3.1.1 L I 5 3.1.2 N - L I 6: Higher Standards............ Making A Difference For You

Higher standards............
making a difference for you
TABLE OF CONTENTS
1. INTRODUCTION 2
2. STATUES AND REGULATORY BODIES 3
3. MARKET OVERVIEW 4
3.1 PLAYERS IN THE M ARKET 5

3.1.1 LIFE INSURANCE 5
3.1.2 NON-LIFE INSURANCE 6
4. TYPES OF INSURANCE 7
4.1 M OTOR INSURANCE 7

4.1.1 TWO WHEELER INSURANCE 8
4.1.2 CAR INSURANCE 8
4.1.3 COMMERCIAL VEHICLE INSURANCE 8
4.2 COMMERCIAL INSURANCE 9

4.2.1 AGRICULTURAL INSURANCE 9
4.2.2 FIRE INSURANCE 10
4.2.3 MARINE INSURANCE 10
4.2.4 SHOP INSURANCE 11
5. RE-INSURANCE 11
6. RURAL AREA PENETRATION 12
7. DISTRIBUTION CHANNELS 13
8. RECENT REFORMS IN THE INDUSTRY 13
9. FOREIGN DIRECT INVESTMENT POLICY 15
10. PROVISIONS IN BUDGET 2008 15
D-19 (GF) & D- 31, South Extension -1, New Delhi-110049, India
email: g.khurana@indialawoffices.com, website: www.indialawoffices.com
Higher standards............making a difference for you
10.1 NEW SCHEMES AND METHODS OF INSURANCE 15
11. POST DE-TARIFFING SCENARIO 17
12. CONCLUSION 18
1. Introduction
Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion and
3rd largest in terms of purchasing power parity. With factors like a stable 8-9
per cent annual growth, rising foreign exchange reserves, a booming capital
market and a rapidly expanding FDI inflows, it is on the fulcrum of an ever
increasing growth curve.
Insurance is one major sector which has been on ascent since the revival of
Indian economy. Taking into account the huge population and growing per
capita income besides several other driving factors, a huge opportunity is in
store for the insurance companies in India. Nearly 80% of Indian population is
without life insurance covering while health insurance and non-life insurance
continues to be below international standards. And this part of the population is
also subjected to weak social security and pension systems with hardly any old
age income security. Insurance in India is primarily used as a means to improve
personal finances and for income tax planning. There is a tendency to invest in
properties and gold followed by bank deposits with a slight investment in Stocks
and shares.
This in itself is an indicator that growth potential for the insurance sector is
immense. It’s a business growing at the rate of 15-20% per annum and
presently is of the order of $47.9 billion.
The various fields covered by insurance companies in India include:
o Life Insurance: for students, children, family, individual etc.

o Health insurance: For self, for family, accidental insurance premium,
medical claim policies etc.
o Non-life insurance: Home or House Insurance and other property

insurance, Auto Insurance (for cars, motorcycle and other two-wheelers,
commercial vehicles), Infrastructure Projects Insurance, Travel Insurance,
real estate insurance, mobile insurance etc.
2. Statues and Regulatory bodies
Insurance in India started as life insurance back in 1818, when it was introduced
for English Widows. Even till the end of the nineteenth century, Insurance
Companies in India were mainly the overseas companies investing in the
insurance works in India. An interesting fact here was that higher premiums
were charged for Indian lives, as they were considered riskier for insurance
cover.
The Indian Government took various steps for the regulation of insurance in
India by passing various insurance laws and acts. These include:
o Life Insurance Companies Act, 1912

o Provident Fund Act 1912
o Insurance Act of 1938
o Life Insurance Corporation Act, 1956
o General Insurance Business (nationalization) Act, 1972
Insurance Regulatory and Development Authority (IRDA) Act, 1999
In 1972, the General Insurance Company was nationalized with four main
subsidiaries National Insurance Company, New India Insurance Company,
Oriental Insurance Company and United India Insurance Company.
Today Insurance Companies in India have grown manifold. The insurance sector
in India has shown immense growth potential. Even today a giant share of
Indian population nearly 80% is not under life insurance coverage, let alone
health and non-life insurance policies. This clearly indicates the potential for
insurance companies to grow their market in India.
In 1999, various reforms were suggested in the insurance industry in India. This
has changed a lot of things for the insurance companies in India. These reforms
were:
o Bringing down of the governments stake holding to 50%

o Only the private companies with a minimum capital of Rs.100 crores
should be allowed to enter the insurance sector.
o No insurance company can deal in both life and non-life insurance under
the same business entity.
o Foreign Insurance Companies can enter India only in collaboration with
domestic insurance companies
o Interest should be paid on delays of payments by the insurance
companies in case of non settlement of insurance claims.
o And many more to bring greater freedom and a well-planned regulation to
the insurance companies in India.
3. Market Overview
In 2000, Indian insurance market size was $21.71 billion. Between 2000 and
2007, it had an increase of 120% and reached $47.89 billion. Between 2000 and
2007, total premiums maintained an average growth rate of 11.96% and the
CAGR growth during this time frame has been 11.96%. It was one of the most
consistent growth patterns we have noticed in any other emerging economies in
Asian as well as Global markets.
Major Driving Factors

o Growing demand from semi-urban population
o Entry of private players following the deregulation
o Rising demand for retirement provision in the ageing population
o The opening of the pension sector and the establishment of the new
pension regulator
o Rising per capita incomes among the strong middle class, and spreading
affluence
o Growing consumer class and increase in spending & saving capacity
o Public private partnerships infrastructure development
o Dearth of innovative & buyer-friendly insurance products
o Success of Auto insurance sector
The upward growth trend started from 2000 was mainly due to economic
policies adopted by the then Indian government.
Comparing it with other countries, India's life insurance premium, as a

percentage of GDP, was 1.8 percent against 5.2 percent in the US, 6.5 percent
in Britain and eight percent in South Korea.
3.1 Major Players in the Market
With the liberalization of the insurance sector there have arrived quite a few
private players in the market being dominated by state owned companies.
3.1.1 Life Insurance
With the entry of private sector players backed by foreign expertise, Indian life
insurance market has become more vibrant. Competition in this market is
increasing with companies continues effort to lure the customers with new
product offerings. However, the market share of private insurance companies
remains in the 10-15% range. Even to day, Life Insurance Corporation (LIC) of
India dominates Indian insurance sector and in the year 2007-08 it has sold
3.75 Crore Policies collecting Rs. 43813 Crore as Premium. The heavy hand of
government still dominates the market, with price controls, limits on ownership,
and other restraints.
Total Industry Market Share (%)

Company 2004 2005 2006 2007 2008
ICICI Prudential 4.7 8.8 10.7 10.6 13.7
Bajaj Allianz 1.2 2.7 6.2 7.4 10.3
SBI Life 0.8 2.4 2.2 4.2 6.2
HDFC Standard 1.0 1.1 3.7 3.1 4.1
Reliance Life nil 0.2 0.4 1.7 4.0
Birla Sunlife 3.1 3.6 2.9 1.9 3.4
Max New York 0.9 1.3 2.0 1.8 2.4
Kotak OM 0.7 1.3 1.7 1.3 1.9
Aviva 0.5 1.1 1.8 1.6 1.8
Tata AIG 1.3 1.8 2.0 1.3 1.5
Met Life 0.2 0.3 0.6 0.8 1.4
ING Vysya 0.5 1.6 1.2 1.0 1.2
Shriram Life nil nil 0.0 0.2 0.3
Bharti AXA nil nil nil 0.0 0.2
Sahara Life nil 0.0 0.0 0.1 0.1

IDBI Fortis nil nil nil 0.0 0.0
Future Generali nil nil nil 0.0 0.0
Private players (total) 14.9 26.3 35.5 37.0 51.9
LIC 85.1 73.7 64.5 63.0 48.1
3.1.2 Non-Life Insurance
The biggest player in this sector is the General Insurance Company. In 1972,
the General Insurance Company was nationalized with four main subsidiaries
National Insurance Company, New India Insurance Company, Oriental Insurance
Company and United India Insurance Company.
This situation is fast changing and recently the State-owned non-life insurance
companies have lost further market share in the first quarter of 2007-08, as the
industry slowly adjusts to a free-pricing market. The slower growth among
state-owned companies has resulted in ICICI Lombard displacing public sector
Oriental Insurance to become the fourth-largest insurer in India.
In the first quarter, non-life insurance has grown 13.4%, taking the total
premium to Rs 8,437 cro re, up from Rs 7,438 crore in the corresponding quarter
last year. The growth has largely come from private companies which have
grown 22.4% against public sector companies which have grown much slower at
7.7%. Unlike life insurance where government presence is through the
monolithic Life Insurance Corporation (LIC), the government owns four
companies in non-life — New India, Oriental Insurance, National Insurance and
United India. The state-owned companies now account for 58% of non-life
premium compared w ith 61% a year ago.
The highest growth rates have been recorded by Cholamandalam (35%),

followed by Iffco-Tokio (33%), Tata AIG (28.12%) and Bajaj Allianz (27.85%).
Reliance General Insurance, which was the fastest growing company last year,
has grown slower than the industry with a 5.2% rise in premium income.
State-owned companies have recorded a lower growth because of hectic

competition for property insurance which has seen them retain old business at
sharply reduced rates. Private companies have been very aggressive in acquiring
motor insurance business through tie-ups with dealership. Motor together with
health insurance have been the drivers of growth in the non-life insurance
industry. During the course of the year private companies have made large
investments in distribution and intermediaries.
Also several new companies have entered the fray. The new companies that
have received license include Future Generali, Universal Sompo, Shriram
General Insurance and Bharti Axa General Insurance. HDFC Ergo General
Insurance, which fell behind last year as HDFC broke up with erstwhile partner
Chubb, is expected to press ahead this year.
GENERAL INSURERS
Public Sector
National Insurance Company Limited www.nationalinsuranceindia.com
New India Assurance Company Limited www.niacl.com
Oriental Insurance Company Limited www.orientalinsurance.nic.in
United India Insurance Company Limited www.uiic.co.in
Private Sector
Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in
ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com
IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in
Reliance General Insurance Co. Limited www.ril.com
Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com
TATA AIG General Insurance Co. Limited www.tata-aig.com
Cholamandalam General Insurance Co. Ltd. www.cholainsurance.com
Export Credit Guarantee Corporation www.ecgcindia.com
HDFC Chubb General Insurance Co. Ltd www.hdfcergo.com
4. Types of Insurance
The segment of Insurance can be broadly classified into the following types.
4.1 Motor Insurance
The predominant growth of Insurance Industry has come mainly due to

exponential growth in motor and health insurance segments. Out of the total
gross premium growth of around Rs.11500 crores, Rs.6 400 crores has gone to
Private Sector and Rs.5100 crores has gone to Public Sector.
The total Motor Insurance premium has grown by around Rs.7000 crores in this
period between 2002-07 out of which Rs.3300 crores has gone to PSU insurers
and another Rs.3700 crores has gone to private sector. Thus the rate of growth
of private sector in motor segment has been phenomenal as compared to PSUs.
The whole of motor insurance is covered by the following:
4.1.1 Two wheeler Insurance
Two wheeler insurance provides a kind of personal accidental cover for owners,
while driving the vehicle. The policy generally provides protection from any loss
or damage to the vehicle arising out of natural calamity like fire, protection
against third party injury, burglary etc. The amount insured will depend on the
current showroom price multiplied by the depreciation rate fixed by the Tariff
Advisory Committee at the time of commencement of policy period. Fast and
easy claim process by most insurance companies will ensure existing customer
loyalty and widen the customer base.
4.1.2 Car Insurance
Car insurance is the fastest growing segment in the auto insurance category.
This is so, because insuring car is mandatory for everyone buying a new car.
Major car manufacturers are tying up with leading insurance companies to
provide hassle free and quick insurance. Car insurance includes loss or damage
by accident, third party insurance, insurance against burglary etc. The amount
of premium will depend on the make and value of the car, state where the car is
registered, year of manufacture etc. Insurance companies are trying hard to
make the claim process simpler and quicker to widen the existing customer
base.
4.1.3 Commercial Vehicle Insurance
Commercial Vehicle Insurance covers all vehicles not used for personal purpose.
Trucks and HMVs are covered under this insurance. The insurance protects
against damage caused due to accident, third party injury, protection against
natural calamity, burglary etc. The premium amount depends on a number of
factors like showroom price of the vehicle at the commencement of the
insurance period, make of the vehicle, place of registration of the vehicle etc.
Fast and easy claim processing by leading insurance companies is the key to
ensure satisfied and loyal customers.
4.2 Commercial Insurance
4.2.1 Agricultural Insurance
The farming community in India consists of about 121 million farmers of which
only about 20 per cent avail crop loans from financial institutions and only three
fourth of those are insured. The remaining 80 per cent (96 millions) are either
self-financing or depend upon informal sources for their financial requirements.
Most of the farmers are illiterate and do not understand the procedural and
other requirements of formal financial institutions and, therefore, shy away from
them. Therefore, while the institutional loanees are insured compulsorily under
the NAIS, only about 15 per cent of the non-loanee farmers avail insurance
cover voluntarily. This is quite indicative of the enormous insurance potential
that exists for addressing the needs of the farming community and enhancing
the overall efficiencies as also the competitiveness of the agriculture sector. This
also signifies the tremendous potential of agriculture insurance in the country as
a concept, which can mitigate the adverse impacts that such uncertainties would
have on the individual farmers.
There are two major categories of agricultural insurance: single and multi-peril
coverage. Single peril coverage offers protection from single hazard while
multiple – peril provides protection from several hazards. In India, multi-peril
crop insurance program is being implemented, considering the overwhelming
impact of nature on agricultural output and its disastrous consequences on the
society, in general, and farmers, in particular.
Year Sum assured Claims ratio Premium / Claims / Ratio of

as % of value (Claims / sum assured sum borrower and
of crop output Premium) % assured % non-borrower
insured farmers
2000-01 2.28 5.45 2.76 15.06 97:3
2001-02 2.22 1.91 3.24 6.20 93:7
2002-03 2.92 5.52 3.23 17.84 86:14
2003-04 2.46 3.29 3.11 10.22 75:25
2004-05 3.77 2.24 3.16 7.06 88:12
2005-06 3.76 2.53 2.97 7.52 85:15
Source: NCAP Report March 2008.
4.2.2 Fire Insurance
Fire Insurance is governed by All India Fire Tariff effective from 31.3.2001
issued by Tariff Advisory Committee, a Statutory Body. It is a commercial policy
covering building, offices, machinery, contents and personal belongings of the
office. It mitigates the risk of loss to customers arising from fire breakout.
In the period, 2002-07, Fire premium has grown by Rs.1500 crores out of which
Rs.1200 crores in Gross Premium goes to private sector and only Rs.200 crores
has accrued to PSU companies. However, out of this huge growth in gross Fire
premium in private sector, the Net Premium has grown only around Rs.330
crores as against the growth of Rs.189 crores in PSUs.
This denotes the growth of fire premium in private sector on the back of
predominantly Reinsurance support.
4.2.3 Marine Insurance
Marine insurance has grown by Rs.633 crores in this period out of which Rs. 472
crores is cornered by private insurance companies while only Rs.161 crores has
accrued to PSUs. The net premium income of private sector has gone up by
Rs.210 crores whereas PSUs net marine premium has gone down by Rs.56
crores thereby denoting that PSUs growth has come probably in Marine (hull)
with heavy reinsurance backing and the private sector growth has come mostly
in cargo insurance.
This still remains a challenging opportunity for the Insurance Companies.
4.2.4 Shop Insurance
Shop Insurance is specially designed to meet the needs of small shopkeepers. It

is a comprehensive insurance, catering to different insurance needs of
shopkeepers. One policy per shop is generally given by insurers. It covers
damage/ loss to shop due to fire, burglary, riot, strike, loss of money in transit,
fraud committed by client's employees etc. The policy is meant for shops only,
hence restaurants and tea /coffee shops cannot be insured under this insurance
policy.
5. Re-insurance
Until GIC was notified as a National Reinsurer, it was operating as a holding /
parent company of the 4 public sector companies, controlling their reinsurance
programmes. GIC would receive 20% obligatory cession of each policy written in
India. Since deregulation, GIC has assumed the role of the market’s only
professional re-insurer. In order to focus on reinsurance, both in India and
through its overseas offices and trading partners, GIC has divested itself of any
direct business that it wrote prior to November 2000, with the temporary
exception of crop insurance. It currently manages Hull Pool on behalf of the
market, which receives a cession from writing companies and after a pool
protection the business is retro-ceded back to the member companies. GIC also
manages the “Terrorism Pool”.
Re-insurance Regulation
The placement of reinsurance business from the Indian market is now governed
by Reinsurance Regulations formed by the IRDA. The objective of the regulation
is to maximize the retention of premiums within the country and to ensure that
IRDA has issued the following instructions:
• Placement of 20% of each policy with Natio nal Re-insurer subject to a

monetary limit for each risk for some classes.
• Inter-company cession between four public sector companies.
• Indian Pool for Hull managed by GIC.
• The treaty and balance risk after automatic capacity are to be first offered
to other insurance companies in the market before offering it to
international re-insurers.
• Each company is free to arrange its own reinsurance program, which has
to be submitted to the IRDA 45 days before commencement.
• Not more than 10% of reinsurance premium to be placed with one re-
insurer.
• No re-insurer will have a rating of less than”BBB” from Standard and
Poor’s or an equivalent rating from AM Best.
6. Rural Area penetration

For the insurance sector Rural India may offer a business opportunity worth US$
23 billion for the insurance companies if the segment can be wooed with
innovative saving schemes at affordable premiums. Presently, only eight to ten
per cent of rural Indian households are covered by life insurance. The remaining
ninety per cent offer a huge potential for insurance companies. India's untapped
rural market holds tremendous growth opportunities for life insurance
companies with business worth US$ 231.67 million for insurance firms.
According to a report, the rural market will grow to a potential of US$ 1.9 billion
by 2015 from the current US$ 487 million.
Life Insurance Corporation of India (LIC) has set a target of selling four million
policies in rural areas in the current financial year.
Another opportunity lies in offering low-interest personal loans to the rural

population, at the rate of six to seven per cent compared to 10 – 12 per cent in
the urban areas, for renovating or modernising their houses and at the time of
marriages of family members or relatives.
Last year, the industry sold over 1.1 crore policies in rural areas which are areas
in terms of the stringent definition set out by the insurance regulator.
The industry has a network of over 2 million active agents on the streets that
can reach a new financial product to a large chunk of the population within
weeks of its launch and are the backbone of the industry.
7. Distribution Channels
Insurers market various insurance covers either directly or through various

distribution channels—individual agents, corporate agents
(Including Bancassurance) and Brokers. The marketer in the distribution
network is in direct interface with the prospect and the customer. Life insurance
products are sold through individual agents and many of them have this as their
only career occupation. General insurance products are sold through individual
agents, corporate agents and brokers. Distribution channels such as agents are
licensed by the IRDA. IRDA regulations on licensing of agents/brokers lay down
the code of conduct for individual agents, corporate agents and brokers.
The following figure represents the quantum of business bought by the various
agencies for the insurance companies:-
8. Recent reforms in the Industry
Several policy initiatives were taken in the insurance sector during 2007 which
include the following:
1. De-tariffing of the general insurance industry- In the detariffed scenario,

insurance companies will arrive at premiums based on their assessment of
risk on a case to case basis. Customers with a good risk profile would
enjoy lower premiums. At the corporate level, intra-portfolio cross
subsidization will be replaced by product-level pricing, as a result of which

fire insurance premiums may see some reduction. Conversely, group
health and marine insurance premiums are likely to move up with
companies reviewing their coverage in order to optimize pricing. Motor
insurance is expected to gravitate towards risk based pricing.
2. Obligations towards the rural & social sectors
3. Micro-insurance- Micro-insurance is a risk transfer device characterized by
low premiums and low coverage limits, and designed for low-income
people not served by typical social or commercial insurance schemes.
4. Currently in India, the few health insurance plans aimed at the poor could
not be tailored to the needs of different communities with different
priorities. Often times, the design and pricing did not reflect local
conditions, creating a mismatch between what the poor wanted and
actually received. What’s more, the packages did not cover expensive
events and were limited to only a few rare events with low caps, or limits
of coverage.
5. Community-based micro health insurance represents a new way for the

poor to obtain affordable yet high-impact health insurance products that
meet their needs.
6. Bancassurance- Bancassurance is a long-standing dream of offering a
seamless service of banking, life & non-life products. India, being the one
of the most populous country in the world with a huge potential for
insurance companies, has an envious chain of bank branches as the
lifeline of its financial system. Banks with over 65,000 branches & 65% of
household investments are the backbone of the Indian financial market.
In India, there are 75 branches per million inhabitants. Clearly, that’s
something insurance companies – both private and state-owned -would
find nearly impossible to achieve on their own. Considering it as a channel
for insurance it gives insurance an unlimited exposure to Indian
consumers.
The IRDA (Obligations of Insurers towards the rural and social sectors)
Regulations, 2002, had laid down the obligations of the insurers for the first five
years of operations. Amendments to the regulations incorporating the
obligations of the insurers up to the tenth year and thereafter have been notified
during 2007.
IRDA has advised all insurance companies to furnish details of the initiatives
taken to promote micro-insurance as a viable business opportunity, with
particular reference to understanding the constraints faced by them. With a view
to synergizing the efforts of all State Governments which are promoting the
poverty alleviation programmes, the IRDA has requested the State Governments
to publicize the concept of micro insurance through their various agencies.
9. Foreign Direct Investment Policy
Foreign equity up to 26% is allowed in the insurance sector. The entry of foreign
partners has resulted in the sector attracting FDI of US 543 million as on 31st
March, 2007. The private companies have created a niche for themselves. They
have been able to increase their share in the insurance market in competition
with their counterparts in the public sector. As a part of the reform process,
premium rates for non-life insurance products have been de-tariffed w.e.f.
1.1.2007.
Union Cabinet will soon take a decision on the insurance sector reforms which
could possibly see hike in the foreign investment limit in private sector insurance
companies from 26 per cent to 49 per cent.
10. Provisions in Budget 2008
The Budget of 2008 has given a huge thrust to health insurance. But at the
same time, it has brought the industry within the ambit of service tax.
Moreover, quoting a PAN is also now mandatory.
Rs 644 crore was allocated for National Agriculture Insurance Scheme, which will
be continued apart from evolving an alternative crop insurance scheme.
More than 75 lakh people are to be covered by health insurance scheme.
A crop insurance scheme for tea, rubber, tobacco, chili, ginger, turmeric, pepper
and cardamom will be introduced next year.
10.1 New Schemes and Methods of Insurance
a. Rashtriya Swasthaya Bima Yojana, a new initiative of Government,

launched on 1st October, 2007 will provide health insurance to
unorganised sector workers. The Scheme aims to provide cashless
hospitalisation cover of Rs. 30,000 to BPL families of the unorganised
sector workers. 1.2 Crore BPL families from 120 districts of all states/UTs
are likely to get benefit under the scheme during 2008-09.
b. Insurance regulator IRDA is vetting a proposal to make health cover

affordable to all senior citizens. A final view will be taken on providing
guaranteed access to health insurance for this segment by the end of this
year, said a top official of the regulatory body. The proposal is based on
the recommendations of an expert panel on health insurance a l st year.
The panel recommended allowing senior citizens to enter the health
insurance system up to 65 years of age — or higher — at the discretion of
the insurer.
c. A Delhi-based life insurance company has introduced the concept of pre-

paid insurance card, which will be sold to distributors for onward retailing.
d. The company proposes to invest up to Rs 400 crore in this special project

and has roped in IBM to provide the technology backbone. For the first
time, the company will be issuing individual insurance contracts issued on
the spot, through hand-held thermal printers which will connect to the
back-end through cell phone networks.
e. The similarity with the mobile business does not end with the pre-paid
card. Max’s distribution strategy is also similar to the one followed by the
mobile industry. The company plans to stock retail stores in small cities
and semi-urban areas with a start-up package which comes in three
denominations and offers five times the sum insured. The cost of the
package ranges from Rs 1,000 to Rs 2,500. The money can also be
topped up or withdrawn. However, there is a lock-in period of three years
for withdrawal. The subsequent top-ups can be for values as low as Rs 10.
f. Pending a decision on an alternative crop insurance scheme that is

acceptable to the farmers as well as viable to the insurer, the National
Agriculture Insurance Scheme (NAIS) will be continued in its present form
for Kharif and Rabi 2008-09. Rs.644 crore have been proposed for the
scheme.
g. A Weather Based Crop Insurance Scheme has been implemented as a

pilot scheme in selected areas of five States which will be continued.
Rs.50 crore has been proposed for this purpose in 2008-09.
h. The Janashree Bima Yojana of LIC covering 44 categories shall provide

special attention to Self Help Groups. The policy offers life and permanent
disability cover to people but only 35,000 SHGs have been covered so far.
Considering the fact that there are over 30 lakh SHGs credit-linked to
banks, it has been proposed to single out this category for special
attention. LIC is required to rapidly scale up the scheme and cover all
women SHGs that are credit-linked to banks. Since one-half of the
premiums are subsidized through the Social Security Fund, it has been
further proposed to contribute Rs.500 crore to the corpus of the fund with
the assurance that annual contributions will be made as the scheme is
scaled up. This scheme, together with the Rashtriya Swasthaya Bima
Yojana, will mark the beginning of a new deal for women by providing
them life and health cover.
i. By March 2008, over 17 lakh families of weavers are to be covered under

the health insurance scheme. The proposed increase in the allocation shall
be to Rs.340 crore in 2008-09.
j. The Aam Admi Bima Yojana that will provide insurance cover to poor
households and in the first year of the Yojana, LIC will cover one crore
landless households by September 30, 2008. Rs.1, 500 crore have been
placed with LIC. In order to cover another one crore poor households in
the second year, an additional sum of Rs.1, 000 crore has been placed
with LIC in 2008-09.
11. Post De-Tariffing Scenario
a. Whereas the industry’s growth has happened in motor and health

insurance, there is a fall of Rs.600 crores in the Fire insurance and Rs.300
crores in miscellaneous insurance, which includes engineering insurance.
b. The total growth of the industry has come down to 12.5% as against 25%
in the previous year.
c. Detariffing has passed smoothly and reinsurance treaties have also been
renewed in April 2008 without any problem.
d. It is expected that the prices in the detariffed segments like fire and
engineering insurance shall stablise early.
12. Conclusion
There are certain other steps that can be taken to facilitate further growth and
to make the Insurance segment more competitive and also more lucrative for all
market participants.
1. Tax breaks like removal of service tax on health insurance / pa policies

2. More encouragement to the growth of individual agents including removal
of sealing on commission.
3. Freedom of policy designing
4. Facilitate insurance skill development
5. More liberalisation for creation of intermediaries.
6. Introduce regulations in health service providers to enable orderly growth.
7. Expedite amendments to Insurance Act, Motor Vehicles Act which are on
final stage
Expectations:-
CAGR of Insurance Industry likely to be around 16% in the next 5 years in tune
with expected GDP growth of 8%. Personal lines of business like motor, health,
travel are expected to grow exponentially. Rural and semi urban sectors shall
grow faster. More insurance companies and more intermediaries with
international standard may be expected to enter the market.
Looking ahead towards great times in insurance industry .

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3.1.1 L I 5 3.1.2 N - L I 6: Higher Standards............ Making A Difference For You

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Higher standards............

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2. STATUES AND REGULATORY BODIES 3

3.1 PLAYERS IN THE M ARKET 5

4.1 M OTOR INSURANCE 7

4.2 COMMERCIAL INSURANCE 9

6. RURAL AREA PENETRATION 12

8. RECENT REFORMS IN THE INDUSTRY 13

9. FOREIGN DIRECT INVESTMENT POLICY 15

10. PROVISIONS IN BUDGET 2008 15

10.1 NEW SCHEMES AND METHODS OF INSURANCE 15

11. POST DE-TARIFFING SCENARIO 17

The various fields covered by insurance companies in India include:

o Life Insurance: for students, children, family, individual etc.

o Non-life insurance: Home or House Insurance and other property

2. Statues and Regulatory bodies

o Life Insurance Companies Act, 1912

Insurance Regulatory and Development Authority (IRDA) Act, 1999

o Bringing down of the governments stake holding to 50%

Major Driving Factors

Comparing it with other countries, India's life insurance premium, as a

3.1 Major Players in the Market

3.1.1 Life Insurance

Total Industry Market Share (%)

Sahara Life nil 0.0 0.0 0.1 0.1

3.1.2 Non-Life Insurance

The highest growth rates have been recorded by Cholamandalam (35%),

State-owned companies have recorded a lower growth because of hectic

4.1 Motor Insurance

The predominant growth of Insurance Industry has come mainly due to

The whole of motor insurance is covered by the following:

4.1.1 Two wheeler Insurance

4.1.2 Car Insurance

4.1.3 Commercial Vehicle Insurance

4.2 Commercial Insurance

4.2.1 Agricultural Insurance

Year Sum assured Claims ratio Premium / Claims / Ratio of

Source: NCAP Report March 2008.

4.2.2 Fire Insurance

4.2.3 Marine Insurance

This still remains a challenging opportunity for the Insurance Companies.

4.2.4 Shop Insurance

Shop Insurance is specially designed to meet the needs of small shopkeepers. It

• Placement of 20% of each policy with Natio nal Re-insurer subject to a

6. Rural Area penetration

Another opportunity lies in offering low-interest personal loans to the rural

Insurers market various insurance covers either directly or through various

8. Recent reforms in the Industry

1. De-tariffing of the general insurance industry- In the detariffed scenario,

subsidization will be replaced by product-level pricing, as a result of which

5. Community-based micro health insurance represents a new way for the

9. Foreign Direct Investment Policy

10. Provisions in Budget 2008

More than 75 lakh people are to be covered by health insurance scheme.

10.1 New Schemes and Methods of Insurance

a. Rashtriya Swasthaya Bima Yojana, a new initiative of Government,

b. Insurance regulator IRDA is vetting a proposal to make health cover

c. A Delhi-based life insurance company has introduced the concept of pre-