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LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW. T.S.VIJAYAN Chairman, LIC of India President, Insurance Institute of India. LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW. THEME OF THE PRESENTATION Future challenges in Life Insurance Business in India.

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LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW

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  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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