The document discusses several major players in the Indian general insurance market, including Bajaj Allianz, ICICI Lombard, TATA-AIG, National Insurance, and New India Assurance. It provides details on the sectors and products each company deals in, such as motor, health and home insurance. Bajaj Allianz and TATA-AIG are joint ventures between Indian and international companies. ICICI Lombard is a joint venture between ICICI Bank and Fairfax Financial Holdings. The document highlights the growth of the non-life insurance sector in India and the business potential that remains untapped.

1. UDAY SINGH MEENA
UDAY BHARATHA REDDY
UDIT KHANDELWAL
UDIT KUMAR
UDIT NARAYAN SINGH
1
Insurance Industry

2. Insurance
2
 We face a lot of risks in our daily lives. Some of these
lead to financial losses. Insurance is a way of
protecting against these financial losses. For a
payment (premium), an insurance company will take
the responsibility of compensating your financial
losses

3. INTRODUCTION AND
OVERVIEW
3
Insurance Sector

4. Insurance Introduction
4
What is “insurance”?
Why do we need it?
How has the insurance industry
and the law of insurance evolved?

5. What is “Insurance”?
5
 Commercial mechanism for transferring risk and
spreading loss
 Economic Concept of Insurance:
1. Insurer offers policy to cover specified risks
2. Insurer collects policy premiums from
customers
3. Insurer invests premiums
4. Insurer pays money to insured customers in
the event of losses covered by policy.

6. What is “Insurance”
6
 Theoretically, everybody comes out ahead (so long as
losses do not exceed returns of invested premiums;
and all parties honor their contractual obligations).
 Theoretically, the insurance industry bridges private
interests and public good.

7. Why do we need insurance?
7

8. Why do we need insurance?
8

9. Insurance Law
9
Sources of Insurance Obligations
 Policy/Insurance Agreement
 Common Law (contract theories; tort theories)
 Statutes
 Regulations
The law of insurance is multi-layered. The prudent
researcher will consider each of the layers when
approaching a research problem.

10. HISTORICAL CONTEXT PROVIDES INSIGHT
AND
PERSPECTIVE INTO TODAY’S INSURANCE
INDUSTRY
10
The History of Insurance

11. The History of Insurance
11
 3000 B.C.E. Mesopotamian merchants assess “risk
surcharges” in transactions with caravan operators
and traders to protect their capital.
 1750 B.C.E. Code of Hammurabi formalizes
concepts of “bottomry” and “respondentia”
(protection against loss of hull and cargo,
respectively) – the underpinnings of maritime
insurance.

12. History of Insurance
12
 1574 Queen Elizabeth I grants to Richard Candler
the right to establish an insurance office in the Royal
Exchange Building for the preparation and
registration of policies.
 1601 Britain’s Parliament enacts the Assurances Act
of 1601 creating an assurance commission for
resolving policy disputes. 43 Eliz. 1 c. 12.

13. History of Insurance
13
 1666 Great Fire of London. Shortly thereafter,
Nicholas Brabon opens the first fire insurance office
in England. It eventually becomes The Phoenix
Assurance Company. Over the next two decades,
more fire insurance companies start up.

14. History of Insurance
 1690s Fire
insurance
companies form
the first
professional fire
brigades.
14

15. Lloyd’s of London
 Late 1600s
Edward Lloyd’s
Coffee House.
Seafarers,
merchants and
insurers meet for
insurance business
and coffee.

16. Lloyd’s of London
 1688 Edward Lloyd
starts a shipping
newspaper and reads
out shipping news
from a pulpit in his
coffee house; attracts
even more shipowners
and insurers
16

17. History of Insurance
 1751 Benjamin
Franklin and other
capitalists start the
Philadelphia
Contributorship,
the first successful
fire insurance
company in
America.

18. History of Insurance
18
 Mid-18th Century Many insurance companies are
more likely than banks to have substantial cash
reserves. Insurance companies function as lending
institutions.
 Mid-18th Century Insurance underwriting is
prosperous industry in America. Lloyd’s of
London also draws a significant share of Colonial
America’s underwriting business (capitalization).

19. Rise of Risk Management
 1906 S.F.
Earthquake
Lloyd’s underwriter,
Cuthbert Heath,
orders agents to
“pay all claims in
full regardless of
policy terms”.
Lloyd’s pays $50
Million in claims.

20. Rise of Risk Management
 Public confidence in
insurance industry
soars; industry booms;
risk management
innovations; new types
of insurance emerge.
20

21. Lloyd’s of London
 Today, Lloyd’s of
London is an
insurance icon
 Not an insurance
company, but an
exclusive insurance
market

22. PRE TO POST
LIBERALIZATION
22
Changing Customer Expectations
in Insurance Sector

23. Comparisons of factors influencing Insurance market
23
Pre Liberalisation Post Liberalisation
Motivating Factor(s) for Considering Insurance
• Security 43%
• Savings 14%
• Tax Rebate 43%
• Security 50%
• Savings* 34%
• Tax Rebate 16%
* children’s education, daughter’s marriage, retirement plan
Sources of Information on Insurance & Product Awareness
• Friends, Colleagues, Relatives and Agent
• Low awareness of several insurance products
due to poor communication in spite of availability
• Additionally from direct mailers, consumer
meets, internet & media (mass media & outdoor)
• Rising level of awareness of new products of both LIC
and private companies
Choice of First Policy
• Money Back 60%
• Endowment 40%
• Whole Life 0%
• Money Back 42%
• Endowment 48%
• Whole Life 10%
This change in product-mix reflects maturing of the
insurance customer

24. Pre Purchase Process : LIFE
24
Pre Liberalisation Post Liberalisation
Approach of the Agent and Consumer’s Experience
• Approach of Agent - informal and through
referral
• Long term family type of relationship
• Often selling insurance as commodity
• Average communication skills
• Approach - more professional, sometimes
aggressive (in one or two private company
agents)
• Proactive in contacting prospects directly,
often has to start from selling concept of
insurance rather than product
• Conducts financial health check up and then
offers suitable products / solutions
• Better communicator & presenter
• Handles larger number of queries
Awareness & Consideration of Private Players
Private Companies Overall SECA SEC B SEC C
Awareness 73% 93% 83% 50%
Consideration 35% 65% 30% 10%
• SEC B & C prospect not influenced much by direct contact of agent and generally takes decision only after
consulting informed family member or friend.

25. Awareness of New Products- LIFE
25
 Though most SEC A & some SEC B customers have generally heard of change in
product offering after liberalization but unable to provide any details.
 Only some customers have mentioned new products such as
 Products with multiple riders-medical, accident, waiver of premium rider
 Pension/retirement benefit plans
 Flexi premium plans – product with single premium and short time premium option
 Some customers exposed to new products perceive new products similar to old ones
and do not offer any additional advantage.
“ New policies are like old wine in new bottle”

26. Purchase Process : LIFE
26
Pre Liberalisation Post Liberalisation
Discount Offering Practices
• No. of customers getting discount : 50%
• Rate of discount : 25%-50% of first year premium
• Customers getting discount : 33% (highest in
Delhi)
• Rate of discount : More or less same
Policy Delivery
• Mode
- Registered post for LIC, hand delivered by
agent in 23% cases
• Time taken
Up to 1 week 0%
One month 65%
> 1 month 35%
• Mode
- Registered post for LIC
- Courier for private companies
• In both cases, policy comes in attractive,
protective plastic jacket
• Time taken LIC Private Co
Up to 1 week 5% 85%
Up to one month 77% 15%
> 1 month 18% 0%

27. Post Purchase Process : LIFE
27
Pre Liberalisation Post Liberalisation
Correspondence (other than premium notice) from Company / Agent
• Generally no correspondence from either
company or agent except for late premium
payment reminder from company
• Agent maintained informal contact with close
customers
• Mailers from both private companies & LIC on
products & services, greeting cards on birthdays,
anniversary and new year
• Phone calls from private company call centres
• Agent in regular contact for offering new
products
Delay in Premium Payment
• Incidence of delay high 30%
(due to irregular receipt of premium notice from
company / reminder from agent)
• Incidence of delay low 15%
(more regular receipt of premium notice from
company / reminder from agent)

28. Changing Customer Expectations - LIFE
28
Role of IRDA
 Educate public on regulatory safeguards, investment guidelines and plough back of profits
(several people had expressed concern about security of their money, credibility of private
insurance company’s investment of funds in foreign markets and repatriation of profits to foreign
countries)
 Inform public on Social and Rural obligations of private players (several people believed that
only LIC was responsible for insuring the poor)

29. Changing Trends in Savings Pattern
29
Pre Liberalisation Post Liberalisation
Saving Instruments % of Respondents
Insurance 23
Bank Deposit 28
PPF 19
NSC 12
Shares 7
Post office 7
Bonds 0
Gold 4_
TOTAL 100
Saving Instruments % of Respondents
Insurance 33
Bank Deposit 44
PPF 8
NSC 0
Shares 3
Post office 3
Bonds 9
Gold 0_
TOTAL 100
* When the respondents were asked where they would invest their extra
income, if any, the top responses were recorded as above

30. Other Non-life Policies (Health, Property, Accident)
30
 Awareness of Tata AIG, ICICI Lombard, Cholamandalam, Bajaj Allianz and Royal
Sundaram among private companies
 No respondent interviewed had taken insurance from any private company
 Respondents did not feel the need to take a separate accident insurance policy, as
most of them perceived it to be covered under life insurance
 Companies regular in sending notice for renewal of policy (pre and post
liberalisation)
 Instances of paying premium by credit card observed (post liberalisation)
 Customers satisfied with both company and agent (pre and post liberalisation)

31. 31
Vehicle Insurance
Accident Claim
 Surveyor comes unannounced and after several days, customer unable to meet him and
explain his case face to face
 Company approves claim for amount much less than repair estimate submitted
 Agent often does not take responsibility to facilitate process of claim settlement
 Owner has to pay repair bill and only then claim payment from company
 Claim settlement takes from 1 to 3 months
Theft or Total Loss
 Claim settlement process lengthy and cumbersome – FIR, RC, road tax and other
documents to be submitted.
 In theft cases, company awaits non-recovery closure of case by police before settling
claim. For this reason claim settlement takes months. General perception is that amount
paid is lower than market value
Claim Settlement Process – NON-LIFE

32. 32
Health Insurance (only one case encountered)
 Hospital bill has to be paid by insured and this causes heavy financial burden
 Claim process involves much paper work - first customer has to send request
to company for sending claim form, then he puts together all bills in original,
doctor’s medical prescriptions and hospital discharge certificate giving history of
illness and treatment and sends these documents along with claim form
 Several queries from company on pre-existence of disease, settlement process
cumbersome and time consuming
No claim settlement encountered in Property and Accident Insurance
Claim Settlement Process – NON-LIFE

33. 33
Motor Vehicle Insurance
 Renewal notice should be received regularly from company/agent
 Collection centres should be set up for depositing renewal cheque
 Premium payment at petrol pumps
 Accident/Total Loss claims should be settled for full estimated value
 Claim should be settled in 30 days
 Inclusion / Exclusion clauses should be explained at the time of issuing
policy to avoid problems at time of claim settlement
Health Insurance
 Non hospitalisation cases should also be entitled for claim settlement
 Pre-existing diseases should be detected through rigorous medical check-up at policy
issue stage, company should not reject claim for this reason later
 Direct payment by company to hospital through TPA arrangement
 Issue Medi-Card so that patient can be admitted in hospital without having
to deposit heavy admission fee
Changing Customer Expectations – NON-LIFE

34. 34
Reasons for not taking Insurance
 Low liquidity in insurance
 Low returns in insurance compared to other investments
 No assured regular source of income of respondent
 Lack of knowledge about insurance process & how it works
Future intention & inclination towards taking Insurance
 Among non-policy holders, SEC A generally not interested in insurance,
prefer other Investments for better returns (bank deposits)
 SEC B & C undecided as yet, may consider insurance in future for family
security reasons, only from LIC ( likely to be money back)
Non Policy Holders (Life)

35. General Insurance
35
 Insurance other than ‘Life Insurance’ falls under the
category of General Insurance. General Insurance
comprises of insurance of property against fire,
burglary etc

36. General Insurance
36
The non-life insurance sector is on an upswing! The
non-life insurance industry in India has grown by
over 16 % p.a. over the last 5 years. There is a vast
business potential that lies untapped, as more and
more cities enter the development phase….

37. INDIAN INSURANCE INDUSTRY
MAJOR PLAYERS OF GENERAL
INSURANCE MARKET
37
Conduct

38. Big Companies of General Insurance
38
 Bajaj Allianz
 ICICI Lombard
 Tata Aig
 National insurance
 New India Assurance
 Oriental insurance

39. Bajaj Allianz
39
 Bajaj Allianz General Insurance Company Limited is a
joint venture between Bajaj Auto Limited and Allianz SE.
Both enjoy a reputation of expertise, stability and strength
Bajaj Allianz today has a network presence in over 200 towns spread
across the length and breadth of the country. From Surat to Siliguri
and Jammu to Thiruvananthapuram, all the offices are
interconnected with the Head Office at Pune.

40. Bajaj Allianz
40
 Dealing in these sectors:-
1. Travel Insurance
2. Health Insurance
3. Corporate Insurance
4. Motor Insurance

41. ICICI - Lombard
41
 ICICI Lombard General Insurance Company Limited is a
74:26 joint venture between ICICI Bank Limited and the
Canada based $ 26 billion Fairfax Financial Holdings
Limited. ICICI Bank is India's second largest bank
 Lombard Canada Ltd, a group company of Fairfax Financial
Holdings Limited, is one of Canada's oldest property and
casualty insurers. ICICI Lombard General Insurance
Company received regulatory approvals to commence
general insurance business in August 2001.

42. ICICI - Lombard
42
 Dealing in three sector:-
1. Health Insurance
2. Motor Insurance
3. Home Insurance

43. Health insurance
43
 A health insurance policy will provide a cover to you
and your family against sudden medical contingency
or bodily injury.

44. Motor Insurance
44
 Motor insurance protects you and your vehicle against
every comprehensible risk related to your vehicle – theft or
damage to it, death of the driver and passengers in an
accident, and damage caused by your vehicle to another
person or property.

45. Home insurance
45
 It is imperative that you secure your home from
natural and man-made catastrophes.
The maximum coverage is up to Rs. 1,00,000 for
up to 6 months. The cover is available only if you
are insuring the structure of your home.

46. TATA-AIG
46
 Tata AIG General Insurance Company Ltd. is a joint
venture company, between Tata Sons and American
International Group
 Tata AIG General Insurance Company, which started
its operations in India on January 22, 2001 offers the
complete range of general insurance for automobile,
home, personal accident, travel, energy, marine,
property and casualty, as well as several specialized
financial lines.

47. TATA - AIG
47
Dealing in three sector:-
1. Individual
2. Small business
3. Corporate

48. Individual
48
“Every stage of life, you are open to immense risk and
immense opportunity and Tata AIG has the ideal
bouquet of insurance products for each of those risks
and opportunities.”

49. Small business
49
Tata AIG offers a comprehensive risk solution
through various Multiline Package Policies:-
 Society Policy
 Office Policy
 Manufacturing Unit – Package Policy

50. Corporate
50
"From blue chips to local marketers,
whatever the size of your business, Tata AIG
has the insurance you are looking for.”
 Accident & Health
 Travel
 Energy
 Property
 Marine

51. National Insurance Company Limited
51
 National Insurance Company Limited was
incorporated in 1906 with its Registered office
in Kolkata. Consequent to passing of the General
Insurance Business Nationalisation Act in 1972, 21
Foreign and 11 Indian Companies were
amalgamated with it and National became a
subsidiary of General Insurance Corporation of
India (GIC) which is fully owned by the
Government of India

52. National Insurance Company Limited
52
 It deals in these policies:-
1. Personal line Insurance
2. Rural Line Insurance
3. Industrial Line Insurance
4. Commercial Line Insurance

53. CONTRIBUTION OF LIFE
INSURANCE SECTOR IN THE
INDIAN ECONOMY
53
Performance

54. STRUCTURE OF INSURANCE INDUSTRY
54
Historical Perspective
(i) Prior to 1956 242 companies operating
(ii) 1956 – 2001 Nationalisation – LIC
Monopoly player
Government control
(iii) 2001 -- Opened up sector

55. Present Structure of Insurance Industry
55
• (i) (a) LIC – Fully owned by Government
(b) Postal Life Insurance

56. Present Structure of Insurance Industry
(contd...)
56
• (ii) Private players -
1. Bajaj Allianz Life Insurance Co. Ltd.
2. Birla Sun Life Insurance Co. Ltd. (BSLI)
3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD
LIFE)
4. ICICI Prudential Life Insurance Co. Ltd. (ICICI
PRU)
5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA)
6. Max New York Life Insurance Co. Ltd. (MNYL)

57. Private players –(contd…)
57
7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE)
8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd.
9. SBI Life Insurance Co. Ltd. (SBI LIFE)
10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)
11. AMP Sanmar Assurance Co. Ltd. (AMP SANMAR)
12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA)
13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)
14. Shriram Sunlam

58. Present Structure of Insurance Industry
(contd...)
58
 (iii) Other likely players –
1. PNB Life Insurance
2. Reliance Life Insurance
3. Axa Bharti Enterprises

59. CONTRIBUTION TO INDIAN ECONOMY
59
 Life Insurance is the only sector which garners long
term savings
 Spread of financial services in rural areas and
amongst socially less privileged
 Long term funds for infrastructure
 Strong positive correlation between development of
capital markets and insurance /pension sector
 Employment generation

60. Aggregation of Long Term Savings
60
(i) Total Assets of Life Insurance Companies
 2002 – 2003 2,80,450 cr
 2003 – 2004 3,52,608 cr
 2004 – 2005 4,23,000 cr
(ii) Total Premium generated
 2002 – 2003 57,708 cr
 2003 – 2004 66,278 cr
 2004 – 2005 79,000 cr
 2005 – 2006 94,000 cr
 2006 – 2007 1,12,000 cr
 2007 – 2008 1,33,000 cr

61. Aggregation of Long Term Savings
61
(iii) Industry is growing @ 19 p.a.
(iv) Life Insurance funds account for 15% of household
savings.
(v) The industry has the potential to increase the share
to 20%.

62. Spread of financial services in rural areas
and amongst socially underprivileged62
• IRDA Regulations provide certain minimum
business to be done
(i) in rural areas
(ii) in the socially weaker sections
• Life Insurance offices are spread over nearly 1400
centres.
• Presence of representative in every tehsil – deeper
penetration in rural areas.

63. Spread of financial services in rural areas
and amongst socially underprivileged
63
• Insurance agents numbering over 6.24 lakhs in rural
areas.
• Policies sold in rural areas (2004-05) –
No. of policies - 55 lakhs
Sum assured - 46,000 crores
• Social security - No. of lives covered
2003-04 17.4 lakhs
2004-05 42.1 lakhs

64. Long term funds for infrastructure
64
• For GDP to grow at 8 to 10%, qualitative
improvement in infrastructure is essential.
• Estimates of funds required for development of
infrastructure vary widely.
• An investment of 6,19,600 crore is anticipated in the
next 5 years (Source : SSKI India)
• Tenure of funding required for infrastructure
normally ranges from 10 to 20 years.
• Major portion of these funds are routed through
debt/private equity participation.

65. Long term funds for infrastructure(contd...)
65
• Part funding through Central Government/State
Government budgetary allocations. Insurance
companies invest in Central/State Government
approved securities which ultimately also used for
infrastructure projects.
• As per IRDA norms, the pattern of investment of life
insurance companies’ funds are
(i) In Central Government, State Government and
other approved securities – not less than 50%
(ii) Infrastructure – 15%

66. Long term funds for infrastructure(contd...)
66
• Investment in the infrastructure projects is a natural
fit for life insurance companies who have long
duration funds. Average Term of Life Policies is 23
years.
• Has investments of over Rs.40,000 cr in
infrastructure.
• It is expected life insurance sector be able to generate
approximately Rs.15,000 cr for infrastructure
investment in 2006-2007 with amount increasing
every year.

67. Development of Capital Markets/Economic Growth
67
•Industry also contributes in economic development
through investments in capital market. Present level
of investments is over Rs. 40,000 crore. (Mark to
Market basis around 80,000 crores).
•Annual Investment of around 9000 crores in capital
markets.
•Contribution to Five Year Plans
9th Plan 2,30,900 crores
Last Two Years 1,70,900 crores
•

68. Development of Capital Markets/Economic Growth
68
Helps inculcate a sense of security by protecting
earning of people in case of untimely death.
Benefits to Policy Holders
2002 – 2003 20,800 cr
2003 – 2004 24,200 cr
2004 – 2005 28,700 cr

69. EMPLOYMENT GENERATION
69
• Life insurance industry provides increased
employment opportunities.
• Employees in insurance sector as on 31st March,
2005 is around 2 lakhs.
• Many agents depend on insurance for their livelihood
– No. of agents on 31st March 2004 – 15.59 lakhs
•Brokers, corporate agents, training establishments
provide extra employment opportunities.
• Many of these openings are in rural sectors

70. SPECIAL FEATURES
70
Capital Intensive Industry
2002 – 03 2003 – 04
(i) Total Income 1631 cr 4053 cr
(ii) Capital employed 2219 cr 3239 cr
(Data excludes LIC)

71. GROWTH POTENTIAL
71
 At present insurance penetration in India is quite
low – 2.26% of GDP.
 In Korea the penetration stands at 6.77%,
 In Singapore – 6.38%.

72. PHASE OF TRANSITION
72
• Life Insurance industry is under the phase of infancy
after 50 years of monopoly
• Competition from within and other sectors of
financial market
• Needs environmental support till it reaches a comfort
zone

73. FICCI CONFERENCE
“INDIAN INSURANCE
INDUSTRY: NEW AVENUES FOR
GROWTH”
NEW DELHI, 19 OCTOBER 2004
73
Indian Insurance Sector

74. INDIA INSURANCE INDUSTRY STATUS
74
Insurance premium
as % of GDP
Insurance premium
per capita (Rs)
2.3%
590
0.62%
160
Number of players 14 14(1)
Premium income
(Rs '000 Cr)
63 17
2004 2004
Life Non-Life
~1.2%
~280
~0.4%
~100
1 4
27.5 9.4
CAGR: 23% CAGR: 16%
2000 2000
India Has Come A Long Way In The Last Four Years
Several new products and channels
(1) Includes 4 nationalised companies
Source: IRDA, Swiss Re

75. Twelfth largest economy in the world (2002)
Real GDP (USD Bn)
Note: Real GDP estimates
Source: EIU, World Bank, Analyst reports, Literature review
180
370
480
500
570
590
670
770
940
1290
1300
1510
1640
2390
Poland
Taiwa
Russia
Mexic
India
Korea
Spain
Canad
Brazil
China
Italy
UK
France
Germa
Japan
USA 10290
4280
Stable and low inflation rates
Average inflation rate from 1999-2002
12.5%
10.0%
6.7% 6.3%
3.8%
0.5% 0.3% 0.0%
Indonesia Brazil India Korea Thailand
Russia Poland Taiwan China
-0.2%
High, steady growth among different economies
GDP CAGR from 1993 to 2002
INDIA'S COMPARATIVE ECONOMIC POSITION IS IMPROVING
Relative to Developed and Developing Economies
75
Stable BoP position (2002)
Current account surplus as a % of GDP
0.3 0.7
-4.4
-3.4
1.9
4.7 5.4
6.3
8.3
India '94 Brazil China Thailand Malaysia
MexicoIndia '02 Indonesia Philippines
-13
-11
-9
-7
-5
-3
-1
1
3
5
7
9
11
13
India's Average GDP
growth (93-02)
India
(93-02)
Taiwan Thailand Malaysia Brazil Japan
% GDP growth
Max
Average
Min
10
-10
-5
5
0
13
-13
India
(83-02)
China S
Korea
HK Mexico UK USA

76. Example: Life insurance penetration increases with affluence
0
2
4
6
8
10
12
0 1 2 31,000 10,000 100,000100
(1) PPP adjusted GDP per capita higher by a factor of ~5-6; lower income categories not shown
Source: Swiss Re; NCAER
Insurance premium
as % GDP
GDP per capita in USD (log scale)
Threshold for
insurance pick-up
Three avenues for growth
Addition of new
customers
Existing customers
buy more
Extension to new
geographies
1
2
3
INDIA
... INSURANCE IS POISED FOR GROWTH
76

77. OVERALL HOWEVER INSURANCE STILL UNDER
PENETRATED ...77
... But still remains # 19 in insurance terms...
... with some product
categories nascent
• Pension scheme
• Annuity scheme
• Health insurance
• Disability and critical illness
insurance
• Professional liability
• Crop insurance
• Income protection
• Credit insurance
17
47
47
50
59
60
112
164
171
247
1055
479
India
...
China
Spain
Netherlands
Canada
S Korea
Italy
France
Germany
UK
Japan
USA1
11
19
Premium income ($ Bn)

78. AS A FULLER PRODUCT LIST COME ON OFFER LATENT
DEMAND WILL GET RELEASED78
Pre 2000
Endowment and money back
policy - ~98% to total premium
income
Products with guaranteed
returns, limited, if any term
Products viewed as necessary
evil for tax-breaks
Personal non-life insurance
products (except motor)
virtually nil
Corporates buying Non life
Today
Variety of products with riders
covering disability,critical
illness, accidents etc.
Increasing acceptance of
variable returns and pure term
products
Unit linked products
New products emerging to
cater to personal needs:
• Health
• Travel (overseas/domestic)
• Household articles
• Building (structure/content)
• Mobile insurance
• Credit insurance
• ...
Tomorrow
Pension scheme
Annuity scheme
Income protection
Increased term
Home building – structure and
contents (penetration in India
~1% v/s ~70% in UK)
Health insurance (penetration
in India 1-2% v/s 10% in UK)
Corporate and professional
liability
Life
Non
Life

79. CUSTOMER AWARENESS IS KEY
79
... due to low awareness for several
types of insurance
17
19
45
9
6
2Theft
Fire
Home
Accident
Health
Auto
% customers with unaided awareness of
different types of insurance in metros
Low penetration of personal non life
products...
2
1
2
39
12
8
Theft
Fire
Home
Accident
Health
Auto
% customers having bought
insurance in metros
Source: Survey of about 306 customers across Delhi, Mumbai and Kanpur conducted in 2002

80. 1 . THREAT OF NEW ENTRANTS
2. POWER OF SUPPLIERS
3. POWER OF BUYERS
4. AVAILABILITY OF SUBSTITUTES
5. COMPETITIVE RIVALRY
Porter's 5 Forces Analysis

81. 1-Threat of New Entrants.
 . The average entrepreneur can't come along and start a
large insurance company. The threat of new entrants lies
within the insurance industry itself. Some companies
have carved out niche areas in which they underwrite
insurance. These insurance companies are fearful of being
squeezed out by the big players.
 Another threat for many insurance companies is other
financial services companies entering the market. What
would it take for a bank or investment bank to start
offering insurance products? In some countries, only
regulations that prevent banks and other financial firms
from entering the industry. If those barriers were ever
broken down, like they were in the U.S. with the Gramm-
Leach-Bliley Act of 1999, you can be sure that the
floodgates will open.

82. 2-Power of Suppliers.
 The suppliers of capital might not pose a big
threat, but the threat of suppliers luring away
human capital does. If a talented insurance
underwriter is working for a smaller
insurance company (or one in a niche
industry), there is the chance that person will
be enticed away by larger companies looking
to move into a particular market.

83. 3-Power of Buyers
 The individual doesn't pose much of a threat
to the insurance industry. Large corporate
clients have a lot more bargaining power with
insurance companies. Large corporate clients
like airlines and pharmaceutical companies
pay millions of dollars a year in premiums.
Insurance companies try extremely hard to
get high-margin corporate clients

84. 4-Availability of Substitutes
 This one is pretty straight forward, for there are
plenty of substitutes in the insurance industry.
Most large insurance companies offer similar
suites of services. Whether it is auto, home,
commercial, health or life insurance, chances are
there are competitors that can offer similar
services. In some areas of insurance, however, the
availability of substitutes are few and far between.
Companies focusing on niche areas usually have a
competitive advantage, but this advantage
depends entirely on the size of the niche and on
whether there are any barriers preventing other
firms from entering.

85. 5-Competitive Rivalry.
 The insurance industry is becoming highly
competitive. The difference between one insurance
company and another is usually not that great. As a
result, insurance has become more like a commodity -
an area in which the insurance company with the low
cost structure, greater efficiency and better customer
service will beat out competitors. Insurance companies
also use higher investment returns and a variety of
insurance investment products to try to lure in
customers. In the long run, we're likely to see more
consolidation in the insurance industry. Larger
companies prefer to take over or merge with other
companies rather than spend the money to market and
advertise to people.

86. 86
Thank You