LIFE INSURANCE INDUSTRY IN INDIA AN OVERVIEW

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LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW

• T.S.VIJAYAN
• Chairman, LIC of India
• President, Insurance Institute of India

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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

• 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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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.

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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.

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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

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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.

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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.

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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.

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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?

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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.

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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.

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LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW

• Thank You