Table : XVI Trend values of new business (Private sector)
Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Private sector (Rs.) 645.20 26852 96570 244071 556457 1026967 1942566 3371595 3415200 3837212 Trend Values (Rs.) -776581.60 -219482.82 337615.96 894714.74 1451813.52 2008912.30 2566011.08 3123109.86 3680208.64 4237307.42

New Business - Private sector Trend Values (in lacs)

5000000

4000000

3000000

2000000

1000000

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
-1000000

-2000000

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Observation: Table XVI depicts the trend values of new business of Private Sector life insurance companies from 2000-01 to 2009-10.

= 1451813.52

= 557098.78 Y= + (X-2005)

= 1451813.52 + 557098.78 (2015-2005) = 7022801.32

Based on the year 2004-05 the trend value for the year 2015 is calculated using linear function where, are constant. Substituting values in

the trend line equation, the expected new business in India for Private sector for the year 2015 would be Rs.7022801.32 lakh. New business in India for private sector also shows an increasing trend.

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5.4.3 Prediction of Total Premium for Public Sector Table : XVII Trend values of total premium (public sector)
Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Public Sector (rs.) 3489202 4982191 5462849 6316760 7512729 9079222 12782284 14978999 15728804 18607731 Trend Values (Rs.) 9816621.00 3209765.85 5437869.60 7665973.35 9894077.10 12122180.85 14350284.60 16578388.35 18806492.10 21034595.85

Total Premium - Public Sector Trend Values (in lacs)

25000000

20000000

15000000

10000000

5000000

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

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Observation: Table XVII depicts the trend values of total premium of Life Insurance Corporation of India from 2000-01 to 2009-10.

= 9894077.10

= 2228103.75 Y = + (X-2005)

= 9894077.10 + 2228103.75 (2015-2005) = 32175114.60

Based on the year 2004-05 the trend value for the year 2015 is calculated using linear function where, are constant. Substituting the values

in the trend line equation, the expected total premium in India for Life Insurance Corporation of India for the year 2015 would be Rs.32175114.60 lakh. Total premium in India for public sector shows an upward trend.

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5.4.4 Prediction of Total Premium for Private Sector Table : XVIII Trend values of total premium (private sector)
Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Private Sector (Rs.) 713 27253 111905 312035 772751 1507953 2824249 5154636 6449741 7937305 Trend Values (Rs.) -1607105.54 -577865.63 451374.28 1480614.19 2509854.10 3539094.01 4568333.92 5597573.83 6626813.74 7656053.65

Total premium - Private Sector Trend Values (in lacs)

10000000

8000000

6000000

4000000

2000000

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
-2000000

-4000000

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Observation: Table XVIII predicts the trend values of total premium of Private Sector life Insurance Company from 2000-01 to 2009-10.

= 2509854.10

= 1029239.91 Y= + (X-2005)

= 2509854.10 + 1029239.91(2015-2005) = 12802253.20

Based on the year 2004-05 the trend value for the year 2015 is calculated using linear function where, are constant. Substituting the values

in the trend line equation, the expected new business in India for Private sector for the year 2015 would be Rs.12802253.20 lakh. Total premium in India for private sector shows an upward trend.

Thus we can conclude that new business and total premium for both the public sector and private sector life insurance companies will increase in future as there is much scope for life insurance business in India.
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5.5 Analysis of Variance (ANOVA)(one way) Table : XIX Total commission to total premium
Sources of variation
Between samples

Sum of squares
0.01

Degree of freedom
h-1=2-1=1

Mean square
0.01

F value

F(crit) value
4.41

Ho R/A
R

10

Within samples

0.02

N-h=20-2=18

0.001

Total

0.03

N-1=20-1=19

Observation: The F value is >F crit value, therefore the null hypothesis is rejected at 5% level of significance. Hence it can be concluded that there is significant difference between total commission to total premium ratio of the public and private sector life insurance companies. The private sector life insurance companies incur huge commission expense in relation to the premium earned. This reflects bad financial management in case of private sector life insurance companies.

Table : XX Total commission to total operating expense

Sources of variation
Between samples

Sum of squares
3.28

Degree of freedom
h-1=2-1=1

Mean square
3.28

F value

F(crit) value
4.41

Ho R/A
R

252.31

Within samples

0.24

N-h=20-2=18

0.013

Total

3.52

N-1=20-1=19

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Observation: The F value is >F crit value, therefore the null hypothesis is rejected at 5% level of significance. Hence it can be concluded that there is significant difference between total commission to total operating expense ratio of the public and private sector life insurance companies. The private sector life insurance companies lure the agents with huge commission especially on ULIP. Commission given by private life insurance companies on an average ranges from 15% to 20% on ULIP while LIC of India on an average gives commission on traditional plans between 5% to 10%.Thus commission becomes a major part of the operating expense for private life insurance companies. This also reflects bad financial planning in case of private sector life insurance companies.

Table : XXI Actuarial efficiency

Sources of variation
Between samples

Sum of squares
0.50

Degree of freedom
h-1=2-1=1

Mean square
0.50

F value

F(crit) value
4.41

Ho R/A
R

250

Within samples

0.03

N-h=20-2=18

0.002

Total

0.53

N-1=20-1=19

Observation: The F value is >F crit value, therefore the null hypothesis is rejected at 5% level of significance. Hence it can be concluded that there is significant difference in actuarial efficiency ratio of the public and private sector life insurance companies. Life Insurance Corporation of India has won the trust of its policyholders by being more efficient in payments of benefits. The private sector life insurance companies have to improve their actuarial efficiency and win the trust and loyalty of its policyholders.
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Table : XXII Current ratio

Sources of variation
Between samples

Sum of squares
5.91

Degree of freedom
h-1=2-1=1

Mean square
5.91

F value

F(crit) value
4.41

Ho R/A
R

12.85

Within samples

8.29

N-h=20-2=18

0.46

Total

14.20

N-1=20-1=19

Observation: The F value is >F crit value, therefore the null hypothesis is rejected at 5% level of significance. Hence it can be concluded that there is significant difference between current ratio of the public and private sector life insurance companies. The liquidity position of public sector is much better than the private sector life insurance companies. The private sector life insurance companies have to improve their current ratio and thus their liquidity position.

table: XXIII Proprietary ratio

Sources of variation
Between samples

Sum of squares
0.80

Degree of freedom
h-1=2-1=1

Mean square
0.80

F value

F(crit) value
4.41

Ho R/A
R

16

Within samples

0.94

N-h=20-2=18

0.05

Total

1.74

N-1=20-1=19

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Observation: The F value is >F crit value, therefore the null hypothesis is rejected at 5% level of significance. Hence it can be concluded that there is significant difference between Proprietary ratio of the public and private sector life insurance companies. The proprietary ratio of the public sector is much better than private sector life insurance companies. This reflects the financial strength of Life Insurance Corporation of India and its solvency is better than private sector life insurance companies.

table: XXIV Total investment to total liability

Sources of variation
Between samples

Sum of squares
0.09

Degree of freedom
h-1=2-1=1

Mean square
0.09

F value

F(crit) value
4.41

Ho R/A
R

15

Within samples

0.10

N-h=20-2=18

0.006

Total

0.19

N-1=20-1=19

Observation: The F value is >F crit value, therefore the null hypothesis is rejected at 5% level of significance. Hence it can be concluded that there is significant difference between total investment to total liability ratio of the public and private sector life insurance companies. Life Insurance Corporation of India has been able to manage its funds well as compared to private life insurance companies. This shows that Life Insurance Corporation of India is more efficient in managing its investments.

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5.6 Cost Efficiency of Life Insurance Companies 5.6.1 Cost Efficiency Score of Life Insurance Companies Table : XxV Cost Efficiency Score
LIFE Insurer 2000- 2001- 2002- 200301
HDFC standard Life Insurance Co.Ltd. MAX NEW YORK Life Insurance Co.Ltd. ICICI Prudential Life Insurance Co.Ltd. Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd. TATA AIG Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. ING Vysya Life Insurance Co. Ltd. NA 0.2851 0.4034 0.4592 0.0210 0.0585 0.0696 0.0276 0.0834 0.1572 NA 1 1 1 1 1 1 0.0692 0.1607 1 NA 0.1684 0.3668 0.4337 0.0104 0.0325 0.0447 0.0159 0.0319 0.0639 1 0.1418 0.2616 0.3875 0.0156 0.0412 0.0453 0.0191 0.0217 0.0464 NA 0.1786 0.3796 0.5342 0.0409 0.1245 0.1795 0.0283 0.0460 0.1596 0.2979 0.0866 0.1340 0.1840 0.0137 0.2018 1 0.0043 1 1 1 0.0795 0.2081 0.2875 0.0120 0.0292 0.0302 0.0128 0.0186 0.0438 1 0.1689 0.3341 0.5415 0.0139 0.0889 0.1123 0.0126 0.0220 0.0450

Year
200405 200506 200607 200708 200809 200910

02

03

04

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BAJAJ ALLIANZ Life Insurance Co. Ltd. MET Life India Insurance Co. Ltd. Reliance Life Insurance Co. Ltd. AVIVA Life Insurance Co.Ltd. SAHARA India Life Insurance Co.Ltd. SHRIRAM Life Insurance Co.Ltd. Bharti Axa Life Insurance Co.Ltd. Future Generali India Life Insurance Co.Ltd. IDBI Fortis Life Insurance Co. Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Co.Ltd. NA NA NA NA NA NA NA NA 0.1636 0.1923 NA NA NA NA NA NA NA 1 0.5723 0.4087 NA NA NA NA NA NA NA 1 0.1258 0.1334 NA NA NA NA NA NA 1 0.0340 0.0634 0.1362 NA NA NA NA NA 1 0.8816 0.3020 0.5024 0.3525 NA NA NA NA 1 1 1 0.5944 0.7708 1 NA NA 0.7994 0.4541 0.0164 0.0371 0.0381 0.0166 0.0504 0.1332 NA 1 1 1 0.1551 1 0.0812 0.0112 0.0131 0.0805 NA 1 1 1 0.0521 0.0932 0.0664 0.0258 0.0414 0.0706 NA 0.2649 0.3492 0.3623 0.0121 0.0249 0.0162 0.0064 0.0169 0.0322

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Argon Religare Life Insurance Co.Ltd. DLF premercia Life Insurance Co.Ltd. Star Union Dai-Ichi Life Insurance co. Ltd. India First Life Insurance Co. Ltd. NA NA NA NA NA NA NA NA NA 1 NA NA NA NA NA NA NA NA 1 0.9334 NA NA NA NA NA NA NA NA 1 1 NA NA NA NA NA NA NA NA 0.2458 0.4562

LIC of India.

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5.6.2 Ranks given to Life Insurance Companies based on Cost Efficiency Score Table : XXVI Ranks given to life insurance companies based on Cost Efficiency Score Year

Life Insurer 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 200901
HDFC standard Life Insurance Co.Ltd. MAX NEW YORK Life Insurance Co.Ltd. ICICI Prudential Life Insurance Co.Ltd. Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd TATA AIG Life Insurance Co. Ltd NA 9 8 9 14 13 13 13 17 19 1 10 11 10 9 11 12 11 19 20 NA 7 7 6 6 7 7 8 15 12 5 11 13 13 11 6 1 18 1 1 1 12 12 12 13 14 15 14 20 22 1 8 10 5 10 9 8 15 18 21

02

03

04

05

06

07

08

09

10

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SBI Life Insurance Co. Ltd ING Vysya Life Insurance Co. Ltd BAJAJ ALLIANz Life Insurance Co. Ltd MET Life India Insurance Co. Ltd. Reliance Life Insurance Co. Ltd AVIVA Life Insurance Co.Ltd. SAHARA India Life Insurance Co.Ltd. SHRIRAM Life Insurance Co.Ltd. Bharti Axa Life Insurance Co.Ltd. Future Generali India Life Insurance Co.Ltd. NA NA NA NA NA NA NA 1 11 15 NA NA NA NA NA NA 1 7 13 14 NA NA NA NA NA 1 6 5 7 10 NA NA NA NA 1 1 1 4 5 1 NA NA 5 8 8 12 14 12 14 16 NA 1 1 1 4 1 9 16 22 17 NA 1 1 1 5 8 11 10 16 18 NA 6 9 11 12 15 16 17 21 23 NA 5 6 7 7 10 10 9 12 13 NA 1 1 1 1 1 1 6 10 1

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IDBI Fortis Life Insurance Co. Ltd. Canara HSBC Oriental Bankl of Commerce Life Insurance Co.Ltd. Argon Religare Life Insurance co.Ltd. DLF premercia Life Insurance Co.Ltd. Star Union Dai-Ichi Life Insurance co. Ltd. India First Life Insurance Co. Ltd. NA NA NA NA NA NA NA NA NA 1 NA NA NA NA NA NA NA NA 1 7 NA NA NA NA NA NA NA NA 1 1 NA NA NA NA NA NA NA NA 8 8 NA NA NA NA NA NA NA NA 9 11 NA NA NA NA NA NA NA 1 6 9

LIC of India.

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Table : XXVII Descriptive statistics of Cost Efficiency Score Year

Particulars 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 200901 02 03 04 05 06 07 08 09 10
Total Life Insurers 05 12 13 13 14 15 16 18 22 23

Total efficiency 4.2979 5.3738 7.2362 7.6440 3.3632 5.7318 6.5651 4.1802 6.9502 9.4451

Mean Cost Efficiency 0.8596 0.4478 0.5566 0.5880 0.2402 0.3821 0.4103 0.2322 0.3159 0.4107

Total Private Life Insurer 04 11 12 12 13 14 15 17 21 22

Total Private insurer efficiency Mean Cost Efficiency of Private Life Insurers Standard Deviation 0.3140 0.4121 0.3435 0.3010 0.4135 0.4545 0.4583 0.3822 0.3859 0.4076 0.8245 0.3976 0.5197 0.5537 0.1818 0.3380 0.3710 0.1871 0.2833 0.3839 3.2979 4.3738 6.2362 6.6440 2.3632 4.7318 5.5651 3.1802 5.9502 8.4451

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Table : XXVIII Cost Efficient Life insurance companies

Cost Year Efficiency Score HDFC Standard Life Insurance Co.Ltd 2000-01 1 MAX NEW YORK Life Insurance Co.Ltd. Birla Sun Life Insurance Co.Ltd. Life Insurance Corporation of India SBI Life Insurance Co.Ltd. 2001-02 1 MET Life India Insurance Co.Ltd. Reliance Life Insurance Co.Ltd. Life Insurance Corporation of India SBI Life Insurance Co.Ltd. 2002-03 1 MET Life India Insurance Co.Ltd. Reliance Life Insurance Co.Ltd. Life Insurance Corporation of India SBI Life Insurance Co.Ltd. 2003-04 1 MET Life India Insurance Co.Ltd. Reliance Life Insurance Co.Ltd. Life Insurance Corporation of India SBI Life Insurance Co.Ltd. 2004-05 1 SAHARA India Life Insurance Co.Ltd. Life Insurance Corporation of India SBI Life Insurance Co.Ltd. Reliance Life Insurance Co.Ltd. 2005-06 1 SAHARA India Life Insurance Co.Ltd. SHRIRAM Life Insurance Co.Ltd. Life Insurance Corporation of India Life Insurer

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ICICI Prudential Life Insurance Co.Ltd SBI Life Insurance Co.Ltd. 2006-07 1 SAHARA India Life Insurance Co.Ltd. BHARTI AXA Life Insurance Co.Ltd. Life Insurance Corporation of India FUTURE GENRALI Life Insurance Co.Ltd. 2007-08 1 IDBI FORTIS Life Insurance Co.Ltd. Life Insurance Corporation of India ICICI Prudential Life Insurance Co.Ltd DLF pramercia Life Insurance Co.Ltd 2008-09 1 Star Union Dai-Ichi Life Insurance Co.Ltd Life Insurance Corporation of India ICICI Prudential Life Insurance Co.Ltd SBI Life Insurance Co.Ltd. 2009-10 1 SAHARA India Life Insurance Co.Ltd. DLF pramercia Life Insurance Co.Ltd India First Life Insurance Co.Ltd Life Insurance Corporation of India Observation: Table XXV, XXVI, XXVII and XXVIII shows the cost efficiency score of life insurance companies, ranks on the basis of cost efficiency score, descriptive statistics of cost efficiency score and cost efficient life insurance companies respectively.

It can be seen that Life Insurance Corporation of India has consistently secured a cost efficiency score of 1 in all the years from 2000-01 to 2009-10 and scored the highest rank for all the years under study. Thus Life Insurance Corporation of India has consistently been a cost efficient organization. While in the case of the private life insurance companies, the cost efficiency score has been inconsistent. Except for SBI Life insurance company which has secured a cost
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efficiency score of 1 in seven years out of ten years but in 2008-09 it has slipped to the 10th rank. Undoubtfully, Life Insurance Corporation of India has maintained higher score than Mean Cost Efficiency and secured 1st rank from 2000-01 to 2009-10.Thus Ho is rejected and we can conclude that cost efficiency score of all life insurance companies is not equal.

The findings show a significant heterogeneity in the cost efficiency scores from 2000-01 to 2009-10.In the year 2009-10, ICICI Prudential Life Insurance Co. Ltd., SBI Life Insurance Co. Ltd., SAHARA India Life Insurance Co.Ltd., DLF pramercia Life Insurance Co. Ltd. , India First Life Insurance Co. Ltd. and Life Insurance Corporation of India were fully cost efficient firms as they had secure a cost efficient score 1. Star Union Dai-Ichi Life Insurance Co. Ltd. is close to a cost efficient score of 1 while the other private life insurance companies should have reduced their cost by: HDFC standard Life Insurance Co.Ltd.(0.9550), Max New York Life Insurance Co. Ltd.(0.9562), Kotak Mahindra Life Insurance Co.Ltd.-(0.8404), Birla Sun Life Insurance Co.Ltd. (0.9536), TATA AIG Life Insurance Co.Ltd. (0.9361), ING Vysya Life Insurance Co. Ltd.(0.8428), BAJAJ Allianz Life Insurance Co. Ltd.(0.9678), MET Life India Insurance Co. Ltd. (0.9294), Reliance Life Insurance Co. Ltd.(0.9195), AVIVA Life Insurance Co.Ltd. (0.8668), Shriram Life Insurance Co. Ltd. (0.6475), Bharti Axa Life Insurance Co.Ltd.(0.8638), Future Generali Life Insurance Co.Ltd. (0.8666), IDBI Fortis Life Insurance Co.Ltd. (0.5913), Canara HSBC Oriental Bank of Commerce Life Insurance Co.Ltd. (0.8077), Argon Religare Life Insurance Co. Ltd. (0.5438) to produce the same amount of output.

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