PROJECT REPORT

ON
COMPARATIVE STUDY OF LIFE INSURANCE COMPANIES IN INDIA
SUBMITTED
In Partial Fulfillment of the Requirement Of
University Of Mumbai
For The Degree Of
Bachelor in Management Studies
Submitted By
Swalia Bashir Mulla
Under The Guidance of
MRS. SHOBHA BISHT

SK COLLEGE OF SCIENCE & COMMERCE

NERUL, NAVI MUMBAI
MUMBAI UNIVERSITY

A PROJECT ON:

COMPARATIVE

STUDY OF LIFE INSURANCE

COMPANIES IN INDIA

UNIVERSITY OF MUMBAI

SUBMITTED BY:

PROJECT GUIDE:

IN PARTIAL FULFILMENT FOR THE AWARD OF THE DEGREE

OF BACHELOR OF MANAGEMENT STUDIES TYBMS
SEMESTER V

S.K. COLLEGE OF SCIENCE AND COMMERCE

NERUL, NAVI MUMBAI 400706
COLLEGE CODE - 874

DECLARATION

Swalia Bashir Mulla

student of Third Year BMS of S.K. College of Science and Commerce

(Neural- East) declare that I have completed the project on COMPARATIVE STUDY OF LIFE
INSURANCE COMPANIES IN INDIA in the academic year 2014-15 as per requirement of Mumbai
university as a part of Bachelor in Management Studies (BMS) Programmed.
The information presented in this project is accurate and original to the best of my knowledge.

Date:

Place:

____________________________
(Swalia

Bashir Mulla)

SR.NO.

TOPIC

PAGE NO.

ACKNOWLEDGEMENT

I, Ms.

Swalia Bashir Mulla would take this opportunity to thank University of Mumbai for

providing me an opportunity to study on COMPARATIVE STUDY OF LIFE INSURANCE

COMPANIES IN INDIA this has been an enormous learning experience.
I would like to acknowledge and thank people who made this project work possible, Mrs. SHOBHA
BISHT be who has been guiding force to me while doing this project and the teaching staff of my
college, friends for providing their help as when required to complete this project. Without their
support and encouragement, making this report would have been impossible for me.
I would also like to thank the respondents who provided me their best knowledge and co-operation
throughout the project.

_____________________________

Swalia Bashir Mulla

4

Introduction

Research Methodology

Company profile

Data Analysis

Cost Efficiency of life insurance

Conclusion

Annexure

Bibliography

INDEX

EXECUTIVESUMMARY
Life insurance in its modern form came to India from England in 1818 with the formation of Oriental Life
Insurance Company. The Government of India nationalized the life insurance industry in January 1956 by
merging about 245 life insurance companies and forming Life Insurance Corporation of India (LIC), which
started functioning from 01.09.1956. For years thereafter, insurance remained a monopoly of the public
sector. The sector was finally opened up to private players in 2001. The Insurance Regulatory and
Development Authority, an autonomous insurance regulator set up in 2000, has extensive powers to oversee
the insurance business and regulate in a manner that will safeguard the interests of the insured. Insurance is a
federal subject in India. There are two legislations that govern the sector The Insurance Act-1938 and the
IRDA Act-1999.the insurance sector in India has come a full circle from being an open competitive market
to nationalized and back to a liberalized market again.
The objective of the study are to compare cost efficiency and financial performance of Life Insurance
Corporation of India and private sector or life insurance companies in India, to understand the concept and
mechanism of insurance and to predict the volume of new business and total premium of life insurance
sector in India.
The study is divided into six chapters. The first chapter is introductory in nature and deals with history of
insurance, meaning and concepts of insurance, principles, functions, importance, types of policies, features
of contract and duties, power and functions of IRDA. The second chapter deals with Research Methodology
which includes research statement, hypothesis, objectives of the study, scope and limitations of the study.
The third chapter describes profile of 15 private life insurance companies and life insurance Corporation in
India. The fourth chapter deals with data analysis. The fifth chapter shows cost efficiency of life insurance
companies. The sixth chapter gives conclusion of the study and gives suggestions based on findings.
The prediction of total premium for both private and public sector life insurance companies in India for the
year 2015 shows upward trend. This signifies that there is a lot of scope for life insurance sector to develop
in India. The financial performance of life insurance corporation of India is better than private life insurance
companies in India. The private life insurance sector has nearly grabbed 30% of total premium income.
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Unless Life Insurance Corporation of India is alive to the emerging trends, its performance may decline
further. Hence, Life Insurance Corporation of India has to work with renewed vigor and enthusiasm so as to
retain its market share. The findings show a significant heterogeneity in the cost efficiency scores from
2000-01 to 2009-10. It can be seen that Life Insurance Corporation of India has consistently secured a cost
efficiency score of 1 in all the years from 2000-01 to 2009-10 and scored the highest rank for all the years
under study. Thus Life Insurance Corporation of India has consistently been a cost efficiency organization.
While in the case of private life insurance companies, the cost efficiency score has been inconsistent except
for SBI Life Insurance Companies which has secured a cost efficiency score of 1 in seven year out of ten
years.

INTRODUCTION TO LIFE INSURANCE IN INDIA

BRIEF HISTORY OF INSURANCE

The Indian life insurance industry has its own origin and history, since its inception. It has passed through
many obstacles, hindrances to attain the present status. Insurance owes its existence to 17th century England.
In fact, it took shape in 1688 at a rather interesting place called Lloyd's Coffee House in London, where
merchants, ship-owners and underwriters met to discuss and transact business. The first stock companies to
get into the business of insurance were chartered in England in 1720. The year 1735 saw the birth of the first
insurance company in the American colonies in Charleston. In 1759, the Presbyterian Synod of Philadelphia
sponsored the first life insurance corporation in America for the benefit of ministers and their dependents.

Life insurance in its modern form came to India from England in 1818 with the formation of Oriental Life
Insurance Company (OLIC) in Kolkata mainly by Europeans to help widows of their kin. Later, due to
persuasion by one of its directors (Shri Babu Muttyal Seal), Indians were also covered by the company.
However, it was after 1840 that life insurance really took off in a big way. By1868, 285 companies were
doing business of insurance in India. Earlier these companies were governed by Indian company Act 1866.

By 1870, 174 companies ceased to exist, when British Parliament enacted Insurance Act 1870. These
companies however, insured European lives. Those Indians who were offered insurance cover were treated
as sub-standard lives and were accepted with an extra premium of 15% to 20%. By the end of the 18th
century, Lloyd's had brewed enough business to become one of the first modern insurance company.

MEANING AND CONCEPTS OF LIFE INSURANCE

Life is a roller coaster ride and is full of twists and turns. Insurance policies are a safeguard against the
uncertainties of life. As in all insurance, the insured transfers a risk to the insurer, receiving a policy and
paying a premium in exchange. The risk assumed by the insurer is the risk of death of the insured in case of
life insurance.
Insurance policies cover the risk of life as well as other assets and valuables such as home, automobiles,
jewelry etc. On the basis of the risk they cover, insurance policies can be classified into two categories:
(a) Life Insurance

(b) General Insurance

Life insurance products cover risk for the insurer against eventualities like death or disability. Non-life
insurance products cover risks against natural calamities, burglary, etc.
Insurance is system by which the losses suffered by a few are spread over many, exposed to similar risks.
With the help of Insurance, large numbers of people exposed to a similar risk make contributions to a
common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made
good. Insurance is a protection against financial loss arising on the happening of an unexpected event.
Insurance policy helps in not only mitigating risks but also provides a financial cushion against adverse
financial burdens suffered.
Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a number of
persons who are exposed to it and who agree to ensure themselves against that risk. Risk is uncertainty of a
financial loss. Insurance is also defined as a social device to accumulate funds to meet the uncertain losses
arising through a certain risk to a person injured against the risk. Insurance provides financial protection
against a loss arising out of happening of an uncertain event.

According to the U.S. Life Office Management Inc., Life Insurance provides a sum of money if the person
who is insured dies whilst the policy is in effect.
The definition of insurance can be seen from two view points:
(a) Functional Definition

(b) Contractual Definition

(a) Functional Definition

Insurance is a co-operative device of distributing losses, falling on an individual or his family over large
number of persons each bearing a nominal expenditure and feeling secure against heavy loss.
(b) Contractual Definition
Insurance may be defined as a contract consisting of one party (the insurer) who agrees to pay to other party
(the insured) or his beneficiary, a certain sum upon a given contingency against which insurance is sought.

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PRINCIPLES OF INSURANCE
Insurance is based upon:

(a) Principles of Co-operation

(b) Principles of Probability

a) Principles of Co-operation :
Insurance is a co-operative device. If one person is providing for his own losses, it cannot be strictly
insurance because in insurance the loss is shared by a group of persons who are willing to co-operate.

b) Principles of Probability :
The loss in the form of premium can be distributed only on the basis of theory of probability. The
chances of loss are estimated in advance to affix the amount of premium. Since the degree of loss depends
upon various factors, the affecting factors are analyzed before determining the amount of loss. With the help
of this principle, the uncertainty of loss is converted into certainty. The insurer will not have to suffer loss as
well as gain windfall. Therefore, the insurer has to charge only so much of amount which is adequate to
meet the losses.
The insurance, on the basis of past experience, present conditions and future prospects, fixes the amount of
premium. Without premium, no co-operation is possible and the premium cannot be calculated without the
help of theory of probability, and consequently no insurance is possible

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FUNCTION OF INSURANCE
The functions of Insurance can be bifurcated into three parts:
(a) Primary Functions

(b) Secondary Functions

(a) Primary Functions :
The primary functions of insurance include the following:
Provide Protection :
The primary function of insurance is to provide protection against future risk, accidents and uncertainty.
Insurance cannot check the happening of the risk, but can certainly provide for losses of risk. Insurance is
actually a protection against economic loss, by sharing the risk with others.

Assessment of risk :
Insurance determines the probable volume of risk by evaluating various factors that give rise to risk.
Risk is the basis for determining the premium rate also

Collective bearing of risk :

Insurance is a device to share the financial loss of few among many others. Insurance is a mean by which
few losses are shared among larger number of people. All the insured contribute premiums towards a fund,
out of which the persons exposed to a particular risk are paid.

Savings and investment :

Insurance serves as a tool for savings and investment, insurance is a compulsory way of savings and it
restricts the unnecessary expenses by the insured. For the purpose of availing income-tax exemptions,
people invest in insurance also.
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(b) Secondary Functions :

The secondary functions of insurance include the following:

Prevention of Losses :
Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate
consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems,
etc. Reduced rate of premiums stimulate more business and better protection to the insured.
Small capital to cover large risks :
Insurance relieves the businessmen from security investments, by paying small amount of premium
against larger risks and uncertainty.
Contributes towards the development of large industries:
Insurance provides development opportunity to large industries having more risks. Even the financial
institutions may be prepared to give credit to sick industrial units which have insured their assets including
plant and machinery.
Source of Earning Foreign Exchange :
Insurance is an international business. The country can earn foreign exchange by way of issue of
insurance policies.
Risk Free Trade :
Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different
types of policies under marine insurance cover.

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IMPORTANCE OF INSURANCE
The process of insurance has been evolved to safeguard the interests of people from uncertainty by
providing certainty of payment at a given contingency. Insurance not only serve the ends of individuals, or
of special groups of individuals, it tends to pervade and transform our modern social order, too. The role and
importance of insurance, here, has been discussed from an individual, business and societys view
(A) Individual
(c) Insurance provides security and safety :
Insurance provides safety and security against the loss on a particular event. In case of life insurance,
payment is made when death occurs or the term of insurance expires. The loss to the family at a premature
death and payment in old age are adequately provided by insurance. In other words security against
premature death and old age sufferings are provided by life insurance. In other insurance, too, this security is
provided against the loss at a given contingency. foreg. property of insured is secured against loss due to fire
in fire insurance.

(d) Insurance affords peace of mind :

Insurance provide security which is the prime motivating factor. It tends to stimulate an individual do
more work.
(e) Insurance protects mortgaged property :
At the death of the owner of the mortgaged property, the property is taken over by the lender of
money and the family is deprived of the use of the property. On the other hand, the mortgagee wishes to get
the property insured because at the damage or destruction of the property he may lose his right. Insurance
provides adequate amount to the dependents at the early death and theproperty-owner to pay off the unpaid
loans. Similarly, the mortgagee gets adequate amount at the loss of the property.

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(f) Insurance eliminates dependency :

At the death of the husband or father or earning mother, the loss to the family needs no elaboration.
Similarly, at destruction of property and goods, the family would suffer a lot. The economic independence
of the family is reduced or, sometimes, lost totally. Insurance tries to eliminate dependency.
(g) Life Insurance encourages saving :
The elements of protection and investment are present only in case of life insurance. In property
insurance, only protection element exists. In most of the life policies elements of saving predominates.
Systematic saving is possible because regular premiums are required to be compulsorily paid. In insurance
the deposited premium cannot be withdrawn easily before the expiry of the term of the policy
(h) Life Insurance provides profitable investment :
Individuals unwilling or unable to handle their own funds are pleased to find an outlet for their
investment in life insurance policies. The elements of investment i.e. regular saving, capital formation, and
return of capital along with certain additional return are perfectly observed in life insurance.
(B) Business
(i) Business efficiency is increased with insurance :
When the owner of a business is free from the botheration of losses, he will certainly devote much time
to the business. The carefree owner can work better for the maximization of the profit. The new as well as
old businessmen are guaranteed payment of certain amount with the insurance policies at the death of the
person; at the damage, destruction or disappearance of the property or goods.
(j) Business continuation :
In partnership, business may discontinue at the death of any partner although the surviving partners can
re-start the businesses, but in both the cases the business and the partners will suffer economically. Insurance
policies provide adequate fund at the time of death. Each partner may be insured for the amount of his
interest in the partnership and his dependents may get that amount at the death of partner.

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(C) Society
(k) Wealth of the society is protected :
The loss of a particular wealth can be protected with insurance. Life insurance provides for loss of
human wealth. The human force, if it is strong, educated and care-free, will generate more income.
Similarly, the loss of damage of property at fire, accident etc., can well indemnified by property insurance ,
cattle, crop, profit and machines are also protected against their accidental and economical losses.
(l) Economic Growth of the country :
For the economic growth of the country, insurance provides protection against loss of property and
adequate capital to produce more wealth. Welfare of employees creates atmosphere to work. Adequate
capital from insurers accelerates production cycle. Similarly in business, too, the property and human
materials are protected against certain losses capital and expanded with the help of insurance. Thus, the
insurance meets all the requirements for the economic growth of a country.

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TYPES OF LIFE INSURANCE POLICIES

A life insurance policy could offer pure protection (insurance), another variant could offer protection as well
as investment while some others could offer only investment. In India, life insurance has been used more for
investment purposes than for protection in ones overall financial planning. Followings are the types of life
insurance policy:
(A) Term Life Insurance Policy :
As its name implies, term life insurance policy is for a specified period. It depends on the length of
time. It has one of the lowest premiums among insurance plans and also carries an added advantage of fixed
payments that do not increase during the term of the policy. In case of the policy holder's untimely demise,
the benefit amount specified in the insurance agreement goes to the nominees.
(B) Whole Life Insurance Policy :
Whole life insurance policies do not have any fixed term or end date and is only payable to the
designated beneficiary after the death of the policy holder. The policy owner does not get any monetary
benefits out of this policy. Because this type of insurance involves fixed known annual premiums, it's a good
option to ensure guaranteed financial benefits for surviving family members.
(C) Money Back Plan :
With a money back plan, policyholder receives periodic payments, which are a percentage of the
entire amount insured, during the lifetime of policy. It's aplan that offers insurance coverage along with
savings. These policies provide for periodic payments of partial survival benefits during the term of the
policy itself. A unique feature associated with this type of policies is that in the event of death of the insured
during the policy term, the designated beneficiary will get the full sum assured without deducting any of the
survival benefit amounts, which have already been paid as money-back components. Moreover, the bonus
on such policies is also calculated on the full sum assured.

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(D) Endowment Policy :

It is the most popular life insurance plan. This policy combines risk cover with objective of savings and
investment. If the policy holder dies during the policy period, he will get the assured amount. Even if he
survives he will receive the assured amount. The advantage of this policy is if the policy holder survives
after the completion of policy tenure, he receives assured amount plus additional benefits like bonus from
the insurance company. Designed primarily to provide a living benefit, along with life insurance protection,
the endowment
There are two types of Endowment policy:
(a) Without-profit endowment plan

(b) With- profit endowment plan

(a)Without profit endowment plan

These plans do not participate in the profits the insurance company makes each year. Apart from the
sum assured, the policyholder could possibly get a loyalty bonus, which is a one time payout.
(b) With-profit endowment plan
These plans share the profits the insurance company makes each year with the policyholder. So they
offer more returns than without-profit endowment plans and are more expensive i.e. the premiums will be
higher than without-profit endowment plans. policy makes a good investment if policyholder wants
coverage, as well as some extra money.
(E) Unit-linked insurance plan (ULIP) :
Unit-linked insurance plans gives a policyholder greater control on where premium can be invested.
The annual premium is invested in various types of funds that invest in debt and equity in a proportion that
suits all types of investors. A policyholder can switch from one fund plan to another freely and can also
monitor the performance of his plan easily. ULIP is suitable for those who understand the stock market well.

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FEATURES OF LIFE INSURANCE CONTRACT

Human life is an income generating asset. This asset can be lost through unexpected death or made through
sickness or disability caused by an accident. On the other hand there is a certainty that death will happen, but
its timing is uncertain. Life insurance protects against loss.
Life insurance contract may be defined as the contract, whereby the insurer in consideration of a premium
undertakes to pay a certain sum of money either on the death of the insured or on the expiry of a fixed
period. The definition of the life insurance contract is enlarged by Section 2(ii) of the Insurance Act 1938 by
including annuity business. Since, the life insurance contract is not an indemnity contract; the undertaking
on the part of the insurer is an absolute one to pay a definite sum on maturity of policy at the death or an
amount in installment for a fixed period or during the life.
Features of Life Insurance Contract:
Followings are the features of life insurance contract:
i.

Nature of General Contract

ii.

Insurable Interest

iii.

Utmost Good Faith

iv.

Warranties

v.

Proximate Cause

vi.

Assignment and Nomination

In life insurance contract the first three features are very important while the rest of them are of
complementary nature.

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(i)

Nature of General Contract

Since the life insurance contract is a sort of contract it is approved by the Indian Contract Act. According to
Section 2(H) and Section 10 of Indian Contract Act, a valid contract must have the following essentialities:

(a) Agreement (offer and acceptance)

(b) Competency of the parties
(c) Free consent of the parties
(d) Legal consideration

(a) Agreement (offer and acceptance)

An offer or proposal is intimation to another of ones intention to do or to abstain from doing
anything with a view to obtaining the assent of that other person to such an act or abstinence. When the
person to whom the proposal or offer is made signifies his assent to it, the offer is said to be accepted. The
offer and acceptance in life insurance is of typical nature. The risk will commence as soon as the acceptance
letter is dispatched by the insurer.
(b) Competency of the Parties
The essential element of a valid Contract is that the parties to it must be legally competent to
contract. Every person is competent to contract who is of the age of majority according to the law, who is of
sound mind, and who is not disqualified from contracting by any law. The insurer will be competent to
contract if he has got the license to carry on insurance business. Majority is attained when a person
completes age of 18 years. A minor is not competent to contract. A contract by a minor is void excepting
contracts for necessaries. The minor can repudiate the contract at any time during his minority. If the life
insurance policy is issued to a minor, the insurer cannot repudiate it but the minor can repudiate it during his
minority.

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(c) Free Consent of the Parties

In life insurance, both parties must know the exact nature of the risk to be underwritten. If the
consent is not free, the contract is generally avoidable at the option of the party whose consent was not
freely given.
(d) Legal Consideration
The presence of a lawful consideration is essential for a legal contract. The insurer must have some
consideration in return of his promise to pay a fixed sum at maturity or death whichever may be the case.
The consideration need not be money only. It should be anything valuable or to which value may be
assigned. It may be interest, right, dividend, etc. The first premium is consideration and subsequent
premiums are merely conditions to contract.
(ii)

Insurable Interest

Insurable interest is the pecuniary interest. The insured must have insurable interest in the life to be
insured for a valid contract. Insurable interest arises out of the pecuniary relationship that exists between the
policy-holder and the life assured so that the former stands to lose by the death of the latter and/or continues
to gain by his survival. If such relationship exists, then the former has insurable interest in the life of the
latter.
Insurable interest in life insurance may be divided into two categories.
(a) Insurable interest in own life and
(b) Insurable interest in others life.
The latter can be sub-divided into two classes:
(a) Where proof is not required and
(b) Where proof is required
Again this insurable interest where proof is required can be divided into two classes:
(i)

Insurable interest arising due to business relationship, and

(ii)

Insurable interest in family relationship

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Insurable interest

Others life

Own life
Proof is not required

Proof is required

Business Relationship

Family

Relationship
(A) Insurable interest in owns Life
An individual always has an insurable interest in his own life. Its presence is not required to be proved.
Bunion says, everyman is presumed to possess an insurable interest in his estate for the loss of his future
gains or savings which might be the result of his premature death. The insurable interest in own life is
unlimited because the loss to the insured or his dependents cannot be measured in terms of money and,
therefore, no limit can be placed to the amount of insurance that one may take on ones own life.

(B) Insurable interest in others life

Life insurance can be affected on the lives of third parties provided the proposed has insurable interest in the
third party. There are two types of insurable interest in others life.

a) Proof is not required

There are only two such cases where the presence of insurable interest is legally presumed and
therefore need not be proved.
Wife has insurable interest in the life of her husband
Husband has insurable interest in the life of his wife
(b) Proof is required
Insurable interest has to be proved in the following cases:
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 Business Relationship
Family Relationship
(iii)
Utmost Good Faith
Life insurance requires that the principle of utmost good, faith should be preserved by both the
parties. The principle of utmost good faith says that the parties, proposer (insured) and insurer must be of the
same mind at the time of contract because only then the risk may be correctly ascertained. They must make
full and true disclosure of the facts material to the risk.
(iv)

Warranties
Warranties are an integral part of the contract, i.e., these are the basis of the contract between the

proposer and insurer and if any statement, whethermaterial or non-material, is untrue, the contract shall be
null and void and the premium paid by him may be forfeited by the insurer. The policy issued will contain
that the proposal and personal statement shall form part of the Policy and be the basis of the contract.
Warranties may be informative and promissory. In life insurance the informative warranties are more
important.
(v)

Proximate Cause
The efficient or effective cause which causes the loss is called proximate cause. It is the real and

actual cause of loss. If the cause of loss (peril) is insured, the insurer will pay; otherwise the insurer will not
compensate. In life insurance the doctrine of CausaProxima (Proximate Cause) is not applicable because the
insurer is bound to pay the amount of insurance whatever may be the reason of death.
(vi)

Assignment and Nomination

The Policy in life insurance can be assigned freely for a legal consideration or love and affection.

The assignment shall be complete and effectual only on the execution of such endorsement either on the
Policy itself or by a separate deed. Notice for this purpose must be given to the insurer who will
acknowledge the assignment.

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Important Milestones in Life Insurance Regulations

In India

Year

Significant Regulatory Event

1818

Establishment of the Oriental Life Insurance Company in Kolkata

1912

The Indian Life Insurance Companies Act enacted as the first statute to
regulate the life insurance business.

1928

The Indian Insurance Companies Act enacted to enable the government to

collect statistical information about both life and non-life insurance
businesses.
Earlier legislation consolidated and amended by the Insurance Act with the
objective of protecting the interests of the insuring public.

1938

1956

1972

245 Indian and foreign insurers and provident societies taken over by the
Central government and nationalized. LIC formed by an Act of Parliament,
viz. LIC Act,1956, with a capital contribution of Rs. 5 crore from the
Government of India.
Nationalization of general insurance business in India

1996

Setting up of (interim) Insurance Regulatory Authority and

Recommendations of the IRA

1997

The Government gives greater autonomy to LIC, GIC and its subsidiaries
with regard to the restructuring of boards and flexibility in investment norms
aimed at channeling funds to the infrastructure sector

1998

The cabinet decides to allow 40% foreign equity in private insurance

companies-26% to foreign companies and 14% to NRIs, OCBs and FIIs.

1999

The Standing Committee headed by Murali Deora decides that foreign equity
in private insurance should be limited to 26%. The IRA bill is renamed the
Insurance Regulatory and Development Authority (IRDA) Bill 1999.
Cabinet clears IRDA Bill.

2000

President gives Assent to the IRDA Bill and Monopoly of Public Sector
Insurance company marks an end and Private companies make inroad.

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25

26

ROLE OF STATUTARY BODY THE (IRDA)

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in
December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to
its schedule of framing regulations and registering the private sector insurance companies. Since being set
up as an independent statutory body the IRDA has put in a framework of globally compatible regulations.
The other decision taken simultaneously to provide the supporting systems to the insurance sector and in
particular the life insurance companies was the launch of the IRDA online service for issue and renewal of
licenses to agents. The approval of institutions for imparting training to agents has also ensured that the
insurance companies would have a trained workforce of insurance agents in place to sell their products.

The regulatory body for insurance IRDA has been established with the following mission:
To protect the interests of the policy holders, to regulate, promote and ensure orderly growth of the
insurance industry and for matters connected therewith or incidental thereto.

Duties, Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA:
(1) Subject to the provisions of this Act and any other law for the time being in force, the Authority shall
have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance
business.
(2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers and
functions of the Authority shall include.
(a) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such
registration.

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(b) Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by
policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms
and conditions of contracts of insurance.
(c) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance
intermediaries and agents.
(d) Specifying the code of conduct for surveyors and loss assessors.
(e) Promoting efficiency in the conduct of insurance business.
(f) Promoting and regulating professional organizations connected with the insurance and re-insurance
business.
(g) Levying fees and other charges for carrying out the purposes of this Act.
(h) Regulating investment of funds by insurance companies.
(i) Regulating maintenance of margin of solvency.
(j) Supervising the functioning of the Tariff Advisory

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RESEARCH METHODOLOGY
INTRODUCTION
The core concept underlying research is its methodology. The methodology controls the study, dictates the
acquisition of the data, and arranges them in logical relationships, sets up a means of refining the raw data,
contrives an approach so that the meanings that lie below the surface of those data become manifest, and
finally issue a conclusion or series of conclusions that lead to an expansion of knowledge.

According to J.W.B. EST, Research is considered to be formal, systematic, intensive process of carrying on
the scientific method of analysis. It involves a more systematic structure of investigation usually resulting in
some sort of formal record of procedures and report of result or conclusions.
RESEARCH STATEMENT
The research statement studied is entitled, A comparative study of Life Insurance Corporation of India and
Private Life Insurance Companies in India. The present study focuses on the analysis of the performance
of public and all private life insurance companies in India with the help of mean, percentage, ratios,
ANOVA, Data Envelopment Analysis and linear trend.
RESEARCH DESIGN
A Research design is a plan of action to be carried out in connection with a research project. It is the
conceptual structure within which research is conducted and it constitutes the blue print for the collection,
measurement and analysis of data. It is the specification of methods and procedures for acquiring the
information needed for solving the problem. Decisions regarding what, where, when, how much, by what
means concerning an inquiry or a research study constitute a research design.

29

OBJECTIVES OF THE STUDY

The objectives of the study are as follows:
To understand the concept and mechanism of insurance.
To compare and analyze the financial performance of private sector life insurance companies and
Life Insurance Corporation of India.
To determine and analyze the market potential of public & private life insurance companies
separately in Indian market.
To compare the cost efficiency of life insurance companies in India.

NATURE OF DATA & METHOD OF DATA COLLECTION

Collection of the data is essential part of research. The nature of data which is collected and used for this
research is secondary in nature. The relevant and required data has been collected from journals, dailies,
annual reports, magazines, literature and websites of selected companies and through various search engines.
The present study involves calculation of different ratios to evaluate the financial performance of life
insurance companies in India from 2000-01 to 2009-10. It also compares the cost efficiency of all life
insurance companies in India during the same period. Prediction of new business and total premium of the
life insurance companies has also been done.
SCOPE OF STUDY

The scope of present study is confined only to Public and all Private life insurance companies in India from
2000-01 to 2009-10.The study mainly involves analyzing the financial performance and cost efficiency of
public and all private life insurance companies in India. Similar studies on this line may be conducted to
compare performance of public and private insurance companies in other countries.

30

LIMITATIONS OF THE STUDY

The present research work is undertaken to maximize objectivity and minimize the errors. However, there
are certain limitations of the study, which are to be taken in to consideration for the present research work.
The study is based on the analysis of the ten years data only.
The study fully depends on financial data collected from the published financial statements of
companies. This study incorporates all the limitations that are inherent in the financial statements.
The data for analysis is basically derived from financial statements. They are not adjusted for
inflation

31

PROFILE OF LIFE INSURANCE COMPANIES IN INDIA

All private life insurance companies and public sector operating in India during 2000-01 to 2009-10 were
taken for the study. Life Insurance Corporation which is the only public sector life insurer and twenty two
private sector life insurers, most of them joint ventures between Indian groups and global insurance giants,
were taken for the study
PUBLIC SECTOR

Life Insurance Corporation of India

Life Insurance Corporation of India (LIC) is an autonomous body authorized to run the life insurance
business in India with its Head Office at Mumbai. About 154 Indian insurance companies, 16 non-Indian
companies and 75 provident fund societies were operating in India at the time of nationalization. The
Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life
Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life
insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in
the country, providing them adequate financial cover at a reasonable cost. Today LIC of India functions with
3250 fully computerized branch offices, 100 divisional offices, 7 zonal offices and the corporate office.
LICs Wide Area Network covers 100 divisional offices and connects all the branches through a Metro Area
Network. LIC of India has tied up with some Banks and Service providers to offer on-line premium
collection facility in selected cities. LICs ECS and ATM premium payment facility is an addition to
customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at
Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities.
With a vision of providing easy access to its policyholders, LIC of India has launched its Satellite Sam park
offices. The satellite offices are smaller, leaner and closer to the customer.

32

PRIVATE SECTOR
The Government having tried various models for the insurance industry such as privatization with negligible
regulation (pre 1956) and nationalization (1956-2000) and having observed sub optimal performance of the
sector, resorted to adopting a hybrid model of both these, resulting in privatization of the sector with an
efficient regulatory mechanism (post 2000). This was initiated with the aim of making the industry
competitive so that there are more players offering a greater variety of products over a large section of the
population. The following companies are entitled to do insurance business in India.
TABLE: 2
PRIVATE LIFE INSURANCE COMPANIES

Sr. No.

Registration
No.

Date of
Registration

Name of the Insurer

101

23/10/2000

HDFC Standard Life Insurance Co. Ltd.

104

15/11/2000

Max New York Life Insurance Co. Ltd.

105

24/11/2000

ICICI Prudential Life Insurance Co. Ltd.

107

10/01/2001

Kotak Mahindra old mutual Life Insurance Co. Ltd.

109

31/01/2001

Birla Sun Life Insurance Co. Ltd.

110

12/02/2001

TATA AIG Life Insurance Co. Ltd.

111

30/03/2001

SBI Life Insurance Co. Ltd.

116

03/08/2001

Bajaj Allianz Li Bajaj Allianz Life Insurance Co. Ltd.

117

06/08/2001

Met Life India Insurance Co. Ltd.

10

121

03/01/2002

Reliance Life Insurance Co. Ltd.

11

122

14/05/2002

Aviva Life Insurance Co. Ltd.

12

127

06/02/2004

Sahara India Life Insurance Co. Ltd.

13

128

17/11/2005

Shriram Life Insurance Co. Ltd.

14

130

14/07/2006

Bharti Axa Life Insurance Co. Ltd.

15

135

19/12/2007

IDBI Fortis Life Insurance Co. Ltd.

33

Table: 3
PRIVATE LIFE INSURANCE COMPANIES AND THEIR PROMOTER

Sr.No.

Name of the Insurer

Indian Promoter

Foreign Promoter

HDFC Standard Life Insurance

Co. Ltd.

HDFC Ltd.

Standard Life Assurance, UK

Max New York Life Insurance

Co. Ltd.
ICICI Prudential Life Insurance
Co. Ltd.

MAX India

New York life, USA

ICICI Bank

Prudential, UK

3
4

Kotak Mahindra old mutual Life

Insurance Co. Ltd

Kotak Mahindra Bank

Old mutual, South Africa

Birla Sun Life Insurance Co. Ltd.

Birla Group

Sun Life, Canada

TATA AIG Life Insurance Co.

Ltd.

TATA Group

American International
Assurance Co., USA

SBI life Insurance Co. Ltd.

State Bank of India

BNP Paribas Assurance, France

Bajaj Auto

Allianz, Germany

Bajaj Allianz Life Insurance Co.

Ltd.
Met Life India Insurance Co. Ltd.

J & K Bank

Met life International Holdings

Ltd. ,USA

10

Reliance Life Insurance Co. Ltd.

Reliance Capital

11

Aviva Life Insurance Co. Ltd.

Dabour Group

Aviva International

12

Sahara India Life Insurance Co.

Ltd.
Shriram Life Insurance Co. Ltd.

Sahara Group

Shriram Group

Sanlam Group, South Africa

Bharti Group

AXA Holdings, France

13
14

15

Bharti Axa Life Insurance Co.

Ltd.

IDBI Fortis Life

Insurance Co. Ltd.

IDBI Bank

Fedral Bank Fortis,

Netherlands

34

DATA ANALYSIS
MARKET SHARE BASED ON PREMIUM AND POLICIES OF PUBLIC &PRIVATE SECTOR
LIFE INSURANCE COMPANIES
Market share based on total premium
The most important indicator to assess life insurers is the amount of premium collected. The sum assured is
fragmented into installments of premium. In other words, premium is the fragmented value of the Sum
Assured of policy, payable continuously at regular intervals until the maturity of the policy. The total
premium consists of first year premium, Renewal Premium and Single Premium.
The amount of premium otherwise called premium rate, depends on:
Mortality experience of insured lives
Expenses incurred by the company in administrating the life fund
Yield on investments of life fund
Besides these three, the premium rates may also be affected by other factors namely interest rates and
taxation rates.
TABLE: 4
MARKET SHARE BASED ON TOTAL PREMIUM
Year
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10

Public Sector (%)

99.98
99.46
97.99
95.29
90.67
85.76
81.90
74.40
70.92
70.10

Private sector (%)

0.02
0.54
2.01
4.71
9.33
14.24
18.10
25.60
29.08
29.90

35

2000-01

2000-02

2000-03

2000-04

2000-05 2000-06 2000-07

Public
Private

2000-08

2000-09

2000-10

Observation
Table 7 shows the market share of public and private sector life insurance companies based on total
premium.
The total premium of Life Insurance Corporation of India increased continuously since 2000-01 to 200910.However a significant decline is noticed in market share from 99.98% in 2000-01 to 70.10% in 2009-10.
While in case of private sector, the total premium income and market share of total premium have both
increased.
The market share of private sector life insurance companies on the basis of total premium has increased
from 0.02% in 2000-01 to 29.90% in 2009-10. It reflects that the private sector has been successful in
capturing the market share from Life Insurance Corporation of India.

36

MARKET SHARE BASED ON TOTAL POLICIES

The life insurance contract provides elements of protection and investment. The two elements of protection
and investment exist in various degrees in different types of policies. The older the policy, the lesser the
element of protection and higher the element of investment and vice-versa is also true. Life insurance
policies are divided on the basis of duration of policy, method of premium payments and participation.
TABLE: 5
MARKET SHARE BASED ON TOTAL POLICIES
Year
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10

Public Sector (%)

99.23
93.98
96.75
94.21
91.48
89.08
82.83
73.93
70.52
73.02

Private sector (%)

0.77
6.02
3.25
5.79
8.52
10.92
17.17
26.07
29.48
26.98

2000-01 2000-02 2000-03 2000-04 2000-05 2000-06 2000-07 2000-08 2000-09 2000-10
PUBLIC SECTOR

PRIVATE SECTOR

37

Observation:
Table X shows the market share of both the public and the private sector life insurance companies based on
total policies. The market share of LIC of India was 99.23% in the year 2000-01.It has decreased to 73.02%
in the year 2009-10. While that of the private sector was 0.77% in the year 2000-01 and increased to 26.98%
in the year 2009-10.
There are concerns over Life Insurance Corporation of Indias declining market share based on total policies
and concurrent rise of private insurers who have just entered ten years ago. Innovative products, smart
marketing and aggressive distribution channels has enabled private life insurance companies to sell policies.
As of today, Life Insurance Corporation of India has retained the market share based on total policies.

38

COST EFFICIENCY
Cost efficiency score of life insurance companies
TABLE: 6
Cost efficiency score
LIFE
Insurer
200001
HDFC
standa
rd
Life
Insura
nce
Co.Lt
d.
MAX
NEW
YOR
K Life
Insura
nce
Co.Lt
d.
ICICI
Prude
ntial
Life
Insura
nce
Co.Lt
d.
Kotak
Mahin
dra
Life
Insura
nce
Co.
Ltd.
Birla
Sun
Life
Insura
nce
Co.
Ltd.
TATA
AIG
Life

Year

2001200220032004200520062007200802
03
04
05
06
07
08
09
1
0.168 0.334 0.541 0.013 0.088 0.112 0.012 0.022
9
1
5
9
9
3
6
0

2009-10
0.0450

0.079
5

0.208
1

0.287
5

0.012
0

0.029
2

0.030
2

0.012
8

0.018
6

0.0438

0.297
9

0.086
6

0.134
0

0.184
0

0.013
7

0.201
8

0.004
3

NA

0.178
6

0.379
6

0.534
2

0.040
9

0.124
5

0.179
5

0.028
3

0.046
0

0.1596

0.141
8

0.261
6

0.387
5

0.015
6

0.041
2

0.045
3

0.019
1

0.021
7

0.0464

NA

0.168
4

0.366
8

0.433
7

0.010
4

0.032
5

0.044
7

0.015
9

0.031
9

0.0639

39

Insura
nce
Co.
Ltd.
SBI
Life
Insura
nce
Co.
Ltd.
BAJA
J
ALLI
ANZ
Life
Insura
nce
Co.
Ltd.
MET
Life
India
Insura
nce
Co.
Ltd.
Relian
ce
Life
Insura
nce
Co.
Ltd.
AVIV
A Life
Insura
nce
Co.
Ltd.
SAHA
RA
India
Life
Insura
nce
Co.Lt
d.
SHRI
RAM
Life
Insura
nce
Co.

NA

0.069
2

0.160
7

NA

0.264
9

0.349
2

0.362
3

0.012
1

0.024
9

0.016
2

0.006
4

0.016
9

0.0322

NA

0.052
1

0.093
2

0.066
4

0.025
8

0.041
4

0.0706

NA

0.155
1

0.081
2

0.011
2

0.013
1

0.0805

NA

NA

0.799
4

0.454
1

0.016
4

0.037
1

0.038
1

0.016
6

0.050
4

0.1332

NA

NA

NA

NA

0.594
4

0.770
8

NA

NA

NA

NA

NA

0.881
6

0.302
0

0.502
4

0.3525

40

Ltd.
Bharti
Axa
Life
Insura
nce
Co.Lt
d.

NA

NA

NA

NA

NA

NA

0.034
0

0.063
4

0.1362

41

Ranks given to Life Insurance Companies based on Cost

Efficiency Score
TABLE: 7
RANKS GIVEN TO LIFE INSURANCE COMPANIES BASED ON
COST EFFICIENCY SCORE

Life
Insurer
200001
HDF
C
standa
rd
Life
Insura
nce
Co.Lt
d.
MAX
NEW
YOR
K
Life
Insura
nce
Co.Lt
d.
ICICI
Prude
ntial
Life
Insura
nce
Co.Lt
d.
Kotak
Mahin
dra
Life
Insura
nce
Co.
Ltd.

Year
2001200220032004200502
03
04
05
06
1
8
10
5
10
9

200607
8

200708
15

200809
18

200910
21

12

12

12

13

14

15

14

20

22

11

13

13

11

18

NA

15

12

42

Birla
Sun
Life
Insura
nce
Co.
Ltd
TAT
A
AIG
Life
Insura
nce
Co.
Ltd

SBI
Life
Insura
nce
Co.
Ltd
BAJA
J
ALLI
ANz
Life
Insura
nce
Co.
Ltd
MET
Life
India
Insura
nce
Co.
Ltd.
Relia
nce
Life
Insura
nce
Co.
Ltd

10

11

10

11

12

11

19

20

NA

14

13

13

13

17

19

NA

10

NA

11

12

15

16

17

21

23

NA

11

10

16

18

NA

16

22

17

43

AVIV NA
A
Life
Insura
nce
Co.Lt
d.
SAH NA
ARA
India
Life
Insura
nce
Co.Lt
d.
SHRI NA
RAM
Life
Insura
nce
Co.Lt
d.

NA

12

14

12

14

16

NA

NA

NA

NA

NA

NA

NA

10

44

SWOT ANALYSIS
Strengths/opportunities of Insurance Industry
The intense competition brought about by deregulation has encouraged the industry to innovate in all areas;
from underwriting, marketing, policy holder servicing to record-keeping.
The Insurance Regulatory Development Authority of Indias (IRDA) emphasis on quarterly
reporting/monitoring of insurer solvency has enhanced capital adequacy and transparency.
Aggressive marketing strategies by private sector insurers will buoy consumer awareness of risk and expand
the markets for products.
Competition in a deregulated environment will allow market forces to set premiums that are appropriate for
exposure and push insurers to differentiate their products and services.
Innovations in distribution and improvements in market penetration will follow as public and private
insurers compete to market their products. Allowing insurers to issue their own policy wordings and set their
own rates will enable underwriters to tailor products to meet client needs. Range of available products will
increase because foreign companies bring with them a wide range of products and product development
expertise.
Licensed brokers are very much part of the intermediary structure and only those with adequate capital,
professional experience and expertise will be licensed by IRDA.
Capital structure of entire insurance industry will improve as foreign companies bring fresh capital with
them.
Market efficiency will improve due to information dissemination, global operating knowledge and increased
competition.
Management efficiency will increase because foreign companies bring with them global experience and
management innovation.
Customers service will improve competition .which will finally benefit the consumers.

Globalization will also improve Regulatory and Governance system. It will also improve market conduct
and Ethical Business Standard.
45

Weaknesses/Challenges of Insurance Industry

Premiums rates will remain under pressure due to intense competition on more profitable lines. Falling
premium income without a corresponding reduction in claims is likely to drive down profits.
Public and private sector insurers greater reliance on their investment portfolios to generate sufficient
income and gains for net profits would subject them to the volatility of the financial markets.
Private insurers need to raise more capital otherwise growth could be constrained since reliance on
reinsurance for capital relief is not always viable or available.
Traditional distribution channels, especially tied agents, need to improve to match the new product
offerings. There is general lack of transparency as financial and operational data for insurers are not readily
available as none of Indias insurers are directly listed on stock exchanges.
Like all developing economies on a fast track, the shortage of trained insurance professionals and
technicians at all levels cannot be remedied in the short term.
Natural catastrophes will always be present; the Indian sub-continent is vulnerable to cyclones, floods,
hurricanes and earthquakes, and until there is a national capacity (similar to the terrorism pool) to manage
losses, dependence on overseas reinsurers will continue.

46

CONCLUSION/SUGESSTION
Indias life insurance companys market share was comparatively lower than developed countries in spite
of India being the most developing and second most populous country in the world. Hence we can conclude
that there is high scope of life insurance sector in India.
Since opening up of Indian insurance sector for private participation, India has reported an increase in both
life insurance density and penetration.
Among developing countries India stands 2nd and there is much scope for life insurance sector to develop in
India.
LICs Challenges

India opened its insurance market to the private sector in 1999 when Parliament passed a new law
establishing an independent regulatory body to oversee the insurance market. The law opened the door for
participation of private insurance companies and a limited participation of foreign insurance companies
through joint ventures with Indian companies. Since then, the life insurance markets have grown
impressively. Since 1999, IRDA has licensed 22 new private Indian insurance companies, who have global
insurance companies as their partners. Due to globalization of financial services and liberalization of
economy, the Life Insurance Corporation of India has been facing intense competition from the new
entrants. The new private players with their aggressive penetration strategies are creating insurance
consciousness in the minds of a wide cross-section of customers.
The twenty two private insurers in the life insurance market have already grabbed nearly 30 percent of the
market in terms of premium income. The new business premium of the twenty two private players was
34.92 percent in 2009-10.Meanwhile, LIC's new premium business has fallen from 99.93% in 2000-01 to
65.08% in 2009-10.Unless Life Insurance Corporation of India is alive to the emerging trends, its
performance may decline further.
Customer Education
Insurance is a unique service industry. The key industry drivers are related to life style issues in terms of
perceiving insurance as a savings instrument rather than for risk cover, need based selling, quality of service
47

and customer awareness. In the present competitive scenario, a key differentiator is the professional
customer service in terms of quality of advice on product choice along with policy servicing.
Product Innovation
Innovative products, smart marketing and aggressive distribution-That's the triple whammy combination that
has enabled fledgling private insurance companies to sign up Indian customers faster than anyone ever
expected. Indians, who have always seen life insurance as a tax saving device, are now suddenly turning to
the private sector and snapping up the new innovative products on offer. The private companies are coming
out with better products which are more beneficial to the customer. Among such products are the Unit
Linked Investment Plans which offer both life cover as well as scope for savings or investment options as
the customer desires.
The growing popularity of the private insurers shows in other ways too. Life Insurance Corporation of India
is still dominating segments like endowments and money back policies which are traditional plans. But in
the annuity or pension products business, the private insurers have already wrested over 30 percent of the
market. The private insurers also seem to be scoring big in other ways. They are persuading people to take
out bigger policies.
Distribution Network
While companies have been successful in product innovation, most of them are still grapping with right mix
of Distribution Channels for capturing maximum market share to build brand equity, building strong and
effective customer relationship and cost effective customer service.
In India Insurance is sold and not bought. The agents / Advisors by using various strategies sell the product
by convincing the customers. Moreover, they push policies with the highest premium to pocket a higher
commission. The consultative approach to selling is the modern approach, which helps customers and
prospects to buy.
New private insurers have used innovative distribution channels to reach a broader range of the population.
Private insurance companies are also using banks, microfinance institutions and co-operatives to increase
their market share and compete with well-entrenched state-owned insurance company. There is huge
potential in the largely undeveloped private pension market. Insurers have to develop new products
48

addressing the new challenges in society. Companies will need to constantly innovate in terms of product
development to meet ever-changing consumer needs. Understanding the customer better will enable
Insurance companies to design appropriate products, determine price correctly and to increase profitability.
Since a single policy cannot meet all the insurance objectives, one should have a portfolio of policies
covering all the needs. Product development is made possible by integrating actuarial, rating, and claims.
Moreover, with increased commoditization of insurance products, brand building is going to play a vital
role. The rural sector has potential for life insurance. To realize this potential, designing suitable products is
important. Insurers will need to pay special attention to the characteristics of the rural labor force, like the
prevalence of irregular income streams and preference for simple products.
Legislation now allows insurance carriers and other financial institutions, such as banks and securities firms,
to sell each anothers products. More insurance carriers now sell financial products such as securities,
mutual funds and various retirement plans. This helps access each other's client base and geographical
markets.
Foreign Direct Investment
Insurance is a capital-intensive industry. It is also a long-gestation business. India's insurance industry needs
capital, and a major source of capital would be from foreign investors, who are now limited to 26 percent
ownership. India needs to raise the cap on Foreign Direct Investment (FDI) to attract capital for the industry.
For some time there has been an understanding that the FDI cap will be raised to 49 percent, and many
companies entered the Indian market with this expectation. And their dreams have come true when the
Government of India has declared 49% FDI in insurance sector in the annual budget 2014. Now leading
foreign companies will bring in more capital to the insurance industry of India.
Role of IRDA
IRDA should also seek to create a regulatory regime that promotes the most efficient use of capital,
eliminates avoidable micro-management of business practices, allows companies to price their products
prudentially, and level the playing field between private and state-owned insurance companies. When
markets are competitive and responsive to consumer demand and preference, it is the consumer that benefits
in terms of lower cost and increased ability to manage risks.
49

Information Technology
Private Insurance companies have discovered that the Internet is a powerful tool for reaching potential and
existing customers. Most carriers use the Internet simply to post company information, such as sales
brochures and product information, financial statements, and a list of local agents. New technology gives the
policyholders / insured better, wider and faster access to products and services. The impact of Information
Technology in Insurance business is being felt at an accelerating pace. In the initial years IT was used more
to execute back office functions like maintenance of accounts, reconciling broker accounts, client processing
etc. With the advent of database concepts, these functions are better integrated in an administrative
efficiency. The real evolution has however emerged out of Internet boom. Internet has provided brand new
distribution channels to the Insurers. Technology has enabled the Insurer to innovate new products, provide
better customer service and deeper and wider insurance coverage to them. Insurance companies should give
customers a distinct claim id to track claims on-line, entertaining on-line enrollment, eligibility review,
financial reporting, billing and electronic fund transfer to benefit clan customers.
In addition to individual carrier-sponsored Internet sites, several lead-generating sites which have emerged
in the developed countries should also be used in India. These sites allow potential customers to input
information about their insurance policy needs. For a fee, the sites forward customer information to a
number of insurance companies, which review the information and, if they decide to take on the policy,
contact the customer with an offer. This practice gives consumers the freedom to accept the best rate.
Quality Service
In the global era, Insurance companies are increasingly willing to spend more on the customer satisfaction
and brand building exercises. Though it is one of the highly regulated industries, it still provides lot of scope
for creativity and innovations. As this industry is predominantly dominated by personal selling and
personalized services, many a time the service standards vary based on the intermediary involved in the
process. In order to achieve the competitive edge over others, it is necessary to standardize the process and
bring about quality improvement and get feedback from the customers regarding the quality of services
rendered. This will result in customer satisfaction, customer retention, customer acquisition, employee
50

retention and cost reduction. Servicing focuses on enhancing the customers experience and maximizing his
convenience. This calls for effective Customer Relationship Management system, which eventually creates
sustainable competitive advantage and enables to build long lasting relationship.

51

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www.gicoi.com
www.easylifeindia.com.
www.transportersindia.com.
www.trade-india.com.
www.indiastat.com.
www.insuranceinfoline.com.
www.eastindiavyapaar.com.
www.indiacore.com.
www.indiannba.com.

52