Challenges in Insurance Operation in India

A Presentation
on
‘ Challenges in Insurance Operations in India’
By B.R.Gupta
Former Executive Director LIC
Former Consultant GIC of India
Advisor Schoolnet India Ltd.
Networked LearningTM Technology. Content. Training. Services.

Concept, Need, Purpose of Insurance
– Insurance is a Risk Management Tool - a great Human

Invention
– In Insurance ‘Risk’ of ‘Unfortunate Few’ Individuals, Families,

Businesses is ‘transferred’ & ‘shared’ by a large Community of
Policy Holders who face similar risk out of the pool of
contributions received by the insurer
– Insurance provides ‘Financial Security’ & ‘Protection’ against

Loss, Damage, Injury caused to ‘Life’, ‘Property’ & ‘Limb’ by
circumstances beyond human control
– Insurance is good for Individuals, good for Families, good for

Society, good for Nation at large
Classification of Insurance
–Insurance Business is broadly classified into 2 categories

• Long Term Business ( Life Insurance)
• General Insurance Business ( Non-Life Insurance)
–Life Insurance Business consists of
• Individual Insurance Plans
• Group Insurance Schemes
• Unit Linked Insurance
• Life Annuities
– Non Life Insurance consists of
• Fire Insurance
• Marine Insurance
• Misc. Insurance e.g. Personal Accident Insurance
• Health Insurance, Disability Insurance, Liability Insurance

Reinsurance
– Insurers insure the insured
– In Reinsurance Insurer insures the Insurer
– Reinsurance is both for Life & General Insurance

Origin & Development of Insurance
– Oriental Life Insurance Co. set up at in Calcutta in

1818 was the first Life Insurance Co. in India
– At the time of Nationalisation of Life Insurance

Industry in 1956, there was 245 Companies which
were all merged into LIC of India.
– General Insurance Industry was Nationalised in

1972, when GIC of India & four subsidiary
Companies were formed by merging 107 Companies

Origin & Development of Insurance
– With the enactment of IRDA Act 1999, Life

Insurance & General Insurance Business was opened
up for Private Sector with 26% participation by the
Foreign Cos.
– Presently we have 14 Life Insurance Companies, 11

Non Life Insurance Companies & one Reinsurance
Co. in India

Origin & Development Insurance
– During the Financial Year 2001-2002, the Business

Highlights of Life Insurance Companies including LIC
were as under
App.
• Total Number of Policies sold during the year -- 2.35 Crore
• Total Number of Policies serviced as at 31/3/2002 - - 13 Crore
• Total Number of Lives Covered under Group Insurance
scheme as at 31/3/2002 - - 2.5 Crore
• Total Amount of Premium collected during the year -- Rs.15,000 Crore
• Total Number of Claims Paid during the year -- 87 lacs
• Total Amount of Claims Paid during the year - - Rs.14,500 Crore
• Assets under Management with Life Insurance Co. - - Rs.2,30,000
Crore
For Non Life Companies
App.
Total Premium Collected during the year - Rs. 12,000 Crore
Total Assets Managed by Non Life Insurance - Rs. 35,000 Crore

Life Insurance Potential
App.
–Insurable Population - 40 Crore lives
–Tapped Potential - 10 Crore lives
–Untapped Potential - 30 Crore live
–Additional Potential - 2 Crore lives per year
–Per Capita Life Insurance Premium - Rs. 500
–Life Insurance Penetration - 2% of GDP
–General Insurance Penetration - 0.5% of GDP
–Scope for Insurance - Vast & Unlimited

Some Key Statistics : Size of Funds
App.
– Insurance Assets : Rs.2.65 lac Crore
– Bank Deposits : Rs.11.80 lac Crore
– UTI & Mutual Fund Assets : Rs.1.20 lac Crore
– Provident Funds : Rs.2.50 lac Crore

Life Insurance Organisation
App.
– Number of Offices : 2,200
– Number of Employees : 1,25,000
– Number of Agents : 10,00,000

Important Functionaries
–Actuaries (Fellow of Actuarial Society of India)

–Underwriters
–Marketing (Sales & Services) Team
–Investment Management Team
–Finance & Accounts Department
–Technology Support Department
–Legal Experts

Diverse Insurance Products
–Individual Life Insurance Products
Term, Whole Life, Endowment, Marriage

Endowment, Joint Life Endowment, Money Back,
Children Plans
–Voluntary Pension Plans - Life Annuities
Immediate, Deferred, Life, Guaranteed, Joint Life

Survivor.

Diverse Insurance Products
– Unit Linked Plans
– Group Insurance Plans / Group Super annuation /

Group Annuity Plans
– KeyMan Insurance
– Partnership Insurance
– Mortgage Redemption Insurance
– Social Security Schemes

Non-Life Products
–Fire Insurance
–Marine Insurance
–Motor Insurance -------- Compulsory Insurance
–Theft Insurance
–Business ‘All Risks’ Insurance
–Goods-in-transit Insurance
–Money Insurance
Non-Life Products
–Personal Accident Insurance
–Health Insurance
–Engineering Insurance
–Liability Insurance ------ Compulsory Insurance
–Loss of Profit Insurance
–Live Stock Insurance
–Agricultural Insurance
Product Innovations/Riders
With the opening up of the Insurance Sector, New Players

have come out with ‘Offering Mix’ by way of ‘Riders’ to Life
Insurance Policies such as-
- Accidental Death Benefit Rider
- Accelerated Death Benefit Rider
- Disability Income Benefit Rider
- Waiver of Premium Benefit Rider
- Critical Illness Rider
- Long Term Care Benefit Rider
- Surgical Procedure Benefit Rider
- Insurance Linked with Bank Deposits / Credit Cards

Distribution Channels / Insurance
Intermediaries
a) Tied Insurance Agents - Part time, Whole time, Career
Agent
.Individual
.Firms
.Corporates
.Non Banking Finance Co.
.Commercial Banks ---- ’ Bank Assurances’
.Co-Operative Sector Banks
.Co-Operative Societies
– Composite Insurance Agent

b)Direct Broker / Reinsurance Broker / Composite Broker
50 lacs 2 Crore 2.5 Crore Networth
. Individuals
. Firms
. Corporates
. Cooperative Society
– Insurance Broker work exclusively for Insurance Business
on behalf of clients but are remunerated by the Insurers /
Reinsurers & not by Clients
– Insurance Broking is a new concept in Indian Insurance /
Reinsurance Market

c) Insurance Surveyors / Loss Adjusters / Loss Assessor /
in Non life
d) Third Party Administrator in Health Insurance
e) Insurance Consultants -
f) Direct Selling of Insurance Products

Key Success Factors in Competitive
Environment
– Proper Underwriting Standards, Selection of
Risks
– Appropriate pricing of Products & Services
– Tailor made Products for Individuals, Families,

Traders, Businesses, Industries
– Strong, Motivated Marketing Team of

Professionals

Key Success Factors in Competitive
Environment
– Stable & Consistent ‘Best’ Returns on Investment

of Funds
– Lowering of Expenses through ‘Superior

Technology’ etc
– Rendering Prompt and Efficient service including

claim settlements

Future for Insurance Industry in India
– Awareness about concept, need, purpose of Insurance

will increase
– Insurance penetration levels which are comparatively

low will improve
– Fast growth in ‘Pension Markets’, Health Insurance

Markets

Future of Insurance Industry in India
– With the entry of Major International Players as

Joint Venture partners in the Indian Insurance,
Pension, Health Markets, distinguishing Products &
services will be available
– Insurance Industry will provide huge long term funds

for infrastructure development of the country
– There will be ample opportunities for Marketing,

Finance & H.R. Professionals like you.

Thanks

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A Presentation

‘ Challenges in Insurance Operations in India’

Networked LearningTM Technology. Content. Training. Services.

– Insurance is a Risk Management Tool - a great Human

– In Insurance ‘Risk’ of ‘Unfortunate Few’ Individuals, Families,

– Insurance provides ‘Financial Security’ & ‘Protection’ against

– Insurance is good for Individuals, good for Families, good for

–Insurance Business is broadly classified into 2 categories

Networked LearningTM Technology. Content. Training. Services.

– Insurers insure the insured

– In Reinsurance Insurer insures the Insurer

– Reinsurance is both for Life & General Insurance

Networked LearningTM Technology. Content. Training. Services.

– Oriental Life Insurance Co. set up at in Calcutta in

– At the time of Nationalisation of Life Insurance

– General Insurance Industry was Nationalised in

Networked LearningTM Technology. Content. Training. Services.

– With the enactment of IRDA Act 1999, Life

– Presently we have 14 Life Insurance Companies, 11

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– During the Financial Year 2001-2002, the Business

Total Premium Collected during the year - Rs. 12,000 Crore

Total Assets Managed by Non Life Insurance - Rs. 35,000 Crore

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Networked LearningTM Technology. Content. Training. Services.

– Insurance Assets : Rs.2.65 lac Crore

– Bank Deposits : Rs.11.80 lac Crore

– UTI & Mutual Fund Assets : Rs.1.20 lac Crore

– Provident Funds : Rs.2.50 lac Crore

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– Number of Offices : 2,200

– Number of Employees : 1,25,000

– Number of Agents : 10,00,000

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–Actuaries (Fellow of Actuarial Society of India)

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–Individual Life Insurance Products

Term, Whole Life, Endowment, Marriage

–Voluntary Pension Plans - Life Annuities

Immediate, Deferred, Life, Guaranteed, Joint Life

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– Unit Linked Plans

– Group Insurance Plans / Group Super annuation /

– Mortgage Redemption Insurance

– Social Security Schemes

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–Motor Insurance -------- Compulsory Insurance

–Business ‘All Risks’ Insurance

–Personal Accident Insurance

–Liability Insurance ------ Compulsory Insurance

–Loss of Profit Insurance

–Live Stock Insurance

With the opening up of the Insurance Sector, New Players

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– Composite Insurance Agent

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d) Third Party Administrator in Health Insurance

f) Direct Selling of Insurance Products