ABSTRACT:

Insurance industry contributes to the financial sector of an economy and also provides
an important social security net in developing countries. The growth of the insurance
sector in India has been phenomenal. The insurance industry has undergone a massive
change over the last few years and the metamorphosis has been noteworthy. There are
numerous private and government insurance companies in India that have become
synonymous with the term insurance over the years. Offering a diversified product
portfolio and excellent services the many insurance companies in India have managed
to make their way into almost every Indian household.
Keywords:
Life Insurance, Substandard, Competitiveness, GDP, Indigenous, Aggressive
Marketing, ULIP, Penetration, Pushed Insurer, Gross Premium, Internet and online
policy purchase is a new trend that has inspired the players to be more focused in their
business. High in volume and low in margin is going to be the ways towards policy
procuring. Rural, social and Micro insurance is a new avenue to be thought of. This
paper discusses the new trends and challenges that the present industry is facing. Our
study is only limited to life insurance sector. The suggestion and recommendation will
help both academician and industry personnel to re- engineer their thought in
insurance sector.

INTRODUCTION
Insurance is one of the demanding financial products in India. Its basic motto is to
protect the family of any uncertainty in life. So it is long term investment and need
knowledge about that. Indian life insurance is too old. It is there from British Period
and after nationalization; it has come fully under Government. In the post
liberalization era, insurance has attracted any private players from different parts of
the country to start business India.

India as a country has potential for growth of this business. With the upcoming of
regulator in the year 2000, the business in India became more streamlined. Large
players along with customer choice results severe competition Life Insurance
Corporation of India in one end and ICICI Prudential life insurance from private
sector on the other end has taken maximum market share from both category. Product
innovation, profitable growth, multi-channel distribution and ethical practices in
business are few factors to be considered. Regulation from Government and research
in this sector, many times is a challenge for the existing players. According to Mr J.
Hari Narayan, Chairman of IRDA, Indian insurance industry in set for some serious
changes. Mr. Narayan said that Indian insurance industry had matured from its state of
childhood to early adulthood. He said that in countries like UK, the agents have
adopted themselves to latest form of marketing and very soon such changes will also
be introduced in India. With an annual growth rate of 15-20% and the largest number
of life insurance policies in force, the potential of the Indian insurance industry is
huge. The total investible funds with the Life Insurance Corporation of India (LIC) are
almost 8 per cent of GDP. The LIC employs more than one lakh employees who in
turn supervise through 2,000 branch offices more than five lakh agents. Yet these
numbers believe the fact that life insurance in India is spread very thinly and
'shallowly', and its role as a mobiliser of long-term savings is underdeveloped.
Insurance companies in the developed world also sell products for old age income
security in the form of pensions and annuities. The absence of pension coverage for a
vast majority of Indians, also points to an important gap to be filled by the life
insurance sector. In the 1990s however, LIC was put on its toes due to winds of
liberalisation unleashed by the report of the committee on insurance reforms, and
subsequent talk of allowing private entry into insurance sector. This has led to
introduction of some new products and some innovations in customer service. But
LIC largely remains a slow moving, over-staffed behemoth. For several decades now,
it has sold overpriced and under-priced policies, and has tried to combine business
objectives (being a corporation) and social objectives (being a state monopoly). There
are big gaps in its product range and along with liberalisation threaten to undermine its
position. However, despite the usual public sector handicaps, LIC has the potential to
turn its big size and reach to its decisive advantage in the wake of private sector entry
into life insurance business.

OBJECTIVE OF STUDY

1) This study and analyse the recent trends of life insurance and their
impact on the insurance industry.

2) To study the present trends in life insurance sector

RESEARCH METHODOLOGY

Exploratory research methodology is used here to analyse the data. Data was collected from
multiple sources such as books, journals to understand the Life insurance industry. Apart
from this, we have visited different websites and professional magazines. Some more data
was collected through newspapers. So it is purely based on available secondary data.

GROWTH DRIVERS OF LIFE INSYRANCE INDUSTRY:

The total market size of India's insurance sector is projected to touch US$ 350-400 billion by
2020 from US$ 66.4 billion in FY13. Digital Insurance- by 2020, a report by Boston
Consulting Group (BCG) and Google India, projects insurance sales from online channels to
increase 20 times from present day sales by 2020, and overall internet influenced sales to
reach Rs.300,000-400,000 crore (US$ 48.51-66.68 billion). Investment corpus in India's
pension sector is anticipated to cross US$ 1 trillion by 2025, following the passage of the
Pension Fund Regulatory and Development Authority (PFRDA) Act 2015, according to a
joint report by CII-EY on Pensions Business in India. Indian insurance companies are
expected to spend Rs.117 billion (US$ 1.89 billion) on IT products and services in 2016, an
increase of five per cent from 2015, as per Gartner Inc. Also, insurance companies in the
country could spend Rs.4.1 billion (US$ 66.29 million) on mobile devices in 2017, a rise of
35 per cent from 2016.
MAJOR FACTORS RESPONSIBLE FOR THIS GROWTH ARE AS FOLLOWS:

Rural as a major thrust: More than 70% of population lives in rural

area. Their consumption pattern, choice and preference have changed.
Technology and internet has given ample scope for rural people towards
adopting new ideas. These forces have provided a larger platform to
multinational players to focus more on rural. In order to faster growth,
Government has also made mandatory to do certain percentage of
policies every year from rural area for the insurance companies. All these
steps provide new avenues for the players to think growth more in rural
area.

Development of other insurance: There is strong growth in auto sector

from 2003 to 2012.
The no of passenger and commercial vehicles has increased incrementally.
As a result, the motor insurance has become more popular among people.
Health insurance has created a separate portfolio in the last few years.
People have realized the importance of this due to rise in the healthcare
cost. Introduction of Technology in medical science and demand for good
service is the main cause for higher medical cost.
Awareness about the health due to various schemes and non-government
intervention has enlarged the vision of the people about health care.
Rastriya Swathya Bima yojana (RSBY) of 2007 is one of the mile stone in
this area where people below poverty line are able to get minimum health
service. Also in 2014, Government has come out with Pradhan Mantri
Suraksha Bima Yojana i.e. Accidental death insurance for Rs.12 per annum
and Pradhan Mantri Jeevan Jyoti Bima Yojana i.e. Life Insurance for Rs.330
per annum.

Growing Economy: The economy of India is growing significantly. The

second most populated country has witnessed a phenomenal growth in
major financial services. Various government schemes and programs also
helped a lot. The purchasing power of people has increased. Also increase
in income has augmented the disposal income among people. Good
saving and awareness among various sources of getting the products
have compelled the people to go for specialization rather than
generalization. It is estimated that by 2026, the working population which
ranges in the age group of 25 to 40 will reach approximately 795.5 million.
The growth if Indian life insurance sector is divided into two main periods,
one from 2001 to 2010 and other from 2012 to onwards. The first 10 years
was high growth with compound annual growth rate (CAGR) of
approximately 3.1% in new business premium. Most of the players were in
good condition due to the emergence of unit linked insurance plans (ULIP).
From 2010 onwards, the compound annual growth rate was around 2%.
Stiff competition was one of the reasons for the stagnant growth in the
year of 2012. Table 1 shows the companies in detail.
TABLE

1.1 Changing Competitive Environment:

With the opening of insurance sector in India, the share of private insurer
was very less. As shown in table-1, total share of private insurer was just
2% in 2001-02. It was because of any reason which includes credibility on
private players. But soon because of innovative & customized products,
novel distribution channels, aggressive marketing etc. private players
gave a tough competition to public sector company (LIC). Gradually, the
market share of private insurer went up and till financial year 2007-08,
total share of private insurer reached as high as 40.35%.The market share
of LIC decreases after the entry of private insurer but it doesnt mean that the
growth of LIC got down. LIC continue its growth even after a cut throat completion
from the private players.
Market Share of Top Insurers in India

The following pie chart shows the market share of top insurance
of India in the period till FY16

Product Innovations
Before entrance of private players, it was observed that only endowment
and money back policies were popular among consumers. But the new,
private insurers focused on providing customized products, products that
contain innovative features to the customers created favourable demands
for other type of policies like tern insurance, child plan, pension plans and
unit linked insurance policies (ULIPs).

According to Mr J. Hari Narayan, Chairman of insurance watchdog IRDA,

Indian insurance industry in set for some serious changes. Mr Narayan
said the Indian insurance industry had matured from its state of childhood
to early adulthood. He said that in countries like UK, the agents have
adopted themselves to latest form of marketing and very soon such
changes will also be introduced in India. With an annual growth rate of 15-
20% and the largest number of life insurance policies in force, the
potential of the Indian insurance industry is huge. The market share of
private sector companies in non-life insurance segment rose from 15 per
cent in FY04 to 45.4 per cent in FY16 . According to government sources, the
insurance and banking services contribution to the country's gross domestic
product (GDP) is 7% out of which the gross premium collection forms a
significant part.

The chart below shows shares of linked and non-linked insurance premium

Share of linked and non-linked insurance premium

100%

80%
59% 58% 63% Non- Linked Premium
60% 76% 83% 85% 88% Linked Premium
40%

20% 41% 42% 37%

24% 17% 15% 12%
0%
FY09 FY10 FY11 FY12 FY13 FY14 FY15

Premium Collected By Private Insurance Companies

The total amount of premium collected by the private insurance
companies also has been
increasing in a faster rate like the increase in the number of policies.

The life insurance market grew from USD10.5 billion in FY02 to USD56.05
billion in FY16 Over FY02FY16, life insurance premiums expanded at a
CAGR of 13.10 per cent.

The life insurance industry has the potential to grow 2-2.5 times by 2020
in spite of multiple challenges supported by long-term trends and
fundamentals underlying household savings
The life insurance premium market expanded at a CAGR of 11.93 per cent,
from USD14.5 billion in FY04 to USD56.05 billion in FY16 During the first
half of financial year 2016-17

Life Insurance industry reported a 20 per cent growth in overall Annual

Premium Equivalent (APE)

37 34 39 45 42 38 39 39.3 40.55
17 21 28
10 11 14

13 14 17 19 18 14 13 14.5 15.5
2 3 6
0 0 1

Private Public

FINDINGS

Difficulty in designing Marketing Mix:

Marketing mix refers the combination of all Ps to make the market attractive. Innovation in
product which invited many unit linked policies was the centre of
attraction for all. Low premium due to large no of players sometimes were
uncomfortable for all. The entire banking industry is advanced in the
communication strategy. This has compelled insurance players to practice
innovative communication strategy including advertisement. So is not only
product, but a balanced marketing mix is required for the industry with
modern trend.
Hybrid distribution channel:
In the life insurance industry, the prominent distribution was agency.
Around 90 % of businesses were coming from them. The high cost and low
persistency in policy has thought of going to other channels known as
alternate channels. Recently the contribution from alternate channels is
increasing. In this context, Bancassuarnce increased and the no of banks
as insurance partner has gone up. Both Public sector banks and Private
Banks have come up with their insurance partners.
Broking and corporate agency has their own way of doing the business.
Individual and institution as corporate agents has helped agency to
increase the revenue. At the same time, we have also taken the help of
rural development organization such as NGOs, Trust and SHG members to
cover the rural area. Finding the right distribution channel for the
customer is a trouble area. All these have demanded a high skill in
management.
On line policy:
Internet and technology has helped a lot to insurer. Now policy procuring
through on line is cheaper than buying the same plan from agent. The
major problem is not getting the support from the agent for that policy, if
there is a claim or maturity. The person has to keep direct contact with the
company.
Regulatory trend: The Indian regulator has introduced rules and
regulation from to time to control the entire industry. Recent changes in
the cap on ULIP charges have created havoc and the contribution of ULIP
to entire policy has decreased. In order to provide better service, the
regulator has come with few changes. Servicing of orphan policy, more
focus on long term are few examples where the insurer are finding
difficult. Standardization of the proposal form is another step by regulator.
So the insurers are facing many challenges in the area of product, price,
distribution and taxation.
Claim Management: From 2010, the no of advisors have decreased in
the industry. The no of agents declined 29% from March 2010 to March
2013. Also it is expected that more agents will leave the industry. Under
this situation, Claim management will be tougher for the companies. As
people buy insurance because of the face value of agents, assistance of
them is highly essential for good business
Customer Servicing: From the year 2013, it is very clear that traditional
plans have gained more weightage over ULIP. As traditional plans are long
term products, insurer need to focus more on this. Customer retention and
servicing is the key to remain in business. Even if in new pension plan, the
capital protection features demands more policy servicing. Here
investment and servicing are important for the companies. Above all,
Policy administration is the most difficulty area to provide customer
servicing.

ECOMMENDATION
From the above discussion on findings, we came across few novel ideas. Life insurance in
India is in growing stage and to maintain it, the following five points are to be considered
Corporate must go to the basics of service marketing such as under promise and over
delivery
Customization of offerings, mainly in product and distribution
Pockets of service is to be done for quicker service and other operation
Advanced knowledge in the insurance is to be imparted to the employees in Insurance
industry
Digitalization and Relationship is to be kept in policy marketing.

RECOMMENDATION
CONCLUSION
Where almost all the industries in the world trying hard for survival due to
the major economic meltdown, Indian life insurance industry is one of the
sectors that is still observing good growth. It is the changing trends of
Indian insurance industry only that has made it to cope with the changing
economic environment. Indian insurance industry has modified itself with
the passage of time by introducing customized products based on
customers need, through innovative distribution channels, Indian life insurance industry
searched its path to grow. Changing government policy and guideline of
the regulatory authority, IRDA have also played a very vital role in the
growth of the sector. Move from non-linked to unit liked insurance policies
is one of the major positive changes in Indian life insurance sector.
Similarly, opening on the sector for private insurer broke the monopoly of
LIC and bring in a tough competition among the players. This completion
resulted into innovations in products, pricing, distribution channels, and
marketing in the industry.
Though the sector is growing fast, the industry has not yet insured even
50% of insurable population of India. Thus the sector has a great potential
to grow. To achieve this objective, this sector requires more improvement
in the insurance density and insurance penetration.
Development of products including special group policies to cater to
different categories should be a priority, especially in rural areas. The life
insurers should conduct more extensive market research before
introducing insurance products targeted at specific segments of the
population so that insurance can become more meaningful and affordable.
By adopting appropriate strategy along with proper government support
and able guidance of IRDA, India will certainly become the new insurance
giant in near future.