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LIFE INSURANCE INDUSTRY IN INDIA AN OVERVIEW

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Title: LIFE INSURANCE INDUSTRY IN INDIA AN OVERVIEW


1
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • T.S.VIJAYAN
  • Chairman, LIC of India
  • President, Insurance Institute of India

2
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • THEME OF THE PRESENTATION
  • Future challenges in Life Insurance Business in
    India

3
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • India is the seventh largest country in the world
    with a population of around 1100 million.
  • India is the second most populous country in the
    world, next only to China.
  • It has 28 states and 7 Union Territories with
    distinct cultural backgrounds.
  • India is known for its diversity with multi
    varied socio-economic conditions and languages.
    It has many geographical features and a rich
    history.
  • India is the largest democratic country in the
    world with a strong judicial framework.

4
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • The middle class segment is 250 million strong.
    It has aspirations and is ambitious.
  • India has the 4th largest economy based on
    Purchasing Power Parity.
  • Indian GDP is growing at an average of 9 over
    the last few years.

5
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • The total individual policies serviced by all
    life companies in India are around 270 millions
    of which LIC alone has around 250 million.
  • Total premium of all life companies is only about
    4 GDP.
  • It still leaves a lot of potential for the life
    companies to grow and prosper in India.

6
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Since Independence, in 1947 India had followed a
    socialistic pattern of economy, wherein
    government intervention and investment were high.
  • Even then there was a strong private sector
    participation since the time of Independence.

7
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • The history of Life Insurance in India
  • The birth and growth of the Insurance sector in
    India is quite breath taking.
  • 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.

8
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • 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, nationalising 245 life
    insurance companies.

9
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • In 1999, the Insurance Regulatory and Development
    Authority popularly known as IRDA was created by
    an act of the Parliament to regulate all
    insurance companies and businesses in India.
  • IRDA has evolved into an effective regulator and
    it has facilitated the entry and growth of
    private players in the insurance sector.
  • Since then the growth of the insurance industry
    in India has never been the same again.

10
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Life Insurance is a sun rise industry in India.
  • Many major international players are operating
    in collaboration with Indian partners. The Joint
    Ventures are backed by strong capital base and
    latest technology.
  • The sector was opened up for private players in
    the year 2000. Currently there are 19 companies
    operating in India in addition to LIC of India.
  • I am proud to state that LIC is the dominant
    player.

11
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • LIC Highlights
  • Assets as on 31.03.2008 185 billion
  • No. of policies 250 million
  • No. of employees 1,13,000
  • No. of agents 1.2 million

12
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • After opening up of the sector the life insurance
    industry has grown leaps and bounds. The industry
    has earned 45 billion total premium income
    during the F.Y 2007-08.
  • The life insurance companies are the largest
    institutional investors in India.

13
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • 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.

14
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Innovative and market driven products are being
    offered by all the companies.
  • All companies are building the distribution
    channels with strong tied agency network.
  • Alternate distribution channels are also being
    developed in order to strengthen the overall
    process of procuration of business and deliver of
    service.
  • India has a total of 2.5 million agents of which
    50 are with LIC alone.
  • There is a sharp increase in the remuneration of
    life insurance professionals

15
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Challenges Many
  • Professionals and experts are in short supply.
    Man power requirement has increased manifold.
  • Increase in salaries to employees leading to high
    levels of attrition. Retention of employees is a
    major challenge.

16
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Challenges Many
  • India being a vast country and with huge
    population, is a challenge for the life
    companies.
  • Designing products for the people of various
    economic strata is a daunting task indeed.

17
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Prosperity of all companies depends upon their
    capability to innovate and include all sections
    of the society into their business portfolio.
  • Micro Insurance and financial inclusion will be
    major challenges for all the companies.
  • There is a shift from traditional endowment
    policies to unit linked policies.

18
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • There is a shift from long term policies to short
    term.
  • Customers are expecting higher returns and
    thereby a strong emphasis on unit linked plans.
  • When stock markets are volatile can the life
    insurance companies overcome the turbulence? Are
    they equipped to tide over the storm?

19
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • One of the key drivers of the Indian economy has
    been the dramatic increase of the urban
    population.
  • Urban India today is already more populous than
    the entire United States. By 2025, it will exceed
    the current population of the European Union.
  • Apart from this, the real potential lies in the
    rural India where prosperity is on the rise
  • Go Rural is the slogan for most of the companies
    in India today.

20
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Key Issues
  • Building institutions for development of self
    regulation for better market conduct
  • Development professionalism and organising
    research for industry to develop on scientific
    lines
  • Ensuring profitability and return to stakeholders
    by cost competitive policies.

21
LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW
  • Thank You
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